MERIDIAN INDUSTRIAL TRUST INC, 10-K405, 1997-03-20

MERIDIAN INDUSTRIAL TRUST INC
10-K405, 1997-03-20
REAL ESTATE INVESTMENT TRUSTS

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<PAGE>

FORM 10-K

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

[ X ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934 (FEE REQUIRED)

For the fiscal year ended DECEMBER 31, 1996

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED)

Commission File No. 1-14166

MERIDIAN INDUSTRIAL TRUST, INC.
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)

MARYLAND 94-3224765
- ------------------------------- ------------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)

455 MARKET STREET
17TH FLOOR
SAN FRANCISCO, CALIFORNIA 94105
- ------------------------------- ------------------------------------
(Address of principal executive (Zip Code)
offices)

Registrant's telephone number,
including area code: (415) 281-3900
------------------------------------

Securities registered pursuant to Section 12(b) of the Act:

TITLE OF EACH CLASS NAME OF EACH EXCHANGE ON WHICH REGISTERED
----------------------- -----------------------------------------
COMMON STOCK, PAR VALUE NEW YORK STOCK EXCHANGE
$0.001 PER SHARE

WARRANTS TO PURCHASE AMERICAN STOCK EXCHANGE
COMMON STOCK

Securities registered pursuant to Section 12(g) of the Act: NONE

Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
----- -----

Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X]

The aggregate market value of the voting stock held by non-affiliates of
the registrant on March 3, 1997 was $188,489,238, computed by reference to the
closing sales price of the common stock reported on the New York Stock Exchange
and by excluding Common Stock and Series B Preferred Stock owned by directors,
executive officers and principal shareholders (i.e., holders of 5% or more of
the registrant's voting stock).

The registrant had 13,596,370 shares of Common Stock outstanding on March
3, 1997.

<PAGE>

MERIDIAN INDUSTRIAL TRUST, INC.

ANNUAL REPORT ON FORM 10-K
FOR THE YEAR ENDED DECEMBER 31, 1996

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

FORM 10-K
ITEM NO. NAME OF ITEM PAGE
-------- ------------ ----

PART I

Item 1. Business. . . . . . . . . . . . . . . . . . . . . . . . . . 1
Item 2. Properties. . . . . . . . . . . . . . . . . . . . . . . . .10
Item 3. Legal Proceedings . . . . . . . . . . . . . . . . . . . . .18
Item 4. Submission of Matters to a Vote of Security Holders . . . .18

PART II

Item 5. Market for Registrant's Common Equity and Related
Stockholder Matters . . . . . . . . . . . . . . . . . . .19
Item 6. Selected Financial Data . . . . . . . . . . . . . . . . . .21
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations . . . . . . . . . . .23
Item 8. Financial Statements and Supplementary Data . . . . . . . .27
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure . . . . . . . . . . .27

PART III

Item 10. Directors and Executive Officers of the Registrant. . . . .28
Item 11. Executive Compensation. . . . . . . . . . . . . . . . . . .28
Item 12. Security Ownership of Certain Beneficial Owners
and Management. . . . . . . . . . . . . . . . . . . . . .28
Item 13. Certain Relationships and Related Transactions. . . . . . .28

PART IV

Item 14. Exhibits, Financial Statement Schedules, and Reports
on Form 8-K . . . . . . . . . . . . . . . . . . . . . . .29

Financial Statements and Financial Statement
Schedules . . . . . . . . . . . . . . . . . . . . .F-1 - F-22

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- --------------------------------------------------------------------------------
PART I
- --------------------------------------------------------------------------------

ITEM 1. BUSINESS.

THE COMPANY

Meridian Industrial Trust, Inc. (the "Company") is a self-administered and
self-managed real estate investment trust engaged primarily in the business of
owning, acquiring, developing, managing and leasing income-producing
warehouse/distribution and light industrial properties. At December 31, 1996,
the Company owned and operated 60 warehouse/distribution and 18 light industrial
properties encompassing approximately 9.4 and 1.0 million square feet,
respectively, of leasable space that were 94% and 97% leased, respectively, to a
total of 186 tenants. See "Item 2. Properties." of this report. Based on the
total square feet of leasable space and management's knowledge of the industrial
real estate market, the Company believes it is one of the largest owners and
managers of industrial space for lease in the United States. The Company also
owned three retail properties encompassing 460,992 square feet at December 31,
1996. (The properties owned by the Company are collectively referred to as the
"Properties".)

On February 23, 1996, (i) Meridian Point Realty Trust IV Co. ("Trust IV"),
Meridian Point Realty Trust VI Co. ("Trust VI"), and Meridian Point Realty Trust
VII Co. ("Trust VII") (collectively the "Merged Trusts") merged with and into
the Company, with the Company as the surviving entity (the "Merger"); and (ii)
in a separate transaction (the "Asset Purchase"), the Company acquired certain
properties and assumed mortgage notes and certain other liabilities from
Meridian Point Realty Trust 83 ("Trust 83"). (Trusts 83, IV, VI, and VII are
collectively referred to herein as the "Trusts.")

The Company has industrial Properties located in significant industrial
centers and distribution hubs throughout the United States (Dallas, Los Angeles
Basin, Memphis, Chicago, Seattle, Atlanta, Columbus, San Francisco Bay Area and
Phoenix). The Company intends to increase its presence in these markets and in
other regional markets (Indianapolis, Orlando and the New Jersey/Pennsylvania I-
95 Corridor) and to continue its strategy of being a demand-driven,
competitively priced, nationwide provider of industrial space. (The regional
markets where the Company's Properties are located and where the Company intends
to own properties in the future are collectively referred to as the "Target
Markets".)

The Company's senior executives have an average of approximately 17 years
experience in the commercial real estate business and an average tenure of eight
and a half years with the Company and its predecessor. The Company's
comprehensive in-house expertise includes management of public and private
companies, operating public real estate investment trusts, acquisitions,
dispositions, development, property management, leasing, marketing, finance,
accounting and law. The executive officers include Allen J. Anderson, Chairman
and Chief Executive Officer, Milton K. Reeder, President and Chief Financial
Officer and Dennis Higgs, Senior Vice President. The Company also has attracted
institutional investors that, as of December 31, 1996, owned a substantial
portion of the Company's outstanding stock, including Hunt Realty Corporation
("Hunt"), J.P. Morgan, USAA Real Estate Company ("USAA"), Ameritech Pension
Trust ("Ameritech"), The State Teachers Retirement Board of Ohio ("OTR"), and
Morgan Stanley Asset Management Inc.

The Company was incorporated in the State of Maryland in May 1995. The
Company's executive offices are located at 455 Market Street, 17th Floor, San
Francisco, California 94105, and its telephone number is (415) 281-3900. At
December 31, 1996, the Company had 27 employees.

BUSINESS OBJECTIVE

The Company's fundamental business objective is to maximize total return to
its stockholders by increasing cash flow per share and increasing the long-term
value of the Company's Properties. The Company intends to achieve this objective
by continuing to implement the operating strategies summarized below.

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The Company's business strategy is responsive to the accelerated pace of
change in the way distribution space is used and where it is located.
Management believes this change is the result of global competition and
technological advances which drive companies to increase efficiencies and reduce
costs. Logistics, the science of procuring, storing and distributing goods, has
redefined many of the criteria for designing distribution space and has led to
the development of the modern warehouse. The Company defines the modern
warehouse building as one that typically has greater clear heights to stack
goods (24 feet or greater), deeper truck turning radii (in excess of 150 feet),
high capacity sprinkler systems and cross docking capabilities as well as other
important features that are designed to increase the velocity of goods
distribution. In addition, rapid decline in the cost of computer driven
technology has made high technology methods for tracking, storing and retrieving
goods available to many companies. As a result of the foregoing, there is a
growing trend among distribution space users to consolidate inventory into
large, modern warehouses located in major markets along the "path of goods
movement" (I.E., major cities at the intersection of highways, airports, rail
lines and shipping ports). Major cities along the path of goods movement are the
Target Markets for the Company's growth strategy.

The Company believes that demand for modern warehouses will increase as a
result of such factors as population growth, increased industrial production,
increased capital spending and increased consumer demand. The resulting
increase in demand for this type of distribution space has not been met by a
corresponding increase in supply. Therefore, distribution space users often
seek build-to-suit transactions in which building design can be matched with
specific logistical requirements and modern distribution technologies.

GROWTH STRATEGY

The Company's growth strategy is to acquire and develop industrial
properties in its Target Markets while maximizing cash flow from operating
Properties. The Company seeks to make acquisitions in its Target Markets and
develop new properties to meet the needs of customers. The Company maximizes
cash flow from operating Properties by retaining existing tenants, releasing
space at higher rates and increasing occupancy levels. As part of this strategy,
the Company will seek to build market share, to achieve name recognition in
Target Markets and to continue to improve its operating efficiency.
Specifically, it will evaluate and engage in the following activities:

ACQUISITIONS. The Company continually investigates opportunities to
acquire individual and portfolio of properties. In 1996, the Company acquired
eight individual Properties which comprise 2.7 million square feet of space for
aggregate consideration of $89.7 million. In addition, the Company intends to
pursue acquisitions of multi-building portfolios currently owned by regional
developers seeking increased liquidity, including acquisitions through tax-
advantaged structures sometimes referred to as "down REITs." Further, many U.S.
companies are, for various financial and logistical reasons, seeking to sell
distribution facilities owned by them. Also, many institutional investors own
industrial portfolios which they may seek to liquidate. These property owners
represent a potential opportunity for the Company to grow through acquisitions.

The following table summarizes property acquisitions completed in 1996.

Investment
Square Cost
Properties Target Market Feet (in millions)
---------------- ---------------------- --------- -------------
Crosswind Drive Columbus 1,014,592 $30.9
Gold River Lane San Francisco Bay Area 351,788 13.5
Arenth Avenue Los Angeles Basin 332,790 9.6
Crossroads Chicago 249,630 9.4
Mission Oaks Los Angeles Basin 310,736 9.1
Overlake Place San Francisco Bay Area 160,000 8.5
Wanamaker Avenue Los Angeles Basin 136,249 4.5
Rustin Avenue Los Angeles Basin 113,721 4.2
--------- -------------
2,669,506 $89.7
--------- -------------
--------- -------------

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The Company, through a joint venture of which it has an 86% interest, is
under contract to acquire a 120,000 square foot industrial property for $5.0
million in the Orlando market.

DEVELOPMENT. The Company also seeks to develop new warehouse/distribution
properties on a selective basis. In 1996, the Company began or completed
construction on five build-to-suit transactions totaling $47.6 million and
aggregating 1.2 million square feet. The Company expects that future
development projects will be undertaken to (i) meet expansion needs of existing
tenants, (ii) meet requirements of new tenants on a build-to-suit basis, and
(iii) selectively provide inventory for lease in certain Target Markets.

During 1996 development was only undertaken on a pre-leased build-to-suit
basis. Those development projects are summarized below:

Date Investment
of Square Cost
Properties Target Market Completion Feet (in millions)
------------------- ------------- ------------------- ---------- -------------
<S> <C> <C> <C> <C>
Water's Ridge Drive Dallas December 1996 367,744 $10.2
Sarah Jane Parkway Dallas November 1996 361,690 15.7
Boulder Avenue Minneapolis Est. March 1997 100,000 4.5
Highlands Parkway Atlanta Est. September 1997 150,000 7.8
Consulate Drive Orlando Est. September 1997 242,160 9.4
---------- -------------
1,221,594 $47.6
---------- -------------
---------- -------------
</TABLE>

When evaluating acquisition and development opportunities, the Company will
consider such factors as: (i) geographic area and type of property; (ii)
location, construction quality, condition and design of the property; (iii)
potential for capital appreciation of the property; (iv) ability of the Company
to improve the property's performance through renovations; (v) terms of tenant
leases, including the potential for rent increases; (vi) potential for economic
growth and the tax and regulatory environment of the area in which the property
is located; (vii) potential for expansion of the property; (viii) occupancy and
demand by tenants for properties of a similar type in the vicinity; (ix)
competition from existing properties and the potential for the construction of
new properties in the area; and (x) the creditworthiness of tenants.

REDEPLOYMENT OF ASSETS. As part of its corporate strategy, the Company
seeks to reposition its existing portfolio by selling properties which no longer
meet its investment criteria. The Company plans to focus on the development and
management of warehouse/distribution and light industrial Properties and,
accordingly, the Company intends to market and sell the balance of its retail
Properties as market conditions warrant. In 1996, the Company sold fourteen
Properties for approximately $33.4 million and entered into another contract to
sell a warehouse distribution Property located in Texas. Subsequent to December
31, 1996, the Company sold two distribution/warehouse Properties located in
Birmingham, Alabama for $3.4 million.

INTERNAL GROWTH. The Company seeks to capitalize on opportunities to
maximize growth in cash flow from its operating Properties by (i) retaining
existing tenants, (ii) increasing occupancy and (iii) releasing space at higher
rates. The occupancy rate of the portfolio at December 31, 1996 was 94% in the
aggregate. The Company's ability to retain existing tenants and its commitment
to increasing occupancy levels may improve property revenues by minimizing
vacancy periods attributable to leasing downtime and reducing leasing costs such
as tenant improvements and leasing commissions. Further, the Company seeks to
achieve internal growth through controlling operating expenses and renovating
properties to a higher and better use where appropriate.

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<PAGE>

PORTFOLIO MANAGEMENT STRATEGY

The Company's portfolio management strategy is to manage the portfolio
actively by utilizing market research to help determine which markets and
submarkets are most favorable for new acquisitions. This research is designed to
facilitate the understanding of market cycles for demand and supply. Market
cycles vary from region to region, making individual markets more or less
attractive for new acquisitions at any given time on a comparative basis. The
Company intends to emphasize new acquisitions in those markets which are, at the
time, believed to offer better risk adjusted investment returns. Based on the
same research and understanding of comparative market cycles, the Company will
sell assets that no longer meet its business objectives or when a market is
believed to be overvalued.

In a similar fashion, the Company makes leasing decisions based upon market
research and its portfolio management strategy. When a particular market is
believed to be in danger of oversupply, longer term lease maturities will be
sought on renewals and new leases. Alternatively, when a market is believed to
be under-supplied relative to expected new demand, shorter term lease maturities
will be accepted.

MARKETING AND LEASING STRATEGY

The Company's marketing and leasing strategy is to anticipate customer
needs in a manner that promotes tenant retention and maximizes the opportunity
to increase net rental revenues. The Company plans to increase its market share
in the Target Markets in which it currently owns Properties. Management believes
that by obtaining and expanding critical mass in Target Markets the Company can
achieve above-average rents and occupancy levels. This opportunity arises out of
an ability to anticipate the changing needs of existing tenants who seek either
to expand or relocate their operations to other buildings owned by the Company.
The Company believes that this flexibility generally leads to greater tenant
satisfaction, higher average rents and lower cost of operations. In addition,
significant local market presence may create stronger access to potential new
tenants.

The Company pursues an active leasing strategy by aggressively marketing
available space, renewing existing leases at higher rents per square foot and
seeking leases that provide for the pass-through of property-related expenses to
the tenant. One component of the Company's leasing strategy is to increase its
percentage of leases (based on leased area) that are on a triple-net basis.

The Company will continue to expand existing local marketing programs that
focus on the business and brokerage communities. Also, the Company will market
its industrial space directly to "Fortune 1000" users in multiple markets to
meet their warehouse and distribution space needs.

FINANCING STRATEGY

The Financing Strategy is to minimize the Company's cost of capital by
maintaining conservative debt levels, achieving an investment grade credit
rating and maintaining ready access to public and private debt and equity
capital. The Company believes that the size of its portfolio and the diversity
of its buildings and tenants will allow it access to the debt and equity markets
that are not generally available to smaller, less diversified property owners
because of the portfolio size and diversity requirements of the capital markets.
In addition, management believes that growing and further diversifying its
portfolio may enhance its ability to achieve an investment grade credit rating.
Where intermediate or long-term debt financing is employed, the Company will
generally seek to obtain fixed interest rates or enter into agreements intended
to cap the effective interest rate on floating rate debt.

The Company intends to operate with a ratio of debt-to-total market
capitalization that generally will not exceed 50%. Total market capitalization
is defined as the total debt outstanding added to the equity value calculated by
multiplying the common stock outstanding (on a fully converted basis) by the
current stock market price. At December 31, 1996, the Company's debt-to-total
market capitalization rate was approximately 19%, after giving effect to the
conversion of the Company's 2,272,727 outstanding shares of Series B Preferred
Stock.

-4-
<PAGE>

The Company is currently negotiating an increase in its borrowing limit
under its Unsecured Credit Facility from $75 million to $150 million. However,
there can be no assurance that this increase will be obtained.

ORGANIZATIONAL STRATEGY

The Company's organizational strategy is to maintain a centralized
professional staff which focuses on important value-added decisions. The Company
implements its growth, marketing and leasing, financing, portfolio management
and organizational strategies together with other critical operating functions,
from its headquarters in San Francisco. The Company is staffed by experienced
real estate professionals and executives who also have substantial private and
public capital markets expertise. The Company's management and real estate
professionals perform the following functions: asset management, investment
analysis, acquisition due diligence, asset acquisition and disposition,
marketing, capital markets, legal, and accounting. The Company maintains
operational, financial and reporting control in all aspects of its business.
However, the Company relies on outsourcing of certain functions where it is most
cost-effective to do so and when management believes that it can effectively
oversee and monitor the quality of services performed by outside vendors. In
pursuing build-to-suit opportunities that meet its investment objectives, the
Company expects to rely on qualified third parties to provide design and
construction services.

The Company currently employs a system of independent agents or "regional
operators" to provide tenants with certain routine services on a day-to-day
basis. These services include maintenance, rent collections, oversight of
physical improvements and certain other services that may be performed by third
party providers in a reliable and cost-effective manner. Because regional
operators are in daily contact with tenants of other industrial property owners,
the Company expects that its relationships with its regional operators may be a
source of additional leasing, acquisition and build-to-suit development
opportunities.

The Company's officers and asset management staff are directly responsible
for all leasing activities, including (i) initiating renewal/expansion
negotiations with existing tenants, (ii) soliciting the brokerage community for
new lease proposals and (iii) negotiating and signing all leases. In addition,
the Company's asset managers maintain regular contact with tenants to assure
customer service and monitor the effectiveness of individual regional operators
on day-to-day property specific duties. Further, over the last two years, the
Company believes this system has helped to maintain high tenant retention in the
Properties while increasing rental rates on lease renewals.

THE INDUSTRIAL REAL ESTATE SECTOR

The Company believes that the industrial real estate sector provides an
opportunity for attractive returns on investment and that demand for industrial
space will increase as a result of such factors as population growth, increased
industrial production, increased capital spending and increased consumer demand.
These economic factors, in the Company's opinion, should lead to continued
strong demand for industrial space. Although the amount of construction of
industrial space in 1995 and 1996 increased significantly from the depressed
levels of the early 1990s, management believes that the overall decrease in the
supply of industrial space during the last six years, coupled with increased
demand for modern space and the downward trend of vacancy rates, will result in
increases in rental rates and appreciation in the value of properties in the
industrial real estate sector.

TARGET MARKETS

GENERAL. The Company believes that, as retailing and manufacturing
businesses continue to focus on higher inventory turnover rates and just-in-time
delivery of goods, transportation of products will continue to be the most
important link in the distribution chain. Faster movement of inventory is
increasing the importance of storing finished goods near the final consumer for
quick response to meet consumer demand. Further, greater reliance on just-in-
time inventory control by manufacturers requires that goods used in the
manufacturing process be stored relatively close to manufacturing centers to
ensure continuous replenishment of those goods when needed.

-5-
<PAGE>

As the distribution chain continues to become shorter and regional
economies expand or contract, the demand for storage space will fluctuate (i.e.
the demand in specific source and destination markets will increase or
decrease). However, space located along the path of goods movement will remain
in demand even as source and destination points change over time. The Company
owns warehouse/distribution and light industrial properties in Target Markets
that are located strategically along the path of goods movement across the
United States.

The Company's current Target Markets are identified as follows: Dallas, Los
Angeles Basin, Memphis, Chicago, Seattle, Atlanta, Columbus, San Francisco Bay
Area, Phoenix, New Jersey/Pennsylvania I-95 Corridor, Orlando and Indianapolis.

The Company currently does not own industrial properties in the
Indianapolis and New Jersey/Pennsylvania I-95 Corridor Target Markets.

The Company expects that it will make further investments in Target Markets
in which it currently owns Properties and will expand into the other Target
Markets as attractive investment opportunities become available. The Company
believes that opportunities exist in Target Markets to acquire or develop
additional industrial properties at attractive yields.

The Company's Target Markets have been selected on the basis of their
ability to play a continuing and expanding role in the country's nationwide
distribution process. The Properties are generally located near major
transportation facilities, including highway and freeway interchanges, airports,
shipping ports and railyards. Management believes that the portfolio of
Properties is geographically well-located within competitive submarkets and is
well-received by prospective tenants and the brokerage communities in the Target
Markets. The current portfolio is characterized by a tenant base that is a mix
of local, regional and national companies. These companies are involved in a
variety of industries, including retailing and wholesaling, telecommunications,
aerospace, publishing, entertainment, advertising, pharmaceuticals and financial
services. Within these industries, the Company's tenants are involved in all
stages of the manufacturing, assembly and distribution processes of a diverse
set of commercial and retail products and services. The Company's intends to
continue to improve this tenant base in each Target Market by increasing the
general credit quality of tenants and emphasizing tenants that have increasing
distribution and storage space requirements.

As part of its business plan, the Company intends to evaluate additional
markets in which it may acquire properties and may eliminate certain existing
Target Markets as conditions warrant.

NATIONAL FOCUS. The Company believes that its national focus on ownership
and management of industrial properties in selected markets has many strategic
advantages over owning and managing properties exclusively in one region of the
country, including the following:

- Enabling the Company to maintain and improve geographic
diversification.

- Permitting the Company to lease space to a company in more than one
market.

- Exposing the Company to direct build-to-suit transactions with major
national tenants in multiple markets.

- Providing the Company with the ability to respond to acquisition
opportunities in multiple markets throughout the country.

- Providing the Company with the opportunity to enhance or create
critical mass in the largest and most diverse industrial markets.

- Affording the Company growth opportunities in markets of institutional
investment quality, thus protecting property values and providing for
easier access to capital.

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<PAGE>

- Allowing the Company to establish a Meridian Industrial Trust
tradename recognized by industrial space users throughout the country.

COMPETITION

All of the Properties owned by the Company are located in developed areas.
There are numerous other industrial properties and real estate companies within
the market areas of each such Property which compete with the Company for
tenants and development and acquisition opportunities. The number of
competitive industrial properties and real estate companies in such areas could
have a material effect on: (i) the Company's ability to rent space at the
properties and the amount of rents currently charged, and (ii) development and
acquisition opportunities. The Company competes for tenants and acquisitions
with others who have greater resources than the Company.

INSURANCE

In addition to other types of insurance to be maintained by the Company,
the Company carries comprehensive general liability and excess liability
coverage on the Properties in the amount of $35,000,000 to insure against
liability claims and provide for the costs of defense. Similarly, the Company
intends to be insured against the risk of direct physical damage in amounts
necessary to reimburse the Company on a replacement cost basis for costs
incurred to repair or rebuild each property, including loss of rental income
during the construction period in the aggregate amount of $25,000,000. There
are, however, certain types of losses (such as losses arising from acts of war
or relating to pollution) that are not generally insured because they are either
uninsurable or not economically insurable.

REGULATION AND SUPERVISION

ENVIRONMENTAL MATTERS. Under various federal, state and local laws and
regulations, a current or previous owner, operator, manager or developer of real
estate may be liable for the cost of removing and remediating certain hazardous
or toxic substances on the property. These laws often impose liability without
regard to whether the owner or operator knew of, or was responsible for, the
presence of hazardous or toxic substances. The cost of removing or remediating
these hazardous or toxic substances may be substantial, and the presence of
these substances, or the failure to remediate conditions effected by the
substances promptly, may adversely affect the owner's or operator's ability to
sell the real estate or borrow against the real estate.

Persons who arrange for the disposal or treatment of hazardous or toxic
substances may also be liable for the cost of removing or remediating these
substances at the disposal or treatment facility. Certain laws impose liability
for the release of asbestos into the air. Third parties may seek recovery from
owners or operators of real properties for personal injury associated with
exposure to asbestos. In connection with its ownership and operation of the
properties, the Company may be potentially liable for these costs. In addition,
the presence of hazardous or toxic substances at a site adjacent to or in the
vicinity of a property could require the owner to participate in remediation
activities in certain cases or could have an adverse effect on the value of the
property.

Although certain tenants at several of the Properties use hazardous or
toxic substances in the ordinary course of their operations, the Company
believes that those Properties are in material compliance with all federal,
state and local regulations regarding hazardous or toxic substances and the
Company is not aware of any material liability or claim relating to hazardous or
toxic substances at any of the Properties.

-7-
<PAGE>

All the Properties have been subject to at least a Phase I environmental
assessment. These assessments were intended to evaluate the environmental
condition of, and potential environmental liabilities associated with, the
Properties, and included: (i) a visual observation of the Properties during a
site visit; (ii) a review of certain records concerning the Properties including
publicly-available information concerning known conditions at other properties
in the vicinity of the Properties; (iii) consideration of the likely presence of
asbestos containing materials in the buildings on the Properties; (iv)
consideration of the likely presence of elevated levels of lead in the drinking
water; (v) an inquiry into the likely presence of polychlorinated biphenyls in
electrical transformers; (vi) consideration of the presence of underground or
above-ground storage tanks and (vii) the preparation of a written report. A
Phase I assessment does not include sampling or analysis of soil, ground water
or other environmental media or subsurface investigations.

Based on environmental investigation conducted at the time of the Merger,
the Company implemented environmental remediation plans at four Properties. The
Company has completed the remediation work for, and obtained a closure letter
from the appropriate regulatory authorities with respect to, one of those
Properties. Pursuant to an indemnification arrangement entered into by the
Company, the majority of the costs incurred for this remediation work were paid
by Trust 83. The Company has also obtained regulatory approval for remediation
plans for the remaining three Properties and has completed the work contemplated
by those plans. Regulatory authorities are currently reviewing test results to
determine whether it would be appropriate for them to issue closure letters for
those three properties. Remediation costs for these four Properties applicable
to the work done in 1996 total $55,000.

In addition, two other Properties have experienced groundwater
contamination. An environmental consultant has reported that the sources of the
contamination appear to be adjoining parcels. Two responsible parties have
acknowledged, one in writing and one orally, that they must fund remediation
costs. Management has reviewed the financial condition of the responsible
parties (one a Fortune 500 company and the other a municipality located in the
San Francisco Bay Area) and believes that both parties have the ability to fund
the costs of remediation. Accordingly, the Company has not accrued any liability
related to these two Properties.

Environmental assessments do not necessarily identify all environmental
compliance issues or the extent of required remediation for those issues they do
identify.

REGULATION. A number of federal, state and local laws (such as the
Americans with Disabilities Act) may require modification to existing buildings
to improve access to such buildings by disabled persons. Additional legislation
may impose further requirements on owners with respect to access by disabled
persons. The cost of compliance with such laws may be substantial and may reduce
overall returns on properties.

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<PAGE>

RISKS ASSOCIATED WITH RELIANCE ON FORWARD LOOKING STATEMENTS

This report contains statements which constitute forward looking statements
within the meaning of Section 27A of the Securities Act of 1933, as amended (the
"Securities Act"), and Section 21E of the Securities Exchange Act of 1934, as
amended (the "Exchange Act')/ Those statements appear in a number of places in
this report and include statements regarding the intent, belief or current
expectations of the Company and its management with respect to, among other
things: (i) potential acquisitions or property developments by the Company; (ii)
the Company's financing plans; (iii) trends affecting the Company's financial
condition or results of operations; (iv) the Company's growth strategy,
operating strategy and financing strategy; (v) the declaration and payment of
dividends; and (vi) regulatory matters affecting the Company. Readers are
cautioned that any such forward looking statements are not guarantees of future
performance and involve risks and uncertainties, and that actual results may
differ materially from those projected in the forward looking statements as a
result of various factors. Risks and uncertainties associated with the
Company's acquisition activities include risks that: acquisition opportunities
explored by the Company may be abandoned, investments will fail to perform in
accordance with expectations and that analysis with respect to the cost of
improvements to bring an acquired project up to standards will prove inaccurate,
as well as general investment risks associated with any new real estate
investment. Additional factors that may cause such differences are described in
the Risk Factors section of the Company's Registration Statement on Form S-11,
File No. 333-02322.

-9-
<PAGE>

ITEM 2. PROPERTIES.

The Company owned and operated 60 warehouse/distribution Properties and 18
light industrial Properties (collectively, the "Industrial Properties")
encompassing approximately 9.4 and 1.0 million square feet, respectively, of
leasable space that was 94% and 97% leased, respectively, as of December 31,
1996. The Company also owned and operated three retail Properties encompassing
460,992 square feet of leasable space that was 87% leased as of December 31,
1996.

INDUSTRIAL PROPERTIES

The warehouse/distribution Properties are adaptable to bulk distribution or
light assembly and manufacturing uses. They generally have clear heights in
excess of 24 feet, building depths in excess of 150 feet, office finish of less
than 15% and numerous dock high truck doors. These Properties comprise
approximately 9.4 million rentable square feet (or approximately 87% of the
total rentable square feet of the Properties) that was 94% leased to 130 tenants
at December 31, 1996. Forty-five of the warehouse/distribution Properties (64%
of total rentable square feet) are located in the Chicago, Dallas or Memphis
metropolitan areas.

The light industrial Properties are adaptable to uses similar to those of
the warehouse/distribution Properties. However, they are better suited for
smaller tenants and have lower ceiling heights and higher office finish. The
light industrial Properties generally have clear heights of 14 to 22 feet,
building depths of 60 to 150 feet and office finish of 10% to 50%. These
Properties comprise approximately 1.0 million rentable square feet (or
approximately 9% of the total rentable square footage of the Properties) that
was 97% leased to 56 tenants at December 31, 1996. Fourteen light industrial
properties (62% of total rentable square feet) are located in Dallas, Phoenix or
the Los Angeles Basin. The remaining light industrial properties are located in
the Memphis, Detroit and San Diego areas.

-10-
<PAGE>
The following table sets forth certain information relating to the
Company's Industrial Properties as of December 31, 1996.
<TABLE>
<CAPTION>

WAREHOUSE/DISTRIBUTION

RENTABLE ANNUAL NUMBER
SQUARE PERCENT BASE RENT OF
PROPERTY NAME LOCATION FEET LEASED (1) TENANTS
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
DALLAS
Great Southwest 110 Arlington, TX 163,043 100.00% $ 407,604 1
Great Southwest #4 Arlington, TX 90,880 100.00% 203,210 2
Beltline Carrollton, TX 96,000 100.00% 290,520 7
201 Regal Row Dallas, TX 59,970 100.00% 165,516 1
Northgate #4 Dallas, TX 56,633 100.00% 160,217 2
Valley Branch #2 Farmers Branch, TX 74,160 100.00% 178,308 2
Valwood 20 Farmers Branch, TX 99,600 100.00% 348,600 1
Centreport 17 Fort Worth, TX 51,923 100.00% 251,567 1
Northgate International Garland, TX 260,000 100.00% 948,698 1
Sarah Jane Parkway Grand Prairie, TX 361,690 100.00% 1,294,127 1
Las Colinas #1 Irving, TX 35,050 100.00% 110,412 1
Wildwood (2) Irving, TX 269,768 100.00% 593,484 1
Water's Ridge Lewisville, TX 367,744 100.00% 1,055,676 1
Palisades I Plano, TX 56,000 80.00% 173,216 5
Palisades II Plano, TX 56,000 80.00% 167,664 5

LOS ANGELES BASIN
Arenth Avenue City of Industry, CA 332,790 100.00% 1,085,916 1
Mission Oaks Camarillo, CA 310,736 100.00% 1,081,361 1
Wanamaker Ontario, CA 136,249 100.00% 522,000 2
Rustin Avenue Riverside, CA 113,721 100.00% 433,464 3
Valencia Industrial Building Valencia, CA 107,520 100.00% 567,706 1

MEMPHIS
Olive Branch Olive Branch, MS 480,000 100.00% 1,279,908 1
Olive Branch II Olive Branch, MS 320,000 100.00% 896,412 1
Hennessey Warehouse La Vergne, TN 96,000 100.00% 273,900 2
1550 Heil Quaker La Vergne, TN 238,900 100.00% 716,700 1
1600 Corporate Place La Vergne, TN 102,652 100.00% 307,956 1
4013 Premier Memphis, TN 181,064 0.00% -- --
4000 Air Park Cove Memphis, TN 120,640 100.00% 319,696 1
Airport Bldg #3 Memphis, TN 75,000 100.00% 167,436 2
Airport Bldg #14 Memphis, TN 175,275 100.00% 433,356 2
Airport Bldg #16A Memphis, TN 62,290 100.00% 288,3301 1
Airport Bldg #16B Memphis, TN 21,000 100.00% 86,520 1
Airport Bldg #17 Memphis, TN 142,618 100.00% 364,656 2
Delp Distribution Memphis, TN 300,000 100.00% 1,035,000 1

-11-
<PAGE>
<CAPTION>
RENTABLE ANNUAL NUMBER
SQUARE PERCENT BASE RENT OF
PROPERTY NAME LOCATION FEET LEASED (1) TENANTS
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
CHICAGO
5101 W. 122nd Street Alsip, IL 123,986 89.43% 480,788 2
Bedford Park Bedford Park, IL 200,808 100.00% 652,626 1
Crossroads Parkway Bolingbrook, IL 249,630 68.10% 651,938 2
700 Pratt Elk Grove Village, IL 81,480 100.00% 282,795 3
900 Pratt Elk Grove Village, IL 30,000 0.00% -- --
1090 Pratt Elk Grove Village, IL 24,975 100.00% 87,413 1
1100 Pratt Elk Grove Village, IL 39,500 100.00% 163,135 1
1180 Pratt Elk Grove Village, IL 24,350 100.00% 113,228 1
801 Lunt Elk Grove Village, IL 41,600 0.00% -- --
1000 Lunt Elk Grove Village, IL 121,465 100.00% 504,861 6
1201 Busse Elk Grove, IL 24,000 100.00% 126,000 1
1815 Landmeier Elk Grove, IL 77,150 100.00% 284,580 1
2375 Touhy Ave Elk Grove, IL 53,550 100.00% 237,762 1
3400 West Lake Glenview, IL 121,225 100.00% 566,596 2
Lombard Lombard, IL 193,000 16.26% 156,000 1
17025 Wallace South Holland, IL 95,515 100.00% 364,907 3
17129 Wallace South Holland, IL 84,000 100.00% 310,318 1

COLUMBUS
Crosswind Drive Columbus, OH 1,014,592 100.00% 2,790,128 1

SAN FRANCISCO BAY AREA
Overlake Place Newark, CA 160,000 100.00% 777,262 1
San Carlos Industrial San Carlos, CA 134,352 100.00% 1,004,622 8
Gold River Lane Stockton, CA 351,788 100.00% 1,279,920 1

SEATTLE
Park At Woodinville Woodinville, WA 237,221 96.22% 1,251,015 14

OTHER
Birmingham 1 (3) Birmingham, AL 78,000 100.00% 243,420 5
Birmingham 2 (3) Birmingham, AL 79,095 56.08% 155,769 2
Baxter Little Rock, AR 50,000 100.00% 162,500 1
Port Distribution Little Rock, AR 185,250 100.00% 468,675 3
Pontiac Pontiac , MI 74,400 100.00% 337,776 1
----------------------------------------

TOTAL WAREHOUSE/DISTRIBUTION PROPERTIES 9,365,848 93.88% $ 29,663,169 130
----------------------------------------
----------------------------------------

-12-
<PAGE>
<CAPTION>
LIGHT INDUSTRIAL

RENTABLE ANNUAL NUMBER
SQUARE PERCENT BASE RENT OF
PROPERTY NAME LOCATION FEET LEASED (1) TENANTS
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
DALLAS
Northgate #5 Dallas, TX 31,747 100.00% $ 119,114 3
Northgate #28 Dallas, TX 36,736 100.00% 119,392 1
Regal Empress Dallas, TX 46,509 100.00% 273,719 6
Valley Branch #1 Farmers Branch, TX 33,000 100.00% 138,902 7
Las Colinas #4 Irving, TX 22,159 55.31% 45,192 4
Las Colinas #5 Irving, TX 77,304 100.00% 231,267 3

LOS ANGELES BASIN
Chatsworth Office Building Chatsworth, CA 40,000 100.00% 297,600 1
Cypress A Building Cypress, CA 32,256 100.00% 278,692 1
Cypress B Building Cypress, CA 68,760 100.00% 476,943 3
Cypress C Building Cypress, CA 36,216 100.00% 308,560 1
North Irvine Santa Ana, CA 56,800 100.00% 467,5781 2

MEMPHIS
Willow Lake Memphis, TN 65,400 100.00% 523,200 1

PHOENIX
Phoenix N. 23rd Phoenix, AZ 40,980 50.00% 62,699 1
Phoenix N. 27th Phoenix, AZ 32,480 100.00% 222,163 1
Phoenix Plaza Three Phoenix, AZ 62,780 100.00% 429,415 1

OTHER
6355 Nancy Ridge Dr. San Diego, CA 5,294 100.00% 40,656 1
Scripps Venturers San Diego, CA 184,761 100.00% 1,403,100 6
Troy Tech II Troy, MI 122,829 100.00% 830,541 3
- -----------------------------------------------------------------------------------------------

TOTAL LIGHT INDUSTRIAL PROPERTIES 996,011 96.95% $ 6,268,733 56
-----------------------------------------
-----------------------------------------

TOTAL INDUSTRIAL PROPERTIES 10,361,859 94.18% $ 35,931,902 186
-----------------------------------------
-----------------------------------------
</TABLE>

- ---------------
(1) Represents annualized monthly Base Rent from leases in effect as of
December 31, 1996. For purposes of this report, "Base Rent" means
contractual gross rent and, therefore, excludes payments by tenants on
account of real estate taxes and operating expense reimbursements.

(2) The Company has entered into a contract to sell the Wildwood Property.

(3) On January 10, 1997, the Company sold the Birmingham I and II properties.
See Item 7 below.

-13-
<PAGE>

LEASES EXPIRATIONS OF INDUSTRIAL PROPERTY. At December 31, 1996, 84
leases, representing 60% of the annual Base Rent from the leased space at the
Industrial Properties as of December 31, 1996 are leased on a triple net basis
with tenants responsible for most day-to-day operating expenses such as real
estate taxes, insurance, utilities, maintenance of common areas and non-
structural repairs. With regard to retaining existing tenants, the Company's
tenant retention rate on a square footage basis for the Company's Industrial
Properties during 1996 was 66%. In connection with renewals and released space,
the average base rents increased by 2% during 1996. The Company also expects to
obtain rental increases from existing leases which expire after December 31,
1996 but have scheduled rental adjustments (both fixed and inflation indexed).
These leases comprise approximately 56% of the annual base rent of the Company's
industrial leases.

The following table shows scheduled lease expirations for the Industrial
Properties for all leases in effect as of December 31, 1996. The table assumes
that none of the tenants exercises any renewal option or termination right. The
annual average rentable square footage subject to leases expiring between 1997
and 2011 for warehouse/distribution Properties and light industrial Properties
is approximately 586,182 and 107,291 square feet, respectively.

LEASE EXPIRATIONS

PERCENTAGE CUMULATIVE
OF TOTAL % OF TOTAL ANNUAL
SQUARE FEET LEASED LEASED BASE RENT
NUMBER OF SUBJECT TO SQUARE FEET SQUARE FEET UNDER
LEASES EXPIRING OF EXPIRING OF EXPIRING EXPIRING
YEAR EXPIRING LEASES LEASES LEASES LEASES (1)
---- -------- ------ ------ ------ ----------
WAREHOUSE/DISTRIBUTION AND LIGHT INDUSTRIAL:

1997 57 2,190,800 22.45% 22.45% $ 7,956,734
1998 28 777,188 7.96% 30.41% 2,750,246
1999 39 1,160,669 11.89% 42.31% 5,264,517
2000 25 875,431 8.97% 51.28% 3,206,233
2001 30 1,138,947 11.67% 62.95% 4,780,224
2002 5 80,736 0.83% 63.78% 391,032
2003 2 52,480 0.54% 64.32% 382,968
2004 4 212,910 2.18% 66.50% 792,002
2005 5 838,361 8.59% 75.09% 2,376,507
2006 5 1,701,400 17.44% 92.53% 5,681,641
2011 2 729,434 7.47% 100.00% 2,349,803
----------------------- ---------------
202 9,758,356 $ 35,931,907
----------------------- ---------------
----------------------- ---------------

WAREHOUSE/DISTRIBUTION:

1997(2) 37 1,870,661 21.28% 21.28% $ 6,112,725
1998 21 747,347 8.50% 29.77% 2,595,693
1999 23 912,463 10.38% 40.15% 3,472,421
2000 15 800,904 9.11% 49.26% 2,819,255
2001 23 964,932 10.97% 60.24% 3,469,072
2002 2 42,360 0.48% 60.72% 150,048
2004 4 212,910 2.42% 63.14% 792,002
2005 4 810,327 9.22% 72.35% 2,220,510
2006 5 1,701,400 19.35% 91.70% 5,681,641
2011 2 729,434 8.30% 100.00% 2,349,803
----------------------- ---------------
136 8,792,738 $ 29,663,169
----------------------- ---------------
----------------------- ---------------

-14-
<PAGE>

LEASE EXPIRATIONS

LIGHT INDUSTRIAL:

1997(3) 20 320,139 33.15% 33.15% $ 1,844,009
1998 7 29,841 3.09% 36.24% 154,552
1999 16 248,206 25.70% 61.95% 1,792,096
2000 10 74,527 7.72% 69.67% 386,979
2001 7 174,015 18.02% 87.69% 1,311,152
2002 3 38,376 3.97% 91.66% 240,984
2003 2 52,480 5.43% 97.10% 382,968
2005 1 28,034 2.90% 100.00% 155,997
----------------------- ---------------
66 965,618 $ 6,268,738
----------------------- ---------------
----------------------- ---------------

- ---------------
(1) Represents annualized monthly Base Rent of the leases in effect at December
31, 1996.

(2) Includes two leases that are on a "month-to-month" basis as of December 31,
1996 (33,495 square feet and $119,280 of annualized Base Rent).

(3) Includes five leases that are on a "month-to-month" basis as of December
31, 1996 (25,766 square feet and $99,000 of annualized Base Rent).

RETAIL PROPERTIES

At December 31, 1996, the Company owned three retail Properties consisting
of one neighborhood and two community shopping centers with a total of 460,992
square feet of retail space. That space was 87% leased to 62 tenants. These
Properties account for 4% of the total rentable square feet of the entire
portfolio. The Company is actively marketing for sale one retail Property,
representing 75,881 square feet or 16% of the total rentable square feet of
retail Properties. The Company expects to sell the remaining retail Properties
in its portfolio as market conditions warrant and purchase, with the net
proceeds from such sales, industrial properties that meet the Company's
investment objectives. The Company's investments in retail properties are
subject to risks incident to: (i) the oversupply of retail space in certain
areas of the United States; (ii) severe competition from new retailers and the
nationwide expansion of existing retailers; and (iii) various negative general
economic factors.

In addition, some of the retail leases include guaranteed minimum rents
plus potential percentage rents equal to a specified percentage of the tenant's
sales over specified amounts. During 1996, few retail tenants' sales reached the
amounts specified in the percentage rent clauses of their leases.

-15-
<PAGE>

The following table sets forth information relating to the Company's retail
properties as of December 31, 1996.

RENTABLE ANNUAL NUMBER
SQUARE PERCENT BASE RENT OF
PROPERTY NAME LOCATION FEET LEASED (1) TENANTS
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Golden Cove Shopping Center Rancho Palos 75,881 39.88% $ 467,995 20
Verdes, CA
Marietta Trade Center Marietta, GA 305,791 94.70% 2,468,208 41
Live Oak Parkway Norcross, GA 79,320 100.00% 500,000 1
----------------------------------------

TOTAL RETAIL PROPERTIES 460,992 86.59% $ 3,436,203 62
----------------------------------------
----------------------------------------
</TABLE>

- -------------
(1) Represents annualized monthly Base Rent from leases in effect as of December
31, 1996.

LEASES EXPIRING OF RETAIL PROPERTIES. The average rentable square feet
subject to expiring leases for the retail Properties between 1997 and 2008 is
approximately 33,263 square feet per year. The following table shows scheduled
lease expirations for the retail Properties for all leases in effect as of
December 31, 1996. The table assumes that none of the tenants exercises any
renewal option or termination right.

1997(2) 18 28,741 7.20% 7.20% $ 283,586
1998 15 43,572 10.92% 18.12% 586,893
1999 15 36,479 9.14% 27.26% 384,560
2000 7 28,588 7.16% 34.42% 353,013
2001 1 6,179 1.55% 35.97% 47,269
2002 3 4,759 1.19% 37.16% 52,464
2004 1 9,600 2.41% 39.56% 110,400
2005 1 3,200 0.80% 40.36% 117,316
2008 3 238,042 59.64% 100.00% 1,500,702
---------------------- ----------------
64 399,160 $ 3,436,203
---------------------- ----------------
---------------------- ----------------

- ---------------
(1) Represents annualized monthly Base Rent of the leases in effect at
December 31, 1996. For purposes of this report, "Base Rent" means
contractual gross rent and, therefore, excludes payments by tenants on
account of real estate taxes and operating expense reimbursements.

(2) Includes five leases that are on a "month-to-month" basis as of December
31, 1996 (15,260 square feet and $116,495 of annualized Base Rent).

-16-
<PAGE>

PRINCIPAL TENANTS

The 15 largest tenants accounted for approximately 50% (or approximately
$18.8 million) of the Company's total annual Base Rent at December 31, 1996. The
weighted average remaining lease term for the 15 largest tenants was 7.4 years
at December 31, 1996. Although the loss of several significant tenants could
have a materially adverse effect on the financial condition of the Company, the
Company believes that the total number and geographical distribution of tenants
at the warehouse/distribution and light industrial Properties contributes to the
stability of the portfolio, eases releasing of space subject to expiring leases
and mitigates the potential impact on cash flows due to periodic vacancies.

The table below shows the 15 largest tenants occupying the Company's
Properties, as measured by annualized Base Rent as of December 31, 1996.

NUMBER SQUARE ANNUAL PERCENTAGE
OF FEET BASE OF TOTAL
LEASES LEASED RENT (1) PORTFOLIO
------ --------- ------------ ----------
Sears Roebuck and Co. (2) 3 1,814,592 $ 4,966,448 12.6%
Continental General Tire, Inc. 2 632,790 2,120,916 5.4
Allegiance Healthcare Corporation (3) 2 411,690 1,456,627 3.7
Technicolor Videocassette, Inc. 1 310,736 1,379,668 3.5
Kraft Foods, Inc. 1 351,788 1,279,920 3.3
L.D. Brinkman and Company 1 367,744 1,055,676 2.7
Cumberland Swan, Inc. 2 341,552 1,024,656 2.6
Carnation Co. (4) 1 260,000 948,698 2.4
Mitchell International 3 84,706 786,312 2.0
BT Office Products International, Inc. 1 160,000 777,262 2.0
Lake River Corporation 1 200,808 652,626 1.7
Bank One Arizona, NA 3 95,260 651,578 1.7
Delta Lithograph Corporation 1 107,520 567,706 1.4
Super Discount Markets 1 76,800 554,227 1.4
The Woodbridge Group 3 70,464 549,197 1.4
---- --------- ------------ ------
Total 26 5,286,450 $ 18,771,517 47.8%
---- --------- ------------ ------
---- --------- ------------ ------
- ----------
(1) Represents annualized Base Rent from leases in effect as of December 31,
1996.

(2) These leases are signed by Sears Logistics Services, Inc. and guaranteed by
Sears Roebuck and Co. These leases cover two Properties: Olive Branch
(Memphis) and Crosswind Drive (Columbus). The two leases covering the Olive
Branch Property expire March 31, 2005, feature two five-year renewal
options and include rent escalation provisions during the final five years
of the leases. The lease covering the Crosswind Drive Property expires in
September 2006, features two five-year renewal options and includes rent
escalation provisions in years six through ten.

(3) This lease is guaranteed by Baxter Healthcare Corporation.

(4) This tenant has sub-leased this space to Blockbuster Videos, Inc.

-17-
<PAGE>

ITEM 3. LEGAL PROCEEDINGS.

The Company currently is not involved in any litigation nor, to its
knowledge, is any litigation currently threatened, except for routine litigation
arising in the ordinary course of business.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.

No matters were submitted to a vote of the Company's security holders
during the last quarter of its fiscal year ended December 31, 1996.

-18-
<PAGE>

PART II

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS.

The Company's Common Stock has been listed on the NYSE since February 26,
1996, under the symbol "MDN." On February 20, 1997, the last reported sales
price per share of Common Stock on the NYSE was $22.375. There were
approximately 19,090 holders of record of the Company's Common Stock at February
20, 1997. The following table sets forth the high and low last reported closing
sales prices per share of the Common Stock on the NYSE since it has been listed.

PERIOD HIGH LOW
-----------------------------------------------------------------
1996
February 26, 1996 through March 31, 1996 $16.625 $15.125
Second Quarter $18.375 $15.875
Third Quarter $18.125 $17.125
Fourth Quarter $21.750 $17.125

There are two holders of record of the Series B Preferred Stock owning
2,272,727 shares. The Series B Preferred Stock is convertible into Common Shares
under certain conditions.

Under the REIT tax rules, the Company will be required to make
distributions to shareholders that aggregate annually to at least 95% of its
taxable income. For the period beginning February 23, 1996 (the date the Merger
and Asset Purchase were completed) through March 31, 1996, the Company declared
and paid distribution of approximately $0.12 per share to holders of record of
Common Stock (equivalent to a quarterly distribution of $0.29 per share).
Thereafter, the Company has declared and paid regular quarterly distributions of
$0.29 per share to holders of its Common Stock, which on an annualized basis is
equivalent to an annual distribution of $1.16 per share of Common Stock. In
addition, the terms of the outstanding shares of Series B Preferred Stock
provide for cumulative dividends at an initial share rate of at least $0.31 per
quarter or $1.24 per year. For the period beginning February 23, 1996 (the date
of completion of the Preferred Stock Private Placement) through March 31, 1996,
the Company declared and paid a distribution per share to the holders of record
of the Series B Preferred Stock of $0.13 (equivalent to a quarterly distribution
of approximately $0.31 per share). Thereafter, the Company has declared and
paid regular quarterly distributions of $0.31 per share to holders of Series B
Preferred Stock. Future distributions by the Company will be at the discretion
of the Company's Board of Directors (the "Board") and will depend on the actual
funds from operations of the Company, its financial condition, its capital
requirements, the annual distribution requirements under the REIT provisions of
the Code and such other factors as the Board deems relevant. In addition, the
rights of holders of Common Stock to receive distributions are junior to the
rights of the holders of the Series B Preferred Stock; the terms of the Series B
Preferred Stock provide that no dividends may be paid on shares of Common Stock
if dividends to which the holders of Series B Preferred Stock are entitled are
in arrears. There can be no assurance that any such distributions will be made
by the Company.

As a result of the Merger, holders of Trust VI common stock and Trust VII
common stock received a total of 553,000 Merger Warrants. The Merger Warrants
were issued in certificated form under a Warrant Agreement between the Company
and First Chicago Trust Company of New York, as warrant agent.

The Merger Warrants were issued on April 8, 1996. Each Merger Warrant
entitles the holder to receive one share of Common Stock upon its exercise. The
Merger Warrants are listed for trading on the American Stock Exchange. The
Merger Warrants are exercisable during the period May 23, 1997 through February
24, 1999. The exercise price of the Merger Warrants is $16.23 (the average of
the closing prices of the Common Stock for the first 20 trading days after the
Merger).

-19-
<PAGE>

The exercise price of the Merger Warrants and the number of shares of
Common Stock issuable upon exercise of the Merger Warrants are subject to
adjustment in the event of stock dividends, stock splits, subdivisions,
reclassifications, reorganizations, consolidations and mergers. During the
period that the Merger Warrants are exercisable, the Merger Warrants may be
exercised by delivering the certificates representing the Merger Warrants, and
paying the exercise price by cash or certified or bank check, to the warrant
agent. The Merger Warrants may not be exercised unless a registration statement
under the Securities Act, covering the underlying shares of Common Stock, is
current and effective and those shares of Common Stock have been qualified, or
there is an exemption from applicable qualification requirements, under the
securities laws of the state of residence of the holder of the Merger Warrants.
The shares of Common Stock underlying the Merger Warrants have been registered
under the Company's registration statement declared effective January 6, 1996.
However, the Company may suspend the exercisability of the Merger Warrants
during the exercise period if, for any reason, no registration statement is
effective with respect to the shares of Common Stock underlying the Merger
Warrants (for example, because a stop order relating to the Registration
Statement issued by the SEC is then in effect) or the Company determines that
the Prospectus does not provide current information as required by the
Securities Act or otherwise needs to be amended in order to comply with the
Securities Act. The Company would extend the exercise period of the Merger
Warrants in the case of certain such suspensions.

If a holder of Merger Warrants fails to exercise his or her Merger Warrants
before their expiration, those warrants will expire and the holder will have no
further rights with respect to Merger Warrants. A holder of Merger Warrants will
not have any rights, privileges or liabilities of a stockholder of the Company
prior to exercise of the Merger Warrants, including the rights to vote and to
receive distributions.

DIVIDEND REINVESTMENT AND STOCK PURCHASE PLAN

The Company has adopted a dividend reinvestment and stock purchase plan
designed to provide holders of Common Stock with a convenient and economical
means to reinvest all or a portion of their cash dividends in shares of Common
Stock and to acquire additional shares of Common Stock through voluntary
purchases. First Chicago Trust Company of New York, which serves as the
Company's transfer agent, administers the dividend reinvestment and stock
purchase plan.

-20-
<PAGE>

ITEM 6. SELECTED FINANCIAL DATA.

The following table summarizes certain selected financial data for the
Company as of and for the year ended December 31, 1996 and for the period from
May 18, 1995 (inception) to December 31, 1995. The Company was incorporated on
May 18, 1995. Except for interest earned on its investments and general and
administrative expenses which have been incurred and accrued, the Company had no
other activities prior to February 23, 1996, the Merger date. This table should
be read in conjunction with the more detailed financial statements included
elsewhere herein.

In addition, the table summarizes certain selected financial data of the
Merged Trusts as of and for the five years ended December 31, 1995 and for the
period January 1, 1996 to February 23, 1996. This table should be read in
conjunction with the more detailed financial statements of the Merged Trusts
incorporated as an exhibit to this report.

SELECTED FINANCIAL AND OTHER DATA
As of and for the periods indicated
(in thousands, except per share data)
<TABLE>
<CAPTION>

COMPANY (1) MERGED TRUSTS (2)
--------------------------------------------------------------------------------------------------
YEAR MAY 18, JANUARY 1,
ENDED 1995 TO 1996 TO YEAR ENDED DECEMBER 31,
DECEMBER 31, DECEMBER 31, FEBRUARY 23, ----------------------------------------------------------
1996 1995 1996(2) 1995 1994 1993 1992 1991
------------ ------------------------ --------- ----------------------- --------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
OPERATING DATA:
Total Revenues $ 35,041 $ 33 $ 5,158 $ 34,597 $ 34,822 $ 35,024 $ 38,096 $ 39,587
Income (Loss) Before
Gain on Sale of Properties
and Extraordinary
Items 11,161 (1,293) (542) 852 (11,135) (9,993) (18,884) (17,878)
Gain on Sale of Properties 3,313 -- -- -- -- -- -- --
Extraordinary Items (411) -- -- (1,865) -- 796 -- --
Net Income (Loss) 14,063 (1,293) (542) (1,013) (11,135) (9,197) (18,884) (17,878)
Net Income (Loss) Allocable
to Common 11,651 (1,322) -- -- -- -- -- --
Net Income (Loss) Per
Common Share:
Before Extraordinary
Items $ 1.38 $ (32.05) $ -- $ -- $ -- $ -- $ -- $ --
Net Income (Loss) 1.33 (32.05) -- -- -- -- -- --
Distributions Per
Share:
Common Stock 0.99 -- -- -- -- -- -- --
Preferred Dividends 1.06 0.03 -- -- -- -- -- --

BALANCE SHEET DATA:
Investment in Real
Estate, Net $ 321,984 $ -- $ -- $ 217,216 $ 226,219 $ 249,492 $ 277,561 $ 300,854
Total Assets 333,063 3,724 -- 247,159 250,986 275,951 304,426 323,735
Mortgage Loans 66,094 -- -- 109,728 137,143 151,130 168,059 166,534
Unsecured Credit
Facility 11,500 -- -- -- -- -- -- --
Stockholders' Equity
(Deficit) 243,513 (714) -- 106,375 107,388 118,523 128,182 148,914

OTHER DATA:
Funds From
Operations (3) $ 16,076 $ -- $ -- $ -- $ -- $ -- $ -- $ --
Cash Flows Provided By
(Used In):
Operating Activities 20,615 (459) (549) 7,229 6,755 8,226 6,946 5,140
Investing Activities (86,302) (576) (185) (5,039) 5,949 (466) (1,723) (3,110)
Financing Activities 68,154 1,510 (442) (6,069) (14,200) (4,696) (1,007) 1,414
Weighted Average:
Common Shares
Outstanding 8,779 900 -- -- -- -- -- --
Preferred Shares
Outstanding 2,273 1,000 -- -- -- -- -- --
</TABLE>

-21-
<PAGE>

- ---------------
(1) Reflects the historical results of the Company as of and for the year ended
December 31, 1996, and as of and for the period from May 18, 1995
(inception) to December 31, 1995.

(2) Reflects the historical operations of the Merged Trusts as of and for the
period from January 1, 1996 to the Merger date of February 23, 1996, and as
of and for each of the five years ended December 31, 1995.

(3) In addition to cash flows and net income, management and industry analysts
generally consider Funds From Operations to be one additional measure of
the performance of an equity REIT because, together with net income and
cash flows, Funds From Operations provides investors with an additional
basis to evaluate the ability of an entity to incur and service debt and to
fund acquisitions and other capital expenditures. However, Funds From
Operations does not measure whether cash flow is sufficient to fund all of
an entity's cash needs including principal amortization, capital
improvements, and distributions to stockholders. Funds From Operations also
does not represent cash generated from operating, investing or financing
activities as determined in accordance with generally accepted accounting
principles. Funds From Operations should not be considered as an
alternative to net income as an indicator of an entity's operating
performance or as an alternative to cash flow as a measure of liquidity.
Funds From Operations is defined by NAREIT as net income or loss, excluding
gains or losses from debt restructurings and sales of properties, plus
depreciation and amortization of real estate assets, and after adjustments
for unconsolidated partnerships and joint ventures. The Company calculates
Funds From Operations as defined by NAREIT and as interpreted in the White
Paper (i.e., the Company does not add back amortization of deferred
financing costs and depreciation of non-rental real estate assets to net
income). A reconciliation of Funds From Operations to net income for the
year ended December 31, 1996 is set forth below:

FOR THE YEAR
ENDED
DECEMBER 31,
1996
-----------------------------------------------------
Net Income $ 14,063,000
Reconciling Items:
Depreciation and Amortization of
Real Estate Assets 4,915,000
Gain on Sale of Properties (3,313,000)
Extraordinary Item 411,000
-----------------------------------------------------
Funds From Operations $ 16,076,000
-----------------------------------------------------
-----------------------------------------------------

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<PAGE>

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS.

INTRODUCTION

The Company is a self-administered and self-managed real estate operating
company engaged primarily in the business of owning, acquiring, developing,
managing, and leasing income-producing warehouse/distribution and light
industrial properties. (See Item 1 above.) The Company's principal asset is
its portfolio of 78 Industrial Properties and three retail properties. (See
Item 2 above.)

This section should be read in conjunction with the financial statements
and supplementary data listed in Item 8 and Item 14 below. Unless otherwise
defined in this report, or unless the context otherwise requires, the
capitalized words or phrases used in this section either (a) describe accounting
terms that are used as line items in those financial statements, or (b) have the
meanings ascribed to them in such financial statements and the notes thereto.

LIQUIDITY AND CAPITAL RESOURCES

GENERAL

Prior to the Merger, the Merged Trusts historically used equity capital and
long-term debt financing as their principal sources for funding property
acquisitions. The Company intends to finance property acquisitions, development,
expansions and renovations using a combination of cash flow from operations and
bank and institutional debt financing, supplemented with private or public debt
or equity placements. Where intermediate or long-term debt financing is
employed, the Company generally seeks to obtain fixed interest rates or enter
into agreements intended to cap the effective interest rate on floating rate
debt. The Company intends to operate with a ratio of debt-to-total market
capitalization (such ratio representing total indebtedness divided by total
market capitalization comprising the sum of total indebtedness, plus the market
value of the Company's Common Stock and the liquidation preference value of the
Series B Preferred Stock) which generally will not exceed 50%.

SOURCES OF LIQUIDITY

The Company's main sources of liquidity are: (i) cash flows from operating
activities, (ii) cash reserves, (iii) borrowings under the Unsecured Credit
Facility, (iv) proceeds from private or public equity or debt placements and
(iv) proceeds from the sale of properties. A summary of the Company's
historical cash flows for the year ended December 31, 1996 is as follows:

Cash flows provided by (used in):
Operating activities $ 20,615,000
Investing activities (86,302,000)
Financing activities 68,154,000

As of December 31, 1996, the Company had approximately $2,942,000 in cash
and cash equivalents.

As of December 31, 1995, the Merged Trusts and Trust 83 had approximately
$126.1 million in total debt, $33.5 million of which was paid off concurrent
with the Merger using a portion of the net proceeds from the Preferred Stock
Private Placement which consisted of the sale in a private placement of
2,272,727 shares of Series B Preferred Stock, resulting in an outstanding debt
balance after the Merger of approximately $92.6 million. Also subsequent to the
Merger, the Company drew on the Unsecured Credit Facility and used the proceeds
to retire all other debt assumed upon the Merger and Asset Purchase, except for
the $66.1 million outstanding on the fixed rate debt facility the ("Mortgage
Loan"). The Mortgage Loan bears interest at the annual rate of 8.63% and
requires interest only payments until its maturity in 2005.

-23-
<PAGE>

During the year ended December 31, 1996, the Company borrowed $118,400,000
on its Unsecured Credit Facility and used the proceeds therefrom to payoff debt
acquired in connection with the Merger and Asset Purchase and fund property
acquisitions.

The Unsecured Credit Facility bears interest at LIBOR plus 1.7% (7.26% at
December 31, 1996), requires interest only payments until maturity in February
1998, and provides for fees on the unused portion of the facility of 25 basis
points if 65% or less of the facility is used and 15 basis points if more than
65% of the facility is used. In addition, the Company (i) paid an agency fee of
$15,000 for the twelve-month period ending February 1, 1997 and (ii) will pay an
agency fee of $30,000 for the twelve-month period ending February 1, 1998. The
Unsecured Credit Facility provides for a maximum borrowing amount of $75
million. The Company is currently negotiating for an increase in the maximum
borrowing amount under the Unsecured Credit Facility to $150 million, and an
extension of the maturity date. In addition, the Company may incur indebtedness
in the future that also bears interest at a variable rate and may be required to
refinance its debt at higher rates. Increases in interest rates could increase
the Company's interest expense, which could adversely affect the Company's
ability to pay expected distributions to stockholders. The Company intends to
use future borrowings on its Unsecured Credit Facility to finance acquisitions
and development and provide working capital.

The expected debt maturities in 1997 and thereafter, after giving effect to
paydowns made during 1996 are as follows:

1997 ---
1998 $ 11,500,000
1999 ---
2000 ---
2001 ---
Thereafter 66,094,000

The $11,500,000 debt maturing in 1998 represents the borrowings outstanding
on the Unsecured Credit Facility. This amount will change to the extent there
are borrowings and/or pay downs made on the facility in 1997.

The Company currently has a policy of incurring debt only if, upon such
incurrence, the Company's debt-to-total market capitalization would be 50% or
less. However, the Company's organizational documents do not contain any
limitation on the amount of indebtedness the Company may incur. Accordingly,
the Board could alter or eliminate this policy and would do so if, for example,
it were necessary in order for the Company to continue to qualify as an REIT.
If this policy were changed, the Company could become more highly leveraged,
resulting in an increase in debt service that could adversely affect the cash
available for distribution to stockholders and could increase the risk of
default on the Company's indebtedness.

On April 3, 1996, the Company completed a public offering of 1,500,000
shares of its Common Stock at an offering price of $16.375 per share, resulting
in gross proceeds of $24,563,000 (the "April offering"). The Company used the
net proceeds of the April offering and existing cash reserves to make a
$24,000,000 payment on its Unsecured Credit Facility.

On November 25, 1996, the Company completed a public offering of 3,400,000
shares of its Common Stock at an offering price of $18.25 per share, resulting
in gross proceeds of $62,050,000 (the "November offering"). The Company used
the net proceeds of the November offering and existing cash reserves to make a
$58,650,000 payment on its Unsecured Credit Facility. In accordance with the
underwriting agreement entered into by the Company and its underwriters for the
November offering, on December 23, 1996, the Company sold an additional 510,000
shares of the Common Stock to the underwriters at an offering price of $18.25
per share, resulting in gross proceeds of $9,308,000. The Company used the net
proceeds to fund a property acquisition.

-24-
<PAGE>

In connection with the Merger, the Company issued approximately 553,000
warrants to purchase an equal number of shares of the Company's Common Stock
(the "Merger Warrants"). The Merger Warrants are exercisable during the period
May 23, 1997 through February 24, 1999. The exercise price of the Merger
Warrants is $16.23 per share.

In addition, the Company issued a warrant to purchase 184,900 shares of the
Company's Common Stock at an exercise price of $14.60 per share. The warrant is
exercisable in whole or in part at any time from May 23, 1997 to February 23,
1999.

On May 15, 1996, the Company sold the Moorpark R & D Building located in
Moorpark, California for $4,100,000. On August 23, 1996, the Company sold for
an aggregate price of $3,900,000 three properties located in Alabama: Progress
Center I, Progress Center II and 8215 Highway Building. On December 31,1996,
the Company sold the Seatac and Meridian Villages located in Bellingham,
Washington for an aggregate of $17,740,000; and eight properties located in
Phoenix, Arizona for a total selling price of $7,658,000. (The properties sold
are collectively referred to as "Properties Disposed".) After closing costs,
escrow holdback, early release of funds and pro-rated items which totaled
$1,975,000, the Company received net proceeds from these property sales totaling
$31,423,000. The net proceeds were used to pay down borrowings on the Unsecured
Credit Facility.

On January 10, 1997, the Company sold the Birmingham 1 & 2 properties
located in Birmingham, Alabama for $3,400,000. After closing costs and pro-
rated items which totaled $173,000, the Company received net proceeds from this
property sale totaling $3,127,000. The Company has entered into an agreement to
sell the Wildwood Pioneer Property located in Irving, Texas. The net proceeds
from property dispositions will be used to repay borrowings on its Unsecured
Credit Facility.

USES OF LIQUIDITY

The Company's principal applications of its cash resources are: (i)
property operating costs, property taxes, general and administrative expenses,
and interest expense, (ii) capital improvements, (iii) payment of distributions,
(iv) principal paydowns on its debt, and (v) property acquisitions.

The Company anticipates that it will have sufficient Funds From Operations
during 1997 to fund : (i) its operating needs, (ii) the capital improvements on
the Properties, and (iii) the proposed distributions to its common and preferred
stockholders. Planned capital improvements consist only of tenant improvements
and other expenditures necessary to lease and maintain the properties.

The Company currently expects to pay regular quarterly distributions of
$0.29 per share to holders of its Common Stock, which on annualized basis is
equivalent to an annual distribution of $1.16 per share of Common Stock. The
Company also currently expects to pay holders of the Series B Preferred Stock
regular quarterly distributions of $0.31 per share, or an annualized dividend
rate of $1.24 per share of Series B Preferred Stock. The Company's anticipated
distribution level is based on a number of assumptions relating to future
operations of the Company. See "Market for Registrant's Common Equity and
Related Stockholder Matters."

During the year ended December 31, 1996, the Company repaid borrowings on
its Unsecured Credit Facility totaling $106,900,000 using the net proceeds
received from: (i) the April offering and November offering, (ii) proceeds
received from the sales of Progress Centers I and II, 8215 Highway Building,
Moorpark R & D Building, Seatac Village, Meridian Village and Phoenix
properties; and (iii) existing cash reserves.

As of December 31, 1996, the Company had borrowings of $11,500,000
outstanding on its Unsecured Credit Facility.

-25-
<PAGE>

During the year ended December 31, 1996, the Company purchased eight
properties located in California, Illinois and Ohio with an aggregate square
footage of 2,669,506 ("Operating Properties Acquired"). The purchase prices
totaled $89,320,000 and were financed by applying a $300,000 deposit paid in
1995, with the balance funded by draws on the Unsecured Credit Facility and
proceeds received from the Company's public offerings of shares of Common Stock.

Also during the year ended December 31, 1996, the Company entered into
separate agreements with five identified tenants to develop five build-to-suit
facilities with an aggregate square footage of 1,221,594. The two facilities
located in Texas were completed in December 1996. The total cost for the design
and construction of the three remaining facilities located in Minnesota, Georgia
and Florida is estimated to total approximately $21,629,000, with targeted
completion dates of March 1997 for the facility located in Minnesota, and
September 1997 for the facilities located in Georgia and Florida. The Company
funded a portion of these draws with cash on-hand and anticipates funding a
majority of the remaining costs with borrowings on its Unsecured Credit
Facility. As of December 31, 1996, the Company had incurred total project costs
of $33,235,000 relating to these developmental projects.

The Company, through a joint venture of which it has an 86% interest, is
under contract to acquire a 120,000 square foot industrial property valued at
$4,955,000 in the Orlando market.

Subsequent to December 31, 1996, two limited partnerships in which the
Company has a 50% beneficial interest entered into two separate agreements to
develop a 129,800 and 117,800 square foot warehouse/distribution facility,
respectively. Both facilities are located in Allen, Texas. Development and
lease-up costs for the two facilities is estimated to total approximately $8.9
million.

OTHER REAL ESTATE ACTIVITY

Two Properties have experienced groundwater contamination. An
environmental consultant has reported that the sources of the contamination
appear to be adjoining parcels. Two responsible parties have acknowledged, one
in writing and one orally, that they must fund remediation costs. Management
has reviewed the financial condition of the responsible parties (one a Fortune
500 company and the other a municipality located in the San Francisco Bay Area)
and believes that both parties have the ability to fund the costs of
remediation. Accordingly, the Company has not accrued any liability related to
these two Properties.

MATERIAL CHANGES IN RESULTS OF OPERATIONS

COMPARISON OF HISTORICAL RESULTS OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31,
1996 TO HISTORICAL RESULTS OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 1995

The Company was incorporated on May 18, 1995. The Merger and Asset
Purchase were consummated on February 23, 1996. Except for interest earned on
its investments and general and administrative expenses which have been incurred
and accrued, the Company had no operating activities as of December 31, 1995.
As a result, the Company's historical results of operations for the year ended
December 31, 1996 are not comparable to the prior year's historical results of
operations. The Company's historical results of operations for the year ended
December 31, 1996 include the operating activities subsequent to the Merger and
Asset.

-26-
<PAGE>

COMPARISON OF HISTORICAL AS ADJUSTED RESULTS OF OPERATIONS FOR THE YEAR ENDED
DECEMBER 31, 1996 TO HISTORICAL AS ADJUSTED RESULTS OF OPERATIONS FOR THE YEAR
ENDED DECEMBER 31, 1995.

The unaudited historical as adjusted operating data of the Company for the
years ended December 31, 1996 and 1995 has been prepared to reflect (i) the
respective historical results of the Merged Trusts and the properties acquired
from Trust 83 ("Trust 83 Properties); (ii) the May 31, 1995 closing of the
transactions under the stock purchase agreements between Hunt and each of the
Merged Trusts and the stock purchase agreements between USAA, and each of the
Merged Trusts, and the concurrent restructuring or retirement of the Merged
Trusts' indebtedness ("Recapitalization"); (iii) the incremental effects of the
Merger, the retirement of certain indebtedness using the net proceeds of the
Preferred Stock Private Placement and availability of funds on the Unsecured
Credit Facility ("Refinancing"); and the effect of purchase accounting on the
historical results of the Merged Trusts and the Trust 83 Properties, and (iv)
the historical results of the Company to reflect the post-Merger operations of
the Company as if such transactions and adjustments had occurred on January 1,
1995. The historical as adjusted information excludes the impact of the April
and November Offerings. The Merger, Asset Purchase and Refinancing closed
concurrently on February 23, 1996.

The Company's historical as adjusted net income of $10,619,000 is $301,000
lower for the year ended December 31, 1996 than the comparative period in 1995.
The decrease is mainly attributable to increases in interest, general and
administrative, and depreciation and amortization expenses totaling $162,000,
635,000 and 1,112,000, respectively. These expenses increased primarily due to
the property acquisitions made in 1996 which necessitated borrowings on the
Unsecured Credit Facility and increased administrative costs. These were
partially offset by an increase in the net operating income generated by the
asset portfolio. Compared to 1995, total revenue increased by $1,338,000 of
which $2,727,000 is attributable to properties acquired in 1996, partially
offset by decreases in total revenues attributable to properties disposed in
1995 and 1996 totaling $1,431,000. Compared to 1995, property operating costs
decreased by $366,000 in 1996. The property operating costs decreased primarily
due to the fact that a portion of costs classified as property operating costs
in 1995 were classified as general and administrative expenses in 1996.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

The financial statements and supplementary data listed in Item 14(a)(1) and
(a)(2) below are incorporated herein by reference and filed as part of this
report.

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
ON ACCOUNTING AND FINANCIAL DISCLOSURE.

The Company has not changed its independent certified public accountants
and has not had any disagreement with its independent certified public
accountants on accounting or financial disclosures required to be made under
rules of the Securities and Exchange Commission.

-27-
<PAGE>

- --------------------------------------------------------------------------------
PART III
- --------------------------------------------------------------------------------

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.

The information required by Item 10 is incorporated by reference from the
Company's definitive proxy statement for its annual stockholders' meeting to be
held on May 26, 1997.

ITEM 11. EXECUTIVE COMPENSATION.

The information required by Item 11 is incorporated by reference from the
Company's definitive proxy statement for its annual stockholders' meeting to be
held on May 26, 1997.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT.

The information required by Item 12 is incorporated by reference from the
Company's definitive proxy statement for its annual stockholders' meeting to be
held on May 26, 1997.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

The information required by Item 13 is incorporated by reference from the
Company's definitive proxy statement for its annual stockholders' meeting to be
held on May 26, 1997.

-28-
<PAGE>

- --------------------------------------------------------------------------------
PART IV
- --------------------------------------------------------------------------------

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.

(a)(1) FINANCIAL STATEMENTS. The following Company financial statements are
filed as part of this report:

PAGE
----
Report of Independent Public Accountants . . . . . . . . . . . .F-1
Consolidated Balance Sheets. . . . . . . . . . . . . . . . . . .F-2
Consolidated Statements of Operations. . . . . . . . . . . . . .F-3
Consolidated Statements of Stockholders' Equity (Deficit). . . .F-4
Consolidated Statements of Cash Flows. . . . . . . . . . . . . .F-5
Notes to Consolidated Financial Statements . . . . . . . . . . .F-6

(a)(2) FINANCIAL STATEMENT SCHEDULES. The following financial statement
schedules are filed as part of this report:

PAGE
----
Valuation and Qualifying Accounts. . . . . . . . . . . . . . . F-17
Real Estate and Accumulated Depreciation . . . . . . . . . . . F-18

(a)(3) EXHIBITS.

NO. DESCRIPTION
- ----- -----------
2.1(1) Amended and Restated Agreement and Plan of Merger among the Trusts and
the Company dated as of November 10, 1995.

2.2(1) Amended and Restated Asset Purchase Agreement between Trust 83 and the
Company dated as of November 10, 1995.

3.1(2) The Company's Third Amended and Restated Articles of Incorporation.

3.2(2) The Company's Second Amended and Restated Bylaws.

4.1(2) Specimen share certificate. (See also restrictions contained
in Exhibits 3.1 and 3.2)

10.1(2) Amended and Restated Employee and Director Incentive Stock Plan of the
Company.

10.2(3) First Amendment to Amended and Restated Employee and Director
Incentive Stock Plan of the Company.

10.3(1) MPP Agreement among MPP, the Company, Milton K. Reeder, Sierra Real
Estate Equity Trust 84 Co. and the Trusts dated as of May 31, 1995.

10.4(2) Amendment No. 1 to MPP Agreement among MPP, the Company, Milton K.
Reeder, Sierra Real Estate Equity Trust 84 Co. and the Trusts dated
February 22, 1996.

10.5(2) MPP Termination Agreement among MPP, the Company and Meridian Point
Realty Trust VIII Co. dated February 22, 1996.

-29-
<PAGE>

10.6(2) Amended and Restated Investor Rights Agreement among the Company,
Hunt, USAA, Trust 83, Ameritech and OTR dated as of February 23, 1996.

10.7(2) Amended and Restated Excepted Holder Agreement between the Company and
Hunt dated as of February 23, 1996.

10.8(2) Amended and Restated Excepted Holder Agreement between the Company and
USAA dated as of February 23, 1996.

10.9(2) Excepted Holder Agreement between the Company and Ameritech dated as
of February 23, 1996.

10.10(2) Excepted Holder Agreement between the Company and OTR dated as of
February 23, 1996.

10.11(1) Amended and Restated Stockholders' Agreement among the Company, the
Trusts, USAA, Allen J. Anderson, C.E. Cornutt, Peter O. Hanson, Robert
E. Morgan, John S. Moody, James M. Pollak, Kenneth N. Stensby and Lee
W. Wilson dated as of November 10, 1995.

10.12(2) Warrant Agreement between the Company and the First Chicago Trust
Company of New York dated as of February 23, 1996.

10.13(1) Form of Indemnification Agreement signed by the Company and certain
directors, officers, employees and agents of the Company.

10.14(1) Stock Purchase Agreement among the Company, Ameritech and OTR dated as
of December 20, 1995.

10.15(3) First Amended and Restated Revolving Credit Agreement dated March
19,1996 among the Company, The First National Bank of Boston, Texas
Commerce Bank National Association, and Nationsbank of Texas, NA.

10.16(2) Guaranty of payment and performance by DFW Nine in connection with the
Revolving Credit Agreement among the Company, The First National Bank
of Boston, Texas Commercial Bank National Association and Nationsbank
of Texas, N.A. dated February, 1996.

10.17(3) Amended and Restated Loan Administration Agreement between The
Prudential Insurance Company of America and the Company, IndTennco
Limited Partnership, Metro-Sierra Limited Partnership, and Progress
Center/Alabama Limited Partnership dated as of February 23, 1996.

10.18(2) Agreement of Limited Partnership of DFW Nine dated April 15, 1987.

10.19(2) Amendment No. 1 to Agreement of Limited Partnership of DFW Nine dated
June 1, 1987.

10.20(2) Assignment of General Partnership Interests and Agreement regarding
DFW Nine dated February, 1996.

10.21(3) Assignment of Limited Partnership Interest in MIT Unsecured L.P.
(formerly known as DFW Nine) dated December 31, 1996.

10.22(2) Agreement of Limited Partnership of Progress Center/Alabama Limited
Partnership dated December 3, 1987.

10.23(2) First Amendment to Agreement of Limited Partnership of Progress
Center/Alabama Limited Partnership dated June 29, 1990.

-30-
<PAGE>

10.24(3) Assignment of Limited Partnership Interest in MIT Secured L.P.
(formerly known as Progress Center/Alabama Limited Partnership) dated
December 31, 1996.

10.25(1) Consulting Agreement among the Trusts, Hunt Realty Corporation and the
Company effective as of January 1, 1995.

10.26(1) Form of employment letters signed by the Company and, respectively,
Allen J. Anderson, Milton K. Reeder, Dennis D. Higgs, Jaime Suarez and
Robert A. Dobbin, each dated November 14, 1995, together with summary
of economic terms for each such employment letter.

10.27(2) Employment letter signed by Celeste Woo dated November 14, 1996.

10.28(2) Employment letter signed by Peter Harmon dated January 30, 1996.

10.29(2) Form of Incentive Stock Option Agreement to be signed by the Company
and certain officers and employees participating in the Company's
Stock Plan.

10.30(2) Form of Nonstatutory Stock Option Agreements to be signed by the
Company and certain directors, officers, employees and agents
participating in the Company's Stock Plan.

10.31(2) Form of Nonstatutory Stock Option Agreement to purchase shares of the
Company's Common Stock at $12.00 per share signed by Messrs. Anderson
(100,000 shares), Reeder (20,000 shares), Higgs (45,000 shares), Keith
(15,000 shares), Suarez (10,000 shares) and Dobbin (1,400 shares).

10.32(2) Stock Purchase Agreement among Meridian Industrial Trust, Inc. and
Messrs. Anderson, Reeder, Higgs, Keith, Suarez and Dobbin.

10.33(2) Form of Promissory Note used in connection with the purchase the
Company's Common Stock signed by Messrs. Anderson ($200,000), Reeder
($40,000), Higgs ($90,000), Keith ($30,000) and Suarez ($20,000).

10.34(2) Note Purchase Agreement between the Company and The First National
Bank of Boston dated as of February 13, 1996.

10.35(2) Security Agreement and Assignment of Account to The First National
Bank of Boston from the Company dated February 13, 1996.

10.36(1) Option Agreement between the Company and USAA Real Estate Company
dated as of November 21, 1995, including the form of USAA Warrant
attached.

10.37(2) Warrant issued to USAA to purchase Common Stock of the Company dated
February 23, 1996.

10.38(2) The Company's Dividend Reinvestment Plan.

21.1(2) Subsidiaries of the Company.

-31-
<PAGE>

- --------------------------------------------------
(1) Filed with the Company's Registration Statement No. 333-00018 on January 3,
1996, and incorporated herein by reference.

(2) Filed with the Company's Amendment No. 1 to Registration Statement No. 333-
02322 on March 25, 1996, and incorporated herein by reference.

(3) Filed with this Report.

(b) REPORTS ON FORM 8-K.

The following Form 8-K reports were filed during the quarter ended December
31, 1996:

Forms 8-KA Amendment No. 1 to the Company's Current Report on Form 8-K
dated September 30, 1996 (this Form 8-KA was filed on December 13, 1996).

(d) The financial statement schedules listed in Item 14(a)(2) above are
submitted as part of this report.

-32-
<PAGE>

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.

Dated: March 20, 1997 MERIDIAN INDUSTRIAL TRUST, INC.

By: /s/ Allen J. Anderson
-------------------------------------
Allen J. Anderson
Chairman and Chief Executive Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed by the following persons on behalf of the Registrant and
in the capacities and on the dates indicated.

/s/ Allen J. Anderson Dated: March 20, 1997
- -----------------------------------
Allen J. Anderson
Chairman, Chief Executive Officer, and Director
(Principal Executive Officer)

/s/ Milton K. Reeder Dated: March 20, 1997
- -----------------------------------
Milton K. Reeder
President and Chief Financial Officer
(Principal Financial Officer)

/s/ James Suarez Dated: March 20, 1997
- -----------------------------------
Treasurer and Controller
(Principal Accounting Officer)

/s/ C.E. "Doc" Cornutt Dated: March 20, 1997
- -----------------------------------
C.E. "Doc" Cornutt
Director

/s/ T. Patrick Duncan Dated: March 20, 1997
- -----------------------------------
T. Patrick Duncan
Director

-33-
<PAGE>

/s/ Peter O. Hanson Dated: March 20, 1997
- -----------------------------------
Peter O. Hanson
Director

/s/ John S. Moody Dated: March 20, 1997
- -----------------------------------
John S. Moody
Director

/s/ James M. Pollak Dated: March 20, 1997
- -----------------------------------
James M. Pollak
Director

Dated: March 20, 1997
- -----------------------------------
Kenneth N. Stensby
Director

/s/ Lee W. Wilson Dated: March 20, 1997
- -----------------------------------
Lee W. Wilson
Director

-34-
<PAGE>

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To the Board of Directors and Stockholders of Meridian Industrial Trust, Inc.:

We have audited the accompanying consolidated balance sheets of Meridian
Industrial Trust, Inc. (a Maryland corporation) as of December 31, 1996 and
1995, and the related consolidated statements of operations, stockholders'
equity (deficit) and cash flows for the year ended December 31, 1996 and for the
period from May 18, 1995 (inception) to December 31, 1995. These financial
statements are the responsibility of the management of Meridian Industrial
Trust, Inc. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Meridian
Industrial Trust, Inc. as of December 31, 1996 and 1995, and the results of its
operations and its cash flows for the year ended December 31, 1996 and for the
period from May 18, 1995 (inception) to December 31, 1995, in conformity with
generally accepted accounting principles.

Our audits were made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The financial statement schedules listed
in Item 14(a)(2) are presented for purposes of complying with the Securities and
Exchange Commission's rules and are not part of the basic financial statements.
These schedules have been subjected to the auditing procedures applied in our
audits of the basic financial statements and, in our opinion, fairly state in
all material respects the financial data required to be set forth in relation to
the basic financial statements taken as a whole.

ARTHUR ANDERSEN LLP

San Francisco, California
February 5, 1997

F-1

<PAGE>

MERIDIAN INDUSTRIAL TRUST, INC.

CONSOLIDATED BALANCE SHEETS
AS OF DECEMBER 31, 1996 AND 1995
(IN THOUSANDS, EXCEPT SHARE DATA)

ASSETS

1996 1995
------------ ----------
<S> <C> <C>
INVESTMENT IN REAL ESTATE:
Rental Properties Held for Investment $ 318,671 $ 300
Less: Accumulated Depreciation (4,217) --
------------ ----------
314,454 300
Rental Properties Held for Sale, Net of Accumulated Depreciation
of $148 at December 31, 1996 7,530 --
------------ ----------
Total Investment in Real Estate 321,984 300
OTHER ASSETS:
Cash and Cash Equivalents 2,942 475
Cash Held in Escrow 347 --
Restricted Cash 1,967 --
Investment in Marketable Securities -- 2,607
Accounts Receivable, Net of Reserves of $571 at December 31, 1996 1,659 --
Capitalized Loan Fees, Lease Commissions and Other Assets, Net 4,164 342
------------ ----------
TOTAL ASSETS $ 333,063 $ 3,724
------------ ----------
------------ ----------

LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)

LIABILITIES:
Mortgage Loan $ 66,094 $ --
Unsecured Credit Facility 11,500 --
Notes Payable to Affiliates -- 750
Accrued Dividends Payable 4,648 29
Accounts Payable 5,411 10
Due to Affiliate -- 232
Short-Term Loan Payable -- 2,351
Prepaid Rent, Tenant Deposits and Other Liabilities 1,897 66
------------ ----------
TOTAL LIABILITIES 89,550 3,438
------------ ----------
COMMITMENTS AND CONTINGENCIES -- --

REDEEMABLE SERIES A PREFERRED STOCK -- Par value $0.001; fully redeemed
during 1996; 1,000,000 shares issued and outstanding at
December 31, 1995 -- 1,000
------------ ----------

STOCKHOLDERS' EQUITY (DEFICIT):
Authorized Shares at Par -- 175,000,000 shares of Common Stock and
25,000,000 shares of Preferred Stock authorized, each with par value of
$0.001; 13,595,563 and 900 shares of Common Stock issued and outstanding
at December 31, 1996 and 1995, respectively; and 2,272,727 shares of
Series B Preferred Stock issued and outstanding at December 31, 1996
with a liquidation preference of $35,000 16 1
Paid-in Capital 243,683 607
Distributions in Excess of Income (186) (1,322)
------------ ----------
TOTAL STOCKHOLDERS' EQUITY (DEFICIT) 243,513 (714)
------------ ----------

Total Liabilities and Stockholders' Equity (Deficit) $ 333,063 $ 3,724
------------ ----------
------------ ----------
</TABLE>

The accompanying notes are an integral part of these statements

F-2

<PAGE>

MERIDIAN INDUSTRIAL TRUST, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1996 AND
FOR THE PERIOD FROM MAY 18, 1995 (INCEPTION) TO DECEMBER 31, 1995
(IN THOUSANDS, EXCEPT SHARE DATA)

1996 1995
---------- ----------
<S> <C> <C>
REVENUES:
Rentals from Real Estate Investments $ 34,465 $ --
Interest and Other Income 576 33
---------- ----------
TOTAL REVENUES 35,041 33
---------- ----------
EXPENSES:
Interest Expense 6,065 5
Property Taxes 4,769 --
Property Operating Costs 3,821 --
General and Administrative 4,273 1,321
Depreciation and Amortization 4,952 --
---------- ----------
TOTAL EXPENSES 23,880 1,326
---------- ----------
Income (Loss) Before Gain on Sale of Properties
and Extraordinary Item 11,161 (1,293)
Gain on Sale of Properties 3,313 --
---------- ----------
Income (Loss) Before Extraordinary Item 14,474 (1,293)
---------- ----------
---------- ----------
Extraordinary Item -- Expenses Incurred in
Connection with Debt Retirements (411) --
NET INCOME (LOSS) $ 14,063 $ (1,293)

Net Income (Loss) $ 14,063 $ (1,293)
Less: Preferred Dividends Declared (2,412) (29)
---------- ----------
NET INCOME (LOSS) ALLOCABLE TO COMMON $ 11,651 $ (1,322)
---------- ----------
---------- ----------

NET INCOME (LOSS) PER WEIGHTED AVERAGE
COMMON SHARE:
Income (Loss) Per Common Share Before
Extraordinary Item $ 1.38 $ (32.05)
Extraordinary Item (0.05) --
---------- ----------
NET INCOME (LOSS) ALLOCABLE TO COMMON PER
Weighted Average Common Share
Outstanding $ 1.33 $ (32.05)
---------- ----------
---------- ----------

</TABLE>

The accompanying notes are an integral part of these statements

F-3

<PAGE>

MERIDIAN INDUSTRIAL TRUST, INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
FOR THE YEAR ENDED DECEMBER 31, 1996 AND
FOR THE PERIOD FROM MAY 18, 1995 (INCEPTION) TO DECEMBER 31, 1995
(IN THOUSANDS, EXCEPT SHARE DATA)

COMMON STOCK PREFERRED STOCK DISTRIBUTIONS
------------ --------------- PAID-IN IN EXCESS
SHARES PAR VALUE SHARES PAR VALUE CAPITAL OF INCOME
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
BALANCE-
MAY 18, 1995 (INCEPTION) -- $ -- -- $ -- $ -- $ --
Issuance of Common Shares 900 1 -- -- 13 --
Stock Option Compensation -- -- -- -- 594 --
Accrued Dividends for
Series A Preferred Stock -- -- -- -- -- (29)
Net Loss -- -- -- -- -- (1,293)
- -------------------------------------------------------------------------------------------------------------------
BALANCE-
DECEMBER 31, 1995 900 1 -- -- 607 (1,322)
Issuance of Shares at Date
of Merger 7,989,756 8 -- -- 116,209 --
Stock Options Exercised 191,900 -- -- -- 2,300 --
Retainer Fee Paid as Shares
to Directors 3,007 -- -- -- 52 --
Issuance of Common Shares 5,410,000 5 -- -- 95,915 --
Issuance of Preferred Shares -- -- 2,272,727 2 34,998 --
Offering Costs -- -- -- -- (6,398) --
Cancellation of Dividends
for Series A Preferred Stock -- -- -- -- -- 29
Distributions Declared:
Common -- -- -- -- -- (10,544)
Preferred -- -- -- -- -- (2,412)
Net Income -- -- -- -- -- 14,063
- -------------------------------------------------------------------------------------------------------------------
BALANCE-
DECEMBER 31, 1996 13,595,563 $ 14 2,272,727 $ 2 $ 243,683 $ (186)
- -------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------

</TABLE>

The accompanying notes are an integral part of these statements.

F-4

<PAGE>

MERIDIAN INDUSTRIAL TRUST, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEAR ENDED DECEMBER 31, 1996 AND
FOR THE PERIOD FROM MAY 18, 1995 (INCEPTION) TO DECEMBER 31, 1995
(IN THOUSANDS)

1996 1995
--------- ---------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income (Loss) $ 14,063 $ (1,293)
Adjustments to Reconcile Net Income (Loss) to Cash Provided by
Operating Activities:
Depreciation and Amortization 4,952 --
Amortization of Loan Fees 419 --
Straight Line Rent (732) --
Gain on Sale of Properties (3,313) --
Extraordinary Item -- Expenses Incurred in Connection with
Debt Retirements 411 --
Stock Option Compensation -- 594
Decrease in Restricted Cash 5,483 --
Decrease (Increase) in Accounts Receivable and Other Assets 1,206 (68)
Net (Decrease) Increase in Accounts Payable, Due to Affiliates,
Prepaid Rent and Other Liabilities (1,874) 308
--------- ---------
Net Cash Provided by (Used in) Operating Activities 20,615 (459)
--------- ---------

CASH FLOWS FROM INVESTING ACTIVITIES:
Cash Contributed by Merged Trusts 11,892 --
Net Cash Received from Property Dispositions 31,447 --
Net Cash Paid in Connection with Asset Purchase (3,257) --
Redemption of Series A Preferred Stock and Accrued Dividends Payable (83) --
Investments in Real Estate (122,637) (300)
Recurring Building Improvements (1,407) --
Recurring Tenant Improvements and Leasing Commissions (2,255) --
Maturity of (Investment in) Marketable Security, Net of Related Debt 256 (256)
Purchase of Other Assets (258) (20)
--------- ---------
Net Cash Used in Investing Activities (86,302) (576)
--------- ---------

CASH FLOWS FROM FINANCING ACTIVITIES:
Payments for Capitalized Loan Fees (551) (254)
(Retirement) Receipt of Net Advances from Affiliates (30) 750
Retirement of Debt (59,408) --
Borrowings on Unsecured Credit Facility 118,400 --
Repayment of Borrowings on Unsecured Credit Facility (106,900) --
Distributions Paid to Stockholders (8,308) --
Proceeds from the Issuance of Common and Preferred Stock, Net 124,951 1,014
--------- ---------
Net Cash Provided by Financing Activities 68,154 1,510
--------- ---------

NET INCREASE IN CASH AND CASH EQUIVALENTS 2,467 475
Cash and Cash Equivalents -- Beginning of Period 475 --
--------- ---------
CASH AND CASH EQUIVALENTS -- END OF PERIOD $ 2,942 $ 475
--------- ---------
--------- ---------

</TABLE>

The accompanying notes are an integral part of these statements

F-5

<PAGE>

MERIDIAN INDUSTRIAL TRUST, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AS OF DECEMBER 31, 1996 AND 1995
(DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)

1. ORGANIZATION.

Meridian Industrial Trust, Inc. (the "Company") was incorporated in the
state of Maryland on May 18, 1995. The Company is a self-administered and
self-managed real estate investment trust ("REIT") engaged primarily in the
business of owning, acquiring, developing, managing and leasing income-producing
warehouse/distribution and light industrial properties. At December 31, 1996,
the Company's principal asset is its portfolio of sixty warehouse/distribution,
eighteen light industrial properties and three retail properties. In addition,
the Company has three pre-leased build-to-suit properties under construction.

On February 23, 1996, the Company merged with Meridian Point Realty Trust
IV Co., Meridian Point Realty Trust VI Co. and Meridian Point Realty Trust VII
Co. ("Trust IV," "Trust VI" and "Trust VII," respectively; collectively referred
to as the "Merged Trusts"), with the Company as the surviving entity (that
transaction is referred to below as the "Merger"). In addition, concurrent with
the Merger, the Company acquired certain properties, and assumed certain
mortgage notes and other liabilities, from Meridian Point Realty Trust '83
("Trust 83") (that transaction is referred to below as the "Asset Purchase").

Concurrent with the closing of the Merger and Asset Purchase, the Company
closed a private placement of preferred stock (the "Preferred Stock Private
Placement") and entered into an unsecured credit facility (the "Unsecured Credit
Facility"). The Preferred Stock Private Placement consisted of the issuance of
2,272,727 shares of Series B convertible preferred stock, par value $0.001 per
share ("Series B Preferred Stock"), at $15.40 per share for gross proceeds of
$35,000. The Unsecured Credit Facility provides for a maximum borrowing amount
of $75,000 and is intended to provide the Company with funds for property
development, acquisitions and working capital needs.

Prior to February 23, 1996, the Company had no operations other than
interest on its investments and general and administrative expenses.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES.

(a) BASIS OF PRESENTATION. The accompanying consolidated financial
statements include the results of the Company, its wholly-owned subsidiaries and
its majority-owned and controlled partnerships. All intercompany transactions
have been eliminated.

(b) USE OF ESTIMATES. The preparation of financial statements in
conformity with generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts of assets and
liabilities, the disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.

(c) CASH AND CASH EQUIVALENTS. The Company considers all short-term
investments with an original maturity of three months or less to be cash
equivalents. At December 31, 1995, the Investment in Marketable Securities has
been separately identified.

F-6

<PAGE>

(d) INCOME TAXES. The Company has previously elected to be taxed as a
REIT for federal and, where the federal rules are allowed, state income tax
purposes. To continue to qualify for REIT status, the Company must meet a
number of ongoing organizational and operational requirements. If the Company
satisfies those REIT requirements and the Company currently distributes all of
its net taxable income (including net capital gains) to its stockholders, the
Company should generally owe no federal or state income tax. The REIT provision
of the Internal Revenue Service Code of 1986, as amended, generally allows a
REIT to deduct dividends paid to stockholders. If the Company fails to qualify
as a REIT in any taxable year, it will be subject to certain state and federal
taxes imposed on its income and properties.

As a result of the deductions allowed for the dividends paid to
shareholders and the utilization of net operating loss carryovers of the Merged
Trusts, the Company has no federal or state taxable income. Accordingly, no
provision for federal or state income taxes has been made in the accompanying
consolidated statements of operations for the 1996 and 1995.

(e) NET INCOME (LOSS) PER SHARE. Net income (loss) per share is
calculated by dividing net income, after deduction of preferred stock dividends
declared, by the weighted average number of shares of common stock outstanding
during the period. The weighted average number of common shares outstanding was
8,779,573 for the year ended December 31, 1996. Such shares include the
dilutive effects of stock options granted by the Company to its directors and
officers pursuant to its stock plan, and shares to be issued pursuant to a stock
option agreement with one of its stockholders, aggregating to 303,112 additional
shares of Common Stock.

The weighted average number of common shares outstanding was 900 for the
period from May 18, 1995 (inception) to December 31, 1995.

(f) CAPITALIZED LOAN FEES AND LEASE COMMISSIONS. Capitalized costs
consist of loan fees and leasing commissions. Capitalized loan fees are
amortized into interest expense on a straight-line basis over the term of the
related debt. Lease commissions are amortized into depreciation and amortization
expense on a straight-line basis over the term of the related lease.

(g) RENTALS FROM REAL ESTATE INVESTMENTS. All leases are classified as
operating leases. The Company recognizes rental income on a straight-line basis
over the term of the lease. Deferred rent receivable, included in other assets,
represents the excess of rental revenue on a straight-line basis over the cash
received under the applicable lease provision.

Certain of the Company's leases relating to its properties require lessees
to pay all or a portion of real estate taxes, insurance, and operating expenses
("Expense Recaptures"). Expense Recaptures are recognized as revenues in the
same period the related expenses are incurred by the Company. For the year
ended December 31, 1996, Expense Recaptures of $4,331 have been included in
rentals from real estate investments.

(h) OFFERING COSTS. Underwriting commissions, offering costs and other
expenses incurred in connection with stock offerings of the Company's Common and
Preferred Stock have been reflected as a reduction of Stockholders' Equity.

(i) FAIR VALUE OF FINANCIAL INVESTMENTS. Based on the borrowing rates
currently available to the Company, the carrying amount of its debt approximates
fair value. The carrying amount of cash and cash equivalents also approximates
fair value.

F-7

<PAGE>

(j) CONSTRUCTION IN PROGRESS. Project costs clearly associated with the
development and construction of a real estate project are capitalized as
construction in progress. In addition, interest, real estate taxes, insurance
and other holding costs are capitalized during the period in which activities
necessary to get the property ready for its intended use are in progress.
During the year ended December 31, 1996, interest expense totaling $561 was
capitalized for properties under construction.

3. TRANSACTIONS WITH AFFILIATES.

For the year ended December 31, 1996 and for the period from May 18, 1995
to December 31, 1995, the Company has incurred fees and expenses relating to
services provided by its directors of approximately $283 and $194, respectively.
The directors are entitled to elect to receive all or any portion of their
annual retainer in shares of Common Stock.

From June 1, 1995 through February 23, 1996, Hunt Realty Corporation
("Hunt") provided the services of Allen J. Anderson (Chairman and Chief
Executive Officer of the Company) and two other persons to the Company in
exchange for reimbursement of Hunt's costs associated with making those persons
available to the Company. During 1995, the Company had incurred $245 for such
services.

On November 21, 1995, the Company entered into an Option Agreement under
which USAA Real Estate Company, a Delaware corporation ("USAA") granted the
Company an option (the "USAA Option") to purchase a 292,000 square-foot
industrial property located in Lakeland, Florida (the "USAA Option Property").
The USAA Option also includes a right of first refusal in favor of the Company
with respect to five bulk warehouse facilities comprising approximately 1.1
million square feet located in West Chicago, Illinois (the "USAA Chicago
Property"). In exchange for the option, the Company issued a warrant to USAA to
purchase shares of the Company's Common Stock at an exercise price that provides
USAA with a value of $300 based upon the value of the Company's Common Stock
during the first 20-trading-day period after the Merger. The Company did not
acquire either the USAA Option Property or Chicago Property under the USAA
Option which expired in February 1997.

During 1995, the Company received $750 in advances from the Merged Trusts
to cover certain operating expenditures. These advances are reflected as Notes
Payable to Affiliates on the accompanying balance sheet as of December 31, 1995.
These notes payable bore interest at a rate of 7% per annum. In connection with
the Merger and Asset Purchase, the Company canceled these Notes Payable to
Affiliates.

4. INVESTMENT IN MARKETABLE SECURITIES.

In December 1995, the Company purchased a U.S. Treasury Note which is
reflected as Investment in Marketable Securities on the accompanying balance
sheet. The Company financed this purchase with a cash deposit equal to 10% of
the total purchase price of the government security and a short-term loan in the
amount of $2,346 bearing interest at a rate of 8.625% per annum, which, together
with accrued interest of $5, is reflected as Short-Term Loan Payable on the
accompanying balance sheet as of December 31, 1995. In January 1996, the
government security matured and the related proceeds were used to pay off the
Short-Term Loan Payable.

F-8

<PAGE>

5. INVESTMENT IN REAL ESTATE.

In accordance with generally accepted accounting principles, the Company
has accounted for the Merger and Asset Purchase using the purchase method. As a
result, the assets and liabilities acquired in connection with the Merger and
Asset Purchase are recorded at their "acquisition cost," representing the fair
value of the consideration surrendered and liabilities assumed. The acquisition
cost was then allocated to all identifiable assets based upon their individual
estimated fair values. The following is a summary of the acquisition cost
recorded in connection with the Merger and Asset Purchase:

Fair value of the Company's common stock valued at $16.375
per share, based upon the average of the closing price of
the Company's common stock for the first five post-Merger
trading days, issued to the Merged Trusts' shareholders
other than Hunt and USAA $ 72,677
Fair value of the Company's common stock totaling 390,360 shares,
valued at $16.375 per share, issued to Trust 83 6,392
Common stock issued to Hunt and USAA valued at the consideration
they paid for their interests in the Merged Trusts 37,173
Cash consideration paid to Trust 83 in connection with the Asset
Purchase before pro-rated items 3,600
Liabilities of the Merged Trusts and Trust 83 assumed by the
Company upon consummation of the Merger and Asset Purchase 133,453
Closing and other accrued costs incurred in connection with the
Merger and Asset Purchase 204
---------
Acquisition cost basis 253,499
Acquisition cost basis allocated to assets other than Investment
in Real Estate (23,668)
---------
Acquisition cost basis allocated to Investment in Real Estate
as a result of the Merger and Asset Purchase $ 229,831
---------
---------

Investments in Real Estate are depreciated over 35 years using the
straight-line method. Expenditures for maintenance, repairs and improvements
which do not materially prolong the normal useful life of an asset are charged
to operations as incurred. Tenant improvements are capitalized and amortized on
a straight-line basis over the related lease term.

Rental properties held for investment as of December 31, 1996 consisted of
the following:

Land $ 72,594
Buildings 241,254
Capital Improvements 1,702
Construction-in-Progress 3,121
----------
Total $ 318,671
----------
----------

The minimum future rental revenue from leases in effect as of December 31,
1996 are as follows:

1997 $ 35,317
1998 29,077
1999 24,914
2000 20,798
2001 16,433
Thereafter 77,773

F-9

<PAGE>

Based on the projected 1997 base rent of existing leases, there are
currently two major tenants comprising approximately 13% and 6%, respectively,
of the total annual revenue of the Company based on the projected 1997 base rent
of existing leases. These tenants have five leases which are scheduled to
expire in 2000, 2001, 2005 and 2006. As of December 31, 1996, the Company's
properties were 94% occupied. During 1997, leases covering 21% of the leased
space are scheduled to expire.

6. DEBT.

The Company has a fixed rate facility which it acquired in connection with
the Merger (the "Mortgage Loan"). The Mortgage Loan bears interest at the annual
rate of 8.63%, requires interest only payments until its maturity in 2005 and is
secured by a pool of the Company's properties with a net book value of $130,732
as of December 31, 1996.

The Unsecured Credit Facility bears interest at LIBOR plus 1.7% per annum
(7.26% at December 31, 1996), requires interest only payments until maturity in
February 1998, and provides for an annual fee on the unused facility of 25 basis
points if 65% or less of the facility is used and 15 basis points if more than
65% of the facility is used. The Unsecured Credit Facility provides for a
maximum borrowing amount of $75,000. The Company is currently negotiating
various terms of the Unsecured Credit Facility including the increase in the
maximum borrowing amount, extension of the maturity date and reduction in the
interest rate spread. However, there can be no assurance that the Company will
be successful in its negotiations.

7. COMMON AND PREFERRED STOCK.

The initial capitalization of the Company consisted of 900 shares of Common
Stock, issued for a total consideration of $14. In addition, Trust 83, and the
Merged Trusts purchased 79,500 and 920,500 shares of Series A Preferred Stock,
respectively, for $1.00 per share. In connection with the Merger and Asset
Purchase transactions, the Company issued 7,599,396 and 390,360 shares of Common
Stock, respectively. The Company also canceled the Series A Preferred Stock
owned by the Merged Trusts and redeemed the Series A Preferred Stock owned by
Trust '83.

Concurrent with the Merger and Asset Purchase, the Company closed the
Preferred Stock Private Placement which consisted of the sale in a private
placement of 2,272,277 shares of Series B Preferred Stock with a liquidation
preference of $35,000. The shares of Series B Preferred Stock are convertible
into shares of Common Stock on a one-for-one basis. The net proceeds were used
to retire debt acquired in connection with the Merger and Asset Purchase in the
principal amount of $33,500.

On April 3, 1996, the Company closed a public offering of 1,500,000 shares
of the Common Stock at an offering price of $16.375 per share, resulting in
gross proceeds of $24,563 (the "April Offering"). The Company used the net
proceeds of the April Offering and existing cash reserves to make a $24,000
payment on its Unsecured Credit Facility.

F-10

<PAGE>

On November 25, 1996, the Company closed a public offering of 3,400,000
shares of the Common Stock at an offering price of $18.25 per share, resulting
in gross proceeds of $62,050 (the "November Offering"). The Company used the
net proceeds of the November Offering and existing cash reserves to make a
$58,650 payment on its Unsecured Credit Facility. In accordance with the
underwriting agreement entered into by the Company and its underwriters for the
November Offering, on December 23, 1996, the Company sold an additional 510,000
shares of the Common Stock to the underwriters to satisfy over allotments at an
offering price of $18.25 per share, resulting in gross proceeds of $9,308. The
Company used the net proceeds therefrom to fund a property acquisition.

The Company has been declaring and paying dividends on a quarterly basis.
During the year ended December 31, 1996, dividends declared to Common and Series
B Preferred Stockholders aggregated to $10,544 and $2,412, respectively, or
$0.99 and $1.06 per share of Common Stock and Preferred Stock, respectively.
The analysis below presents the amount of distributions paid to stockholders and
the percentage of the distributions which the Company estimates is taxable and
nontaxable for the year ended December 31, 1996. Nontaxable distributions are
treated as return of capital to stockholders.

PREFERRED COMMON
--------- -------
Distributions Paid Per Share $ 0.75 $ 0.70
--------- -------
--------- -------

Nontaxable Dividends -- 96.37%
Taxable Dividends 100.00% 3.63%
--------- -------
100.00% 100.00%
--------- -------
--------- -------

The holders of Series B Preferred Stock generally have a cumulative
preferential right to such quarterly dividends as are declared each year by the
Board of Directors. From the date of the Merger through the fourth quarter of
1997, the dividend amount per share will be equal to the greater of: (i) $0.31
per full calendar quarter (pro-rated for periods less than a full quarter), or
(ii) 103% of the quarterly dividend payable per share of Common Stock during the
corresponding dividend period. Thereafter, each share of Series B Preferred
Stock shall be entitled to receive an amount equal to the greater of: (i) the
last quarterly preferred dividend amount declared by the Board of Directors, or
(ii) the dividend paid per share of Common Stock.

8. STOCK PLAN.

The Board of Directors of the Company has adopted an incentive stock plan
(the "Stock Plan") to enable the Company to attract, retain and motivate key
employees, directors and, on occasion, consultants and advisors, by providing
them with equity participation in the Company. The Stock Plan provides for the
grant of incentive stock options, non-qualified stock options, unrestricted
stock, restricted stock and stock appreciation rights.

The Stock Plan is administered by the Board of Directors or a committee
appointed by the board (the "Committee"). The Committee, which must consist of
not less than two members of the Company's Board of Directors, selects the
employees (and any consultants or advisors) to whom awards will be granted, the
number of shares subject to such award, and the other terms and conditions of
the award, consistent with the Stock Plan.

F-11

<PAGE>

In November 1995, the Board of Directors authorized the award of two sets
of stock options to certain employees relating to services performed by the
employees in 1995 to effect the Merger. The first set of awards provided for
the issuance of 653,000 stock options to be issued under the Stock Plan
concurrent with the Merger, exercisable at the stock trading price at Merger of
$15.12 per share. These option awards provided that 461,000 of the stock
options vest over five years. The remaining stock options granted under the
first set of awards, totaling 192,000, include certain performance criteria that
would allow for vesting after three years if certain performance criteria are
achieved, or vesting at the end of five years if the performance criteria are
not met. These options will become fully-vested in the event of a termination
of employment without "cause" by the Company or for "good reason" by the
employee (in each case as defined in the stock option agreement), or in the
event of the death or disability of the employee.

The second set of stock options granted in 1995 consisted of non-qualified
stock options to purchase 191,400 shares of the Company's Common Stock at any
time between January 26, 1996 and February 28, 1996 for $12 per share. In
connection with the grant of these options, the Company agreed to repurchase
certain promissory notes executed by the employees from a third party lender in
the event that the employees default under such notes. The Company has $1,900
in proceeds from the exercise of these stock grants held as restricted cash in
connection with the repurchase rights of the third party lender. The
accompanying statement of operations for the period from May 18, 1995
(Inception) to December 31, 1996 reflects a charge to earnings for the stock
option compensation attributable to the excess of the market price of the
Company's Common Stock over the exercise price of the non-qualified stock
options. The non-qualified stock options were not granted under the Stock Plan.

After the Merger, the Company granted each director of the Company, who was
not an employee of the Company, an option to purchase 5,000 shares of the
Company's Common Stock. In addition, beginning June 30, 1996, on the last day
of each calendar quarter, the Company automatically grants each non-employee
director a non-qualified option to purchase 1,167 shares of the Company's Common
Stock. The exercise price of these options is the fair value of the shares of
the Company's Common Stock covered by the options on the date of grant. Each of
these director options are fully exercisable beginning six months after the date
of grant and generally terminate (unless terminated sooner under the terms of
the Stock Plan) ten years after the date of grant.

Additionally, under the Stock Plan, each non-employee director may elect to
receive his or her retainer in either cash, shares of the Company's Common
Stock, or a combination of both cash and the Company's Common Stock.

A maximum of 1,000,000 shares of the Company's Common Stock, subject to
adjustment under certain conditions, may be issued under the Stock Plan.

F-12

<PAGE>

In October 1995, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standard (SFAS) No. 123, "Accounting for Stock Based
Compensation" which establishes financial accounting and reporting standards for
stock-based employee compensation plans. SFAS No. 123 became effective for the
Company in its 1996 fiscal year. This statement encourages a "fair value based
method" of accounting for an employee stock option or similar equity instrument
which calls for compensation cost to be measured at the grant date based on the
value of the award and is recognized over the service period, which is usually
the vesting period. As provided by the provisions of SFAS No. 123, the Company
records measurement of compensation for its stock plans using the "intrinsic
value based method" of accounting, with disclosure of the pro forma impact on
net income and earnings per share as if the "fair value based method" of
accounting had been applied as follows:

Year Ended Dec. 31, 1996
----------------------------
As Reported Pro Forma
--------------- -----------
Net Income $ 14,063 $ 13,856
Net Income Per Weighted Average
Common Share $ 1.33 $ 1.31

The following table summarizes the stock option activity for the year ended
December 31, 1996.

Number Weighted
of Shares Average
Outstanding Exercise Price
--------------- ----------------
Balance, December 31, 1995 -- --
Granted 708,507 $ 15.37
Exercised -- --
Expired -- --
Forfeited -- --
Balance, December 31, 1996 708,507 $ 15.37

As of December 31, 1996, there were a total of 46,669 exercisable options.
The weighted average fair value of the options granted in 1996 was $1.24. The
options outstanding have exercise prices between $15.12 and $21.00 with a
weighted average exercise price of $15.37 and a weighted average remaining
contractual life of 9.20 years.

The fair value of each option grant is estimated on the date of grant using
the Black-Scholes option pricing model with the following weighted average
assumptions used for grants in 1996: risk-free interest rate of 6.01%, expected
dividend yield of 6.66%, expected life of 10 years, and expected volatility of
14.48%.

9. PROPERTY ACQUISITIONS AND DEVELOPMENTS.

ACQUISITIONS

During the year ended December 31, 1996, the Company purchased eight
properties located in California, Illinois and Ohio with an aggregate square
footage of 2,669,506 ("Operating Properties Acquired"). The purchase prices
totaled $89,703 and were financed by applying a $300 deposit paid in 1995, with
the balance funded by draws on its Unsecured Credit Facility and net proceeds
received from the Company's public offerings of shares of Common Stock.

F-13

<PAGE>

DEVELOPMENTS

Also during the year ended December 31, 1996, the Company entered into
separate agreements with four identified tenants to develop four build-to-suit
facilities with an aggregate square footage of 979,434. Two facilities that are
located in Texas were completed in December 1996. The total cost for the design
and construction of the two remaining facilities located in Minnesota and
Georgia is estimated to total approximately $12,238, with a targeted completion
dates of March 1997 and July 1997, respectively. The Company funded a portion of
these draws with cash on-hand and anticipates funding a majority of the
remaining costs with draws on its Unsecured Credit Facility. As of December 31,
1996, the Company had incurred total project costs of $30,501 relating to these
four projects.

On December 20, 1996, the Company entered into an Agreement of Limited
Partnership with Jackson-Shaw/Florida Inc.("JSF"), a Florida corporation; and
Jackson-Shaw/FOCP ("JSC'), a Florida limited partnership, and thereby formed
MDN/JSC, a California limited partnership (the "Partnership"). The Partnership
purchased a 19.15 acre property located in Orlando, Florida. The property is
being improved with a 242,160 square foot built-to-suit facility with a target
completion date of September 1997. The cost for acquisition of the property and
design and construction of the facility is estimated to total approximately
$9,400. Upon completion of the facility, the Partnership will acquire the
120,000 square foot warehouse/distribution property currently occupied by the
tenant moving into the built-to-suit facility valued at $4,955. The Company's
contribution into the Partnership is estimated to total $13,125. As of December
31, 1996, the Partnership had incurred total project costs of $2,487 relating to
both properties. The Company and JSC are the limited partners with interests
of 85% and 13%, respectively; and MJV IV, Inc., a wholly-owned subsidiary of the
Company and JSF are the general partners with each an interest of 1%.

10. PROPERTY DISPOSITION.

On May 15, 1996, the Company sold the Moorpark R & D Building located in
Moorpark, California for $4,100. On August 23, 1996, three properties located
in Alabama (Progress Center I, Progress Center II and 8215 Highway Building)
were sold for a total selling price of $3,900. Also, on December 31, 1996, the
Company sold the Seatac and Meridian Village Shopping Centers located in Federal
Way and Bellingham, Washington, respectively, for an aggregate sale price of
$17,740; and eight properties located in Phoenix, Arizona for a total selling
price of $7,658. (The properties sold are collectively referred to as
"Properties Disposed".) After closing costs, escrow holdback, early release of
funds and pro-rated items which totaled $1,975, the Company received net
proceeds from the property sales totaling $31,447. The net proceeds were used
to pay down borrowings on its Unsecured Credit Facility.

As of December 31, 1996, the Company has entered into a contract for sale
of the Wildwood Pioneer building. On January 10, 1997, the Company sold
Birmingham 1 and 2 properties located in Birmingham, Alabama for $3,400. After
closing costs and pro-rated items which totaled $173, the Company received net
proceeds from the property sales totaling $3,127.

As of December 31, 1996, the net book value of these rental properties held
for sale was $7,530. The net proceeds from the sales of these properties will
be used to repay borrowings made under the Unsecured Credit Facility.

F-14

<PAGE>

11. SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION.

The following table reflects supplemental disclosure of non-cash
transactions for the year ended December 31, 1996.

Cash Paid For Interest $ 6,276

Merger Transaction:
Acquisition Cost Allocated to Investment in Real Estate 203,489
Restricted Cash 5,551
Receivables, Net 2,889
Note Receivable from Affiliate 720
Capitalized Loan Fees 992
Cancellation of Redeemable Series A Preferred Stock 960
Mortgage Loan Assumed (66,094)
Other Long-Term Debts Assumed (43,191)
Accounts Payable Assumed (2,869)
Shares of Common Stock Issued, at Par Value (8)
Paid-in Capital (109,842)
Other Net Liabilities Assumed (4,489)

Asset Purchase Transaction:
Acquisition Cost Allocated to Investment in Real Estate 26,342
Restricted Cash Applied to Debt Payment 117
Mortgage Notes Payable Assumed (16,334)
Paid-in Capital of Common Shares Issued (6,392)
Accrued Closing Costs and Pro-rated Items (476)

12. QUARTERLY FINANCIAL DATA (UNAUDITED).

The following table shows selected quarterly financial data for 1996:

QUARTER YEAR ENDED
------------------------------------------ DECEMBER 31,
1 2 3 4 1996
-------- -------- -------- -------- ------------
<S> <C> <C> <C> <C> <C>
Total Revenues $ 3,624 $ 10,132 $ 10,177 $ 11,108 $ 35,041
Total Expenses 2,688 6,690 6,777 7,725 23,880
Income Before Gain on Sale of
Properties and Extraordinary Item 936 3,442 3,400 3,383 11,161
Gain on Sale of Properties -- 7 170 3,136 3,313
Extraordinary Item (375) (36) -- -- (411)
Net Income 561 3,413 3,570 6,519 14,063
Net Income Allocable to Common 265 2,708 2,864 5,814 11,651
Net Income Per Weighted Average
Common Share:
Before Extraordinary Item $ 0.19 $ 0.28 $ 0.29 $ 0.51 $ 1.38
Net Income 0.08 0.28 0.29 0.51 1.33

</TABLE>

F-15

<PAGE>

13. SUPPLEMENTAL INFORMATION. (UNAUDITED)

HISTORICAL AS ADJUSTED INFORMATION

As discussed in Note 6, in accordance with generally accepted accounting
principles, the Company accounted for the Merger and Asset Purchase by the
purchase method of accounting. As such, the Company is providing the following
supplemental information.

The unaudited historical as adjusted operating data presented below for the
years ended December 31, 1996 and 1995 has been prepared to reflect (i) the
respective historical results of the Merged Trusts and the properties acquired
from Trust 83 ("Trust 83 Properties); (ii) the May 31, 1995 closing of the
transactions under the stock purchase agreements between Hunt and each of the
Merged Trusts and the stock purchase agreements between USAA, and each of the
Merged Trusts, and the concurrent restructuring or retirement of the Merged
Trusts' indebtedness ("Recapitalization"); (iii) the incremental effects of the
Merger, the retirement of certain indebtedness using the net proceeds of the
Preferred Stock Private Placement and availability of funds on the Unsecured
Credit Facility ("Refinancing"); and the effect of purchase accounting on the
historical results of the Merged Trusts and the Trust 83 Properties, and (iv)
the historical results of the Company to reflect the post-Merger operations of
the Company as if such transactions and adjustments had occurred on January 1,
1995. The historical as adjusted information excludes the impact of the April
and November Offerings. The Merger, Asset Purchase and Refinancing closed
concurrently on February 23, 1996.

In the opinion of management, the historical as adjusted consolidated
financial information provides for all adjustments necessary to reflect the
effects of the Merger, the Asset Purchase, the Refinancing and the
Recapitalization.

This financial information is unaudited and is not necessarily indicative
of the historical as adjusted consolidated results that would have occurred if
the transaction and adjustments reflected therein had been consummated in the
period presented or on any particular date in the future, nor does it purport to
represent the financial position, results of operations or changes in cash flows
for future periods.

FOR THE YEAR ENDED
DECEMBER 31,
----------------------
1996 1995
---------- ----------
TOTAL REVENUE $ 40,199 $ 38,861

EXPENSES:

Interest Expense 7,571 7,409
Property Taxes 5,581 5,485
Property Operating Costs 4,733 5,099
General and Administrative Expenses 5,435 4,800
Depreciation and Amortization 6,260 5,148
---------- ----------
TOTAL EXPENSES 29,580 27,941
---------- ----------

NET INCOME BEFORE EXTRAORDINARY ITEM $ 10,619 $ 10,920
---------- ----------
---------- ----------

F-16

<PAGE>

MERIDIAN INDUSTRIAL TRUST, INC.
SCHEDULE II
VALUATION AND QUALIFYING ACCOUNTS

BALANCE AT BALANCE AT
BEGINNING OF CHARGED TO ADDITIONS END OF
DESCRIPTION YEAR EXPENSE (DEDUCTIONS) YEAR
- --------------------------------------------------------------------------------

1995
- ----
Reserve for Bad Debts $ -- $ -- $ -- $ --

1996
- ----
Reserve for Bad Debts -- 485,468 85,772 571,240

F-17

<PAGE>

MERIDIAN INDUSTRIAL TRUST, INC.
SCHEDULE III
REAL ESTATE AND ACCUMULATED DEPRECIATION
DECEMBER 31, 1996
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>

GROSS AMOUNT
INITIAL COST TO COMPANY CARRIED AT END OF PERIOD
------------------------------------------ -----------------------------------------
BUILDING &
DESCRIPTION LAND BUILDING IMPROVEMENTS LAND IMPROVEMENTS TOTAL
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
DISTRIBUTION/WAREHOUSE:
CHICAGO:
1000 Lunt (1) $ 567 $ 1,910 $ 57 $ 567 $ 1,967 $ 2,534
1090 Pratt (1) 211 415 - 211 415 626
1100 Pratt (1) 231 641 - 231 641 872
1180 Pratt (1) 128 410 - 128 410 538
1201 Busse (1) 109 289 - 109 289 398
17025 Wallace (1) 163 1,622 138 163 1,760 1,923
17129 Wallace (1) 133 1,544 - 133 1,544 1,677
1815 Landmeier (1) 363 1,370 - 363 1,370 1,733
2375 Touhy Avenue (1) 301 836 - 301 836 1,137
3400 West Lake (1) 881 1,694 15 881 1,709 2,590
5101 W. 122nd Street (1) 191 2,443 171 191 2,614 2,805
700 Pratt (1) 386 1,414 1 386 1,415 1,801
801 Lunt (1) 203 645 - 203 645 848
900 Pratt (1) 226 534 5 226 539 765
Bedford Park 359 2,713 156 359 2,869 3,228
Crossroads Parkway 1,497 7,860 - 1,497 7,860 9,357
Lombard I (1) 853 4,558 25 853 4,583 5,436
Pontiac (1) 519 2,078 - 519 2,078 2,597
--------- ----------- -------- --------- ----------- -----------
Subtotal 7,321 32,976 568 7,321 33,544 40,865
--------- ----------- -------- --------- ----------- -----------
COLUMBUS:
Crosswind Drive 4,993 25,962 - 4,993 25,962 30,955
--------- ----------- -------- --------- ----------- -----------
Subtotal 4,993 25,962 - 4,993 25,962 30,955
--------- ----------- -------- --------- ----------- -----------

DALLAS/FORT WORTH:
201 Regal Row (1) 283 906 - 283 906 1,189
Beltline 494 1,153 24 494 1,177 1,671
Centreport 17 (1) 383 1,441 - 383 1,441 1,824
Great Southwest #4 340 1,233 - 340 1,233 1,573
Las Colinas #1 218 587 - 218 587 805
Northgate #4 244 834 - 244 834 1,078
Northgate International (1) 1,761 5,541 - 1,761 5,541 7,302

ACCUMULATED DATE OF DATE OF DEPRECIABLE
DESCRIPTION DEPRECIATION CONSTRUCTION ACQUISITION LIFE
- ----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
DISTRIBUTION/WAREHOUSE:
CHICAGO:
1000 Lunt (1) $ (54) 1964 02/23/96 35 yrs.
1090 Pratt (1) (10) 1964 02/23/96 35 yrs.
1100 Pratt (1) (16) 1964 02/23/96 35 yrs.
1180 Pratt (1) (10) 1963 02/23/96 35 yrs.
1201 Busse (1) (7) 1964 02/23/96 35 yrs.
17025 Wallace (1) (42) 1973 02/23/96 35 yrs.
17129 Wallace (1) (37) 1970 02/23/96 35 yrs.
1815 Landmeier (1) (33) 1964 02/23/96 35 yrs.
2375 Touhy Avenue (1) (20) 1963 02/23/96 35 yrs.
3400 West Lake (1) (42) 1974 02/23/96 35 yrs.
5101 W. 122nd Street (1) (61) 1973 02/23/96 35 yrs.
700 Pratt (1) (35) 1964 02/23/96 35 yrs.
801 Lunt (1) (16) 1970 02/23/96 35 yrs.
900 Pratt (1) (13) 1964 02/23/96 35 yrs.
Bedford Park (68) 1980 02/23/96 35 yrs.
Crossroads Parkway (1) 1995 12/31/96 35 yrs.
Lombard I (1) (113) 1974 02/23/96 35 yrs.
Pontiac (1) (50) 1986 02/23/96 35 yrs.
----------
Subtotal (628)
----------
COLUMBUS:
Crosswind Drive (186) 1989 09/30/96 35 yrs.
----------
Subtotal (186)
----------

DALLAS/FORT WORTH:
201 Regal Row (1) (22) 1966 02/23/96 35 yrs.
Beltline (29) 1980 02/23/96 35 yrs.
Centreport 17 (1) (35) 1987 02/23/96 35 yrs.
Great Southwest #4 (30) 1979 02/23/96 35 yrs.
Las Colinas #1 (14) 1977 02/23/96 35 yrs.
Northgate #4 (20) 1979 02/23/96 35 yrs.
Northgate International (1) (133) 1987 02/23/96 35 yrs.
</TABLE>

F-18

<PAGE>

MERIDIAN INDUSTRIAL TRUST, INC.
SCHEDULE III
REAL ESTATE AND ACCUMULATED DEPRECIATION
DECEMBER 31, 1996
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>

MEMPHIS/NASHVILLE:
1550 Heil Quaker 298 3,228 5 298 3,233 3,531
1600 Corporate Place 185 1,260 7 185 1,267 1,452
4000 Air Park Cove 241 1,361 - 241 1,361 1,602
4013 Premier 204 1,556 - 204 1,556 1,760
Airport Bldg #14 363 2,410 - 363 2,410 2,773
Airport Bldg #16 A 132 1,339 27 132 1,366 1,498
Airport Bldg #16 B 42 428 - 42 428 470
Airport Bldg #17 237 1,938 71 237 2,009 2,246
Airport Bldg #3 170 898 - 170 898 1,068
Baxter (1) 115 1,210 - 115 1,210 1,325
Birmingham I (1) 283 1,206 - 283 1,206 1,489
Birmingham II (1) 440 936 - 440 936 1,376
Delp Distribution (1) 1,101 5,830 - 1,101 5,830 6,931
Hennessy Warehouse 201 1,226 33 201 1,259 1,460
Olive Branch (1) 587 9,250 4 587 9,254 9,841
Olive Branch 2 - 6,726 2 - 6,728 6,728
Port Distribution (1) 218 2,900 3 218 2,903 3,121
--------- ----------- -------- --------- ----------- -----------
Subtotal 4,817 43,702 152 4,817 43,854 48,671
--------- ----------- -------- --------- ----------- -----------

GREATER LOS ANGELES:
Arenth Avenue (1) 3,430 6,105 78 3,430 6,183 9,613
Mission Oaks 2,176 6,892 - 2,176 6,892 9,068
Rustin Avenue 623 3,542 - 623 3,542 4,165
Valencia Industrial (1) 1,429 3,591 4 1,429 3,595 5,024
Wanamaker 499 4,049 - 499 4,049 4,548
--------- ----------- -------- --------- ----------- -----------
Subtotal 8,157 24,179 82 8,157 24,261 32,418
--------- ----------- -------- --------- ----------- -----------

Palisades I (24) 1981 02/23/96 35 yrs.
Palisades II (23) 1981 02/23/96 35 yrs.
Valley Branch #2 (24) 1980 02/23/96 35 yrs.
Valwood #20 (1) (58) 1987 02/23/96 35 yrs.
Wildwood (1) (96) 1968 02/23/96 35 yrs.
----------
Subtotal (508)
----------

MEMPHIS/NASHVILLE:
1550 Heil Quaker (79) 1978 02/23/96 35 yrs.
1600 Corporate Place (31) 1976 02/23/96 35 yrs.
4000 Air Park Cove (33) 1988 02/23/96 35 yrs.
4013 Premier (38) 1970 02/23/96 35 yrs.
Airport Bldg #14 (59) 1977 02/23/96 35 yrs.
Airport Bldg #16 A (35) 1977 02/23/96 35 yrs.
Airport Bldg #16 B (10) 1977 02/23/96 35 yrs.
Airport Bldg #17 (50) 1978 02/23/96 35 yrs.
Airport Bldg #3 (22) 1971 02/23/96 35 yrs.
Baxter (1) (28) 1990 02/23/96 35 yrs.
Birmingham I (1) (29) 1980 02/23/96 35 yrs.
Birmingham II (1) (23) 1982 02/23/96 35 yrs.
Delp Distribution (1) (140) 1982 02/23/96 35 yrs.
Hennessy Warehouse (33) 1975 02/23/96 35 yrs.
Olive Branch (1) (224) 1989 02/23/96 35 yrs.
Olive Branch 2 (162) 1995 02/23/96 35 yrs.
Port Distribution (1) (72) 1986 02/23/96 35 yrs.
----------
Subtotal (1,068)
----------

GREATER LOS ANGELES:
Arenth Avenue (1) (131) 1973 03/29/96 35 yrs.
Mission Oaks (4) 1969 12/24/96 35 yrs.
Rustin Avenue (13) 1990 11/15/96 35 yrs.
Valencia Industrial (1) (86) 1985 02/23/96 35 yrs.
Wanamaker (14) 1985 11/22/96 35 yrs.
----------
Subtotal (248)
----------
</TABLE>

F-19

<PAGE>

MERIDIAN INDUSTRIAL TRUST, INC.
SCHEDULE III
REAL ESTATE AND ACCUMULATED DEPRECIATION
DECEMBER 31, 1996
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>

SAN FRANCISCO BAY AREA
Gold River Lane 2,153 11,304 - 2,153 11,304 13,457
Overlake Place 2,900 5,635 - 2,900 5,635 8,535
San Carlos Industrial 3,042 4,829 103 3,042 4,932 7,974
--------- ----------- -------- --------- ----------- -----------
Subtotal 8,095 21,768 103 8,095 21,871 29,966
--------- ----------- -------- --------- ----------- -----------

SEATTLE:
Park at Woodinville (1) 2,530 9,560 130 2,530 9,690 12,220
--------- ----------- -------- --------- ----------- -----------
Subtotal 2,530 9,560 130 2,530 9,690 12,220
--------- ----------- -------- --------- ----------- -----------

LIGHT INDUSTRIAL:
CHICAGO:
Troy Tech II (1) 1,326 5,305 - 1,326 5,305 6,631
--------- ----------- -------- --------- ----------- -----------
Subtotal 1,326 5,305 - 1,326 5,305 6,631
--------- ----------- -------- --------- ----------- -----------

DALLAS/FORT WORTH:
Great Southwest #110 (1) 512 2,310 94 512 2,404 2,916
Las Colinas #4 139 298 - 139 298 437
Las Colinas #5 492 1,058 263 492 1,321 1,813
Northgate #28 152 796 - 152 796 948
Northgate #5 137 469 135 137 604 741
Regal Empress 435 1,345 - 435 1,345 1,780
Valley Branch #1 175 442 - 175 442 617
--------- ----------- -------- --------- ----------- -----------
Subtotal 2,042 6,718 492 2,042 7,210 9,252
--------- ----------- -------- --------- ----------- -----------

MEMPHIS/NASHVILLE:
Willow Lake Business (1) 750 3,210 143 750 3,353 4,103
--------- ----------- -------- --------- ----------- -----------
Subtotal 750 3,210 143 750 3,353 4,103
--------- ----------- -------- --------- ----------- -----------

ACCUMULATED DATE OF DATE OF DEPRECIABLE
DESCRIPTION DEPRECIATION CONSTRUCTION ACQUISITION LIFE
- ----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
SAN FRANCISCO BAY AREA
Gold River Lane (2) 1996 12/30/96 35 yrs.
Overlake Place (90) 1996 06/10/96 35 yrs.
San Carlos Industrial (125) 1969 02/23/96 35 yrs.
----------
Subtotal (217)
----------

SEATTLE:
Park at Woodinville (1) (234) 1982 02/23/96 35 yrs.
----------
Subtotal (234)
----------

LIGHT INDUSTRIAL:
CHICAGO:
Troy Tech II (1) (129) 1986 02/23/96 35 yrs.
----------
Subtotal (129)
----------

DALLAS/FORT WORTH:
Great Southwest #110 (1) (58) 1974 02/23/96 35 yrs.
Las Colinas #4 (7) 1980 02/23/96 35 yrs.
Las Colinas #5 (37) 1980 02/23/96 35 yrs.
Northgate #28 (19) 1983 02/23/96 35 yrs.
Northgate #5 (13) 1979 02/23/96 35 yrs.
Regal Empress (33) 1984 02/23/96 35 yrs.
Valley Branch #1 (11) 1980 02/23/96 35 yrs.
----------
Subtotal (178) 35 yrs.
----------

MEMPHIS/NASHVILLE:
Willow Lake
Business (1) (78) 1988 02/23/96 35 yrs.
----------
Subtotal (78)
----------
</TABLE>

F-20

<PAGE>

MERIDIAN INDUSTRIAL TRUST, INC.
SCHEDULE III
REAL ESTATE AND ACCUMULATED DEPRECIATION
DECEMBER 31, 1996
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>

PHOENIX:
Phoenix N. 23rd 203 372 7 203 379 582
Phoenix N. 27th 197 658 0 197 658 855
Phoenix Plaza Three 486 1,121 82 486 1,203 1,689
--------- ----------- -------- --------- ----------- -----------
Subtotal 886 2,151 89 886 2,240 3,126
--------- ----------- -------- --------- ----------- -----------

RETAIL:
ATLANTA:
Live Oak Parkway 1,885 1,654 - 1,885 1,654 3,539
Marietta Trade Center (1) 7,235 11,661 38 7,235 11,699 18,934
--------- ----------- -------- --------- ----------- -----------
Subtotal 9,120 13,315 38 9,120 13,353 22,473
--------- ----------- -------- --------- ----------- -----------

GREATER LOS ANGELES:
Golden Cove Shopping
Center 539 3,061 16 539 3,077 3,616
--------- ----------- -------- --------- ----------- -----------
Subtotal 539 3,061 16 539 3,077 3,616
--------- ----------- -------- --------- ----------- -----------

DEVELOPMENT PROJECTS:
Orlando, FL 2,309 22 156 2,309 178 2,487
Atlanta, GA 2,060 24 263 2,060 287 2,347
Rosemont, MN 5 8 2,534 5 2,542 2,547
Dallas, TX 3,174 12,506 - 3,174 12,506 15,680
Dallas, TX 2,358 7,813 - 2,358 7,813 10,171
--------- ----------- -------- --------- ----------- -----------
Subtotal 9,906 20,373 2,953 9,906 23,326 33,232
--------- ----------- -------- --------- ----------- -----------
- --------------------------------------------------------------------------------------------------------------------
TOTAL $ 74,195 $ 247,085 $ 5,069 $ 74,195 $ 252,154 $ 326,349
- --------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------
<CAPTION>

PHOENIX:
Phoenix N. 23rd (9) 1977 02/23/96 35 yrs.
Phoenix N. 27th (16) 1983-1984 02/23/96 35 yrs.
Phoenix Plaza Three (45) 1969-1970 02/23/96 35 yrs.
----------
Subtotal (70)
----------

RETAIL:
ATLANTA:
Live Oak Parkway (40) 1988 02/23/96 35 yrs.
Marietta Trade Center (1) (287) 1986 02/23/96 35 yrs.
----------
Subtotal (327)
----------

GREATER LOS ANGELES:
Golden Cove Shopping
Center (76) 1963 02/23/96 35 yrs.
----------
Subtotal (76)
----------

DEVELOPMENT PROJECTS:
Orlando, FL - (3) 12/20/96 (3)
Atlanta, GA - (3) 12/02/96 (3)
Rosemont, MN - (2) 08/16/96 (2)
Dallas, TX (39) (2) 05/15/96 (2)
Dallas, TX (20) (2) 04/18/96 (2)
----------
Subtotal (59)
----------
- ----------------------------------------------------------------------------------------
TOTAL $ (4,365)
- ----------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------
</TABLE>

F-21

<PAGE>

MERIDIAN INDUSTRIAL TRUST, INC.
SCHEDULE III
REAL ESTATE AND ACCUMULATED DEPRECIATION
DECEMBER 31, 1996
(DOLLARS IN THOUSANDS)

Reconciliation of cost and accumulated depreciation for the year ended December
31, 1996 is as follows:

Accumulated
Cost Depreciation
---------------------------
Balance at beginning of year $ 300 $ -
Additions during period:
Merged Trusts 229,831 -
Acquisition of rental properties 89,320 -
Land acquistion and property development costs 33,235 -
Recurring building and tenant improvements 2,265 -
Adjustments to property basis 446 -
Depreciation - (4,792)
Property dispositions (29,048) 427
---------------------------
Balance at End of Year $ 326,349 $ (4,365)
---------------------------
---------------------------

(1) These properties serve as collateral for the Mortgage Loan facility. As of
December 31, 1996, the outstanding indebtedness under this facility totaled
$66,094. As of December 31, 1996, these properties have a net book value
of $130,732.

(2) These properties were completed in December 1996.

(3) As of December 31, 1996 these properties were still under construction.
The property located in Minnesota is anticipated to be completed in March
1997, and the properties located in Florida and Georgia have a target
completion date of September 1997.

F-22

<PAGE>

FIRST AMENDMENT TO AMENDED AND RESTATED
EMPLOYEE AND DIRECTOR INCENTIVE STOCK PLAN OF
MERIDIAN INDUSTRIAL TRUST, INC.

The Amended and Restated Employee and Director Incentive Stock Plan of
Meridian Industrial Trust, Inc. (the "Plan") is hereby amended as follows
effective February 28, 1997:

1. The definition of "Disinterested Person" in section 1.2 of the Plan
is amended in its entirety to read as follows: "'Disinterested Person' means a
person who is both a 'non-employee director' under Rule 16b-3 and an 'outside
director' as defined in Section 162(m), unless the Board has determined that
the Plan should not comply with Rule 16b-3 or Section 162(m) or both."

2. Section 2 of the Plan is amended in its entirety to read as follows:

2. ELIGIBLE PERSONS

Every person who, at or as of the Grant Date, is (a) a
full-time employee of the Company or a Subsidiary of the Company,
(b) a director of the Company or (c) someone whom the
Administrator designates as eligible for an Award (other than for
Incentive Stock Options) because the person (i) performs
bona fide consulting or advisory services for the Company or a
Subsidiary of the Company (other than services in connection with
the offer or sale of securities in a capital-raising transaction)
and (ii) has a direct and significant effect on the financial
development of the Company or a Subsidiary of the Company shall
be eligible to receive Awards. Directors of the Company who are
not full-time employees are only eligible to receive NQOs under
Section 5.3 and Director Stock under Section 9. Notwithstanding
the foregoing provisions of this Section 2, to ensure that the
requirements of Section 4 are satisfied, the Board may from time
to time specify individuals who shall not be eligible for the
grant of Awards under any plan of the Company or its affiliates.
Nevertheless, the Board may at any time determine that an
individual who has been so excluded from eligibility shall become
eligible for grants of Awards under any plans of the Company or
its affiliates so long as that eligibility will not impair the
Plan's satisfaction of the conditions of Rule 16b-3, unless the
Board has determined that the Plan should not comply with Rule
16b-3."

3. The first sentence of section 4.1 of the Plan is amended in its
entirety to read as follows: "This Plan shall be administered by the
or by a Board committee or sub-committee (the "Committee") appointed
by the Board."

<PAGE>

4. The last sentence of section 4.1 of the Plan is amended in its
entirety to read as follows:

With the exception of grants or awards of the type specified in
Sections 5.3 and 9.1 of this Plan, persons elected to serve on
the Committee as Disinterested Persons shall not be eligible to
receive Awards or equity securities under any plan of the Company
or any of its affiliates while they are serving as members of the
Committee and shall not have been granted or awarded equity
securities under the Plan or any other plan of the Company or any
of its affiliates during the year before their appointments to
the Committee become effective.

5. Section 6.1(g) of the Plan is amended in its entirety to read as
follows:

"(g) ASSIGNABILITY OF RIGHTS. The Committee may (in its sole
discretion) permit a Participant to transfer an Award, or may
cause the Company to grant an Award that otherwise would be
granted to an eligible individual, in any of the following
circumstances: (a) pursuant to a qualified domestic relations
order, (b) to a trust established for the benefit of the eligible
individual or one or more of the children, grandchildren, or
spouse of the Participant, (c) to a limited partnership in which
all the interests are held by the eligible individual and that
person's children, grandchildren or spouse; or (d) to another
person in circumstances that the Committee believes will result
in the Award continuing to provide an incentive for the eligible
individual to remain in the service of the Company and apply
their best efforts for the benefit of the Company. If the
Committee determines to allow such transfers or issuances of
Awards, any Participant or eligible individual desiring such
transfers or issuances shall make application therefore in the
manner and time that the Committee specifies and shall comply
with such other requirements as the Committee may require to
assure compliance with all applicable laws, including securities
laws, and to assure fulfillment of the purposes of this Plan.
The Committee shall not authorize any such transfer or issuance
if it may not be made in compliance with all applicable federal,
state and foreign securities laws. The granting of permission
for such an issuance or transfer shall not obligate the Company
to register the shares of Stock to be issued under the applicable
Award."

6. Section 9.1 of the Plan is amended in its entirety to read as
follows:

9.1 ELECTION. The Company intends to pay each Eligible
Director an annual retainer in the amount set from time to time
by the Board (the "Retainer"). Each Eligible Director shall be
entitled to receive his or her Retainer exclusively in cash,
exclusively in shares of Stock ("Director Stock") or any portion
in cash and any portion in Director Stock. Each Eligible
Director shall be given the opportunity, during the month the

<PAGE>

Eligible Director first becomes an Eligible Director and during
the last month of each quarter thereafter, to elect among these
choices for the remainder of the quarter (in the case of the
election made when the Eligible Director first becomes an
Eligible Director) and for the following quarter (in the case of
any subsequent election). If the Eligible Director chooses to
receive at least some of his or her Retainer in Director Stock,
the election shall also indicate the percentage of the Retainer
to be paid in Director Stock. If an Eligible Director makes no
election during his or her first opportunity to make an
election, the Eligible Director shall be assumed to have elected
to receive his or her entire Retainer in cash. If an Eligible
Director makes no election during any succeeding election month,
the Eligible Director shall be assumed to have remade the
election then currently in effect for that Eligible Director. An
election by an Eligible Director to receive a portion of his or
her retainer in Director Stock shall either (a) be approved by
(i) the Committee or (ii) the Board of Directors or (b) provide
that Director Stock received by the Eligible Director pursuant to
such election shall be held by the Eligible Director for a period
of six months.

<PAGE>

FIRST AMENDED AND RESTATED
REVOLVING CREDIT AGREEMENT

DATED MARCH___, 1996

AMONG

MERIDIAN INDUSTRIAL TRUST, INC.

AND

THE FIRST NATIONAL BANK OF BOSTON,

THE OTHER BANKS WHICH ARE
A PARTY TO THIS AGREEMENT

AND

OTHER BANKS WHICH MAY BECOME
PARTIES TO THIS AGREEMENT

AND

THE FIRST NATIONAL BANK OF BOSTON,
AS AGENT

<PAGE>

TABLE OF CONTENTS

Section 1. DEFINITIONS AND RULES OF INTERPRETATION...........................-2-
Section 1.1. DEFINITIONS.......................................-2-
Section 1.2. RULES OF INTERPRETATION..........................-18-

Section 2. THE REVOLVING CREDIT FACILITY....................................-19-
Section 2.1. COMMITMENT TO LEND...............................-19-
Section 2.2. FACILITY FEE.....................................-19-
Section 2.3. INTENTIONALLY OMITTED............................-19-
Section 2.4. NOTES............................................-20-
Section 2.5. INTEREST ON LOANS................................-20-
Section 2.6. REQUESTS FOR LOANS...............................-20-
Section 2.7. FUNDS FOR LOANS..................................-21-
Section 2.8. EXTENSION OF MATURITY DATE.......................-22-
Section 2.9. LETTERS OF CREDIT................................-23-

Section 3. REPAYMENT OF THE LOANS...........................................-25-
Section 3.1. STATED MATURITY..................................-25-
Section 3.2. MANDATORY PREPAYMENTS............................-25-
Section 3.3. OPTIONAL PREPAYMENTS.............................-25-
Section 3.4. PARTIAL PREPAYMENTS..............................-25-
Section 3.5. EFFECT OF PREPAYMENTS............................-26-
Section 3.6. PROCEEDS FROM DEBT OFFERING AND EQUITY
OFFERING.........................................-26-

Section 4. CERTAIN GENERAL PROVISIONS.......................................-26-
Section 4.1. CONVERSION OPTIONS...............................-26-
Section 4.2. COMMITMENT FEE...................................-27-
Section 4.3. INTENTIONALLY OMITTED............................-27-
Section 4.4. FUNDS FOR PAYMENTS...............................-27-
Section 4.5. COMPUTATIONS.....................................-28-
Section 4.6. INABILITY TO DETERMINE EURODOLLAR RATE...........-28-
Section 4.7. ILLEGALITY.......................................-29-
Section 4.8. ADDITIONAL INTEREST..............................-29-
Section 4.9. ADDITIONAL COSTS, ETC............................-29-
Section 4.10. CAPITAL ADEQUACY................................-31-
Section 4.11. INDEMNITY OF BORROWER...........................-31-
Section 4.12. INTEREST ON OVERDUE AMOUNTS; LATE CHARGE........-31-
Section 4.13. CERTIFICATE.....................................-31-
Section 4.14. LIMITATION ON INTEREST..........................-32-

Section 5. SECURITY.........................................................-32-

<PAGE>

Section 6. REPRESENTATIONS AND WARRANTIES...................................-32-
Section 6.1. CORPORATE AUTHORITY, ETC.........................-32-
Section 6.2. GOVERNMENTAL APPROVALS...........................-33-
Section 6.3. TITLE TO PROPERTIES; LEASES......................-33-
Section 6.4. FINANCIAL STATEMENTS.............................-34-
Section 6.5. NO MATERIAL CHANGES..............................-34-
Section 6.6. FRANCHISES, PATENTS, COPYRIGHTS, ETC.............-34-
Section 6.7. LITIGATION.......................................-35-
Section 6.8. NO MATERIALLY ADVERSE CONTRACTS, ETC.............-35-
Section 6.9. COMPLIANCE WITH OTHER INSTRUMENTS, LAWS, ETC.....-35-
Section 6.10. TAX STATUS......................................-35-
Section 6.11. NO EVENT OF DEFAULT.............................-35-
Section 6.12. HOLDING COMPANY AND INVESTMENT COMPANY ACTS.....-35-
Section 6.13. ABSENCE OF UCC FINANCING STATEMENTS, ETC........-36-
Section 6.14. INTENTIONALLY OMITTED...........................-36-
Section 6.15. CERTAIN TRANSACTIONS............................-36-
Section 6.16. EMPLOYEE BENEFIT PLANS..........................-36-
Section 6.17. REGULATIONS U AND X.............................-36-
Section 6.18. ENVIRONMENTAL COMPLIANCE........................-37-
Section 6.19. SUBSIDIARIES....................................-38-
Section 6.20. INTENTIONALLY OMITTED...........................-38-
Section 6.21. LOAN DOCUMENTS..................................-38-
Section 6.22. PROPERTY........................................-38-
Section 6.23. BROKERS.........................................-39-
Section 6.24. OTHER DEBT......................................-39-
Section 6.25. SOLVENCY........................................-39-
Section 6.26. GUARANTOR.......................................-39-

Section 7. AFFIRMATIVE COVENANTS OF THE BORROWER............................-40-
Section 7.1. PUNCTUAL PAYMENT.................................-40-
Section 7.2. MAINTENANCE OF OFFICE............................-40-
Section 7.3. RECORDS AND ACCOUNTS.............................-40-
Section 7.4. FINANCIAL STATEMENTS, CERTIFICATES AND
INFORMATION......................................-40-
Section 7.5. NOTICES..........................................-42-
Section 7.6. EXISTENCE; MAINTENANCE OF PROPERTIES.............-44-
Section 7.7. INSURANCE........................................-44-
Section 7.8. TAXES............................................-44-
Section 7.9. INSPECTION OF PROPERTIES AND BOOKS...............-45-
Section 7.10. COMPLIANCE WITH LAWS, CONTRACTS, LICENSES,
AND PERMITS.....................................-45-
Section 7.11. USE OF PROCEEDS.................................-45-
Section 7.12. FURTHER ASSURANCES..............................-46-
Section 7.13. REIT STATUS.....................................-46-
Section 7.14. RESTRICTIONS ON ACQUISITIONS....................-46-

<PAGE>

Section 7.15. UNENCUMBERED OPERATING PROPERTIES...............-46-
Section 7.16. LIMITING AGREEMENTS.............................-47-
Section 7.17. ENVIRONMENTAL AND ENGINEERING INSPECTIONS.......-48-

Section 8. CERTAIN NEGATIVE COVENANTS OF THE BORROWER.......................-48-
Section 8.1. RESTRICTIONS ON INDEBTEDNESS.....................-48-
Section 8.2. RESTRICTIONS ON LIENS, ETC.......................-49-
Section 8.3. RESTRICTIONS ON INVESTMENTS..................... -50-
Section 8.4. MERGER, CONSOLIDATION............................-52-
Section 8.5. SALE AND LEASEBACK...............................-52-
Section 8.6. COMPLIANCE WITH ENVIRONMENTAL LAWS...............-52-
Section 8.7. DISTRIBUTIONS....................................-53-
Section 8.8. ASSET SALES......................................-54-
Section 8.9. DEVELOPMENT ACTIVITY.............................-54-
Section 8.10. SOURCES OF CAPITAL..............................-55-
Section 8.11. RESTRICTION ON PREPAYMENT OF INDEBTEDNESS.......-55-

Section 9. FINANCIAL COVENANTS OF THE BORROWER..............................-55-
Section 9.1. LIABILITIES TO TANGIBLE NET WORTH RATIO..........-55-
Section 9.2. DEBT COVERAGE....................................-55-
Section 9.3. FIXED CHARGE COVERAGE............................-56-
Section 9.4. BORROWING BASE...................................-56-
Section 9.5. TANGIBLE NET WORTH...............................-56-
Section 9.6. REAL ESTATE ASSETS...............................-56-
Section 9.7. VALUE ADJUSTMENT.................................-56-
Section 9.8. ANNUALIZATION OF RESULTS.........................-57-

Section 10. CLOSING CONDITIONS..............................................-57-
Section 10.1. LOAN DOCUMENTS..................................-57-
Section 10.2. CERTIFIED COPIES OF ORGANIZATIONAL DOCUMENTS....-57-
Section 10.3. BYLAWS; RESOLUTIONS AND CONSENTS................-57-
Section 10.4. INCUMBENCY CERTIFICATE; AUTHORIZED SIGNERS......-58-
Section 10.5. OPINION OF COUNSEL..............................-58-
Section 10.6. PAYMENT OF FEES.................................-58-
Section 10.7. PERFORMANCE; NO DEFAULT.........................-58-
Section 10.8. REPRESENTATIONS AND WARRANTIES..................-58-
Section 10.9. PROCEEDINGS AND DOCUMENTS.......................-58-
Section 10.10. COMPLIANCE CERTIFICATE.........................-59-
Section 10.11. OTHER..........................................-59-
Section 10.12. INTENTIONALLY OMITTED...........................-59-
Section 10.13. INTENTIONALLY OMITTED..........................-59-
Section 10.14. EQUITY OFFERING................................-59-
Section 10.15. TANGIBLE NET WORTH.............................-59-

iii

<PAGE>

Section 10.16. DUE DILIGENCE..................................-59-
Section 10.17. MANAGEMENT OF THE BORROWER.....................-59-

Section 11. CONDITIONS TO ALL BORROWINGS....................................-59-
Section 11.1. PRIOR CONDITIONS SATISFIED......................-59-
Section 11.2. REPRESENTATIONS TRUE; NO DEFAULT................-59-
Section 11.3. NO LEGAL IMPEDIMENT.............................-60-
Section 11.4. GOVERNMENTAL REGULATION.........................-60-
Section 11.5. PROCEEDINGS AND DOCUMENTS.......................-60-
Section 11.6. BORROWING DOCUMENTS.............................-60-

Section 12. EVENTS OF DEFAULT; ACCELERATION; ETC............................-60-
Section 12.1. EVENTS OF DEFAULT AND ACCELERATION..............-60-
Section 12.2. LIMITATION OF CURE PERIODS......................-63-
Section 12.3. TERMINATION OF COMMITMENTS......................-64-
Section 12.4. REMEDIES........................................-64-
Section 12.5. DISTRIBUTION OF PROCEEDS........................-64-

Section 13. INTENTIONALLY OMITTED...........................................-65-

Section 14. THE AGENT.......................................................-65-
Section 14.1. AUTHORIZATION...................................-65-
Section 14.2. EMPLOYEES AND AGENTS............................-65-
Section 14.3. NO LIABILITY....................................-66-
Section 14.4. NO REPRESENTATIONS..............................-66-
Section 14.5. PAYMENTS........................................-66-
Section 14.6. HOLDERS OF NOTES................................-67-
Section 14.7. INDEMNITY.......................................-67-
Section 14.8. AGENT AS BANK...................................-68-
Section 14.9. RESIGNATION.....................................-68-
Section 14.10. DUTIES IN THE CASE OF ENFORCEMENT..............-68-
Section 14.11. DETERMINATIONS BY AGENT........................-68-

Section 15. EXPENSES........................................................-69-

Section 16. INDEMNIFICATION.................................................-69-

Section 17. SURVIVAL OF COVENANTS, ETC......................................-70-

Section 18. ASSIGNMENT AND PARTICIPATION....................................-71-
Section 18.1. CONDITIONS TO ASSIGNMENT BY BANKS...............-71-
Section 18.2. REGISTER........................................-71-
Section 18.3. NEW NOTES.......................................-72-

<PAGE>

Section 18.4. PARTICIPATIONS..................................-72-
Section 18.5. PLEDGE BY BANK..................................-72-
Section 18.6. NO ASSIGNMENT BY BORROWER.......................-72-
Section 18.7. DISCLOSURE......................................-72-

Section 19. NOTICES.........................................................-73-

Section 20. RELATIONSHIP....................................................-74-

Section 21. GOVERNING LAW; CONSENT TO JURISDICTION AND SERVICE..............-74-

Section 22. HEADINGS........................................................-75-

Section 23. COUNTERPARTS....................................................-75-

Section 24. ENTIRE AGREEMENT, ETC...........................................-75-

Section 25. WAIVER OF JURY TRIAL............................................-75-

Section 26. DEALINGS WITH THE BORROWER......................................-76-

Section 27. CONSENTS, AMENDMENTS, WAIVERS, ETC..............................-76-

Section 28. SEVERABILITY....................................................-77-

Section 29. NO UNWRITTEN AGREEMENTS.........................................-77-

Section 30. TIME OF THE ESSENCE.............................................-77-

<PAGE>

EXHIBIT A - Form of Note

EXHIBIT B - Form of Request for Loan

EXHIBIT C - Reserved

EXHIBIT D - Form of Compliance Certificate

SCHEDULE 1 - Banks and Commitments

SCHEDULE 2 - Initial Unencumbered Properties

SCHEDULE 3 - Adjusted Asset Values of Real Estate

SCHEDULE 6.3 - Title to Properties; Leases

SCHEDULE 6.7 - Litigation

SCHEDULE 6.19 - Subsidiaries of the Borrower

<PAGE>

FIRST AMENDED AND RESTATED REVOLVING CREDIT AGREEMENT

THIS FIRST AMENDED AND RESTATED REVOLVING CREDIT AGREEMENT (this
"Agreement") is made the ____ day of March, 1996, by and among MERIDIAN
INDUSTRIAL TRUST, INC. (the "Borrower"), a Maryland corporation having its
principal place of business at 455 Market Street, 17th Floor, San Francisco,
California 94105, THE FIRST NATIONAL BANK OF BOSTON, TEXAS COMMERCE BANK
NATIONAL ASSOCIATION, NATIONSBANK OF TEXAS, N.A. and the other lending
institutions which may become parties hereto pursuant to Section 18 (the
"Banks"), THE FIRST NATIONAL BANK OF BOSTON, as Agent for the Banks (the
"Agent"), and TEXAS COMMERCE BANK, NATIONAL ASSOCIATION, as Co-Agent for the
Banks (the "Co-Agent").

RECITALS.

WHEREAS, Borrower, Agent, Co-Agent and the Banks have entered into that
Revolving Credit Agreement dated February 26, 1996 (the "Original Credit
Agreement"); and

WHEREAS, Borrower has requested that the Banks increase the Total
Commitment and add a sublimit for letters of credit; and

WHEREAS, Borrower, Agent, Co-Agent and the Banks desire to amend and
restate the Original Credit Agreement in its entirety;

NOW, THEREFORE, in consideration of the recitals herein and the mutual
covenants contained herein, the parties hereto hereby agree to amend and
restate the Original Credit Agreement in its entirety as follows:

Section 1. DEFINITIONS AND RULES OF INTERPRETATION.

Section 1.1. DEFINITIONS. The following terms shall have the meanings
set forth in this Section l or elsewhere in the provisions of this Agreement
referred to below:

AGENT. The First National Bank of Boston acting as agent for the Banks,
its successors and assigns.

AGENT'S HEAD OFFICE. The Agent's head office located at 100 Federal
Street, Boston, Massachusetts 02110, or at such other location as the Agent
may designate from time to time by notice to the Borrower and the Banks.

AGENT'S SPECIAL COUNSEL. Long, Aldridge & Norman or such other counsel
as may be approved by the Agent.

<PAGE>

AGREEMENT. This First Amended and Restated Revolving Credit Agreement,
including the SCHEDULES and EXHIBITS hereto.

ASSET VALUE. With respect to the Initial Unencumbered Operating
Properties and any other parcels of Real Estate owned by the Borrower and its
Subsidiaries as of the Closing Date, the book value after adjustment for
market values in accordance with Section 9.7, and with respect to Unencumbered
Operating Properties and any other parcels of Real Estate acquired after the
Closing Date, the purchase price (including improvements) and ordinary
related purchase transaction costs, without deduction for depreciation, or if
developed by the Borrower, the completed construction costs, determined in
accordance with generally accepted accounting principles. If any parcel of
Real Estate is purchased as a part of a group of properties, the Asset Value
shall be calculated based upon a reasonable allocation by the Borrower of the
aggregate purchase price among all parcels of Real Estate purchased in such
transaction and agreed to by the Majority Banks.

AUTHORIZED OFFICER. As to the Borrower, each of Allen J. Anderson, as
Chairman of the Board of the Borrower; Milton Reeder, as President of the
Borrower; or Jim Suarez, as Treasurer/Controller of the Borrower; and their
respective successors in office. As to each Guarantor, the managing general
partner of each such Guarantor and their respective successors in office.

BALANCE SHEET DATE. September 30, 1995.

BANKS. FNBB, Texas Commerce Bank National Association, NationsBank of
Texas, N.A. and any other Person who becomes an assignee of any rights of a
Bank pursuant to Section 18 (but not including any Participant, as defined
in Section 18).

BASE RATE. The higher of (a) the annual rate of interest announced from
time to time by the Agent at its head office as its "base rate", or (b) one
half of one percent (0.5%) above the Federal Funds Effective Rate (rounded
upwards, if necessary, to the next one-eighth of one percent). Any change in
the rate of interest payable hereunder resulting from a change in the Base
Rate shall become effective as of the opening of business on the day on which
such change in the Base Rate becomes effective.

BASE RATE LOANS. Those Loans bearing interest calculated by reference
to the Base Rate.

BORROWER. As defined in the preamble hereto.

BORROWING BASE. At any time, the Borrowing Base shall be the aggregate
of the Borrowing Bases for each Unencumbered Operating Property. The
Borrowing Base for each Unencumbered Operating Property shall be the amount
which is the lesser of (a) fifty percent (50%) of the Asset Value of each
Unencumbered Operating Property; or (b) fifty percent (50%)

<PAGE>>

of the value of each Unencumbered Operating Property, such value being
determined as follows: (x) for each Initial Unencumbered Operating Property
and each hereafter acquired Unencumbered Operating Property which does not
constitute a Qualifying Property, value shall be the amount resulting from
dividing (i) the sum of Net Operating Income for the four preceding fiscal
quarters MINUS the Capital Improvement Reserve for such Unencumbered
Operating Property by (ii) ten and one half percent (10.5%); and (y) for each
Qualifying Property, value shall be the amount resulting from dividing (i)
Net Operating Income for the four preceding fiscal quarters MINUS the Capital
Improvement Reserve for such Qualifying Property by (ii) nine and
three-quarters of one percent (9.75%); or (c) the Debt Service Coverage
Amount for each Unencumbered Operating Property; and the amount which is the
lesser of (a), (b) or (c) shall be the Borrowing Base for each Unencumbered
Operating Property.

BUILDING. With respect to any portion of the Real Estate, all of the
buildings, structures and improvements now or hereafter located thereon.

BUSINESS DAY. Any day on which banking institutions in the head office
of the Agent are open for the transaction of banking business and, in the
case of Eurodollar Rate Loans, which also is a Eurodollar Business Day.

CASH AVAILABLE FOR DISTRIBUTION. With respect to any Person for any
fiscal period, an amount equal to Funds from Operations, MINUS the Capital
Improvement Reserve with respect to the Real Estate, MINUS actual tenant
improvements and leasing commissions incurred during such fiscal period.

CAPITAL IMPROVEMENT PROJECT. With respect to any Real Estate now or
hereafter owned by the Borrower or its Subsidiaries which is utilized
principally for industrial purposes, capital improvements consisting of
rehabilitation, refurbishment, replacement and improvements to the existing
Buildings on such Real Estate which may be properly capitalized under
generally accepted accounting principles.

CAPITAL IMPROVEMENT RESERVE. With respect to the Real Estate or any
portion thereof, a reserve for Capital Improvement Projects in the amount of
fifteen cents ($0.15) multiplied by the Gross Rentable Area contained therein.

CERCLA. See Section 6.18.

CLOSING DATE. The first date on which all of the conditions set forth
in Section 10 and Section 11 have been satisfied.

CO-AGENT. Texas Commerce Bank National Association, acting as co-agent
with Agent for the Banks, its successors and assigns.

CODE. The Internal Revenue Code of 1986, as amended.

-3-
<PAGE>

COMMITMENT. With respect to each Bank, the amount set forth on SCHEDULE 1
hereto as the amount of such Bank's Commitment to make or maintain Loans to
the Borrower or purchase participations in Letters of Credit issued by the
Agent to the Borrower, as the same may be changed from time to time in
accordance with the terms of this Agreement.

COMMITMENT PERCENTAGE. With respect to each Bank, the percentage set
forth on SCHEDULE 1 hereto as such Bank's percentage of the aggregate
Commitments of all of the Banks.

COMPLIANCE CERTIFICATE. See Section 7.4(e).

CONSOLIDATED or COMBINED. With reference to any term defined herein,
that term as applied to the accounts of the Borrower and its Subsidiaries,
consolidated or combined in accordance with generally accepted accounting
principles.

CONSOLIDATED TANGIBLE NET WORTH. The amount by which Consolidated Total
Assets exceed Consolidated Total Liabilities, and LESS the sum of:

(a) the total book value of all assets of a Person properly classified
as intangible assets under generally accepted accounting principles,
including such items as good will, the purchase price of acquired assets
in excess of the fair market value thereof, trademarks, trade names,
service marks, brand names, copyrights, patents and licenses, and rights
with respect to the foregoing; PLUS

(b) all amounts representing any write-up in the book value of any
assets of such Person resulting from a revaluation thereof subsequent to
the Balance Sheet Date; PLUS

(c) prepaid fees and deferred charges (regardless of whether classified
as intangible assets under generally accepted accounting principles); PLUS

(d) the total book value of any minority interests in partnerships,
joint ventures, corporation or other entities.

CONSOLIDATED TOTAL ASSETS. All assets of the Borrower and its
Subsidiaries determined on a Consolidated basis in accordance with generally
accepted accounting principles. The assets of the Borrower and its
Subsidiaries on the consolidated financial statements of the Borrower and its
Subsidiaries shall be adjusted as of the Closing Date for market values in
accordance with Section 9.7 and to reflect the Borrower's allocable share of
such asset, for the relevant period or as of the date of determination,
taking into account (a) the relative proportion of each such item derived
from assets directly owned by the Borrower and from assets owned by its
respective Subsidiaries, and (b) the Borrower's respective ownership interest
in its Subsidiaries.

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<PAGE>

CONSOLIDATED TOTAL LIABILITIES. All liabilities of the Borrower and its
Subsidiaries determined on a Consolidated basis in accordance with generally
accepted accounting principles and all Indebtedness of the Borrower and its
Subsidiaries, whether or not so classified.

CONVERSION REQUEST. A notice given by the Borrower to the Agent of its
election to convert or continue a Loan in accordance with Section 4.1.

DEBT OFFERING. The issuance and sale by the Borrower or the Guarantor
of any debt securities of the Borrower or the Guarantor.

DEBT SERVICE. For any period, the sum of all interest (including
capitalized interest) and mandatory scheduled principal payments due and
payable during such period with respect to any Indebtedness excluding any
balloon payments due upon maturity of any Indebtedness. For the period prior
to the date hereof, Debt Service on the Prudential Loan shall be calculated
by multiplying the outstanding principal balance of the Prudential Loan as of
May 31, 1995, by 8.62%. For the purpose of testing compliance with the
covenants contained in Section 9.2 and Section 9.3 only, Debt Service for
any fiscal quarter prior to the consolidation of certain Subsidiaries with
and into Borrower as described in Section 10.13 shall be calculated on the
basis of the interest rate and the total amount of the Indebtedness as of the
date of such consolidation.

DEBT SERVICE COVERAGE AMOUNT. At any time determined by Agent, an
amount equal to the maximum principal loan amount which, when bearing
interest at a rate per annum equal to the greater of (a) the then-current
annual yield on ten (10) year obligations issued by the United States
Treasury most recently prior to the date of determination plus two percent
(2%) and (b) ten percent (10%), and payable based on a twenty-five year
mortgage style amortization schedule, could be paid by the monthly principal
and interest payment amount resulting from dividing (x) the quotient obtained
by dividing an amount equal to (i) the sum of the Net Operating Income from
an individual Unencumbered Operating Property for the preceding four fiscal
quarters, MINUS the Capital Improvement Reserve for such Unencumbered
Operating Property, by (ii) 1.75 by (y) 12.

DEFAULT. See Section 12.1.

DISTRIBUTION. The declaration or payment of any dividend or
distribution on or in respect of any shares of beneficial interest of the
Borrower or the Guarantor, other than dividends or distributions payable
solely in equity securities of the Borrower or the Guarantor; the purchase,
redemption, exchange or other retirement of any shares of beneficial interest
of the Borrower or the Guarantor, directly or indirectly through a Subsidiary
of the Borrower or the Guarantor or otherwise, including without limitation,
the purchase of shares of beneficial interest of the Borrower for cash
pursuant to the Excepted Holder Agreement (as defined in the definition of
Indebtedness), but excluding the purchase of shares of beneficial interest of
the Borrower from executive officers of the Borrower where the only
consideration for such purchase is the extinguishing of notes made by such
executive officers and held by the Borrower; the return of

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<PAGE>

capital by the Borrower to its shareholders as such; or any other distribution
on or in respect of any shares of beneficial interest of the Borrower or the
Guarantor, including, without limitation, interest and premium paid on the
Debentures (as defined in the definition of Indebtedness).

DOLLARS or $. Dollars in lawful currency of the United States of
America.

DOMESTIC LENDING OFFICE. Initially, the office of each Bank designated
as such in SCHEDULE 1 hereto; thereafter, such other office of such Bank, if
any, located within the United States that will be making or maintaining Base
Rate Loans.

DRAWDOWN DATE. The date on which any Loan is made, and the date on
which any Loan which is made prior to the Maturity Date is converted or
combined in accordance with Section 4.1.

EMPLOYEE BENEFIT PLAN. Any employee benefit plan within the meaning of
Section 3(3) of ERISA maintained or contributed to by the Borrower or any
ERISA Affiliate, other than a Multi-employer Plan.

ENVIRONMENTAL LAWS. See Section 6.18(a).

EQUITY OFFERING. The issuance and sale by the Borrower or the Guarantor
of any equity securities of the Borrower or the Guarantor.

ERISA. The Employee Retirement Income Security Act of 1974, as amended
and in effect from time to time and any rules and regulations promulgated
pursuant thereto.

ERISA AFFILIATE. Any Person which is treated as a single employer with
the Borrower under Section 414 of the Code.

ERISA REPORTABLE EVENT. A reportable event with respect to a Guaranteed
Pension Plan within the meaning of Section 4043 of ERISA and the regulations
promulgated thereunder as to which the requirement of notice has not been
waived.

EUROCURRENCY RESERVE RATE. For any day with respect to a Eurodollar
Rate Loan, the maximum rate (expressed as a decimal) at which the Reference
Bank would be required to maintain reserves under Regulation D of the Board
of Governors of the Federal Reserve System (or any successor or similar
regulations relating to such reserve requirements) against "Eurocurrency
Liabilities" (as that term is used in Regulation D or any successor or
similar regulation), if such liabilities were outstanding. The Eurocurrency
Reserve Rate shall be adjusted automatically on and as of the effective date
of any change in the Eurocurrency Reserve Rate.

EURODOLLAR BUSINESS DAY. Any day on which commercial banks are open for
international business (including dealings in Dollar deposits) in London or
such other eurodollar interbank

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<PAGE>

market as may be selected by the Agent in its sole discretion acting in good
faith.

EURODOLLAR LENDING OFFICE. Initially, the office of each Bank
designated as such in SCHEDULE 1 hereto; thereafter, such other office of
such Bank, if any, that shall be making or maintaining Eurodollar Rate Loans.

EURODOLLAR RATE. For any Interest Period with respect to a Eurodollar
Rate Loan, the rate per annum equal to the sum of (a) the quotient (rounded
upwards to the nearest 1/16 of one percent) of (i) the rate at which the
Reference Bank's Eurodollar Lending Office is offered Dollar deposits two
Eurodollar Business Days prior to the beginning of such Interest Period in
whatever interbank eurodollar market may be selected by the Reference Bank in
its sole discretion, acting in good faith, for delivery on the first day of
such Interest Period for the number of days comprised therein and in an
amount comparable to the amount of the Eurodollar Rate Loan to which such
Interest Period applies (based upon Telerate quotes, page 3750, or such other
page as contains the same information as contained on page 3750), divided by
(ii) a number equal to 1.00 minus the Eurocurrency Reserve Rate; and (b) one
and seven-tenths percent (1.7%).

EURODOLLAR RATE LOANS. Loans bearing interest calculated by reference
to a Eurodollar Rate.

EVENT OF DEFAULT. See Section 12.1.

EXTENSION REQUEST. See Section 2.8.

FEDERAL FUNDS EFFECTIVE RATE. For any day, the rate per annum equal to
the weighted average of the rates on overnight Federal funds transactions
with members of the Federal Reserve System arranged by Federal funds brokers,
as published for such day (or, if such day is not a Business Day, for the
next preceding Business Day) by the Federal Reserve Bank of New York, or, if
such rate is not so published for any day that is a Business Day, the average
of the quotations for such day on such transactions received by the Agent
from three Federal funds brokers of recognized standing selected by the Agent.

FNBB. The First National Bank of Boston.

FUNDING CAP. The limit on the aggregate amount of Outstanding Loans and
Outstanding Letters of Credit (including Letters of Credit accepted but
unpaid), as in effect from time to time. As of the date of this Agreement,
the Funding Cap is $50,000,000.00 ($16,666,666.67 for each Bank). For each
additional $1,000,000.00 of gross proceeds received by the Borrower from an
Equity Offering subsequent to March 1, 1996 (and over and above the
$35,000,000.00 in gross proceeds which was a condition to the closing under
the Original Agreement), the Funding Cap shall be increased by $1,000,000.00,
up to, but not in excess of the Total Commitment of $75,000,000.00. Prior to
an increase in the Funding Cap, the Borrower shall provide to the Agent
evidence reasonably satisfactory to the Majority Banks the amount of gross
proceeds

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<PAGE>

received from any such Equity Offering.

FUNDS FROM OPERATIONS. With respect to any Person for any fiscal
period, an amount equal to the Net Income (or Deficit) of such Person
computed in accordance with generally accepted accounting principles,
excluding financing costs and gains (or losses) from debt restructuring and
sales of property, PLUS depreciation and amortization and other non-cash
items, PLUS the amortized portion of the Initial Loan Fees for such fiscal
period (excluding amortization of loan fees not constituting Initial Loan
Fees).

GENERALLY ACCEPTED ACCOUNTING PRINCIPLES. Principles that are (a)
consistent with the principles promulgated or adopted by the Financial
Accounting Standards Board and its predecessors, as in effect from time to
time and (b) consistently applied with past financial statements of the
Borrower or any of its Subsidiaries adopting the same principles; PROVIDED
that a certified public accountant would, insofar as the use of such
accounting principles is pertinent, be in a position to deliver an
unqualified opinion (other than a qualification regarding changes in
generally accepted accounting principles) as to financial statements in which
such principles have been properly applied.

GROSS CASH RECEIPTS. Gross Cash Receipts shall mean with respect to any
parcel of Real Estate the sum of cash recorded during any period by or for
the account of the Borrower or the Guarantor in payment of the following
items:

(b) Rentals, including minimum or base rent, percentage rent, and
rent attributable to recovery of tenant improvements costs
received from tenants occupying space in such parcel of Real Estate
during such period (prepaid rentals shall be treated in accordance
with generally accepted accounting principles);

(c) All amounts paid by tenants to the Borrower or the
Guarantor under Leases with respect to taxes and assessments
imposed on such parcel of Real Estate or in reimbursement of
operating expenses;

(d) Parking revenues received in connection with the operation of
parking facilities; and

(e) Receipts from vending machines, recreational facilities and any and
all other operating revenues received from such parcel of Real
Estate.

In the event that the Borrower or the Guarantor receives a
payment of Gross Cash Receipts other than on a monthly basis, then
for the purposes of determining the Gross Cash Receipts for a four
quarter period (a "Determination Period"), only the amount of such
payment which relates to the Determination Period (as opposed to a
period either before or after the Determination Period) shall be
included in the calculation of Gross Cash Receipts for such period.

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<PAGE>

Any payment of Gross Cash Receipts received from a tenant of a parcel of
Real Estate which is delinquent shall not be included as Gross Cash Receipts
until all delinquencies relating to such tenant for any prior periods have
been paid in full. Gross Cash Receipts shall not include any amounts payable
by tenants holding over pursuant to expired or terminated Leases, nor any
amounts paid by tenants as late charges, default interest or such other
similar charges.

If the Borrower or the Guarantor shall receive cash by reason of fire or
other casualty insurance proceeds, proceeds of rental, loss or business
interruption insurance (except to the extent that such proceeds replace the
rental payments which otherwise would have been due to the Borrower or the
Guarantor from tenants of a parcel of Real Estate), the forfeiting by tenants
of security or other deposits or payments made by tenants to cancel their
Leases or the recovery by the Borrower or the Guarantor of future rentals
under Leases (regardless of whether or not discounted to present value), or a
taking by eminent domain, a loan or advance, a sale, transfer, assignment or
other disposition of any part of a parcel of Real Estate or any interest
therein, or any other items of income which are extraordinary or of a
non-recurring nature, such amounts shall not be included in Gross Cash
Receipts.

Except as otherwise provided herein, Gross Cash Receipts shall be
determined on the basis of generally accepted accounting principles applied
on a consistent basis.

GROSS RENTABLE AREA. With respect to any portion of the Real Estate,
the floor area of a Building (exclusive of common areas) available for
leasing to tenants determined in accordance with the Rent Roll for such Real
Estate, the manner of such determination to be consistent for all Real Estate
unless otherwise approved by the Agent.

GUARANTEED PENSION PLAN. Any employee pension benefit plan within the
meaning of Section 3(2) of ERISA maintained or contributed to by the
Borrower or any ERISA Affiliate the benefits of which are guaranteed on
termination in full or in part by the PBGC pursuant to Title IV of ERISA,
other than a Multi-employer Plan.

HAZARDOUS SUBSTANCES. See Section 6.18(b).

GUARANTOR. DFW Nine, A California Limited Partnership, a California
limited partnership, having a usual place of business at c/o Meridian
Industrial Trust, Inc., 455 Market Street, 17th Floor, San Francisco,
California 94105.

GUARANTY. The Unconditional Guaranty of Payment and Performance dated
February 26, 1996 made by the Guarantor in favor of Agent and the Banks, as
modified by that certain First Amendment to Unconditional Guaranty of Payment
and Performance dated of even date herewith, and as the same may be modified
or amended hereafter, such Guaranty to be in form and substance satisfactory
to the Agent.

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<PAGE>

INDEBTEDNESS. All obligations, contingent and otherwise, that in
accordance with generally accepted accounting principles should be classified
upon the obligor's balance sheet as liabilities, or to which reference should
be made by footnotes thereto, including in any event and whether or not so
classified: (a) all debt and similar monetary obligations, whether direct or
indirect (including, without limitation, any obligations evidenced by bonds,
debentures, notes or similar debt instruments); (b) all liabilities secured
by any mortgage, pledge, security interest, lien, charge or other encumbrance
existing on property owned or acquired subject thereto, whether or not the
liability secured thereby shall have been assumed; (c) all guarantees,
endorsements and other contingent obligations whether direct or indirect in
respect of indebtedness of others, including any obligation to supply funds
to or in any manner to invest directly or indirectly in a Person, to purchase
indebtedness, or to assure the owner of indebtedness against loss through an
agreement to purchase goods, supplies or services for the purpose of enabling
the debtor to make payment of the indebtedness held by such owner or
otherwise, and the obligation to reimburse the issuer in respect of any
letter of credit; (d) all obligations to purchase under agreements to
acquire, or otherwise to contribute money with respect to, properties under
"development" within the meaning of Section 8.9; (e) a Person's pro rata
share of any of the above-described obligations of its unconsolidated
affiliates; and (f) all amounts available to be drawn under Letters of
Credit; PROVIDED, HOWEVER, that with respect to the conversion of certain
preferred stock of the Borrower into debentures of the Borrower (the
"Debentures") pursuant to that certain Excepted Holder Agreement to be
entered into between the Borrower and State Street Bank and Trust Company, as
Trustee for Ameritech Pension Trust ("Ameritech"), and that certain letter
agreement (the "Letter Agreement") dated December 29, 1995, between the
Borrower and Ameritech, such Debentures shall be excluded from the definition
of Indebtedness for the purposes of this Agreement upon the approval by the
Banks of each and every term of the Debentures in the exercise of their sole
discretion, including, without limitation, the terms of the subordination of
such Debentures to payment of the Loans and all renewals, modifications and
extensions thereof, and provided further that Ameritech shall enter into a
subordination and standstill agreement in form and substance satisfactory to
the Banks in their sole discretion.

INITIAL LOAN FEES. The fees payable by the Borrower in connection with
the closing of the transactions contemplated by the Original Credit
Agreement, this Agreement and the restructure of the Prudential Loan
completed on May 31, 1995, including any and all fees paid or which may be
paid by the Borrower after such date in connection with collateralizing or
modifying the collateralization of the Prudential Loan pursuant to such
restructuring.

INITIAL UNENCUMBERED OPERATING PROPERTIES. The Unencumbered Operating
Properties described on SCHEDULE 2 attached hereto.

INTEREST PAYMENT DATE. As to each Loan, the first day of each calendar
month during the term of such Loan and with respect to each Eurodollar Rate
Loan, the last day of each Interest Period during the term of such Eurodollar
Rate Loan.

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<PAGE>

INTEREST PERIOD. With respect to each Eurodollar Rate Loan (a)
initially, the period commencing on the Drawdown Date of such Loan and ending
one, two, three or six months thereafter, and (b) thereafter, each period
commencing on the day following the last day of the next preceding Interest
Period applicable to such Loan and ending on the last day of one of the
periods set forth above, as selected by the Borrower in a Conversion Request;
PROVIDED that all of the foregoing provisions relating to Interest Periods
are subject to the following:

(A) if any Interest Period with respect to a Eurodollar Rate Loan
would otherwise end on a day that is not a Eurodollar Business Day, that
Interest Period shall end and the next Interest Period shall commence on the
next preceding or succeeding Eurodollar Business Day as determined
conclusively by the Reference Bank in accordance with the then current bank
practice in the applicable eurodollar interbank market;

(B) if the Borrower shall fail to give notice as provided in
Section 4.1, the Borrower shall be deemed to have requested a conversion of
the affected Eurodollar Rate Loan to a Base Rate Loan on the last day of the
then current Interest Period with respect thereto; and

INVESTMENTS. With respect to any Person, all shares of capital stock,
evidences of Indebtedness and other securities issued by any other Person,
all loans, advances, or extensions of credit to, or contributions to the
capital of, any other Person, all purchases of the securities or business or
integral part of the business of any other Person and commitments and options
to make such purchases, all interests in real property, and all other
investments; PROVIDED, HOWEVER, that the term "Investment" shall not include
(i) equipment, inventory and other tangible personal property acquired in the
ordinary course of business, or (ii) current trade and customer accounts
receivable for services rendered in the ordinary course of business and
payable in accordance with customary trade terms. In determining the
aggregate amount of Investments outstanding at any particular time: (a) the
amount of any investment represented as a guaranty shall be taken at not less
than the principal amount of the obligations guaranteed and still
outstanding; (b) there shall be included as an Investment all interest
accrued with respect to Indebtedness constituting an Investment unless and
until such interest is paid; (c) there shall be deducted in respect of each
such Investment any amount received as a return of capital (but only by
repurchase, redemption, retirement, repayment, liquidating dividend or
liquidating distribution); (d) there shall not be deducted in respect of any
Investment any amounts received as earnings on such Investment, whether as
dividends, interest or otherwise, except that accrued interest included as
provided in the foregoing clause (b) may be deducted when paid; and (e) there
shall not be deducted from the aggregate amount of Investments any decrease
in the value thereof.

LEASES. Leases, licenses and agreements whether written or oral,
relating to the use or

<PAGE>

occupation of space in the Building or on the Real Estate by persons other
than the Borrower or the Guarantor.

LETTER OF CREDIT. A standby letter of credit which is payable upon
presentation of a sight draft and other documents, as originally issued
pursuant to this Agreement or as amended, modified, extended, reviewed or
supplemented.

LETTER OF CREDIT REQUEST. See Section 2.9.

LIENS. See Section 8.2.

LOAN DOCUMENTS. This Agreement, the Notes, the Guaranty and all other
documents, instruments or agreements executed or delivered by or on behalf of
the Borrower or the Guarantor evidencing or securing the Loans.

LOAN REQUEST. See Section 2.6.

LOANS. The aggregate Loans to be made by the Banks hereunder. Amounts
drawn under a Letter of Credit shall also be considered Loans as provided in
Section 2.9(f).

MAJORITY BANKS. As of any date, the Agent and the Bank or Banks whose
aggregate Commitment Percentage is equal to or greater than the percentage
required to approve such matter as set forth in that certain Intercreditor
Agreement dated of even date herewith among the Banks, and as disclosed by
the Agent to the Borrower from time to time.

MATURITY DATE. February 26, 1998, as the same may be extended as
provided in Section 2.8 or such earlier date on which the Loans shall become
due and payable pursuant to the terms hereof.

MULTI-EMPLOYER PLAN. Any Multi-employer plan within the meaning of
Section 3(37) of ERISA maintained or contributed to by the Borrower or any
ERISA Affiliate.

NET CAPITAL EXPENDITURES. With respect to any Person or asset for any
fiscal period, an amount equal to the amount of capital expenditures incurred
by such Person or with respect to such asset during such fiscal period
determined in accordance with generally accepted accounting principles.

NET INCOME (OR DEFICIT). With respect to any Person (or any asset of
any Person) for any fiscal period, the net income (or deficit) of such Person
(or attributable to such asset), after deduction of all expenses, taxes and
other proper charges, determined in accordance with generally accepted
accounting principles. For the purpose of testing compliance with the
covenants contained in Section 9.2 and Section 9.3 only, overhead and
other expenses for any fiscal quarter prior to the consolidation of certain
Subsidiaries with and into the Borrower as described in

<PAGE>

Section 10.13 shall be in an amount equal to the quarterly pro forma
overhead and expenses for the first year following such consolidation as
approved by the Agent.

NET OPERATING INCOME. During any period for any parcel of Real Estate,
the sum of (a) Gross Cash Receipts from such parcel of Real Estate less (b)
Operating Expenses for such parcel of Real Estate.

NON-RECOURSE INDEBTEDNESS. Indebtedness of the Borrower or any
Subsidiary which is secured by one or more parcels of Real Estate and related
personal property or interests therein and Short-term Investments and is not
a general obligation of the Borrower or any Subsidiary, the holder of such
Indebtedness having recourse solely to the parcels of Real Estate securing
such Indebtedness, the improvements thereon, related personal property and
leases thereon, and the rents and profits thereof and the Short-term
Investments securing such Indebtedness.

NOTES. See Section 2.4.

NOTICE. See Section 19.

OBLIGATIONS. All indebtedness, obligations and liabilities of the
Borrower to any of the Banks and the Agent, individually or collectively,
under this Agreement or any of the other Loan Documents or in respect of any
of the Loans, the Letters of Credit or the Notes, or other instruments at any
time evidencing any of the foregoing, whether existing on the date of this
Agreement or arising or incurred hereafter, direct or indirect, joint or
several, absolute or contingent, matured or unmatured, liquidated or
unliquidated, secured or unsecured, arising by contract, operation of law or
otherwise.

OPERATING CASH FLOW. With respect to any parcel of Real Estate for any
period, an amount equal to Net Operating Income less Net Capital Expenditures.

OPERATING EXPENSES. With respect to any parcel of Real Estate during
any period the sum of the following:

(a) All taxes and assessments imposed upon such parcel of Real
Estate actually paid by or on behalf of the Borrower or the
Guarantor (to the extent not paid by tenants of the Borrower
or the Guarantor) during such period in accordance with
generally accepted accounting principles (or if such taxes or
assessments are paid in advance with respect to future periods,
such payment shall be amortized over the period covered by such
payment);

(b) The amounts paid by or on behalf of the Borrower or the
Guarantor (to the extent not paid by tenants of the Borrower
or the Guarantor) in such period in accordance with generally
accepted accounting principles on account of

<PAGE>

insurance premiums for insurance carried in connection with
such parcel of Real Estate or the Borrower's or the Guarantor's
ownership and operation thereof, and the deductible amounts
expended by the Borrower or the Guarantor not reimbursed under
any such insurance (or if such insurance premiums are paid in
advance with respect to future periods, such payment shall be
amortized over the period covered by such payment); and

(c) Operating expenses paid by or on behalf of the Borrower or the
Guarantor in such period for the operation, cleaning,
marketing, maintenance and repair of such parcel of Real Estate
properly chargeable against income according to generally
accepted accounting principles, including management fees.

For the purposes of this Agreement, Operating Expenses shall not include any
of the following:

(i) Foreign, U.S., state and local income taxes, franchise
taxes or other taxes based on the income imposed on the
Borrower or the Guarantor generally and not as owner of such
parcel of Real Estate;

(ii) Depreciation and any other non-cash expenditures of the
Borrower or the Guarantor for income tax purposes;

(iii) Any improvements to such parcel of Real Estate of a
capital nature (as determined in accordance with generally
accepted accounting practices);

(iv) Any expense paid or incurred in connection with the sale
of all or any part of such parcel of Real Estate or any
interest therein;

(v) All costs, expenses, fees, commissions or other compensation
paid by or on behalf of the Borrower or the Guarantor
in connection with the renovation, improvement or development
of such parcel of Real Estate to the extent treated as Net
Capital Expenditures;

(vi) Any payment of principal or interest under the Notes or
other fees or charges payable under this Agreement; and

(vii) The Capital Improvement Reserve.

Operating Expenses shall be determined on the basis of sound cash basis
accounting practices applied on a consistent basis, modified as described
above.

OUTSTANDING. With respect to the Loans, the aggregate unpaid principal
thereof as of any

<PAGE>

date of determination. With respect to the Letters of Credit, the aggregate
amount of amounts available to be drawn under Letters of Credit.

PBGC. The Pension Benefit Guaranty Corporation created by Section 4002
of ERISA and any successor entity or entities having similar responsibilities.

PERMITTED LIENS. Liens, security interests and other encumbrances
permitted by Section 8.2.

PERSON. Any individual, corporation, partnership, trust, unincorporated
association, business, or other legal entity, and any government or any
governmental agency or political subdivision thereof.

PROSPECTUS. The prospectus included in the registration statement on
Form S-4 of the Borrower dated January 11, 1996 and filed with the SEC.

PRUDENTIAL LOAN. That certain $66,100,000 Non-recourse loan made by The
Prudential Life Insurance Company of America to Borrower as restructured by
the predecessors in interest of the Borrower on May 31, 1995, as amended on
December 14, 1995.

QUALIFYING PROPERTY. With respect to the Unencumbered Operating
Properties, an Unencumbered Operating Property meeting all of the following
requirements at the time of determination: (a) age does not exceed twelve
(12) years; (b) total Gross Rentable Area is not less than 50,000 square
feet; (c) use is non-specialized; and (d) at least two of the following three
characteristics are present: (i) finished out air conditioned office space
does not exceed twenty percent (20%) of total Gross Rentable Area, (ii)
ceiling clearance height is not less than twenty-two (22) feet, and (iii) the
average amount of Gross Rentable Area covered by each Lease is not less than
20,000 square feet.

REAL ESTATE. All real property at any time owned or leased (as lessee
or sublessee) by the Borrower or any of its Subsidiaries.

RECORD. The grid attached to any Note, or the continuation of such
grid, or any other similar record, including computer records, maintained by
any Bank with respect to any Loan referred to in such Note.

REFERENCE BANK. Agent.

REIT STATUS. With respect to the Borrower, its status as a real estate
investment trust as defined in Section 856(a) of the Code.

RELEASE. See Section 6.18(c)(iii).

<PAGE>

RENT ROLL. A report prepared and certified by the Borrower or the
Guarantor, as applicable, showing for each unit its type, location, Gross
Rentable Area, occupancy status, lease expiration date, market rent, lease
rent and other information in substantially the form presented to the Banks
prior to the date hereof or in such other form as may have been approved by
the Agent, such approval not to be unreasonably withheld.

SEC. The federal Securities and Exchange Commission.

SHORT-TERM INVESTMENTS. Investments described in subsections (a)
through (g), inclusive, of Section 8.3.

STATE. A state of the United States of America.

SUBSIDIARY. Any corporation, association, partnership, trust, or other
business entity of which the designated parent shall at any time own directly
or indirectly through a Subsidiary or Subsidiaries at least a majority (by
number of votes or controlling interests) of the outstanding Voting Interests.

TEST PERIOD. See Section 9.2.

TOTAL COMMITMENT. The sum of the Commitments of the Banks, as in effect
from time to time.

TYPE. As to any Loan, its nature as a Base Rate Loan or a Eurodollar
Rate Loan.

UNENCUMBERED OPERATING PROPERTIES. Real Estate which is owned one
hundred percent (100%) in fee simple by the Borrower and the Guarantor and
which satisfies all of the following conditions:

(a) each of the Unencumbered Operating Properties shall be free and
clear of all Liens other than Liens permitted in Section 8.2(ii) and (iv);

(b) to the best of the Borrower's knowledge and belief, none of the
Unencumbered Operating Properties shall have any material environmental,
structural, title, survey or other defects that would give rise to a
materially adverse effect as to the value, use of or ability to sell or
refinance such property; and

(c) each of the Unencumbered Operating Properties shall consist
solely of Real Estate (i) which is fully operational and (ii) with respect to
which valid certificates of occupancy for all Buildings thereon have been
issued and are in full force and effect;

Notwithstanding anything herein to the contrary, Unencumbered Operating
Properties shall only

<PAGE>

be owned by the Guarantor to the extent necessary to reduce or minimize
franchise or other similar taxes computed with respect to the ownership
and/or operation of the Unencumbered Operating Properties.

VOTING INTERESTS. Stock or similar ownership interests, of any class or
classes (however designated), the holders of which are at the time entitled,
as such holders, (a) to vote for the election of a majority of the directors
(or persons performing similar functions) of the corporation, association,
partnership, trust or other business entity involved, or (b) to control,
manage, or conduct the business of the corporation, partnership, association,
trust or other business entity involved.

Section 1.2. RULES OF INTERPRETATION.

(a) A reference to any document or agreement shall include such
document or agreement as amended, modified or supplemented from time to time
in accordance with its terms and the terms of this Agreement.

(b) The singular includes the plural and the plural includes the
singular.

(d) A reference to any Person includes its permitted successors
and permitted assigns.

(e) Accounting terms not otherwise defined herein have the
meanings assigned to them by generally accepted accounting principles applied
on a consistent basis by the accounting entity to which they refer.

(f) The words "include", "includes" and "including" are not
limiting.

(g) The words "approval" and "approved", as the context so
determines, means an approval in writing given to the party seeking approval
after full and fair disclosure to the party giving approval of all material
facts necessary in order to determine whether approval should be granted.

(h) All terms not specifically defined herein or by generally
accepted accounting principles, which terms are defined in the Uniform
Commercial Code as in effect in the Commonwealth of Massachusetts, have the
meanings assigned to them therein.

(i) Reference to a particular "Section", refers to that section of
this Agreement unless otherwise indicated.

(j) The words "herein", "hereof", "hereunder" and words of like
import shall

<PAGE>

refer to this Agreement as a whole and not to any particular section or
subdivision of this Agreement.

Section 2. THE REVOLVING CREDIT FACILITY.

Section 2.1. COMMITMENT TO LEND. Subject to the terms and conditions
set forth in this Agreement, each of the Banks severally agrees to lend to
the Borrower, and the Borrower may borrow (and repay and reborrow) from time
to time between the Closing Date and the Maturity Date upon notice by the
Borrower to the Agent given in accordance with Section 2.6, such sums as are
requested by the Borrower for the purposes set forth in Section 7.11 up to a
maximum aggregate principal amount Outstanding (after giving effect to all
amounts requested and the amount of Letters of Credit Outstanding, including
Letters of Credit accepted but unpaid) at any one time equal to such Bank's
Commitment (as limited by each Bank's Commitment Percentage of the Funding
Cap), PROVIDED, that, in all events no Default or Event of Default shall have
occurred and be continuing; and PROVIDED, FURTHER, that the Outstanding
principal amount of the Loans (after giving effect to all amounts requested
and the amount of Letters of Credit Outstanding, including Letters of Credit
accepted but unpaid) shall not at any time exceed the Total Commitment (as
limited by the Funding Cap) or cause a violation of the covenant set forth in
Section 9.4. The Loans shall be made PRO RATA in accordance with each
Bank's Commitment Percentage. The funding of a Loan hereunder shall
constitute a representation and warranty by the Borrower that all of the
conditions set forth in Section 10 and Section 11, in the case of the
initial Loan, and Section 11, in the case of all other Loans, have been
satisfied on the date of such funding. Notwithstanding anything to the
contrary contained in this Agreement, the aggregate amount of Outstanding
Loans and Outstanding Letters of Credit (including Letters of Credit accepted
but unpaid) shall not exceed the Funding Cap.

Section 2.2. FACILITY FEE. The Borrower agrees to pay to the Agent
for the accounts of the Banks in accordance with their respective Commitment
Percentages a facility fee calculated at the rate of one-fourth of one
percent (0.25%) per annum on the average daily amount by which the Total
Commitment exceeds the Outstanding principal amount of Loans and the amount
of Outstanding Letters of Credit (including Letters of Credit accepted but
unpaid) during each calendar quarter or portion thereof commencing on the
Closing Date and ending on the Maturity Date, provided, however, that in the
event for any quarter the ratio (expressed as a percentage) of (a) the
average daily amount of the Outstanding principal amount of the Loans and the
amount of Outstanding Letters of Credit (including Letters of Credit accepted
but unpaid) during such quarter to (b) the Total Commitment is greater than
sixty-five percent (65%), then the facility fee shall be calculated at the
rate of three-twentieths of one percent (0.15%) for such quarter. The
facility fee shall be payable quarterly in arrears on the last day of each
calendar quarter for such calendar quarter or portion thereof, with a final
payment on the Maturity Date.

Section 2.3. INTENTIONALLY OMITTED.

Section 2.4. NOTES. The Loans shall be evidenced by separate
promissory notes of the Borrower

<PAGE>

in substantially the form of EXHIBIT A hereto (collectively, the "Notes"),
dated the date of this Agreement and completed with appropriate insertions.
One Note shall be payable to the order of each Bank in the principal face
amount equal to such Bank's Commitment and shall be payable as set forth
below. The Borrower irrevocably authorizes each Bank to make or cause to be
made, at or about the time of the Drawdown Date of any Loan or at the time of
receipt of any payment of principal thereof, an appropriate notation on such
Bank's Record reflecting the making of such Loan or (as the case may be) the
receipt of such payment. The Outstanding amount of the Loans set forth on
such Bank's Record shall be PRIMA FACIE evidence of the principal amount
thereof owing and unpaid to such Bank, but the failure to record, or any
error in so recording, any such amount on such Bank's Record shall not limit
or otherwise affect the obligations of the Borrower hereunder or under any
Note to make payments of principal of or interest on any Note when due.

By delivery of the Notes, there shall not be deemed to have occurred, and
there has not otherwise occurred, any payment, satisfaction or novation of
the indebtedness evidence by the "Notes" as defined in the Original Credit
Agreement, which indebtedness is instead allocated among the Banks as of the
date hereof and evidenced by the Notes in accordance with their respective
Commitment Percentages.

Section 2.5. INTEREST ON LOANS.

(a) Each Base Rate Loan shall bear interest for the period
commencing with the Drawdown Date thereof and ending on the date on which
such Base Rate Loan is repaid or converted to a Eurodollar Rate Loan at the
rate per annum equal to the Base Rate.

(b) Each Eurodollar Rate Loan shall bear interest for the period
commencing with the Drawdown Date thereof and ending on the last day of the
Interest Period with respect thereto at the rate per annum equal to the sum
of the Eurodollar Rate determined for such Interest Period.

(d) Base Rate Loans and Eurodollar Rate Loans may be converted to
Loans of the other Type as provided in Section 4.1.

Section 2.6. REQUESTS FOR LOANS. Except with respect to the initial
Loan, the Borrower (i) shall notify the Agent of a potential request for a
Loan as soon as possible but not less than five (5) Business Days prior to
the Borrower's proposed Drawdown Date, and (ii) shall give to the Agent
written notice in the form of EXHIBIT B hereto (or telephonic notice
confirmed in writing in the form of EXHIBIT B hereto) of each Loan requested
hereunder (a "Loan Request") no less than three (3) Business Days prior to
the proposed Drawdown Date. The Agent shall promptly notify each of the
Banks following the receipt of a Loan Request, but in any event not less than
three (3) Business Days prior to the proposed Drawdown Date. Borrower shall
not make a Loan

<PAGE>

Request more frequently than three (3) times each month. Each such notice
shall specify with respect to the requested Loan the proposed principal
amount, Drawdown Date, Interest Period (if applicable) and Type. Each such
notice shall also contain (i) a statement as to the purpose for which such
advance shall be used (which purpose shall be in accordance with the terms of
Section 7.11), (ii) a certification by an Authorized Officer of the Borrower
and the Guarantor that since the date of the last Compliance Certificate
delivered under this Agreement, there have been no material changes in the
matters certified in such Compliance Certificate that could cause a Default
or Event of Default to occur after giving effect to the making of such Loan,
and (iii) a certification by an Authorized Officer of the Borrower that the
Borrower is and will be in compliance with Section 9.4 after giving effect
to the making of such Loan. Promptly upon receipt of any such notice, the
Agent shall notify each of the Banks thereof. Except as provided in this
Section 2.6, each such Loan Request shall be irrevocable and binding on the
Borrower and shall obligate the Borrower to accept the Loan requested from
the Banks on the proposed Drawdown Date, provided that, in addition to the
Borrower's other remedies against any Bank which fails to advance its
proportionate share of a requested Loan, such Loan Request may be revoked by
the Borrower by notice received by the Agent no later than the Drawdown Date
if any Bank fails to advance its proportionate share of the requested Loan in
accordance with the terms of this Agreement, provided further that the
Borrower shall be liable in accordance with the terms of this Agreement to
any Bank which is prepared to advance its proportionate share of the
requested Loan for any costs, expenses or damages incurred by such Bank as a
result of the Borrower's election to revoke such Loan Request (including,
without limitation, the items described in Section 4.8, as applicable, but
not including any damages for lost interest earnings as a result of such Loan
not being made). Nothing herein shall prevent the Borrower from seeking
recourse against any Bank that fails to advance its proportionate share of a
requested Loan as required by this Agreement. The Borrower may without cost
or penalty revoke a Loan Request by delivering notice thereof to each of the
Banks no later than three (3) Business Days prior to the Drawdown Date. Each
Loan Request shall be (a) for a Base Rate Loan in a minimum aggregate amount
of $1,000,000 or an integral multiple of $100,000 in excess thereof, or (b)
for a Eurodollar Rate Loan in a minimum aggregate amount of $1,000,000 or an
integral multiple of $100,000 in excess thereof; PROVIDED, HOWEVER, that
there shall be no more than five (5) Eurodollar Rate Loans outstanding at any
one time.

Section 2.7. FUNDS FOR LOANS. Not later than 2:00 p.m. (Boston time)
on the proposed Drawdown Date of any Loans, each of the Banks will make
available to the Agent, at the Agent's Head Office, in immediately available
funds, the amount of such Bank's Commitment Percentage of the amount of the
requested Loans which may be disbursed pursuant to Section 2.1. Upon
receipt from each Bank of such amount, and upon receipt of the documents
required by Section 10 and Section 11 and the satisfaction of the other
conditions set forth therein, to the extent applicable, the Agent will make
available to the Borrower the aggregate amount of such Loans made
available to the Agent by the Banks by crediting such amount to the account
of the Borrower maintained at the Agent's Head Office. The failure or
refusal of any Bank to make available to the Agent at the aforesaid time and
place on any Drawdown Date the amount of its Commitment Percentage of the
requested Loans shall not relieve any other Bank from its several obligation
hereunder to make available to the Agent by the Banks by crediting such
amount to the account of the Borrower maintained at the Agent's Head Office.
The failure or refusal of any Bank to make available to the Agent at the
aforesaid time and place on any Drawdown Date the amount of its Commitment
Percentage of the requested Loans shall not relieve any other Bank from its
serveral obligationa hereunder to make

<PAGE>

available to the Agent the amount of such other Bank's Commitment Percentage
of any requested Loans, including any additional Loans that may be requested
subject to the terms and conditions hereof to provide funds to replace those
not advanced by the Bank so failing or refusing, provided that the Borrower
may by notice received by the Agent no later than the Drawdown Date refuse to
accept any Loan which is not fully funded in accordance with the Borrower's
Loan Request subject to the terms of Section 2.6. In the event of any such
failure or refusal, the Banks not so failing or refusing shall be entitled to
a priority position as against the Bank or Banks so failing or refusing for
such Loans as provided in Section 12.5.

Section 2.8. EXTENSION OF MATURITY DATE.

(a) The Borrower has requested the ability to extend the Maturity
Date. The Borrower acknowledges and agrees that the Banks have no agreement or
obligation to extend the Maturity Date. Notwithstanding the foregoing, the
Borrower and the Banks have agreed upon the following procedure with respect to
requests by the Borrower to extend the Maturity Date:

(i) The Borrower may request that the Banks extend the
Maturity Date by one (1) year. If the Borrower desires to request that the
Maturity Date be extended by one (1) year, the Borrower shall deliver
written notice of such request to the Agent not earlier than the first
anniversary of the Closing Date and not later than the date which is ninety
(90) days prior to the then effective Maturity Date (an "Extension
Request"). The Agent shall provide a copy of such notice to each of the
Banks within ten (10) days after the Agent's receipt of such notice. The
Banks shall notify the Agent within forty-five (45) days of receipt of such
notice from the Agent of such Bank's approval or rejection of the Extension
Request. No Extension Request shall be deemed approved unless approved by
all of the Banks, which approval may be granted or withheld in each
Bank's sole and absolute discretion. In the event that a Bank
shall fail to respond in writing to the Agent within such forty-five
(45) day period, such Bank shall be deemed to have rejected the Extension
Request. The Agent shall promptly notify the Borrower of the responses
received from the Banks with respect to the Extension Request.

(ii) If the Extension Request is approved by all of the
Banks as provided in Section 2.8(a)(i), the Borrower shall retain the
right to request further one (1) year extensions in the manner provided
in this Section 2.8(a).

(b) In the event that an Extension Request is approved as
provided in Section 2.8(a), each and every such approval shall be
conditioned upon satisfaction of the following conditions precedent, which
terms shall be in addition to any terms and conditions which may be required
by the Banks as a condition to the approval of the Extension Request and must
be satisfied prior to the effectiveness of any extension of the Maturity Date:

(i) PAYMENT OF EXTENSION FEE. Within fifteen (15) days of
approval of the Extension Request by all of the Banks (but in no event
later than the Maturity Date as

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<PAGE>

determined without regard to such extension), the Borrower
shall pay to the Agent for the PRO RATA accounts of the Banks in accordance
with their respective Commitment Percentages an extension fee equal to
one-fifth of one percent (0.2%) of the Total Commitment, which fee
shall, when paid, be fully earned and non-refundable under any
circumstances.

(ii) NO DEFAULT. On the date the Extension Request is given
and on the Maturity Date (as determined without regard to such extension)
there shall exist no Default or Event of Default.

(iii) REPRESENTATIONS AND WARRANTIES. The representations and
warranties made by the Borrower or the Guarantor in the Loan Documents or
otherwise made by or on behalf of the Borrower, the Guarantor or any of the
Borrower's Subsidiaries in connection therewith or after the date thereof
shall have been true and correct in all material respects when made and
shall also be true and correct in all material respects on the Maturity
Date (as determined without regard to such extension) other than for
changes in the ordinary course of business permitted by this Agreement that
have not had any materially adverse affect on the business of the Borrower,
the Guarantor or any of the Borrower's Subsidiaries.

Section 2.9. LETTERS OF CREDIT.

(a) Subject to the terms and conditions set forth in this
Agreement, at any time and from time to time from the Closing Date through
the day that is thirty (30) days prior to the Maturity Date, the Agent shall
issue such Letters of Credit as the Borrower may request, for the purposes
provided in Section 7.11, upon the delivery of a written request in the form
of EXHIBIT C hereto (a "Letter of Credit Request") to the Agent, PROVIDED
that (i) upon issuance of such Letter of Credit, the sum of all Outstanding
Loans plus Outstanding Letters of Credit (including Letters of Credit
accepted but unpaid) shall not exceed the Funding Cap, (ii) upon issuance of
such Letter of Credit, the Outstanding Letters of Credit (including Letters
of Credit accepted but unpaid) shall not exceed Six Million Dollars
($6,000,000.00), (iii) the conditions set forth in Section 10 and 11 shall
have been satisfied, and (iv) in no event shall any amount drawn under a
Letter of Credit be available for reinstatement or a subsequent drawing under
such Letter of Credit. The Borrower assumes all risks with respect to the
use of the Letters of Credit. Unless the Agent and the Majority Banks
otherwise consent, the term of any Letter of Credit shall not exceed the
lesser of twelve (12) months or a period of time commencing on the issuance
of the Letter of Credit and ending on the date which is fifteen (15) days
prior to the Maturity Date (but in any event the term shall not extend beyond
the Maturity Date), and no Letter of Credit shall contain an automatic
extension or renewal clause. The amount available to be drawn under any
Letter of Credit shall reduce on a dollar for dollar basis the amount
available to be drawn under the Total Commitment (as limited by the Funding
Cap) as a Loan.
(b) Each Letter of Credit Request shall be
submitted to the Agent at least ten (10) Business Days prior to the date upon
which the requested Letter of Credit is to be issued.

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<PAGE>

Following the receipt of a Letter of Credit Request, the Agent shall promptly
notify each of the Banks of the Letter of Credit Request. Each such Letter
of Credit Request shall contain (i) a statement as to the purpose for which
such Letter of Credit shall be used (which purpose shall be in accordance
with the terms of Section 7.11), (ii) a certification by an Authorized
Officer of the Borrower that the Borrower is and will be in compliance with
all covenants under the Loan Documents after giving effect to the issuance of
such Letter of Credit, and (iii) a certification by an Authorized Officer of
the Borrower that the Borrower is and will be in compliance with
Section 7.15 after giving effect to the issuance of the Letter of Credit.
The Borrower shall further deliver to the Agent such additional applications
and documents as the Agent may require, in conformity with the then standard
practices of its letter of credit department, in connection with the issuance
of such Letter of Credit; provided that in the event of any conflict, the
terms of this Agreement shall control.

(c) The Agent shall, if it approves of the content of the Letter
of Credit Request (which approval shall not be unreasonably withheld), and
subject to the conditions set forth in this Agreement, issue the Letter of
Credit on or before ten (10) Business Days following receipt of the documents
last due pursuant to Section 2.9(b). Each Letter of Credit shall be in form
and substance satisfactory to the Agent in its sole discretion. Upon
issuance of a Letter of Credit, the Agent shall provide copies of each Letter
of Credit to the Banks.

(d) Upon the issuance of a Letter of Credit, each Bank shall be
deemed to have purchased a participation therein from Agent in an amount equal
to its respective Commitment Percentage of the amount of such Letter of Credit.

(e) Upon the issuance of each Letter of Credit, the Borrower shall
pay to the Agent (i) for its own account, a Letter of Credit fee calculated at
the rate of one-half of one percent (0.5%) per annum of the amount available to
be drawn under such Letter of Credit (which fee shall not be less than $1,000.00
in any event), and (ii) for the accounts of the Banks in accordance with their
respective percentage shares of participation in such Letter of Credit, a Letter
of Credit fee calculated at the rate of one and one-fifth percent (1.2%) per
annum of the amount available to be drawn under such Letter of Credit. Such
fees shall be payable in quarterly installments in advance with respect to each
Letter of Credit commencing on its date of issuance and continuing on each
quarter thereafter, as applicable.

(f) If and to the extent that any amounts are drawn upon any
Letter of Credit, the amounts so drawn shall, from the date of payment
thereof by the Agent, be considered Loans for all purposes hereunder bearing
interest as provided in Section 2.5(a). The Banks shall be required to make
such Loans regardless of whether all of the conditions to disbursement set
forth in Section 11 have been satisfied.

(g) Upon the receipt by the Agent of any draw or other presentation
for payment of a Letter of Credit and the payment of any amount under a Letter
of Credit, the Agent shall, without notice to or the consent of the Borrower,
direct the Banks to fund to the Agent in

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<PAGE>

accordance with Section 2.7 on or before 2:00 p.m. (Boston time) on the next
Business Day their respective Commitment Percentages of the amount so paid by
the Agent. The proceeds of such funding shall be paid to the Agent to
reimburse the Agent for the payment made by it under the Letter of Credit.
The provisions of Section 2.7 shall apply to any Bank or Banks failing or
refusing to fund its Commitment Percentage of any such draw.

(h) The issuance of any supplement, modification, amendment, renewal
or extension to or of any Letter of Credit shall be treated in all respects the
same as the issuance of a new Letter of Credit.

Section 3. REPAYMENT OF THE LOANS.

Section 3.1. STATED MATURITY. The Borrower promises to pay on the
Maturity Date and there shall become absolutely due and payable on the
Maturity Date, all of the Loans Outstanding on such date, together with any
and all accrued and unpaid interest thereon.

Section 3.2. MANDATORY PREPAYMENTS. If at any time the aggregate
Outstanding principal amount of the Loans and Outstanding Letters of Credit
(including Letters of Credit accepted but unpaid) exceeds the Funding Cap,
then the Borrower shall immediately pay the amount of such excess to the
Agent for the respective accounts of the Banks for application to the Loans.
If at any time the Borrower is not in compliance with the covenants contained
in Section 9.4, the Borrower shall pay to the Agent for the accounts of the
Banks so much of the Outstanding principal amounts of the Loans as is
necessary to cause the Borrower to be in compliance with Section 9.4.

Section 3.3. OPTIONAL PREPAYMENTS. The Borrower shall have the right,
at its election, to prepay the Outstanding amount of the Loans, as a whole or
in part, at any time without penalty or premium; PROVIDED, that the full or
partial prepayment of the Outstanding amount of any Eurodollar Rate Loans
pursuant to this Section 3.3 may be made only on the last day of the
Interest Period relating thereto unless accompanied by breakage costs
computed in accordance with Section 4.8 and except as otherwise required
pursuant to Section 4.7. The Borrower shall give the Agent, no later than
1:00 p.m., Boston time, at least three (3) Business Days prior written notice
of any prepayment pursuant to this Section 3.3 specifying the proposed date
of payment of Loans and the principal amount to be paid.

Section 3.4. PARTIAL PREPAYMENTS. Each partial prepayment of the
Loans under Section 3.2 and Section 3.3 shall be in an integral multiple of
$500,000, shall be accompanied by the payment of accrued interest on the
principal prepaid to the date of payment and, after payment of such interest,
shall be applied, in the absence of instruction by the Borrower, first to the
principal of Base Rate Loans and then to the principal of Eurodollar Rate
Loans.

Section 3.5. EFFECT OF PREPAYMENTS. Amounts of the Loans
prepaid under Section 3.2 and Section 3.3 prior to the Maturity Date may be
reborrowed as provided in Section 2.

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<PAGE>

Section 3.6. PROCEEDS FROM DEBT OFFERING AND EQUITY OFFERING. Upon
the occurrence of a Default or Event of Default and during any period during
which such Default or Event of Default shall be continuing, the Borrower
shall cause all gross proceeds of each and every Debt Offering and Equity
Offering, less all reasonable costs, fees, expenses, underwriting
commissions, fees and discounts incurred in connection therewith, to be
promptly paid by the Borrower to the Agent for the account of the Banks as a
prepayment of the Loans to the extent of the Outstanding balance of the Loans.

Section 4. CERTAIN GENERAL PROVISIONS.

Section 4.1. CONVERSION OPTIONS.

(a) The Borrower may elect from time to time to convert
any outstanding Loan to a Loan of another Type and such Loan shall thereafter
bear interest as a Base Rate Loan or a Eurodollar Rate Loan, as applicable;
PROVIDED that (i) with respect to any such conversion of a Eurodollar Rate
Loan to a Base Rate Loan, the Borrower shall give the Agent at least three
Business Days' prior written notice of such election, and such conversion
shall only be made on the last day of the Interest Period with respect to
such Eurodollar Rate Loan; (ii) with respect to any such conversion of a Base
Rate Loan to a Eurodollar Rate Loan, the Borrower shall give the Agent at
least four Eurodollar Business Days' prior written notice of such election
and the Interest Period requested for such Loan, the principal amount of the
Loan so converted shall be in a minimum aggregate amount of $1,000,000 or an
integral multiple of $100,000 in excess thereof and, after giving effect to
the making of such Loan, there shall be no more than five (5) Eurodollar Rate
Loans Outstanding at any one time; and (iii) no Loan may be converted into a
Eurodollar Rate Loan when any Default or Event of Default has occurred and is
continuing. All or any part of the Outstanding Loans of any Type may be
converted as provided herein, PROVIDED that no partial conversion shall
result in a Base Rate Loan in an aggregate principal amount of less than
$1,000,000 or a Eurodollar Rate Loan in an aggregate principal amount of less
than $1,000,000 and that the aggregate principal amount of each Loan shall be
in an integral multiple of $100,000. On the date on which such conversion is
being made, each Bank shall take such action as is necessary to transfer its
Commitment Percentage of such Loans to its Domestic Lending Office or its
Eurodollar Lending Office, as the case may be. Each Conversion Request
relating to the conversion of a Base Rate Loan to a Eurodollar Rate Loan
shall be irrevocable by the Borrower.

(b) Any Loan may be continued as such Type upon the
expiration of an Interest Period with respect thereto by compliance by the
Borrower with the terms of Section 4.1; PROVIDED that no Eurodollar Rate
Loan may be continued as such when any Event of Default has occurred and is
continuing, but shall be automatically converted to a Base Rate Loan on the
last day of the Interest Period relating thereto ending during the
continuance of any Event of Default.

(c) In the event that the Borrower does not notify the
Agent of its election hereunder with respect to any Loan, such Loan shall be
automatically converted to a Base Rate

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<PAGE>

Loan at the end of the applicable Interest Period.

Section 4.2. COMMITMENT FEE. The Borrower agrees to pay $125,000.00
on or before the Closing Date to the Agent for the account of the Banks in
accordance with their respective Commitment Percentages as a commitment fee.

Section 4.3. INTENTIONALLY OMITTED.

Section 4.4. FUNDS FOR PAYMENTS.

(a) All payments of principal, interest, facility fees,
Agent's fees, closing fees, Letter of Credit fees and any other amounts due
hereunder or under any of the other Loan Documents shall be made to the
Agent, for the respective accounts of the Banks and the Agent, as the case
may be, at the Agent's Head Office, not later than 1:00 p.m. (Boston time) on
the day when due, in each case in immediately available funds. The Agent is
hereby authorized to charge the account of the Borrower with FNBB, on the
dates when the amount thereof shall become due and payable, with the amounts
of the principal of and interest on the Loans and all fees, charges, expenses
and other amounts owing to the Agent and/or the Banks under the Loan
Documents.

(b) All payments by the Borrower hereunder and under any
of the other Loan Documents shall be made without setoff or counterclaim and
free and clear of and without deduction for any taxes, levies, imposts,
duties, charges, fees, deductions, withholdings, compulsory loans,
restrictions or conditions of any nature now or hereafter imposed or levied
by any jurisdiction or any political subdivision thereof or taxing or other
authority therein unless the Borrower is compelled by law to make such
deduction or withholding. If any such obligation is imposed upon the
Borrower with respect to any amount payable by it hereunder or under any of
the other Loan Documents, the Borrower will pay to the Agent, for the account
of the Banks or (as the case may be) the Agent, on the date on which such
amount is due and payable hereunder or under such other Loan Document, such
additional amount in Dollars as shall be necessary to enable the Banks or the
Agent to receive the same net amount which the Banks or the Agent would have
received on such due date had no such obligation been imposed upon the
Borrower. The Borrower will deliver promptly to the Agent certificates or
other valid vouchers for all taxes or other charges deducted from or paid
with respect to payments made by the Borrower hereunder or under such other
Loan Document.

(c) The obligations of the Borrower to the Banks under
this Agreement shall be absolute, unconditional and irrevocable, and shall be
paid and performed strictly in accordance with the terms of this Agreement,
under all circumstances whatsoever, including, without limitation, the
following circumstances: (i) any improper use which may be made of any
Letter of Credit or any improper acts or omissions of any beneficiary or
transferee of any Letter of Credit in connection therewith; (ii) the
existence of any claim, set-off, defense or any right which the Borrower may
have at any time against any beneficiary or any transferee of any Letter

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<PAGE>

of Credit (or persons or entities for whom any such beneficiary or any such
transferee may be acting) or the Banks (other than the defense of payment to
the Banks in accordance with the terms of this Agreement) or any other
person, whether in connection with any Letter of Credit, this Agreement, any
other Loan Document, or any unrelated transaction; (iii) any statement or any
other documents presented under any Letter of Credit proving to be
insufficient, forged, fraudulent or invalid in any respect or any statement
therein being untrue or inaccurate in any respect whatsoever; (iv) any breach
of any agreement between Borrower and any beneficiary or transferee of any
Letter of Credit; (v) any irregularity in the transaction with respect to
which any Letter of Credit is issued, including any fraud by the beneficiary
or any transferee of such Letter of Credit; (vi) payment by the Agent under
any Letter of Credit against presentation of a sight draft or a certificate
which does not comply with the terms of such Letter of Credit, provided that
such payment shall not have constituted gross negligence or willful
misconduct on the part of the Agent, and (vii) any other circumstance or
happening whatsoever, whether or not similar to any of the foregoing,
provided that such other circumstances or happenings shall not have been the
result of gross negligence or willful misconduct on the part of the Agent.

(d) Each Bank organized under the laws of a jurisdiction
outside the United States, if requested in writing by the Borrower (but only
so long as such Bank remains lawfully able to do so), shall provide the
Borrower with such duly executed form(s) or statement(s) which may, from time
to time, be prescribed by law and, which, pursuant to applicable provisions
of (i) an income tax treaty between the United States and the country of
residence of such Bank, (ii) the Code, or (iii) any applicable rules or
regulations in effect under (i) or (ii) above, indicating the withholding
status of such Bank; provided that nothing herein (including without
limitation the failure or inability to provide such form or statement) shall
relieve the Borrower of its obligations under Section 4.4(b). In the event
that the Borrower shall have delivered the certificates or vouchers described
above for any payments made by the Borrower and such Bank receives a refund
of any taxes paid by the Borrower pursuant to Section 4.4(b), such Bank will
pay to the Borrower the amount of such refund promptly upon receipt thereof,
PROVIDED that if at any time thereafter such Bank is required to return such
refund, the Borrower shall promptly repay to such Bank the amount of such
refund.

Section .4.5 COMPUTATIONS. All computations of interest on the Loans
and of other fees to the extent applicable shall be based on a 360-day year
and paid for the actual number of days elapsed. Except as otherwise provided
in the definition of the term "Interest Period" with respect to Eurodollar
Rate Loans, whenever a payment hereunder or under any of the other Loan
Documents becomes due on a day that is not a Business Day, the due date for
such payment shall be extended to the next succeeding Business Day, and
interest shall accrue during such extension. The Outstanding amount of the
Loans as reflected on the records of the Agent from time to time shall be
considered PRIMA FACIE evidence of such amount.

Section 4.6. INABILITY TO DETERMINE EURODOLLAR RATE. In the event
that, prior to the commencement of any Interest Period relating to any
Eurodollar Rate Loan, the Agent shall determine that adequate and reasonable
methods do not exist for ascertaining the Eurodollar Rate

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for such Interest Period, the Agent shall forthwith give notice of such
determination (which shall be conclusive and binding on the Borrower and the
Banks) to the Borrower and the Banks. In such event (a) any Loan Request
with respect to Eurodollar Rate Loans shall be automatically withdrawn and
shall be deemed a request for Base Rate Loans and (b) each Eurodollar Rate
Loan will automatically, on the last day of the then current Interest Period
thereof, become a Base Rate Loan, and the obligations of the Banks to make
Eurodollar Rate Loans shall be suspended until the Agent determines that the
circumstances giving rise to such suspension no longer exist, whereupon the
Agent shall so notify the Borrower and the Banks.

Section 4.7. ILLEGALITY. Notwithstanding any other provisions herein,
if any present or future law, regulation, treaty or directive or the
interpretation or application thereof shall make it unlawful, or any central
bank or other governmental authority having jurisdiction over a Bank or its
Eurodollar Lending Office shall assert that it is unlawful, for any Bank to
make or maintain Eurodollar Rate Loans, such Bank shall forthwith give notice
of such circumstances to the Agent and the Borrower and thereupon (a) the
commitment of the Banks to make Eurodollar Rate Loans or convert Loans of
another type to Eurodollar Rate Loans shall forthwith be suspended and (b)
the Eurodollar Rate Loans then Outstanding shall be converted automatically
to Base Rate Loans on the last day of each Interest Period applicable to such
Eurodollar Rate Loans or within such earlier period as may be required by law.

Section 4.8. ADDITIONAL INTEREST. If any Eurodollar Rate Loan or any
portion thereof is repaid or is converted to a Base Rate Loan for any reason
on a date which is prior to the last day of the Interest Period applicable to
such Eurodollar Rate Loan, the Borrower will pay to the Agent upon demand for
the account of the Banks in accordance with their respective Commitment
Percentages, in addition to any amounts of interest otherwise payable
hereunder, any amounts required to compensate the Banks for any losses, costs
or expenses which may reasonably be incurred as a result of such payment or
conversion, including, without limitation, an amount equal to daily interest
for the unexpired portion of such Interest Period on the Eurodollar Rate Loan
or portion thereof so repaid or converted at a per annum rate equal to the
excess, if any, of (a) the Eurodollar Rate applicable to such Eurodollar Rate
Loan minus one and seven tenths percent (1.7%) over (b) the yield obtainable
by the Agent upon the purchase of debt securities customarily issued by the
Treasury of the United States of America which have a maturity date most
closely approximating the last day of such Interest Period (it being
understood that the purchase of such securities shall not be required in
order for such amounts to be payable) (it being agreed that a Bank shall not
be obligated or required to have actually obtained funds at the Eurodollar
Rate or to have actually reinvested such amount as described above).

Section 4.9. ADDITIONAL COSTS, ETC. Notwithstanding anything herein
to the contrary, if any present or future applicable law, which expression,
as used herein, includes statutes, rules and regulations thereunder and
legally binding interpretations thereof by any competent court or by any
governmental or other regulatory body or official with appropriate
jurisdiction charged with the administration or the interpretation thereof
and requests, directives, instructions and notices at any time or from time
to time hereafter made upon or otherwise issued to any Bank or the Agent

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by any central bank or other fiscal, monetary or other authority (whether or not
having the force of law), shall:

(a) subject any Bank or the Agent to any tax, levy, impost,
duty, charge, fee, deduction or withholding of any nature with respect to
this Agreement, the other Loan Documents, such Bank's Commitment, a Letter of
Credit or the Loans (other than taxes based upon or measured by the income or
profits of such Bank or the Agent), or

(b) materially change the basis of taxation (except for
changes in taxes on income or profits) of payments to any Bank of the
principal of or the interest on any Loans or any other amounts payable to any
Bank under this Agreement or the other Loan Documents, or

(c) impose or increase or render applicable any special
deposit, reserve, assessment, liquidity, capital adequacy or other similar
requirements (whether or not having the force of law) against assets held by,
or deposits in or for the account of, or loans by, or letters of credit from,
or commitments of any Bank beyond those in effect as of the date hereof, or

(d) impose on any Bank or the Agent any other conditions or
requirements with respect to this Agreement, the other Loan Documents, the
Loans, such Bank's Commitment, a Letter of Credit or any class of loans or
commitments of which any of the Loans or such Bank's Commitment forms a part;
and the result of any of the foregoing is

(i) to increase the cost to any Bank of making,
funding, issuing, renewing, extending or maintaining any of the Loans or
Letters of Credit or such Bank's Commitment, or

(ii) to reduce the amount of principal, interest or
other amount payable to such Bank or the Agent hereunder on account of
such Bank's Commitment or any of the Loans or Letters of Credit, or

(iii) to require such Bank or the Agent to make any
payment or to forego any interest or other sum payable hereunder, the
amount of which payment or foregone interest or other sum is calculated
by reference to the gross amount of any sum receivable or deemed
received by such Bank or the Agent from the Borrower hereunder,

then, and in each such case, the Borrower will, within fifteen (15) days of
demand made by such Bank or (as the case may be) the Agent at any time and
from time to time and as often as the occasion therefor may arise, pay to
such Bank or the Agent such additional amounts as such Bank or the Agent
shall determine in good faith to be sufficient to compensate such Bank or the
Agent for such additional cost, reduction, payment or foregone interest or
other sum. Each Bank and the Agent in determining such amounts may use any
reasonable averaging and attribution methods, generally applied by such Bank
or the Agent.

Section 4.10. CAPITAL ADEQUACY. If after the date hereof any Bank
determines that (a) the

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adoption of or change in any law, rule, regulation or guideline
regarding capital requirements of general application for banks or bank holding
companies (as opposed to a particular bank) or any change in the interpretation
or application thereof by any governmental authority charged with the
administration thereof, or (b) compliance by such Bank or its parent bank
holding company with any future guideline, request or directive of any such
entity regarding capital adequacy or any amendment or change in interpretation
of any existing guideline, request or directive (whether or not having the force
of law), has the effect of reducing the return on such Bank's or such holding
company's capital as a consequence of such Bank's commitment to make Loans
hereunder to a level below that which such Bank or holding company could have
achieved but for such adoption, change or compliance (taking into consideration
such Bank's or such holding company's then existing policies with respect to
capital adequacy and assuming the full utilization of such entity's capital) by
any amount deemed by such Bank to be material, then such Bank may notify the
Borrower thereof. The Borrower agrees to pay to such Bank the amount of such
reduction in the return on capital as and when such reduction is determined,
upon presentation by such Bank of a statement of the amount setting for the
Bank's calculation thereof. In determining such amount, such Bank may use any
reasonable averaging and attribution methods, generally applied by such Bank.

Section 4.11. INDEMNITY OF BORROWER. The Borrower agrees to indemnify
each Bank and to hold each Bank harmless from and against any loss, cost or
expense that such Bank may sustain or incur as a consequence of (a) default
by the Borrower in payment of the principal amount of or any interest on any
Eurodollar Rate Loans as and when due and payable, including any such loss or
expense arising from interest or fees payable by such Bank to lenders of
funds obtained by it in order to maintain its Eurodollar Rate Loans, or (b)
default by the Borrower in making a borrowing or conversion after the
Borrower has given (or is deemed to have given) a Loan Request or a
Conversion Request; provided, however, that the Borrower shall not be
required to so indemnify any Bank pursuant to clause (b) above which fails or
refuses to fund its proportionate share of a Loan in accordance with the
terms of this Agreement.

Section 4.12. INTEREST ON OVERDUE AMOUNTS; LATE CHARGE. Overdue
principal and (to the extent permitted by applicable law) interest on the
Loans and all other overdue amounts payable hereunder or under any of the
other Loan Documents shall bear interest payable on demand at a rate per
annum equal to four percent (4%) above the Base Rate until such amount shall
be paid in full (after as well as before judgment). In addition, the
Borrower shall pay a late charge equal to three percent (3%) of any amount of
interest and/or principal payable on the Loans or any other amounts payable
hereunder or under the Loan Documents, which is not paid within ten days of
the date when due.

Section 4.13. CERTIFICATE. A certificate setting forth any amounts
payable pursuant to Section 4.8, Section 4.9, Section 4.10, Section 4.11
or Section 4.12 and a brief explanation of such amounts which are due,
submitted by any Bank or the Agent to the Borrower, shall be conclusive in
the absence of manifest error.

Section 4.14. LIMITATION ON INTEREST. Notwithstanding anything in
this Agreement to the

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contrary, all agreements between the Borrower and the Banks and the Agent,
whether now existing or hereafter arising and whether written or oral, are
hereby limited so that in no contingency, whether by reason of acceleration
of the maturity of any of the Obligations or otherwise, shall the interest
contracted for, charged or received by the Banks exceed the maximum amount
permissible under applicable law. If, from any circumstance whatsoever,
interest would otherwise be payable to the Banks in excess of the maximum
lawful amount, the interest payable to the Banks shall be reduced to the
maximum amount permitted under applicable law; and if from any circumstance
the Banks shall ever receive anything of value deemed interest by applicable
law in excess of the maximum lawful amount, an amount equal to any excessive
interest shall be applied to the reduction of the principal balance of the
Obligations and to the payment of interest or, if such excessive interest
exceeds the unpaid balance of principal of the Obligations, such excess shall
be refunded to the Borrower. All interest paid or agreed to be paid to the
Banks shall, to the extent permitted by applicable law, be amortized,
prorated, allocated and spread throughout the full period until payment in
full of the principal of the Obligations (including the period of any renewal
or extension thereof) so that the interest thereon for such full period shall
not exceed the maximum amount permitted by applicable law. This section
shall control all agreements between the Borrower and the Banks and the
Agent.

Section 5. SECURITY. The Banks have agreed to make the Loans to the
Borrower on an unsecured basis. Notwithstanding the foregoing, the
Obligations shall be guaranteed by Guarantor pursuant to the Guaranty.

Section 6. REPRESENTATIONS AND WARRANTIES.

The Borrower represents and warrants to the Agent and the Banks as follows:

Section 6.1. CORPORATE AUTHORITY, ETC.

(a) INCORPORATION; GOOD STANDING. The Borrower (i) is a
corporation duly organized pursuant to its organizational documents and
amendments thereto filed with the Department of Assessments and Taxation of
Maryland and is validly existing and in good standing under the laws of the
State of Maryland, (ii) has all requisite power to own its property and
conduct its business as now conducted and as presently contemplated, (iii) is
in good standing as a foreign entity and is duly authorized to do business in
the jurisdictions where the Unencumbered Operating Properties are located to
the extent required to be so authorized and in each other jurisdiction where
a failure to be so qualified in such other jurisdiction could have a
materially adverse effect on the business, assets or financial condition of
the Borrower and (iv) is a real estate investment trust in full compliance
with and entitled to the benefits of Section 856 of the Code.

(b) SUBSIDIARIES. Each of the Subsidiaries of the Borrower
(including the Guarantor) (i) is a corporation, limited partnership, limited
liability company or trust duly organized under the laws of its State of
organization and is validly existing and in good standing

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under the laws thereof, (ii) has all requisite power to own its property and
conduct its business as now conducted and as presently contemplated and (iii)
is in good standing and is duly authorized to do business in each
jurisdiction where a failure to be so qualified could have a materially
adverse effect on the business, assets or financial condition of the Borrower
or such Subsidiary.

(c) AUTHORIZATION. The execution, delivery and performance of
this Agreement and the other Loan Documents and the transactions contemplated
hereby and thereby (i) are within the authority of the Borrower and the
Guarantor, (ii) have been duly authorized by all necessary proceedings on the
part of the such Person, (iii) do not and will not conflict with or result in
any breach or contravention of any provision of law, statute, rule or
regulation to which such Person is subject or any judgment, order, writ,
injunction, license or permit applicable to such Person, (iv) do not and will
not conflict with or constitute a default (whether with the passage of time
or the giving of notice, or both) under any provision of the charter
documents, partnership agreement, declaration of trust or other charter
documents or bylaws of, or any agreement or other instrument binding upon,
such Person or any of its properties, and (v) do not and will not result in
or require the imposition of any lien or other encumbrance on any of the
properties, assets or rights of such Person.

(d) ENFORCEABILITY. The execution and delivery of this Agreement
and the other Loan Documents are valid and legally binding obligations of the
Borrower and the Guarantor enforceable in accordance with the respective
terms and provisions hereof and thereof, except as enforceability is limited
by bankruptcy, insolvency, reorganization, moratorium or other laws relating
to or affecting generally the enforcement of creditors' rights and except to
the extent that availability of the remedy of specific performance or
injunctive relief is subject to the discretion of the court before which any
proceeding therefor may be brought.

Section 6.2. GOVERNMENTAL APPROVALS. The execution, delivery and
performance by the Borrower and the Guarantor of this Agreement and the other
Loan Documents and the transactions contemplated hereby and thereby do not
require the approval or consent of, or filing with, any governmental agency
or authority other than those already obtained.

Section 6.3. TITLE TO PROPERTIES; LEASES. Except as indicated on
SCHEDULE 6.3 hereto, the Borrower and its Subsidiaries own all of the assets
reflected in the consolidated balance sheet of the Borrower as at the Balance
Sheet Date or acquired since that date (except property and assets sold or
otherwise disposed of in the ordinary course of business since that date),
subject to no rights of others, including any mortgages, leases (excluding
leases entered into in the ordinary course of the Borrower's business),
conditional sales agreements, title retention agreements, liens or other
encumbrances except Permitted Liens. Without limiting the foregoing, the
Borrower and its Subsidiaries have good and marketable fee simple title to,
or a valid and subsisting leasehold interest in, all real property reasonably
necessary for the operation of its business in whole, free from all liens or
encumbrances of any nature whatsoever, except for Permitted Liens. The
Borrower or its Subsidiary or the Guarantor, as the case may be, is the
insured under owner's policies of title insurance covering all real property
owned by it, in each case in an

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amount not less than the purchase price for such real property. Neither the
Borrower nor the Guarantor is a party to a Lease with a tenant which accounts
for one-half percent (0.5%) or more of the total rental revenues of the
Borrower and in which Ameritech owns, directly or indirectly, more than a
nine and nine tenths percent (9.9%) interest.

Section 6.4. FINANCIAL STATEMENTS. The Borrower has furnished to each
of the Banks: (a) the pro forma consolidated balance sheet of the Borrower
and its Subsidiaries and of the Guarantor as of the Balance Sheet Date and
their related consolidated statements of income, changes in stockholder
equity and cash flows for the fiscal year then ended, certified by an
Authorized Officer of the Borrower and the Guarantor, as applicable, (b) a
pro forma consolidated balance sheet and a pro forma consolidated statement
of income and cash flows of the Borrower and its Subsidiaries and of the
Guarantor for each of the fiscal quarters of the Borrower ended since the
Balance Sheet Date certified by an Authorized Officer of the Borrower and the
Guarantor, as applicable, to have been prepared in accordance with generally
accepted accounting principles consistent with those used in the preparation
of the annual statements delivered pursuant to subsection (a) above and to
fairly present the financial condition of the Borrower and its Subsidiaries
and the Guarantor as at the close of business on the dates thereof and the
results of operations for the fiscal quarters then ended (subject to year-end
adjustments), and (c) an unaudited consolidated statement of Net Operating
Income for the Borrower and its Subsidiaries and the Guarantor and an
unaudited statement of Net Operating Income for each parcel of Real Estate
for the nine (9) months ended September 30, 1995, satisfactory in form to the
Majority Banks and certified by an Authorized Officer of the Borrower and the
Guarantor, as applicable, as fairly presenting the operating income for such
parcels for such periods. Such balance sheet and statements of income,
stockholder's equity and cash flows have been prepared in accordance with
generally accepted accounting principles and fairly present the financial
condition of the Borrower and its Subsidiaries and the Guarantor as of such
dates and the results of the operations of the Borrower and its Subsidiaries
and the Guarantor for such periods. There are no liabilities, contingent or
otherwise, of the Borrower or any of its Subsidiaries or the Guarantor
involving material amounts not disclosed in said financial statements and the
related notes thereto.

Section 6.5. NO MATERIAL CHANGES. Since the Balance Sheet Date, there
has occurred no materially adverse change in the financial condition or
business of the Borrower and its Subsidiaries or the Guarantor taken as a
whole as shown on or reflected in the consolidated balance sheet of the
Borrower and its Subsidiaries and the Guarantor, adjusted pursuant to
Section 9.7, as of the Balance Sheet Date, or its consolidated statement
of Net Operating Income or Operating Cash Flow for the Real Estate for the
fiscal year then ended, other than changes in the ordinary course of business
that have not had any materially adverse effect either individually or in the
aggregate on the business or financial condition of such Person.

Section 6.6. FRANCHISES, PATENTS, COPYRIGHTS, ETC. The Borrower and
its Subsidiaries and the Guarantor possess all franchises, patents,
copyrights, trademarks, trade names, servicemarks, licenses and permits, and
rights in respect of the foregoing, adequate for the conduct of their
business substantially as now conducted without known conflict with any
rights of others.

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Section 6.7. LITIGATION. Except as stated on SCHEDULE
6.7 there are no actions, suits, proceedings or investigations of any kind
pending or threatened against the Borrower or any of its Subsidiaries or the
Guarantor before any court, tribunal or administrative agency or board that,
if adversely determined, might, either in any case or in the aggregate,
materially adversely affect the properties, assets, financial condition or
business of such Person or materially impair the right of such Person to
carry on business substantially as now conducted by it, or result in any
liability not adequately covered by insurance, or for which adequate reserves
are not maintained on the balance sheet of such Person, or which question the
validity of this Agreement or any of the other Loan Documents, any action
taken or to be taken pursuant hereto or thereto, or which will adversely
affect the ability of the Borrower or the Guarantor to pay and perform the
Obligations in the manner contemplated by this Agreement and the other Loan
Documents.

Section 6.8. NO MATERIALLY ADVERSE CONTRACTS, ETC. Neither the
Borrower nor any of its Subsidiaries nor the Guarantor is subject to any
charter, corporate or other legal restriction, or any judgment, decree,
order, rule or regulation that has or is expected in the future to have a
materially adverse effect on the business, assets or financial condition of
the Borrower or any of its Subsidiaries or the Guarantor. Neither the
Borrower nor any of its Subsidiaries nor the Guarantor is a party to any
contract or agreement that has or is expected, in the judgment of the
officers of such Person, to have any materially adverse effect on the
business of any of them.

Section 6.9. COMPLIANCE WITH OTHER INSTRUMENTS, LAWS, ETC. Neither
the Borrower nor any of its Subsidiaries nor the Guarantor is in violation of
any provision of its charter or other organizational documents, by-laws, or
any agreement or instrument to which it may be subject or by which it or any
of its properties may be bound or any decree, order, judgment, statute,
license, rule or regulation, in any of the foregoing cases in a manner that
could result in the imposition of substantial penalties or materially and
adversely affect the financial condition, properties or business of the
Borrower or its Subsidiaries or the Guarantor.

Section 6.10. TAX STATUS. The Borrower and each of its Subsidiaries
and the Guarantor (a) has made or filed all federal and state income and all
other tax returns, reports and declarations required by any jurisdiction to
which it is subject, (b) has paid all taxes and other governmental
assessments and charges shown or determined to be due on such returns,
reports and declarations, except those being contested in good faith and by
appropriate proceedings and (c) has set aside on its books provisions
reasonably adequate for the payment of all taxes for periods subsequent to
the periods to which such returns, reports or declarations apply. There are
no unpaid taxes in any material amount claimed to be due by the taxing
authority of any jurisdiction, and the officers of such Person know of no
basis for any such claim.

Section 6.11. NO EVENT OF DEFAULT. No Default or Event of Default has
occurred and is continuing.

Section 6.12. HOLDING COMPANY AND INVESTMENT COMPANY ACTS. Neither
the Borrower nor any of its Subsidiaries nor the Guarantor is a "holding
company", or a "subsidiary company" of a

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"holding company", or an "affiliate" of a "holding company", as such terms
are defined in the Public Utility Holding Company Act of 1935; nor is it an
"investment company", or an "affiliated company" or a "principal underwriter"
of an "investment company", as such terms are defined in the Investment
Company Act of 1940.

Section 6.13. ABSENCE OF UCC FINANCING STATEMENTS, ETC. Except with
respect to Permitted Liens, there is no financing statement, security
agreement, chattel mortgage, real estate mortgage or other document filed or
recorded with any filing records, registry, or other public office, that
purports to cover, affect or give notice of any present or possible future
lien on, or security interest or security title in, any property of the
Borrower or its Subsidiaries or the Guarantor or rights thereunder.

Section 6.14. INTENTIONALLY OMITTED.

Section 6.15. CERTAIN TRANSACTIONS. Except as set forth in the
Prospectus, none of the officers, trustees, directors, or employees of the
Borrower or any of its Subsidiaries or the Guarantor is a party to any
transaction with the Borrower or any of its Subsidiaries or the Guarantor
(other than for services as employees, officers and directors), including any
contract, agreement or other arrangement providing for the furnishing of
services to or by, providing for rental of real or personal property to or
from, or otherwise requiring payments to or from any officer, trustee,
director or such employee or, to the knowledge of the Borrower, any
corporation, partnership, trust or other entity in which any officer,
trustee, director, or any such employee has a substantial interest or is an
officer, director, trustee or partner.

Section 6.16. EMPLOYEE BENEFIT PLANS. The Borrower and each ERISA
Affiliate has fulfilled its obligations under the minimum funding standards
of ERISA and the Code with respect to each Employee Benefit Plan,
Multiemployer Plan or Guaranteed Pension Plan and is in compliance in all
material respects with the presently applicable provisions of ERISA and the
Code with respect to each Employee Benefit Plan, Multiemployer Plan or
Guaranteed Pension Plan. Neither the Borrower nor any ERISA Affiliate has
(a) sought a waiver of the minimum funding standard under Section 412 of the
Code in respect of any Employee Benefit Plan, Multiemployer Plan or
Guaranteed Pension Plan, (b) failed to make any contribution or payment to
any Employee Benefit Plan, Multiemployer Plan or Guaranteed Pension Plan, or
made any amendment to any Employee Benefit Plan, Multiemployer Plan or
Guaranteed Pension Plan, which has resulted or could result in the imposition
of a Lien or the posting of a bond or other security under ERISA or the Code,
or (c) incurred any liability under Title IV of ERISA other than a liability
to the PBGC for premiums under Section 4007 of ERISA. None of the
Unencumbered Operating Properties constitutes a "plan asset" of any Employee
Plan, Multiemployer Plan or Guaranteed Pension Plan.

Section 6.17. REGULATIONS U AND X. No portion of any Loan is to be
used for the purpose of purchasing or carrying any "margin security" or
"margin stock" as such terms are used in Regulations U and X of the Board of
Governors of the Federal Reserve System, 12 C.F.R. Parts

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221 and 224.

Section 6.18. ENVIRONMENTAL COMPLIANCE. The Borrower has
conducted or caused to be conducted Phase I environmental site assessments
with respect to the past usage and condition of the Real Estate and the
operations conducted thereon, and is familiar with the present condition and
usage of the Real Estate and the operations conducted thereon and, based upon
such reports and knowledge, makes the following representations and
warranties.

(a) To the best of the Borrower's knowledge, none of the Borrower
or its Subsidiaries or any operator of the Real Estate, or any operations
thereon is in violation, or alleged violation, of any judgment, decree,
order, law, license, rule or regulation pertaining to environmental matters,
including without limitation, those arising under the Resource Conservation
and Recovery Act ("RCRA"), the Comprehensive Environmental Response,
Compensation and Liability Act of 1980 as amended ("CERCLA"), the Superfund
Amendments and Reauthorization Act of 1986 ("SARA"), the Federal Clean Water
Act, the Federal Clean Air Act, the Toxic Substances Control Act, or any
state or local statute, regulation, ordinance, order or decree relating to
the environment (hereinafter "Environmental Laws"), which violation involves
the Real Estate and would have a material adverse effect on the environment
or the business, assets or financial condition of the Borrower.

(b) Neither the Borrower nor any of its Subsidiaries has received
notice from any third party including, without limitation, any federal, state
or local governmental authority, (i) that it has been identified by the
United States Environmental Protection Agency ("EPA") as a potentially
responsible party under CERCLA with respect to a site listed on the National
Priorities List, 40 C.F.R. Part 300 Appendix B (1986); (ii) that any
hazardous waste, as defined by 42 U.S.C. Section 9601(5), any hazardous
substances as defined by 42 U.S.C. Section 9601(14), any pollutant or
contaminant as defined by 42 U.S.C. Section 9601(33) or any toxic
substances, oil or hazardous materials or other chemicals or substances
regulated by any Environmental Laws ("Hazardous Substances") which it has
generated, transported or disposed of have been found at any site at which a
federal, state or local agency or other third party has conducted or has
ordered that the Borrower or any of its Subsidiaries conduct a remedial
investigation, removal or other response action pursuant to any Environmental
Law; or (iii) that it is or shall be a named party to any claim, action,
cause of action, complaint, or legal or administrative proceeding (in each
case, contingent or otherwise) arising out of any third party's incurrence of
costs, expenses, losses or damages of any kind whatsoever in connection with
the release of Hazardous Substances.

(c) To the best of the Borrower's knowledge, except as set forth
in SCHEDULE 6.18 or, in the case of Real Estate acquired after the date
hereof, except as may be disclosed in writing to the Agent upon the
acquisition of the same: (i) no portion of the Real Estate has been used for
the handling, processing, storage or disposal of Hazardous Substances except
in accordance with applicable Environmental Laws, and no underground tank or
other underground storage receptacle for Hazardous Substances is located on
any portion of the Real Estate; (ii) in the course of any activities
conducted by the Borrower, its Subsidiaries or the operators of its
properties, no Hazardous Substances have been generated or are being used on
the Real Estate

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except in the ordinary course of business and in accordance with applicable
Environmental Laws; (iii) there has been no past or present releasing,
spilling, leaking, pumping, pouring, emitting, emptying, discharging,
injecting, escaping, disposing or dumping (a "Release") or threatened Release
of Hazardous Substances on, upon, into or from the Real Estate, or, to the
best of the Borrower's knowledge, on, upon, into or from the other properties
of the Borrower or its Subsidiaries, which Release would have a material
adverse effect on the value of any of the Real Estate or adjacent properties
or the environment; (iv) to the best of the Borrower's knowledge, there have
been no Releases on, upon, from or into any real property in the vicinity of
any of the Real Estate which, through soil or groundwater contamination, may
have come to be located on, and which would have a material adverse effect on
the value of, the Real Estate; and (v) any Hazardous Substances that have
been generated on any of the Real Estate have been transported off-site only
by carriers having an identification number issued by the EPA or approved by
a state or local environmental regulatory authority having jurisdiction
regarding the transportation of such substance and, to the best knowledge of
the Borrower without independent investigation, treated or disposed of only
by treatment or disposal facilities maintaining valid permits as required
under all applicable Environmental Laws, which transporters and facilities
have been and are, to the best of the Borrower's knowledge, operating in
compliance with such permits and applicable Environmental Laws.

(d) Neither the Borrower, its Subsidiaries nor any Real Estate is
subject to any applicable Environmental Law requiring the performance of
Hazardous Substances site assessments, or the removal or remediation of
Hazardous Substances, or the giving of notice to any governmental agency or
the recording or delivery to other Persons of an environmental disclosure
document or statement by virtue of the transactions set forth herein and
contemplated hereby, or as a condition to the effectiveness of any other
transactions contemplated hereby.

Section 6.19. SUBSIDIARIES. SCHEDULE 6.19 sets forth all of the
Subsidiaries of the Borrower. The form and jurisdiction of organization of
each of the Subsidiaries, and the Borrower's ownership interest therein, is
set forth in said SCHEDULE 6.19.

Section 6.20. INTENTIONALLY OMITTED.

Section 6.21. LOAN DOCUMENTS. All of the representations and
warranties of the Borrower made in this Agreement and the other Loan
Documents or any document or instrument delivered to the Agent or the Banks
pursuant to or in connection with any of such Loan Documents are true and
correct in all material respects, and neither the Borrower nor the Guarantor
has failed to disclose such information as is necessary to make such
representations and warranties not misleading.

Section 6.22. PROPERTY. All of the Borrower's and its Subsidiaries'
properties are in good repair and condition in all material respects, subject
to ordinary wear and tear, other than with respect to deferred maintenance
existing as of the date of acquisition of such property as permitted in this
Section 6.22. Without limiting the foregoing, the Borrower has completed an
appropriate investigation of the physical condition of each such property as
of the later of the date of the Borrower's or

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such Subsidiaries' purchase thereof or the date upon which such property was
last security for Indebtedness of the Borrower or such Subsidiary, or their
predecessors, including without limitation an analysis of the structural
condition and existence of any material deferred maintenance, and such
property is in good condition, order and repair, and any material deferred
maintenance existing as of the date of acquisition of such property has been
corrected or satisfactory remediation actions are being taken. The Borrower
further has completed an appropriate investigation of the environmental
condition of each such property as of the later of the date of the Borrower's
or such Subsidiaries' purchase thereof or the date upon which such property
was last security for Indebtedness of the Borrower or such Subsidiary, or
their predecessors, including preparation of a "Phase I" report and, if
appropriate, a "Phase II" report, in each case prepared by a recognized
environmental engineer in accordance with customary standards which discloses
that such property is not in violation of the representations and covenants
set forth in this Agreement, unless satisfactory remediation actions are
being taken. There are no unpaid or outstanding real estate or other taxes
or assessments on or against any property of the Borrower or any of its
Subsidiaries which are payable by the Borrower or its Subsidiaries (except
only real estate or other taxes or assessments, that are not yet due and
payable). There are no pending eminent domain proceedings against any
property of the Borrower or its Subsidiaries or any part thereof, and, to the
knowledge of the Borrower, no such proceedings are presently threatened or
contemplated by any taking authority which may individually or in the
aggregate have any materially adverse effect on the business or financial
condition of the Borrower. None of the property of Borrower or its
Subsidiaries is now damaged or injured as a result of any fire, explosion,
accident, flood or other casualty in any manner which individually or in the
aggregate would have any materially adverse effect on the business or
financial condition of the Borrower.

Section 6.23. BROKERS. Neither the Borrower nor any of its
Subsidiaries has engaged or otherwise dealt with any broker, finder or
similar entity in connection with this Agreement or the Loans contemplated
hereunder.

Section 6.24. OTHER DEBT. Neither the Borrower nor any of its
Subsidiaries nor the Guarantor is in default in the payment of any other
Indebtedness or under any agreement, mortgage, deed of trust, security
agreement, financing agreement, indenture or lease to which any of them is a
party, excluding trade payables less than sixty (60) days old. The Borrower
is not a party to or bound by any agreement, instrument or indenture that may
require the subordination in right or time of payment of any of the
Obligations to any other indebtedness or obligation of the Borrower.

Section 6.25. SOLVENCY. As of the Closing Date and after giving
effect to the transactions contemplated by this Agreement and the other Loan
Documents, including all of the Loans made hereunder, the Borrower and the
Guarantor are not insolvent on a balance sheet basis such that the sum of
each of their respective assets exceeds the sum of each of their respective
liabilities, each is able to pay its debts as they become due, and each has
sufficient capital to carry on its business.

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Section 6.26. GUARANTOR. Each Guarantor is a wholly-owned Subsidiary
of the Borrower.

Section 7. AFFIRMATIVE COVENANTS OF THE BORROWER.

The Borrower covenants and agrees that, so long as any Loan or Note or
Letter of Credit is outstanding or any Bank has any obligation to make any
Loans or the Agent has any obligation to issue any Letters of Credit:

Section 7.1. PUNCTUAL PAYMENT. The Borrower will duly and punctually
pay or cause to be paid the principal and interest on the Loans and all
interest and fees provided for in this Agreement, all in accordance with the
terms of this Agreement and the Notes as well as all other sums owing
pursuant to the Loan Documents.

Section 7.2. MAINTENANCE OF OFFICE. The Borrower will maintain its
chief executive office at 455 Market Street, 17th Floor, San Francisco,
California 94105, or at such other place in the United States of America as
the Borrower shall designate upon prior written notice to the Agent and the
Banks, where notices, presentations and demands to or upon the Borrower in
respect of the Loan Documents may be given or made.

Section 7.3. RECORDS AND ACCOUNTS. The Borrower will (a) keep, and
cause each of its Subsidiaries to keep, true and accurate records and books
of account in which full, true and correct entries will be made in accordance
with generally accepted accounting principles and (b) maintain adequate
accounts and reserves for all taxes (including income taxes), depreciation
and amortization of its properties and the properties of its Subsidiaries,
contingencies and other reserves.

Section 7.4. FINANCIAL STATEMENTS, CERTIFICATES AND INFORMATION. The
Borrower will deliver to each of the Banks:

(a) as soon as practicable, but in any event not later than 90
days after the end of each fiscal year of the Borrower, the audited
consolidated balance sheet of the Borrower and its Subsidiaries at the end of
such year, and the related audited consolidated statements of income, changes
in shareholder's equity and cash flows for such year, each setting forth in
comparative form the figures for the previous fiscal year and all such
statements to be in reasonable detail, prepared in accordance with generally
accepted accounting principles, and accompanied by an auditor's report
prepared without qualification by Arthur Andersen LLP or by another "Big Six"
accounting firm, the Form 10-K filed with the SEC (unless the SEC has
approved an extension, in which event the Borrower will deliver to the Agent
and each of the Banks a copy of the Form 10-K simultaneously with delivery to
the SEC), and any other information the Banks may need to complete a
financial analysis of the Borrower and its Subsidiaries. At any time that the
Agent has reasonable grounds to request the same (including, without
limitation, at any time that the Compliance Certificate indicates that the
Borrower is at or near minimum compliance with the financial covenants
contained in this Agreement), the Agent may require that such report be
accompanied by a written statement from such accountants to the

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effect that they have read a copy of this Agreement, and that, in making the
examination necessary for said certification, they have obtained no knowledge
of any Default or Event of Default, or, if such accountants shall have
obtained knowledge of any then existing Default or Event of Default, they
shall disclose in such statement any such Default or Event of Default;

(b) as soon as practicable, but in any event not later than 45
days after the end of each fiscal quarter of the Borrower (including the
fourth fiscal quarter in each year), copies of the unaudited consolidated
balance sheet of the Borrower and its Subsidiaries as at the end of such
quarter, and the related unaudited consolidated statements of income, changes
in shareholder's equity and cash flows for the portion of the Borrower's
fiscal year then elapsed, all in reasonable detail and prepared in accordance
with generally accepted accounting principles (which may be provided by
inclusion in the Form 10-Q of the Borrower for such period provided pursuant
to subsection (c) below), together with a certification by an Authorized
Officer of the Borrower that the information contained in such financial
statements fairly presents the financial position of the Borrower and its
Subsidiaries on the date thereof (subject to year-end adjustments);

(c) as soon as practicable, but in any event not later than 45
days after the end of each fiscal quarter of the Borrower (excluding the
fourth fiscal quarter in each year), copies of Form 10-Q filed with the SEC
(unless the SEC has approved an extension in which event the Borrower will
deliver such copies of the Form 10-Q to the Agent and each of the Banks
simultaneously with delivery to the SEC);

(d) as soon as practicable, but in any event not later than 45
days after the end of each fiscal quarter of the Borrower (including the
fourth fiscal quarter in each year), copies of a consolidated statement of
the Funds from Operations for such fiscal quarter for the Borrower and its
Subsidiaries and the Net Operating Income and Operating Cash Flow for the
Real Estate and year-to-date in form and substance satisfactory to Agent,
prepared on a basis consistent with the statement furnished pursuant to
Section 6.4(c) together with a certification by an Authorized Officer of the
Borrower that the information contained in such statement fairly presents the
Funds from Operations of the Borrower and its Subsidiaries and the Net
Operating Income and Operating Cash Flow for the Real Estate for such period;

(e) simultaneously with the delivery of the financial statements
referred to in subsections (a) and (b) above, and within thirty (30) days of
the filing with the SEC of a Form 8-K or any other document amending any
other filing previously made by the Borrower which could reasonably be
expected to have a materially adverse effect on the Borrower, a statement (a
"Compliance Certificate") certified by an Authorized Officer of the Borrower
and the Guarantor in the form of EXHIBIT D hereto setting forth in reasonable
detail computations evidencing compliance with the covenants contained in
Section 9, and (if applicable) reconciliations to reflect changes in
generally accepted accounting principles since the Balance Sheet Date;

(f) concurrently with the delivery of the financial statements
described in

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<PAGE>

subsections (b) and (c) above, a certificate signed by an Authorized Officer
of the Borrower to the effect that, having read this Agreement, and based
upon an examination which they deem sufficient to enable them to make an
informed statement, there does not exist any Default or Event of Default, or
if such Default or Event of Default has occurred, specifying the facts with
respect thereto;

(g) contemporaneously with the filing or mailing thereof, copies
of all material of a financial nature filed with the SEC or sent to the
stockholders of the Borrower;

(h) upon request of the Agent, but in any event not later than 30
days after receipt of notice of such request from the Agent, updated Rent
Rolls with respect to the Real Estate, a summary of each Rent Roll in form
reasonably satisfactory to the Agent, and a leasing activity report with
respect to the Real Estate setting forth the Borrower's efforts to market and
lease the then unleased space in the Real Estate and the results of such
efforts;

(i) simultaneously within the delivery of the financial statement
referred to in subsection (a) above, a statement (i) listing the Real Estate
owned by the Borrower and its Subsidiaries (or in which Borrower or its
Subsidiaries owns an interest) and stating the owner thereof, the location
thereof, the date acquired and the acquisition cost, (ii) listing the
Indebtedness of the Borrower and its Subsidiaries (excluding Indebtedness of
the type described in Section 8.1(b)-(e)), which statement shall include,
without limitation, a statement of the original principal amount of such
Indebtedness and the current amount outstanding, the holder thereof, the
maturity date and any extension options, the interest rate, the collateral
provided for such Indebtedness and whether such Indebtedness is recourse or
Non-recourse, and (iii) listing the properties of the Borrower and its
Subsidiaries which are under "development" (as used in Section 8.9) and
providing a brief summary of the status of such development;

(j) promptly after they are filed with the Internal Revenue
Service, copies of all annual federal income tax return and amendments
thereto of the Borrower; and

(k) from time to time such other financial data and information in
the possession of the Borrower or the Guarantor (including without limitation
separate financial statements for the Guarantor, auditors' management
letters, evidence of payment of taxes, property inspection and environmental
reports and information as to zoning and other legal and regulatory changes
affecting the Borrower or the Guarantor) as the Agent may reasonably request.

Section 7.5. NOTICES.

(a) DEFAULTS. The Borrower will promptly notify the Agent in
writing of the occurrence of any Default or Event of Default. If any Person
shall give any notice or take any other action in respect of a claimed
default (whether or not constituting an Event of Default) under this
Agreement or under any note, evidence of indebtedness, indenture or other
obligation

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to which or with respect to which the Borrower or any of its Subsidiaries or
the Guarantor is a party or obligor, whether as principal or surety, and such
default would permit the holder of such note or obligation or other evidence
of indebtedness to accelerate the maturity thereof, which acceleration would
have a material adverse effect on the Borrower or the Guarantor or the
existence of which claimed default might become an Event of Default under
Section 12.1(g), the Borrower shall forthwith give written notice thereof to
the Agent and each of the Banks, describing the notice or action and the
nature of the claimed default.

(b) ENVIRONMENTAL EVENTS. The Borrower will promptly give notice
to the Agent (i) upon the Borrower obtaining knowledge of any potential or
known Release, or threat of Release, of any Hazardous Substances at or from
any Real Estate of the Borrower or its Subsidiaries; (ii) of any violation of
any Environmental Law that the Borrower or any of its Subsidiaries reports in
writing or is reportable by such Person in writing (or for which any written
report supplemental to any oral report is made) to any federal, state or
local environmental agency and (iii) upon becoming aware thereof, of any
inquiry, proceeding, investigation, or other action, including a notice from
any agency of potential environmental liability, of any federal, state or
local environmental agency or board, that in either case involves any Real
Estate of the Borrower or its Subsidiaries or has the potential to materially
affect the assets, liabilities, financial conditions or operations of the
Borrower or any Subsidiary.

(c) NOTICE OF LITIGATION AND JUDGMENTS. The Borrower will give
notice to the Agent in writing within 15 days of becoming aware of any
litigation or proceedings threatened in writing or any pending litigation and
proceedings affecting the Borrower, any of its Subsidiaries or the Guarantor,
or to which such Person is or is to become a party involving an uninsured
claim against such Person that could reasonably be expected to have a
materially adverse effect on such Person and stating the nature and status of
such litigation or proceedings. The Borrower will give notice to the Agent,
in writing, in form and detail satisfactory to the Agent and each of the
Banks, within ten days of any judgment not covered by insurance, whether
final or otherwise, against the Borrower, any of its Subsidiaries or the
Guarantor in an amount in excess of $250,000.

(d) NOTICE OF PROPOSED SALES, ENCUMBRANCES, REFINANCE OR TRANSFER.
The Borrower will give notice to the Agent of any proposed or completed sale,
encumbrance (excluding encumbrances described in Section 8.2(iv)), refinance
or transfer of any Real Estate or other Investment described in
Section 8.3(j) of the Borrower of its Subsidiaries within any fiscal quarter
of the Borrower, such notice to be submitted together with the Compliance
Certificate provided or required to be provided to the Banks under
Section 7.4 with respect to such fiscal quarter. The Compliance Certificate
shall with respect to any proposed or completed sale, encumbrance, refinance
or transfer be adjusted in the best good-faith estimate of the Borrower to
give effect to such sale, encumbrance, refinance or transfer and demonstrate
that no Default or Event of Default with respect to the covenants referred to
therein shall exist after giving effect to such sale, encumbrance, refinance
or transfer. Notwithstanding the foregoing, in the event of any sale,
encumbrance, refinance or transfer of any Real Estate or other Investment
described in Section 8.3(j) of

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<PAGE>

the Borrower or its Subsidiaries involving an amount in excess of twenty
percent (20%) of the value of the Consolidated Total Assets of the Borrower,
the Borrower shall promptly give notice to the Agent of such transaction,
which notice shall be accompanied by a certification of Authorized Officer of
the Borrower that no Default or Event of Default shall exist after giving
affect to such event.

(e) NOTIFICATION OF BANKS. Promptly after receiving any notice
under this Section 7.5, the Agent will forward a copy thereof to each of the
Banks, together with copies of any certificates or other written information
that accompanied such notice.

Section 7.6. EXISTENCE; MAINTENANCE OF PROPERTIES.

(a) The Borrower will do or cause to be done all things necessary
to preserve and keep in full force and effect its existence as a Maryland
corporation. The Borrower will cause each of its Subsidiaries to do or cause
to be done all things necessary to preserve and keep in full force and effect
its legal existence. The Borrower will do or cause to be done all things
necessary to preserve and keep in full force all of its rights and franchises
and those of its Subsidiaries. The Borrower will, and will cause each of its
Subsidiaries to, continue to engage primarily in the businesses now conducted
by it and in related businesses.

(b) The Borrower (i) will cause all of its properties and those of
its Subsidiaries used or useful in the conduct of its business or the
business of its Subsidiaries to be maintained and kept in good condition,
repair and working order (ordinary wear and tear excepted) and supplied with
all necessary equipment, and (ii) will cause to be made all necessary
repairs, renewals, replacements, betterments and improvements thereof in all
cases in which the failure so to do would have a material adverse effect on
the condition of its properties or on the financial condition, assets or
operations of the Borrower and its Subsidiaries.

Section 7.7. INSURANCE. The Borrower will, at its expense, procure
and maintain or cause to be procured and maintained insurance covering the
Borrower, its Subsidiaries and their respective properties in such amounts
and against such risks and casualties as are customary for properties of
similar character and location, due regard being given to the type of
improvements thereon, their construction, location, use and occupancy.

Section 7.8. TAXES. The Borrower and each Subsidiary will duly pay
and discharge, or cause to be paid and discharged, before the same shall
become overdue, all taxes, assessments and other governmental charges imposed
upon it and upon the Real Estate, sales and activities, or any part thereof,
or upon the income or profits therefrom, as well as all claims for labor,
materials, or supplies that if unpaid might by law become a lien or charge
upon any of its property; PROVIDED that any such tax, assessment, charge,
levy or claim need not be paid if the validity or amount thereof shall
currently be contested in good faith by appropriate proceedings and if the
Borrower or such Subsidiary shall have set aside on its books adequate
reserves with respect thereto; and PROVIDED, FURTHER, that forthwith upon the
commencement of proceedings to foreclose any lien

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that may have attached as security therefor, the Borrower and each Subsidiary
of the Borrower either (i) will provide a bond issued by a surety reasonably
acceptable to the Agent and sufficient to stay all such proceedings or (ii)
if no such bond is provided, will pay each such tax, assessment, charge, levy
or claim. The Borrower shall certify annually to the Agent that the Borrower
is in compliance with this Section 7.8 with respect to the Unencumbered
Operating Properties.

Section 7.9. INSPECTION OF PROPERTIES AND BOOKS. The Borrower shall
permit the Banks, through the Agent or any representative designated by the
Agent, at the Borrower's expense to visit and inspect any of the properties
of the Borrower or any of its Subsidiaries, to examine the books of account
of the Borrower and its Subsidiaries (and to make copies thereof and extracts
therefrom) and to discuss the affairs, finances and accounts of the Borrower
and its Subsidiaries with, and to be advised as to the same by, its officers,
all at such reasonable times and intervals as the Agent or any Bank may
reasonably request. The Banks shall use good faith efforts to coordinate
such visits and inspections so as to minimize the interference with and
disruption to the Borrower's normal business operations.

Section 7.10. COMPLIANCE WITH LAWS, CONTRACTS, LICENSES, AND PERMITS.
The Borrower will comply with, and will cause each of its Subsidiaries to
comply in all respects with (i) all applicable laws and regulations now or
hereafter in effect wherever its business is conducted, including all
Environmental Laws, (ii) the provisions of its corporate charter, partnership
agreement or declaration of trust, as the case may be, and other charter
documents and bylaws, (iii) all agreements and instruments to which it is a
party or by which it or any of its properties may be bound, (iv) all
applicable decrees, orders, and judgments, and (v) all licenses and permits
required by applicable laws and regulations for the conduct of its business
or the ownership, use or operation of its properties (with respect to
subsections (i), (iii) and (v) above, such compliance shall be in all
material respects, subject to the provisions of Section 12.1(f)). If at any
time while any Loan or Note or Letter of Credit is outstanding or the Banks
have any obligation to make Loans hereunder or the Agent has any obligation
to issue any Letters of Credit hereunder, any authorization, consent,
approval, permit or license from any officer, agency or instrumentality of
any government shall become necessary or required in order that the Borrower
may fulfill any of its obligations hereunder, the Borrower will immediately
take or cause to be taken all steps necessary to obtain such authorization,
consent, approval, permit or license and furnish the Agent and the Banks with
evidence thereof.

Section 7.11. USE OF PROCEEDS. Subject to the limitations set forth
herein, the Borrower will use the proceeds of the Loans or issuances of
Letters of Credit solely to provide short-term financing (a) for the
acquisition and development of fee interests in primarily non-specialized
industrial real estate of institutional quality, including reasonable
transaction costs related thereto; (b) for working capital purposes; and (c)
for such other purposes as the Majority Banks in their discretion from time
to time may agree to in writing. Notwithstanding anything herein to the
contrary, the amount of Loans and Letters of Credit Outstanding at any time
which has been advanced for the purpose described in Section 7.11(b) shall
not exceed $15,000,000.00, and may be

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used by Borrower only for the following purposes: (i) for the payment of
expenditures for Capital Improvement Projects, tenant finish and leasing
commissions; (ii) up to $2,500,000.00 per quarter for payment of
Distributions up to a maximum amount outstanding at one time of
$5,000,000.00, provided that the Borrower shall not draw on the Loans for
payment of Distributions in any two (2) consecutive quarters; (iii) up to a
maximum amount outstanding at any time of $10,000,000.00 to repurchase Voting
Interests of the Borrower (other than Voting Interests owned by Hunt Realty
Acquisitions, L.P., USAA Real Estate Company or subsequent private placement
investors), which amount must be drawn before the first anniversary of the
Closing Date; and (iv) with respect to amounts Outstanding under Letters of
Credit only, for other working capital purposes. Upon repayment of all or a
portion of the Loans, the Borrower will be allowed to reborrow for working
capital purposes subject to the limitations set forth above.

Section 7.12. FURTHER ASSURANCES. The Borrower will cooperate with,
and will cause each of its Subsidiaries to cooperate with the Agent and the
Banks and execute such further instruments and documents as the Banks or the
Agent shall reasonably request to carry out to their satisfaction the
transactions contemplated by this Agreement and the other Loan Documents.

Section 7.13. REIT STATUS. Subject to the terms of Section 8.7, the
Borrower shall at all times comply with all requirements of applicable laws
and regulations necessary to maintain REIT Status and shall operate its
business as described in the Prospectus in all material aspects and in
compliance with the terms and conditions of this Agreement and the other Loan
Documents.

Section 7.14. RESTRICTIONS ON ACQUISITIONS. The Borrower shall, and
shall cause each of its Subsidiaries to, exercise due diligence in connection
with the acquisition of Real Estate or other assets and shall not knowingly
acquire any Real Estate or other assets which has any material title, survey,
environmental, structural or other defects that would give rise to a
materially adverse effect as to the value, use of or ability to sell or
refinance such property or the business or affairs of the Borrower or its
Subsidiaries.

Section 7.15. UNENCUMBERED OPERATING PROPERTIES.

(a) The Borrower and the Guarantor shall at all times own
Unencumbered Operating Properties which satisfy all of the following
conditions:

(i) at least seventy percent (70%) of the Asset Value of
the Unencumbered Operating Properties constitutes industrial properties,
which percentage shall be increased to seventy-five percent (75%) on the
first anniversary of the Closing Date;

(ii) as of the end of each fiscal quarter, at least
eighty-five percent (85%) of the total Gross Rentable Area of the
Unencumbered Operating Properties is subject to arms-length Leases which
are in full force and effect and pursuant to which the

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tenants are paying rent, and at least seventy-seven percent (77%) of the
total Gross Rentable Area in the Unencumbered Operating Properties is
physically occupied by tenants under arms-length Leases which are in
full force and effect;

(iii) no more than twenty percent (20%) of the Asset Value
of the Unencumbered Operating Properties is located in any one city or
metropolitan area, provided that no more than thirty percent (30%) may be
located in Memphis, Tennessee, or any surrounding suburbs, including
Olive Branch, Mississippi; and

(iv) no one tenant shall comprise more than seven percent
(7%) [ten percent (10%) if the tenant has a Standard & Poor's Rating of
BBB- or better] of the Gross Cash Receipts generated by the Unencumbered
Operating Properties.

(b) The Borrower shall provide to the Agent as of the Closing Date
and concurrently with the delivery of the financial statements described in
Section 7.4(a) (i) a list of the Unencumbered Operating Properties, (ii) the
certification of an Authorized Officer of the Borrower or the Guarantor, as
applicable, of the Asset Values and that such Unencumbered Operating
Properties are in compliance with Section 7.15(a), and (iii) operating
statements setting forth the Net Operating Income and Operating Cash Flow for
each of the Unencumbered Operating Properties for the previous three (3)
fiscal quarters certified as true and correct by an Authorized Officer of the
Borrower or the Guarantor, as applicable. In the event that all or any
material portion of a property within the Unencumbered Operating Properties
shall be damaged or taken by condemnation, then such property shall no longer
be a part of the Unencumbered Operating Properties unless and until any
damage to such Real Estate is repaired or restored, such Real Estate becomes
fully operational and the Agent shall receive evidence satisfactory to the
Agent of the value, Net Operating Income and Operating Cash Flow of such Real
Estate following such repair or restoration.

(c) Nothing herein shall be construed as an obligation of the
Borrower to grant any mortgage, pledge or security interest to the Agent or
the Banks in any of the Unencumbered Operating Properties, nor as an
obligation of the Borrower to reserve any particular Unencumbered Operating
Property as potential collateral for the Agent and the Banks; provided,
however, that this Section 7.15(c) shall not diminish the Borrower's
obligation to comply with the terms of this Section 7.15 or Section 7.16.

(d) The Borrower and the Guarantor will use commercially
reasonable efforts to ascertain the equity ownership of each of its potential
tenants prior to executing a Lease (excluding those tenants from whom the
Borrower or the Guarantor derive a sufficiently small amount of revenue such
that, in the reasonable opinion of the management of the Borrower or the
Guarantor, rent from such tenant would not adversely affect the Borrower's
ability to qualify as a REIT), in order to identify any tenants in which
Ameritech owns, directly or indirectly, a ten percent (10%) or greater equity
interest, and neither the Borrower nor any Guarantor shall enter into Leases
with any tenants so identified.

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Section 7.16. LIMITING AGREEMENTS.

(a) Neither Borrower nor any of its Subsidiaries nor the Guarantor
shall enter into any agreement, instrument or transaction which has or may
have the effect of prohibiting or limiting the Borrower's or the Guarantor's
ability to pledge to Agent Real Estate which is owned by the Borrower or the
Guarantor one hundred percent (100%) in fee simple. Borrower and Guarantor
shall take, and Borrower shall cause its Subsidiaries to take, such actions
as are necessary to preserve the right and ability of Borrower and Guarantor
to pledge those Real Estate assets as security for the Loans without any such
pledge after the date hereof causing or permitting the acceleration (after
the giving of notice or the passage of time, or otherwise) of any other
Indebtedness of Borrower or any of its Subsidiaries or the Guarantor. This
Section 7.16 shall not be construed as limiting Borrower's or Guarantor's
rights under Section 8.2 as it relates to a particular type of lien which
the Borrower or the Guarantor may incur.

(b) Borrower shall, upon demand by the Agent in the exercise of
the Agent's reasonable discretion, provide to the Agent such evidence as the
Agent may reasonably require to evidence Borrower's compliance with this
Section 7.16, which evidence shall include, without limitation, copies of any
agreements or instruments which would in any way restrict or limit the
Borrower's or the Guarantor's ability to pledge assets as security for
Indebtedness, or which provide for the occurrence of a default (after the
giving of notice or the passage of time, or otherwise) if assets are pledged
in the future as security for Indebtedness of the Borrower or any of its
Subsidiaries or the Guarantor.

Section 7.17. ENVIRONMENTAL AND ENGINEERING INSPECTIONS. The Borrower
shall, with respect to each property at any time included as part of the
Unencumbered Operating Properties, provide to the Agent evidence reasonably
satisfactory to the Agent prior to the inclusion of such property within the
Unencumbered Operating Properties that (a) the Borrower has completed an
appropriate investigation of the physical condition of such property,
including without limitation an analysis of the structural condition and
existence of any material deferred maintenance, and that such property is in
good condition, order and repair and that any material deferred maintenance
has been corrected or satisfactory remediation actions are being taken, as
determined by the Agent in its reasonable judgment, and (b) that the Borrower
has completed an appropriate investigation of the environmental condition of
each proposed property, including preparation of a "Phase I" report and, if
appropriate, a "Phase II" report, in each case prepared by a recognized
environmental engineer in accordance with customary standards which discloses
that such property is not in violation of the representations and covenants
set forth in this Agreement, unless satisfactory remediation actions are
being taken, as determined by the Agent in its reasonable judgment.

Section 8. CERTAIN NEGATIVE COVENANTS OF THE BORROWER.

The Borrower covenants and agrees that, so long as any Loan or Note or
Letter of Credit is outstanding or any of the Banks has any obligation to
make any Loans or the Agent has any obligation to issue any Letters of Credit:

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Section 8.1. RESTRICTIONS ON INDEBTEDNESS. The Borrower will not, and
will not permit any of its Subsidiaries to, create, incur, assume, guarantee
or be or remain liable, contingently or otherwise, with respect to any
Indebtedness other than:

(a) Indebtedness to the Banks arising under any of the Loan
Documents;
(b) current liabilities of the Borrower or its Subsidiaries incurred
in the ordinary course of business, including letters of credit not to exceed
$1,500,000.00 in the aggregate, but not incurred through (i) the borrowing of
money, or (ii) the obtaining of credit except for credit on an open account
basis customarily extended and in fact extended in connection with normal
purchases of goods and services;

(c) Indebtedness in respect of taxes, assessments, governmental
charges or levies and claims for labor, materials and supplies to the extent
that payment therefor shall not at the time be required to be made in
accordance with the provisions of Section 7.8;

(d) Indebtedness in respect of judgments or awards that have been
in force for less than the applicable period for taking an appeal so long as
execution is not levied thereunder or in respect of which the Borrower shall
at the time in good faith be prosecuting an appeal or proceedings for review
and in respect of which a stay of execution shall have been obtained pending
such appeal or review;

(e) endorsements for collection, deposit or negotiation and
warranties of products or services, in each case incurred in the ordinary
course of business;

(f) subject to the provisions of Section 9, Non-recourse
Indebtedness of the Borrower or any Subsidiary of the Borrower related to the
acquisition of Real Estate in an aggregate outstanding principal amount not
exceeding $20,000,000.00;

(g) Indebtedness in respect of reverse repurchase agreements
having a term of not more than 180 days with respect to Investments described
in Section 8.3(d) or (e);

(h) The Prudential Loan, provided the Prudential Loan shall remain
Non-recourse as to the Borrower; and

(i) Indebtedness not to exceed $2,000,000.00 in the aggregate in
respect of note purchase agreement(s) relating to loans made to executive
officers of the Borrower for the purchase of shares of beneficial interest in
the Borrower.

Section 8.2. RESTRICTIONS ON LIENS, ETC. The Borrower will not, and
will not permit any of its Subsidiaries to, (a) create or incur or suffer to
be created or incurred or to exist any lien, encumbrance, mortgage, pledge,
charge, restriction or other security interest of any kind upon any of its
property or assets of any character whether now owned or hereafter acquired,
or upon the income or profits therefrom; (b) transfer any of its property or
assets or the income or profits therefrom for the purpose of subjecting the
same to the payment of Indebtedness or performance of any other obligation in
priority to payment of its general creditors; (c) acquire, or agree or have
an option to acquire, any property or assets upon conditional sale or other
title retention or purchase money security agreement, device or arrangement;
(d) suffer to exist for a period of more than 30 days after the same shall
have been incurred any Indebtedness or claim or demand

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against it that if unpaid might by law or upon bankruptcy or insolvency, or
otherwise, be given any priority whatsoever over its general creditors; or
(e) sell, assign, pledge or otherwise transfer any accounts, contract rights,
general intangibles, chattel paper or instruments, with or without recourse
(collectively "Liens"); PROVIDED that, the Borrower and any Subsidiary of the
Borrower may create or incur or suffer to be created or incurred or to exist:

(i) liens in favor of the Borrower on all or
part of the assets of Subsidiaries of the Borrower securing
Indebtedness owing by Subsidiaries of the Borrower to the
Borrower;

(ii) liens on properties to secure taxes,
assessments and other governmental charges or claims for labor,
material or supplies in respect of obligations not overdue;

(iii) liens on properties in respect of
judgments, awards or indebtedness, the Indebtedness with respect
to which is permitted by Section 8.1(d) or Section 8.1(f);

(iv) encumbrances on properties consisting
of leases entered into in the ordinary conduct of the business
of the Borrower and its Subsidiaries, easements, rights of way,
zoning restrictions, restrictions on the use of real property
and defects and irregularities in the title thereto, landlord's
or lessor's liens under leases to which the Borrower or a
Subsidiary of the Borrower is a party, and other minor liens or
encumbrances none of which interferes materially with the use of
the property effected in the ordinary conduct of the business of
the Borrower and its Subsidiaries, which defects do not
individually or in the aggregate have a materially adverse
effect on the business of the Borrower individually or of the
Borrower and its Subsidiaries on a consolidated basis;

(v) liens on Real Estate and Short-term
Investments securing Non-recourse Indebtedness permitted by
Section 8.1(f);

(vi) liens in favor of the Agent and the
Banks; and

(vii) liens securing the Prudential Loan.

Section 8.3. RESTRICTIONS ON INVESTMENTS. The Borrower will not, and
will not permit any of its Subsidiaries to, make or permit to exist or to
remain outstanding any Investment except Investments in:

(a) marketable direct or guaranteed obligations of the United
States of America that mature within five (5) years from the date of purchase
by the Borrower or its Subsidiary;

(b) marketable direct obligations of any of the following: Federal
Home Loan Mortgage Corporation, Student Loan Marketing Association, Federal
Home Loan Banks, Federal National Mortgage Association, Government National
Mortgage Association, Bank for

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Cooperatives, Federal Intermediate Credit Banks, Federal Financing Banks,
Export-Import Bank of the United States, Federal Land Banks, or any other
agency or instrumentality of the United States of America;

(c) demand deposits, certificates of deposit, bankers acceptances
and time deposits of United States banks having total assets in excess of
$100,000,000; PROVIDED, HOWEVER, that the aggregate amount at any time so
invested with any single bank having total assets of less than $1,000,000,000
will not exceed $200,000;

(d) securities commonly known as "commercial paper" issued by a
corporation organized and existing under the laws of the United States of
America or any State which at the time of purchase are rated by Moody's
Investors Service, Inc. or by Standard & Poor's Corporation at not less than
"P 1" if then rated by Moody's Investors Service, Inc., and not less than
"A 1", if then rated by Standard & Poor's Corporation;

(e) mortgage-backed securities guaranteed by the Government
National Mortgage Association, the Federal National Mortgage Association or
the Federal Home Loan Mortgage Corporation and other mortgage-backed bonds
which at the time of purchase are rated by Moody's Investors Service, Inc. or
by Standard & Poor's Corporation at not less than "Aa" if then rated by
Moody's Investors Service, Inc. and not less than "AA" if then rated by
Standard & Poor's Corporation;

(f) repurchase agreements having a term not greater than 90 days
and fully secured by securities described in the foregoing subsection (a),
(b) or (e) with banks described in the foregoing subsection (c) or with
financial institutions or other corporations having total assets in excess of
$500,000,000;

(g) shares of so-called "money market funds" registered with the
SEC under the Investment Company Act of 1940 which maintain a level per-share
value, invest principally in investments described in the foregoing
subsections (a) through (f) and have total assets in excess of $50,000,000;

(h) subject to the provisions of Section 9.6, Investments in fee
interests in Real Estate constituting institutional grade, non-specialized
industrial property, including earnest money deposits relating thereto and
transaction costs;

(i) Investments in Subsidiaries in which the Borrower holds 100%
of the Voting Interests;

(j) subject to the provisions of Section 9.6, interests in
partnerships, joint ventures, corporations or other entities which own
institutional grade real property used principally for industrial purposes;

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(k) Investments in shares of beneficial interest in the Borrower,
provided that the Borrower shall give notice to the Agent concurrently with
the financial statements provided in '7.4(b) of any such Investments that
have occurred during the preceding fiscal quarter of the Borrower;
(l) Investments in purchase money notes payable to the order of the Borrower
or any of its Subsidiaries which are received in connection with the sale by
the Borrower or any of its Subsidiaries of Real Estate, provided that
Borrower shall not, for any fiscal quarter, permit the aggregate outstanding
principal balance of such purchase money notes to exceed ten percent (10%) of
the value of the Consolidated Total Assets of the Borrower, adjusted pursuant
to -Section-9.7; and

(m) Investments in notes payable to the Borrower made by executive
officers of the Borrower for the purchase of shares of beneficial interest in
the Borrower in an aggregate outstanding principal amount not exceeding
$2,000,000.00.

-Section-8.4. MERGER, CONSOLIDATION. The Borrower will not, and will
not permit any of its Subsidiaries to, become a party to any merger or
consolidation without the prior written consent of the Majority Banks except
(i) the merger or consolidation of one or more of the Subsidiaries of the
Borrower with and into the Borrower, (ii) the merger or consolidation of two
or more Subsidiaries of the Borrower, and (iii) the merger or consolidation
of one or more unaffiliated corporations or other entities with and into the
Borrower where (a) the Borrower is the surviving entity, (b) immediately
after the merger or consolidation, the original shareholders of the Borrower
at the time of such consolidation or merger own at least fifty-one percent
(51%) of the Voting Interests in the Borrower, (c) the purpose of the
consolidation or merger is the acquisition of Real Estate as permitted under
this Agreement, and (d) immediately prior to such merger the Borrower shall
have provided to the Banks a written statement that no Default or Event of
Default exists and a Compliance Certificate demonstrating that the Borrower
will be in compliance with the covenants referred to therein after giving
effect to said merger.

-Section-8.5. SALE AND LEASEBACK. The Borrower will not, and will not
permit any of its Subsidiaries to, enter into any arrangement, directly or
indirectly, whereby the Borrower or any Subsidiary of the Borrower shall sell
or transfer any Real Estate owned by it in order that then or thereafter the
Borrower or any Subsidiary shall lease back such Real Estate.

-Section-8.6. COMPLIANCE WITH ENVIRONMENTAL LAWS. The Borrower will
not, and will not permit any of its Subsidiaries, to do any of the following:
(a) use any of the Real Estate or any portion thereof as a facility for the
handling, processing, storage or disposal of Hazardous Substances, except for
small quantities of Hazardous Substances used in the ordinary course of
business and in compliance with all applicable Environmental Laws, (b) cause
or permit to be located on any of the Real Estate any underground tank or
other underground storage receptacle for Hazardous Substances except in full
compliance with Environmental Laws, (c) generate any Hazardous Substances on
any of the Real Estate except in full compliance with Environmental Laws, (d)
conduct any activity at any Real Estate or use any Real Estate in any manner
so as to cause a

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Release of Hazardous Substances on, upon or into the Real Estate or any
surrounding properties or any threatened Release of Hazardous Substances
which might give rise to liability under CERCLA or any other Environmental
Law, or (e) directly or indirectly transport or arrange for the transport of
any Hazardous Substances (except in compliance with all Environmental Laws).

The Borrower shall:

(i) in the event of any change in Environmental Laws governing the
assessment, release or removal of Hazardous Substances, which change would
lead a prudent owner of real property to require additional testing to avail
itself of any statutory insurance or limited liability, take all action
(including, without limitation, the conducting of engineering tests at the
sole expense of the Borrower) to determine whether Hazardous Substances were
ever Released or disposed of on the Real Estate; and

(ii) if any Release or disposal of Hazardous Substances shall
occur or shall have occurred on the Real Estate (including without limitation
any such Release or disposal occurring prior to the acquisition of such Real
Estate by the Borrower), cause the prompt containment and removal of such
Hazardous Substances and remediation of the Real Estate in full compliance
with all applicable laws and regulations and to the satisfaction of the
Majority Banks; PROVIDED, that the Borrower shall be deemed to be in
compliance with Environmental Laws for the purpose of this clause (ii) so
long as it or a responsible third party with sufficient financial resources
is taking reasonable action to remediate or manage any event of noncompliance
to the satisfaction of the Majority Banks and no action shall have been
commenced by any enforcement agency. The Majority Banks may engage their own
Environmental Engineer to review the environmental assessments and the
Borrower's compliance with the covenants contained herein, the cost of which
shall be borne by the Borrower.

At any time after an Event of Default shall have occurred hereunder, or,
whether or not an Event of Default shall have occurred, at any time that the
Agent or the Majority Banks shall have reasonable grounds to believe that a
Release or threatened Release of Hazardous Substances may have occurred,
relating to any Real Estate, or that any of the Real Estate is not in
compliance with the Environmental Laws, and, unless such Real Estate is an
Unencumbered Operating Property, that such Release, threatened Release or
noncompliance may be reasonably expected to have a material adverse effect on
the Borrower as determined by the Agent in the exercise of its sole
discretion, the Agent may at its election (and will at the request of the
Majority Banks excluding the Agent) obtain such environmental assessments of
such Real Estate prepared by an Environmental Engineer as may be necessary or
advisable for the purpose of evaluating or confirming (i) whether any
Hazardous Substances are present in the soil or water at or adjacent to such
Real Estate and (ii) whether the use and operation of such Real Estate comply
with all Environmental Laws. Environmental assessments may include detailed
visual inspections of such Real Estate including, without limitation, any and
all storage areas, storage tanks, drains, dry wells and leaching areas, and
the taking of soil samples, as well as such other investigations or analyses
as are necessary or appropriate for a complete determination of the
compliance of such Real Estate and the use and operation thereof with all
applicable Environmental Laws. All

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such environmental assessments shall be at the sole cost and expense of the
Borrower.

-Section-8.7. DISTRIBUTIONS. The Borrower will not make any
Distributions which would cause it to violate any of the following covenants:
(a) Pay any Distribution to the shareholders of the Borrower if
such Distribution is in excess of the greater of (i) the minimum
Distributions required under the Code to maintain the REIT status of the
Borrower, and (ii) the amount which, when added to the amount of all other
Distributions paid in the same fiscal quarter, would exceed (a) eighty-five
percent (85%) of its Funds from Operations for such fiscal quarter (except
that, for the first fiscal quarter after the Closing Date only, such
percentage shall be increased to ninety-five percent (95%)), and (b) one
hundred ten percent (110%) of its Cash Available for Distribution for the
preceding four quarters (except that, commencing with any fiscal quarter
after December 31, 1996, such percentage shall be decreased to one hundred
percent (100%));

(b) In the event that an Event of Default shall have occurred and
be continuing, the Majority Banks may require that the Borrower make no
Distributions other than the minimum Distributions required under the Code to
maintain the REIT Status of the Borrower, as evidenced by a certification of
an Authorized Officer of the Borrower containing calculations in reasonable
detail satisfactory in form and substance to the Agent; and

(c) Notwithstanding the foregoing, at any time when an Event of
Default shall have occurred and the maturity of the Obligations has been
accelerated, the Majority Banks may prohibit Borrower from making any
Distributions whatsoever, directly or indirectly.

-Section-8.8. ASSET SALES. Neither the Borrower nor any Subsidiary
shall sell, transfer or otherwise dispose of any Real Estate or other
Investment described in -Section-8.3(j) or (k) or any of the Unencumbered
Operating Properties in excess of twenty percent (20%) of the value of the
Consolidated Total Assets of the Borrower, adjusted pursuant to -Section-9.7
(except as the result of a condemnation or casualty and except for the
granting of Permitted Liens, as applicable) unless there shall have been
delivered to the Banks a statement that no Default or Event of Default exists
and a certification that the Borrower will be in compliance with its
covenants referred to therein after giving effect to such sale, transfer or
other disposition.

-Section-8.9. DEVELOPMENT ACTIVITY. Neither the Borrower nor any
Subsidiary shall engage, directly or indirectly, in the development of
commercial real estate except for the development of one hundred percent
(100%) preleased, build-to-suit bulk distribution facilities, the aggregate
cost of which facilities (on a fully developed basis) under development at
any one time shall not exceed ten percent (10%) of the value of the
Consolidated Total Assets of the Borrower, adjusted pursuant to -Section-9.7.
For purposes of this -Section-8.9, the term "development" shall include new
construction or the substantial renovation or rehabilitation of improvements
to real property. A project shall be considered to be under development
until final certificates of occupancy or the equivalent have been issued for
the entire project and the project is 100% leased to tenants actually paying
rent. Without limiting the generality of the foregoing, the Borrower

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acknowledges that for the purposes of this Agreement, (i) any interest by the
Borrower or any Subsidiary in a property which is proposed to be developed,
or any interest therein pursuant to which the Borrower or any Subsidiary has
the right to approve site plans or other plans and specifications or pursuant
to which such party's obligations are conditioned upon the achievement of
certain initial lease-up levels, or (ii) any agreement by the Borrower or any
Subsidiary which obligates such party to contribute or otherwise advance
funds in connection with or upon completion of the development of a property,
or (iii) any acquisition of a property which is proposed to be developed or
which is under development and initial lease-up at the time such agreement is
entered into, shall be considered a "development" for the purposes of this
- -Section-8.9; provided, however, that nothing in this -Section-8.9 shall
prohibit the Borrower or any Subsidiary from entering into an agreement to
acquire Real Estate at a time when such Real Estate has been developed and
initially leased by another Person.

-Section-8.10. SOURCES OF CAPITAL. The Borrower shall, at all times
that the Borrower or any of its Subsidiaries is engaging in any development
as provided in -Section-8.9 or has entered into any agreement to acquire
properties under purchase agreements, maintain available sources of capital
equal to the total cost to acquire and complete such developments and to
purchase such properties, which sources of capital shall be acceptable to the
Agent in its reasonable discretion. Amounts available to be disbursed for
such purposes pursuant to this Agreement may be considered as a source of
capital for the purposes of this -Section-8.10. The Non-recourse
Indebtedness described in -Section-8.1(f) shall be considered a source of
such capital.

-Section-8.11. RESTRICTION ON PREPAYMENT OF INDEBTEDNESS. The Borrower
shall not prepay the principal amount, in whole or in part, of any
Indebtedness other than the Obligations after the occurrence of any Event of
Default; provided, however, that this -Section-8.11 shall not prohibit the
prepayment of Indebtedness which is financed solely from the proceeds of a
new loan which would otherwise be permitted by the terms of -Section-8.1.

-Section-9. FINANCIAL COVENANTS OF THE BORROWER.

-Section-9.1. LIABILITIES TO TANGIBLE NET WORTH RATIO. The Borrower
will not, at the end of any fiscal quarter, permit the ratio of Consolidated
Total Liabilities to Consolidated Tangible Net Worth of the Borrower to
exceed 0.75 to 1.

-Section-9.2. DEBT COVERAGE. The Borrower will not, at the end of any
fiscal quarter, permit the Funds from Operations plus expensed interest for
such fiscal quarter and the preceding three fiscal quarters (the ATest
Period@) to be less than 2.5 times the Debt Service for the Test Period. For
purposes of testing compliance with this covenant only, if Debt Service
includes capitalized interest incurred as the result of Borrower or its
Subsidiary engaging in a development activity

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permitted by -Section-8.9, Funds from Operations for each fiscal quarter in
which interest is so capitalized as a result of such development shall
include the Pro Forma Development Net Operating Income for such development.
For any fiscal quarter, the Pro Forma Development Net Operating Income shall
be the amount obtained by multiplying (x) the quarterly Net Operating Income
which the Borrower and the Agent mutually agree will be derived immediately
following the completion of such development project and the delivery of
leased premises to tenants with signed leases on the basis of such signed
leases in effect as of the date of such calculation (any cancellation or
termination options contained in such leases must be acceptable to the Agent
in the exercise of its reasonable discretion), by (y) the quotient obtained
by dividing (i) the amount of Loans advanced under this Agreement in
connection with the construction of such development project during the
fiscal quarter in question, by (ii) the total project costs incurred for such
development project as of the end of the fiscal quarter in question. The
Borrower shall provide the Agent with copies of such leases, information
regarding project costs and such other information, data and reports as the
Agent shall require in order to test compliance with this covenant.

-Section-9.3. FIXED CHARGE COVERAGE. The Borrower will not, at the end
of any fiscal quarter, permit the Cash Available for Distribution plus
expensed interest for any Test Period to be less than 1.75 times the Debt
Service for such Test Period.

-Section-9.4. BORROWING BASE. The Borrower will not, at the end of any
fiscal quarter, permit the Outstanding principal balance of the Loans and
Outstanding Letters of Credit (including Letters of Credit accepted but
unpaid) as of the date of determination to be greater than the Borrowing Base
as determined as of the same date.

-Section-9.5. TANGIBLE NET WORTH. The Borrower will not, at the end of
any fiscal quarter, permit its Consolidated Tangible Net Worth to be less
than $155,000,000.00 plus the amount of any net proceeds received from any
Equity Offering subsequent to March 1, 1996.

-Section-9.6. REAL ESTATE ASSETS.

(a) The Borrower shall not, for any fiscal quarter, permit the
Asset Value of its direct or indirect interests in joint ventures or
partnerships to exceed ten percent (10%) of the value of the Consolidated
Total Assets of the Borrower, adjusted pursuant to -Section-9.7; provided
that the Borrower shall be required to own a majority interest in any such
entities with full right, power and authority to control the underlying
assets thereof, including the right to encumber and convey such assets (the
forgoing limitation contained in this -Section-9.6shall not apply if the
Borrower and its Subsidiaries, on a Consolidated basis,own one hundred
percent (100%) of the total interests in such entities and nothird party
investors are involved).

(b) The Borrower shall not, for any fiscal quarter, permit its
direct or indirect interests in non-income producing land assets to exceed
three percent (3%) of the value of the Consolidated Total Assets of the
Borrower, adjusted pursuant to -Section-9.7.

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-Section-9.7. VALUE ADJUSTMENT. The Borrower and the Banks have agreed
to a one-time market value adjustment to the Asset Value of each parcel of
Real Estate as contained in SCHEDULE 3 attached hereto and by this reference
incorporated herein, and the financial covenants set forth in -Section-9.1,
- -Section-9.4, -Section-9.5 and -Section-9.6 shall for the term of this
Agreement be tested against the market value of each such parcel of Real
Estate, based on such one-time market value adjustment. As so adjusted, the
Asset Value of the Initial Unencumbered Operating Properties is
$110,689,687.00, and the Asset Value of the Real Estate is $269,416,009.00.
Within thirty (30) days of the Closing Date, the Borrower shall provide the
Agent with a schedule listing the book value of each parcel of Real Estate.

-Section-9.8. ANNUALIZATION OF RESULTS. In the event that the
covenants and other provisions contained in this Agreement shall require the
submission of data for four consecutive fiscal quarters and the Borrower
shall not have such data available at the time in question, the Agent shall
annualize the available data in such manner as the Agent shall determine in
its sole discretion so as to allow calculations and other tests to be
performed with respect to four consecutive fiscal quarters.

-Section-10. CLOSING CONDITIONS.

The obligations of the Agent and the Banks to make the initial Loans
and/or the Agent to issue the initial Letters of Credit shall be subject to
the satisfaction of the following conditions precedent on or prior to March
15, 1996:

-Section-10.1. LOAN DOCUMENTS. Each of the Loan Documents (including
any amendments to the Loan Documents securing the Original Credit Agreement
as required by the Agent) shall have been duly executed and delivered by the
respective parties thereto, shall be in full force and effect and shall be in
form and substance satisfactory to the Majority Banks. The Agent shall have
received a fully executed copy of each such document, except that each Bank
shall have received a fully executed counterpart of its Note. The Agent is
authorized by the Banks to execute on behalf of the Banks and the Agent, as
applicable, any amendments to the Loan Documents securing the Original Credit
Agreement.

-Section-10.2. CERTIFIED COPIES OF ORGANIZATIONAL DOCUMENTS. The Agent
shall have received from the Borrower and the Guarantor, a copy, certified as
of a recent date by the appropriate officer of each State in which the
Borrower and the Guarantor is organized and an Authorized Officer of the
Borrower and the Guarantor, as applicable, to be true and complete, of the
articles or certificate of incorporation of the Borrower and the agreement
and certificate of limited partnership of the Guarantor or its qualification
to do business, as applicable, as in effect on such date of certification (or
a certification satisfactory to the Agent that there have been no changes to
the foregoing since the date they were provided to the Agent in connection
with the execution of the Original Credit Agreement).

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-Section-10.3. BYLAWS; RESOLUTIONS AND CONSENTS. All action on the
part of the Borrower and the Guarantor necessary for the valid execution,
delivery and performance by the Borrower and the Guarantor of this Agreement
and the other Loan Documents to which it is or is to become a party shall
have been duly and effectively taken, and evidence thereof satisfactory to
the Agent shall have been provided to the Agent. The Agent shall have
received from the Borrower true copies of its bylaws and the resolutions
adopted by its board of directors authorizing the transactions described
herein, and from the Guarantor all necessary partner consents authorizing the
transactions described herein, each certified by an Authorized Officer of the
Borrower and the Guarantor, as applicable, as of a recent date to be true
and complete (or a certification satisfactory to the Agent that there have
been no changes to the foregoing since the date they were provided to the
Agent in connection with the execution of the Original Credit Agreement).

-Section-10.4. INCUMBENCY CERTIFICATE; AUTHORIZED SIGNERS. The Agent
shall have received from the Borrower and the Guarantor an incumbency
certificate, dated as of the Closing Date, signed by an Authorized Officer of
the Borrower and the Guarantor, as applicable, and giving the name and
bearing a specimen signature of each individual who shall be authorized: (a)
to sign, in the name and on behalf of the Borrower and the Guarantor, each of
the Loan Documents to which the Borrower and the Guarantor is or is to become
a party; (b) to make Loan and Conversion Requests; and (c) to give notices
and to take other action on behalf of the Borrower and the Guarantor under
the Loan Documents.

-Section-10.5. OPINION OF COUNSEL. The Agent shall have received a
favorable opinion addressed to the Banks and the Agent and dated as of the
Closing Date, in form and substance satisfactory to the Agent, from each of
Goodwin, Procter & Hoar, Landels Ripley & Diamond and Ballard, Spahr Andrews
& Ingersoll, counsel of the Borrower and the Guarantor, as to such matters as
the Agent shall reasonably request.

-Section-10.6. PAYMENT OF FEES. The Borrower shall have paid to the
Agent the fees required to be paid as of the Closing Date pursuant to
- -Section-4.2.

-Section-10.7. PERFORMANCE; NO DEFAULT. The Borrower shall have
performed and complied with all terms and conditions herein required to be
performed or complied with by it on or prior to the Closing Date, and on the
Closing Date there shall exist no Default or Event of Default.

-Section-10.8. REPRESENTATIONS AND WARRANTIES. The representations and
warranties made by the Borrower and the Guarantor in the Loan Documents or
otherwise made by or on behalf of the Borrower, the Guarantor or any
Subsidiaries of the Borrower in connection therewith or after the date
thereof shall have been true and correct in all material respects when made
and shall also be true and correct in all material respects on the Closing
Date.

-Section-10.9. PROCEEDINGS AND DOCUMENTS. All proceedings in
connection with the transactions contemplated by this Agreement and the other
Loan Documents shall be reasonably satisfactory to the Agent and the Agent's
Special Counsel in form and substance, and the Agent shall have

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received all information and such counterpart originals or certified copies
of such documents and such other certificates, opinions or documents as the
Agent and the Agent's Special Counsel may reasonably require.

-Section-10.10. COMPLIANCE CERTIFICATE. A Compliance Certificate dated
as of the date of the Closing Date demonstrating compliance with each of the
covenants calculated therein as of the most recent fiscal quarter end for
which the Borrower and the Guarantor have provided financial statements under
- -Section-6.4, adjusted in the best good faith estimate of the Borrower and
the Guarantor and dated as of the date of the Closing Date shall have been
delivered to the Agent.

-Section-10.11. OTHER. The Agent shall have reviewed such other
documents, instruments, certificates, opinions, assurances, consents and
approvals as the Agent or the Agent's Special Counsel may reasonably have
requested.

-Section-10.12. INTENTIONALLY OMITTED.

-Section-10.13. INTENTIONALLY OMITTED.

-Section-10.14. EQUITY OFFERING. If the amount of the requested Loans
and/or Letters of Credit (plus the amount of any Outstanding Loans under the
Original Credit Agreement) exceeds the Funding Cap as of the date of this
Agreement, the Agent shall have received evidence reasonably satisfactory to
the Majority Banks that the Borrower shall have received gross proceeds from
an Equity Offering in at least the amount of the excess of the amount of such
Loans and/or Letters of Credit over the Funding Cap as of the date of this
Agreement.

-Section-10.15. TANGIBLE NET WORTH. The Borrower shall have a
Consolidated Tangible Net Worth, adjusted for market values pursuant to
- -Section-9.7, of not less than $185,000,000.00.

-Section-10.16. DUE DILIGENCE. The Banks shall have completed and found
satisfactory their due diligence regarding the Unencumbered Operating
Projects.

-Section-10.17. MANAGEMENT OF THE BORROWER. There shall be no material
change in the management of the Borrower.

-Section-11. CONDITIONS TO ALL BORROWINGS.

The obligations of the Banks to make any Loan or of the Agent to issue
any Letter of Credit, whether on or after the Closing Date, shall also be
subject to the satisfaction of the following conditions precedent:

-Section-11.1. PRIOR CONDITIONS SATISFIED. All conditions set forth in
'10 shall continue to be satisfied as of the date upon which any Loan is to
be made.

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-Section-11.2. REPRESENTATIONS TRUE; NO DEFAULT. Each of the
representations and warranties of the Borrower and the Guarantor contained in
this Agreement, the other Loan Documents or in any document or instrument
delivered pursuant to or in connection with this Agreement shall be true in
all material respects as of the date as of which they were made and shall
also be true in all material respects at and as of the time of the making of
such Loan, with the same effect as if made at and as of that time (except to
the extent of changes resulting from transactions contemplated or permitted
by this Agreement and the other Loan Documents and changes occurring in the
ordinary course of business that singly or in the aggregate are not
materially adverse, and except to the extent that such representations and
warranties relate expressly to an earlier date) and no Default or Event of
Default shall have occurred and be continuing. Each of the Banks shall have
received a certificate of the Borrower signed by an Authorized Officer of the
Borrower to such effect.

-Section-11.3. NO LEGAL IMPEDIMENT. No change shall have occurred in
any law or regulations thereunder or interpretations thereof that in the
reasonable opinion of any Bank would make it illegal for such Bank to make
such Loan.

-Section-11.4. GOVERNMENTAL REGULATION. Each Bank shall have received
such statements in substance and form reasonably satisfactory to such Bank as
such Bank shall require for the purpose of compliance with any applicable
regulations of the Comptroller of the Currency or the Board of Governors of
the Federal Reserve System.

-Section-11.5. PROCEEDINGS AND DOCUMENTS. All proceedings in
connection with the Loan shall be satisfactory in substance and in form to
the Majority Banks, and the Majority Banks shall have received all
information and such counterpart originals or certified or other copies of
such documents as the Majority Banks may reasonably request.

-Section-11.6. BORROWING DOCUMENTS. In the case of any request for a
Loan, the Agent shall have received a copy of the request for a Loan required
by -Section-2.6 in the form of EXHIBIT B hereto, fully completed.

-Section-12. EVENTS OF DEFAULT; ACCELERATION; ETC.

-Section-12.1. EVENTS OF DEFAULT AND ACCELERATION. If any of the
following events ("Events of Default" or, if the giving of notice or the
lapse of time or both is required, then, prior to such notice or lapse of
time, "Defaults") shall occur:

(a) the Borrower shall fail to pay any principal of the Loans when
the same shall become due and payable, whether at the stated date of maturity
or any accelerated date of maturity or at any other date fixed for payment;

(b) the Borrower shall fail to pay any interest on the Loans or
any other sums due hereunder or under any of the other Loan Documents, when
the same shall become due and

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payable, whether at the stated date of maturity or any accelerated date of
maturity or at any other date fixed for payment;

(d) the Borrower shall fail to comply with any covenant contained
in Article 9, and such failure shall continue for 45 days after written
notice thereof shall have been given to the Borrower by the Agent;

(e) the Borrower or any of its Subsidiaries or the Guarantor shall
fail to perform any other term, covenant or agreement contained herein or in
any of the other Loan Documents (other than those specified above in this
- -Section-12);

(f) any representation or warranty of the Borrower or any of its
Subsidiaries or the Guarantor in this Agreement or any other Loan Document,
or in any report, certificate, financial statement, request for a Loan, or in
any other document or instrument delivered pursuant to or in connection with
this Agreement, any advance of a Loan or any of the other Loan Documents
shall prove to have been false in any material respect upon the date when
made or deemed to have been made or repeated;

(g) the Borrower or any of its Subsidiaries or the Guarantor shall
fail to pay at maturity, or within any applicable period of grace, any
obligation for borrowed money or credit received or other Indebtedness,
including, without limitation, the Prudential Loan, or fail to observe or
perform any material term, covenant or agreement contained in any agreement
by which it is bound, evidencing or securing any such borrowed money or
credit received or other Indebtedness for such period of time as would permit
(assuming the giving of appropriate notice if required) the holder or holders
thereof or of any obligations issued thereunder to accelerate the maturity
thereof;

(h) the Borrower or any of its Subsidiaries or the Guarantor, (A)
shall make an assignment for the benefit of creditors, or admit in writing
its general inability to pay or generally fail to pay its debts as they
mature or become due, or shall petition or apply for the appointment of a
trustee or other custodian, liquidator or receiver of the Borrower or any of
its Subsidiaries or the Guarantor or of any substantial part of the assets of
any thereof, (B) shall commence any case or other proceeding relating to the
Borrower or any of its Subsidiaries or the Guarantor under any bankruptcy,
reorganization, arrangement, insolvency, readjustment of debt, dissolution or
liquidation or similar law of any jurisdiction, now or hereafter in effect,
or (C) shall take any action to authorize or in furtherance of any of the
foregoing;

(i) a petition or application shall be filed for the appointment
of a trustee or other custodian, liquidator or receiver of the Borrower or
any of its Subsidiaries or the Guarantor or any substantial part of the
assets of any thereof, or a case or other proceeding shall be

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commenced against the Borrower or any of its Subsidiaries or the Guarantor
underany bankruptcy, reorganization, arrangement, insolvency, readjustment of
debt,dissolution or liquidation or similar law of any jurisdiction, now or
hereafter in effect, and the Borrower or any of its Subsidiaries or the
Guarantor shall indicate its approval thereof, consent thereto or
acquiescence therein or such petition, application, case or proceeding shall
not have been dismissed within 60 days following the filing or commencement
thereof;

(j) a decree or order is entered appointing any such trustee,
custodian, liquidator or receiver or adjudicating the Borrower or any of its
Subsidiaries or the Guarantor bankrupt or insolvent, or approving a petition
in any such case or other proceeding, or a decree or order for relief is
entered in respect of the Borrower or any of its Subsidiaries or the
Guarantor, in each case of the foregoing in an involuntary case under federal
bankruptcy laws as now or hereafter constituted;

(k) there shall remain in force, undischarged, unsatisfied and
unstayed, for more than 60 days, whether or not consecutive, any uninsured
final judgment against the Borrower or any of its Subsidiaries or the
Guarantor that, with other outstanding uninsured final judgments,
undischarged, against the Borrower or any of its Subsidiaries or the
Guarantor exceeds in the aggregate $5,000,000.00;

(l) if any of the Loan Documents shall be canceled, terminated,
revoked or rescinded otherwise than in accordance with the terms thereof or
with the express prior written agreement, consent or approval of the Banks,
or any action at law, suit in equity or other legal proceeding to cancel,
revoke or rescind any of the Loan Documents shall be commenced by or on
behalf of the Borrower or the Guarantor or any of its holders of Voting
Interests, or any court or any other governmental or regulatory authority or
agency of competent jurisdiction shall make a determination that, or issue a
judgment, order, decree or ruling to the effect that, any one or more of the
Loan Documents is illegal, invalid or unenforceable in accordance with the
terms thereof in any material respect as determined by the Majority Banks;

(m) any dissolution, termination, partial or complete liquidation,
merger or consolidation of the Borrower or the Guarantor, or any sale,
transfer or other disposition of the assets of the Borrower or the Guarantor,
other than as permitted under the terms of this Agreement or the other Loan
Documents;

(n) any suit or proceeding shall be filed against the Borrower or
the Guarantor or any of their respective assets which in the good faith
business judgment of the Majority Banks after giving consideration to the
likelihood of success of such suit or proceeding and the availability of
insurance to cover any judgment with respect thereto and based on the
information available to them, if adversely determined, would have a
materially adverse affect on the ability of the Borrower or the Guarantor to
perform each and every one of its obligations under and by virtue of the Loan
Documents;

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(o) the Borrower or the Guarantor, shall be indicted for a federal
crime, a punishment for which could include the forfeiture of any assets of
the Borrower or the Guarantor;

(p) Allen J. Anderson shall cease to be the Chairman of the Board
and Milton Reeder shall cease to be the President of the Borrower, and a
competent and experienced successor for such Person shall not be approved by
the Majority Banks within three (3) months of such event;

(q) the Borrower shall no longer own directly or indirectly one
hundred percent (100%) of the Voting Interests of the Guarantor;

(r) the Guarantor denies that the Guarantor has any liability or
obligation under the Guaranty, or shall notify the Agent or any of the Banks
of the Guarantor's intention to attempt to cancel or terminate the Guaranty,
or shall fail to observe or comply with any term, covenant, condition or
agreement under the Guaranty; or

(s) the Borrower shall make any payment with respect to the
Debentures, including principal thereto or interest or premium thereon,
except as specifically approved by the Banks as provided herein or any
subordination and standstill agreement executed pursuant hereto or there
shall be a default by Ameritech pursuant to any subordination and standstill
agreement executed pursuant hereto;

then, and in any such event, the Agent may, and upon the request of the
Majority Banks shall, by notice in writing to the Borrower declare all
amounts owing with respect to this Agreement, the Notes and the other Loan
Documents to be, and they shall thereupon forthwith become, immediately due
and payable without presentment, demand, protest or other notice of any kind,
all of which are hereby expressly waived by the Borrower; PROVIDED that in
the event of any Event of Default specified in Section 12.1(h), Section
12.1(i) or Section 12.1(j), all such amounts shall become immediately due and
payable automatically and without any requirement of notice from any of the
Banks or the Agent. The Borrower and any other Person shall be entitled to
conclusively rely on a statement from the Agent that it has the authority to
act for and bind the Banks pursuant to this Agreement and the other Loan
Documents.

Section 12.2. LIMITATION OF CURE PERIODS. Notwithstanding anything
contained in Section 12.1 to the contrary, (i) no Event of Default shall
exist hereunder upon the occurrence of any failure described in Section
12.1(a) or Section 12.1(b) in the event that the Borrower cures such default
within five (5) days following receipt of written notice of such default,
provided that no such cure period shall apply to any payments due upon the
maturity of the Notes; (ii) no Event of Default shall exist hereunder upon
the occurrence of any failure described in Section 12.1(c) as it pertains to
Section 7.15 only in the event that the Borrower cures such default within
sixty (60) days following receipt of written notice of such default; and
(iii) no Event of Default shall exist hereunder upon the occurrence of any
failure described in Section 12.1(e) in the event that the Borrower cures
such default within forty-five (45) days following receipt of written notice
of such default, provided that the provisions of

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this clause (iii) shall not pertain to any default consisting of a failure to
comply with Section 7.4(e), or to any default excluded from any provision of
cure of defaults contained in any other of the Loan Documents.

Section 12.3. TERMINATION OF COMMITMENTS. If any one or more Events
of Default specified in Section 12.1(h), Section 12.1(i), Section 12.1(j),
Section 12.1(l) or Section 12.1(r) shall occur, then immediately and without
any action on the part of the Agent or any Bank any unused portion of the
credit hereunder shall terminate and the Banks shall be relieved of all
obligations to make Loans or provide Letters of Credit to the Borrower. If
any other Event of Default shall have occurred and be continuing, the Agent,
upon the election of the Majority Banks, may by notice to the Borrower
terminate the obligation to make Loans or provide Letters of Credit to the
Borrower. No termination under this Section 12.2 shall relieve the Borrower
of its obligations to the Banks arising under this Agreement or the other
Loan Documents.

Section 12.4. REMEDIES. In case any one or more of the Events of
Default shall have occurred and be continuing, and whether or not the Banks
shall have accelerated the maturity of the Loans pursuant to Section 12.1,
the Agent on behalf of the Banks, may, with the consent of the Majority Banks
but not otherwise, proceed to protect and enforce their rights and remedies
under this Agreement, the Notes or any of the other Loan Documents by suit in
equity, action at law or other appropriate proceeding, whether for the
specific performance of any covenant or agreement contained in this Agreement
and the other Loan Documents or any instrument pursuant to which the
Obligations are evidenced, including to the full extent permitted by
applicable law the obtaining of the EX PARTE appointment of a receiver, and,
if such amount shall have become due, by declaration or otherwise, proceed to
enforce the payment thereof or any other legal or equitable right. No remedy
herein conferred upon the Agent or the holder of any Note is intended to be
exclusive of any other remedy and each and every remedy shall be cumulative
and shall be in addition to every other remedy given hereunder or now or
hereafter existing at law or in equity or by statute or any other provision
of law. In the event that all or any portion of the Obligations is collected
by or through an attorney-at-law, the Borrower shall pay all costs of
collection including, but not limited to, reasonable attorney's fees not to
exceed fifteen percent (15%) of such portion of the Obligations.
Notwithstanding anything herein to the contrary, upon the occurrence of any
Event of Default, an amount equal to the aggregate amount of the Outstanding
Letters of Credit (including Letters of Credit accepted but unpaid) shall, at
the Majority Banks' option, without demand upon or further notice to the
Borrower, be deemed to have been paid or disbursed by the Agent under the
Letter of Credit and a Loan to the Borrower from the Banks in such amount to
have been made and accepted, which Loan shall be immediately due and payable.

Section 12.5. DISTRIBUTION OF PROCEEDS. In the event that, following
the occurrence or during the continuance of any Event of Default, any monies
are received in connection with the enforcement of any of the Loan Documents,
or otherwise with respect to the realization upon any of the assets of the
Borrower, such monies shall be distributed for application as follows:

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(a) First, to the payment of, or (as the case may be) the
reimbursement of, the Agent for or in respect of all reasonable costs,
expenses, disbursements and losses which shall have been incurred or
sustained by the Agent in connection with the collection of such monies by
the Agent, for the exercise, protection or enforcement by the Agent of all or
any of the rights, remedies, powers and privileges of the Agent under this
Agreement or any of the other Loan Documents or in support of any provision
of adequate indemnity to the Agent against any taxes or liens which by law
shall have, or may have, priority over the rights of the Agent to such monies;

(b) Second, to all other Obligations in such order or preference
as the Majority Banks shall determine; PROVIDED, HOWEVER, that (i) in the
event that any Bank shall have wrongfully failed or refused to make an
advance under Section 2.7 and such failure or refusal shall be continuing,
advances made by other Banks during the pendency of such failure or refusal
shall be entitled to be repaid as to principal and accrued interest in
priority to the other Obligations described in this subsection (b), and (ii)
Obligations owing to the Banks with respect to each type of Obligation such
as interest, principal, fees and expenses, shall be made among the Banks PRO
RATA; and PROVIDED, further that the Majority Banks may in their discretion
make proper allowance to take into account any Obligations not then due and
payable; and

Section 13. INTENTIONALLY OMITTED.

Section 14. THE AGENT.

Section 14.1. AUTHORIZATION. The Agent is authorized to take such
action on behalf of each of the Banks and to exercise all such powers as are
hereunder and under any of the other Loan Documents and any related documents
delegated to the Agent, together with such powers as are reasonably incident
thereto, PROVIDED that no duties or responsibilities not expressly assumed
herein or therein shall be implied to have been assumed by the Agent. The
relationship between the Agent and the Banks is and shall be that of agent
and principal only, and nothing contained in this Agreement or any of the
other Loan Documents shall be construed to constitute the Agent as a trustee
for any Bank. Unless they have been expressly notified in writing by all of
the Banks to the contrary, the Borrower and any other Person shall be
entitled to conclusively rely on a statement from the Agent that it has the
authority to act for and bind the Banks pursuant to this Agreement and the
other Loan Documents.

Section 14.2. EMPLOYEES AND AGENTS. The Agent may exercise its powers
and execute its duties by or through employees or agents and shall be
entitled to take, and to rely on, advice of counsel concerning all matters
pertaining to its rights and duties under this Agreement and the other Loan
Documents. The Agent may utilize the services of such Persons as the Agent
may reasonably determine, and all reasonable fees and expenses of any such
Persons shall be paid by the

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Borrower.

Section 14.3. NO LIABILITY. Neither the Agent nor any of its
shareholders, directors, officers or employees nor any other Person assisting
them in their duties nor any agent, or employee thereof, shall be liable for
any waiver, consent or approval given or any action taken, or omitted to be
taken, in good faith by it or them hereunder or under any of the other Loan
Documents, or in connection herewith or therewith, or be responsible for the
consequences of any oversight or error of judgment whatsoever, except that
the Agent or such other Person, as the case may be, may be liable for losses
due to its willful misconduct or gross negligence.

Section 14.4. NO REPRESENTATIONS. The Agent shall not be responsible
for the execution or validity or enforceability of this Agreement, the Notes,
any of the other Loan Documents or any instrument at any time constituting,
or intended to constitute, collateral security for the Notes, or for the
value of any such collateral security or for the validity, enforceability or
collectability of any such amounts owing with respect to the Notes, or for
any recitals or statements, warranties or representations made herein or in
any of the other Loan Documents or in any certificate or instrument hereafter
furnished to it by or on behalf of the Borrower or any of its Subsidiaries or
the Guarantor, or be bound to ascertain or inquire as to the performance or
observance of any of the terms, conditions, covenants or agreements herein or
in any other of the Loan Documents. The Agent shall not be bound to
ascertain whether any notice, consent, waiver or request delivered to it by
the Borrower or the Guaranty or any holder of any of the Notes shall have
been duly authorized or is true, accurate and complete. The Agent has not
made nor does it now make any representations or warranties, express or
implied, nor does it assume any liability to the Banks, with respect to the
creditworthiness or financial condition of the Borrower or any of its
Subsidiaries or the Guarantor. Each Bank acknowledges that it has,
independently and without reliance upon the Agent or any other Bank, and
based upon such information and documents as it has deemed appropriate, made
its own credit analysis and decision to enter into this Agreement. Each Bank
also acknowledges that it will, independently and without reliance upon the
Agent or any other Bank, based upon such information and documents as it
deems appropriate at the time, continue to make its own credit analysis and
decisions in taking or not taking action under this Agreement and the other
Loan Documents.

Section 14.5. PAYMENTS.

(a) A payment by the Borrower or the Guarantor to the Agent
hereunder or under any of the other Loan Documents for the account of any
Bank shall constitute a payment to such Bank. The Agent agrees to exercise
reasonable efforts to distribute to each Bank on the same day as (but in no
event later than one Business Day after) the Agent's receipt of good funds,
determined in accordance with the Agent's customary practices, such Bank's
PRO RATA share of payments received by the Agent for the account of the Banks
except as otherwise expressly provided herein or in any of the other Loan
Documents. In the event that the Agent fails to distribute such amounts
within one Business Day as provided above, the Agent shall pay interest on
such amount at a rate per annum equal to the Federal Funds Effective Rate
from time to time

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in effect.

(b) If in the opinion of the Agent the distribution of any amount
received by it in such capacity hereunder, under the Notes or under any of
the other Loan Documents might involve it in liability, it may refrain from
making distribution until its right to make distribution shall have been
adjudicated by a court of competent jurisdiction. If a court of competent
jurisdiction shall adjudge that any amount received and distributed by the
Agent is to be repaid, each Person to whom any such distribution shall have
been made shall either repay to the Agent its proportionate share of the
amount so adjudged to be repaid or shall pay over the same in such manner and
to such Persons as shall be determined by such court.

(c) Notwithstanding anything to the contrary contained in this
Agreement or any of the other Loan Documents, any Bank that fails (i) to make
available to the Agent its PRO RATA share of any Loan or (ii) to comply with
the provisions of Section 13 with respect to making dispositions and
arrangements with the other Banks, where such Bank's share of any payment
received, whether by setoff or otherwise, is in excess of its PRO RATA share
of such payments due and payable to all of the Banks, in each case as, when
and to the full extent required by the provisions of this Agreement, shall be
deemed delinquent (a "Delinquent Bank") and shall be deemed a Delinquent Bank
until such time as such delinquency is satisfied. A Delinquent Bank shall be
deemed to have assigned any and all payments due to it from the Borrower and
the Guarantor, whether on account of outstanding Loans, interest, fees or
otherwise, to the remaining nondelinquent Banks for application to, and
reduction of, their respective PRO RATA shares of all Outstanding Loans. The
Delinquent Bank hereby authorizes the Agent to distribute such payments to
the nondelinquent Banks in proportion to their respective PRO RATA shares of
all Outstanding Loans. A Delinquent Bank shall be deemed to have satisfied
in full a delinquency when and if, as a result of application of the assigned
payments to all Outstanding Loans of the nondelinquent Banks or as a result
of other payments by the Delinquent Banks to the nondelinquent Banks, the
Banks' respective PRO RATA shares of all Outstanding Loans have returned to
those in effect immediately prior to such delinquency and without giving
effect to the nonpayment causing such delinquency.

Section 14.6. HOLDERS OF NOTES. Subject to the terms of Article 18,
the Agent may deem and treat the payee of any Note as the absolute owner or
purchaser thereof for all purposes hereof until it shall have been furnished
in writing with a different name by such payee or by a subsequent holder,
assignee or transferee.

Section 14.7. INDEMNITY. The Banks ratably agree hereby to indemnify
and hold harmless the Agent from and against any and all claims, actions and
suits (whether groundless or otherwise), losses, damages, costs, expenses
(including any reasonable expenses for which the Agent has not been
reimbursed by the Borrower as required by Section 15), and liabilities of
every nature and character arising out of or related to this Agreement, the
Notes, or any of the other Loan Documents or the transactions contemplated or
evidenced hereby or thereby, or the Agent's actions taken hereunder or
thereunder, except to the extent that any of the same shall be directly

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caused by the Agent's willful misconduct or gross negligence.

Section 14.8. AGENT AS BANK. In its individual capacity, FNBB shall
have the same obligations and the same rights, powers and privileges in
respect to its Commitment and the Loans made by it, and as the holder of any
of the Notes as it would have were it not also the Agent.

Section 14.9. RESIGNATION. Subject to the terms of Section 18.1, the
Agent may resign at any time by giving 60 days' prior written notice thereof
to the Banks and the Borrower. Upon any such resignation, the Co-Agent shall
be appointed as a successor Agent provided that the Co-Agent is still a Bank,
the Co-Agent's senior debt obligations are rated not less than "A" or its
equivalent by Moody's Investors Service, Inc. or not less than "A" or its
equivalent by Standard & Poor's Corporation and the Co-Agent has total
assets in excess of $10,000,000,000.00. If the Co-Agent fails to satisfy
such conditions or declines to serve as Agent, the Majority Banks shall have
the right to appoint as a successor Agent any Bank or any other banks
satisfying the conditions contained in the immediately preceding sentence.
Unless a Default or Event of Default shall have occurred and be continuing,
such successor Agent (including the Co-Agent) shall be reasonably acceptable
to the Borrower. If no successor Agent shall have been so appointed by the
Majority Banks and shall have accepted such appointment within 30 days after
the retiring Agent's giving of notice of resignation, then the retiring Agent
may, on behalf of the Banks, appoint a successor Agent, which shall be a bank
whose debt obligations are rated not less than "A" or its equivalent by
Moody's Investors Service, Inc. or not less than "A" or its equivalent by
Standard & Poor's Corporation and which has total assets in excess of
$10,000,000,000.00. Upon the acceptance of any appointment as Agent
hereunder by a successor Agent, such successor Agent shall thereupon succeed
to and become vested with all the rights, powers, privileges and duties of
the retiring Agent, and the retiring Agent shall be discharged from its
duties and obligations hereunder as Agent. After any retiring Agent's
resignation, the provisions of this Agreement and the other Loan Documents
shall continue in effect for its benefit in respect of any actions taken or
omitted to be taken by it while it was acting as Agent.

Section 14.10. DUTIES IN THE CASE OF ENFORCEMENT. In case one or more
Events of Default have occurred and shall be continuing, and whether or not
acceleration of the Obligations shall have occurred, the Agent shall, if (a)
so requested by the Majority Banks and (b) the Banks have provided to the
Agent such additional indemnities and assurances against expenses and
liabilities as the Agent may reasonably request, proceed to exercise all or
any legal and equitable and other rights or remedies as it may have. The
Majority Banks may direct the Agent in writing as to the method and the
extent of any such exercise, the Banks hereby agreeing to indemnify and hold
the Agent harmless from all liabilities incurred in respect of all actions
taken or omitted in accordance with such directions, PROVIDED that the Agent
need not comply with any such direction to the extent that the Agent
reasonably believes the Agent's compliance with such direction to be unlawful
or commercially unreasonable in any applicable jurisdiction.

Section 14.11. DETERMINATIONS BY AGENT. Any and all determinations to
be made by the Agent pursuant to the provisions of this Agreement shall be
conclusive and binding absent manifest

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error and so long as the same shall be determined in good faith by the
Agent. Where no procedures for such determinations are specified, such
determinations shall be made in such manner as Agent shall determine in its
sole discretion, subject to the provisions of this Section 14.11.

Section 15. EXPENSES.

The Borrower agrees to pay (a) the reasonable costs of producing and
reproducing this Agreement, the other Loan Documents and the other agreements
and instruments mentioned herein, (b) any taxes (including any interest and
penalties in respect thereto) payable by the Agent or any of the Banks (other
than taxes based upon the Agent's or any Bank's gross or net income),
including any recording, mortgage, documentary or intangibles taxes in
connection with the Loan Documents, or other taxes payable on or with respect
to the transactions contemplated by this Agreement, including any such taxes
payable by the Agent or any of the Banks after the Closing Date under the
Original Credit Agreement (the Borrower hereby agreeing to indemnify the
Agent and each Bank with respect thereto), (c) all reasonable internal
charges of the Agent (determined in good faith and in accordance with the
Agent's internal policies applicable generally to its customers) for
commercial finance exams and engineering and environmental reviews and the
reasonable fees, expenses and disbursements of the counsel to the Agent,
counsel for the Banks and any local counsel to the Agent incurred in
connection with the preparation, administration or interpretation of the Loan
Documents and other instruments mentioned herein (excluding, however, the
preparation of agreements evidencing participations granted under Section
18.4), each closing hereunder, and amendments, modifications, approvals,
consents or waivers hereto or hereunder, (d) the reasonable fees, expenses
and disbursements of the Agent incurred by the Agent in connection with the
preparation, administration or interpretation of the Loan Documents and other
instruments mentioned herein, and the making of each advance hereunder, (e)
all reasonable out-of-pocket expenses (including reasonable attorneys' fees
and costs, which attorneys may be employees of any Bank or the Agent and the
fees and costs of appraisers, engineers, investment bankers or other experts
retained by any Bank or the Agent) incurred by any Bank or the Agent in
connection with (i) the enforcement of or preservation of rights under any of
the Loan Documents against the Borrower or the Guarantor or the
administration thereof after the occurrence of a Default or Event of Default
and (ii) any litigation, proceeding or dispute whether arising hereunder or
otherwise, in any way related to the Agent's or any of the Bank's
relationship with the Borrower or the Guarantor, and (f) all reasonable fees,
expenses and disbursements of any Bank or the Agent incurred in connection
with UCC searches, UCC filings, title rundowns or title searches. The
covenants of this Section 15 shall survive payment or satisfaction of payment
of amounts owing with respect to the Notes. Notwithstanding the foregoing,
each of the Banks (excluding the Agent) shall only be entitled to recover up
to $5,000.00 each for the fees, expenses and disbursements of their counsel
incurred on or before the Closing Date.

Section 16. INDEMNIFICATION.

The Borrower agrees to indemnify and hold harmless the Agent and the
Banks and each director, officer, employee, agent, attorney and any Person
who controls the Agent or any Bank

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from and against any and all claims, actions and suits, whether groundless
or otherwise, and from and against any and all liabilities, losses, damages
and expenses of every nature and character arising out of or relating to this
Agreement or any of the other Loan Documents or the transactions contemplated
hereby and thereby including, without limitation, (a) any leasing fees and
any brokerage, finders or similar fees asserted against any Person
indemnified under this Section 16 based upon any agreement, arrangement or
action made or taken, or alleged to have been made or taken, by the Borrower
or any of its Subsidiaries or the Guarantor, (b) any condition of the Real
Estate, (c) any actual or proposed use by the Borrower of the proceeds of any
of the Loans or any actual or proposed use of a Letter of Credit by any
beneficiary of a Letter of Credit, (d) any actual or alleged infringement of
any patent, copyright, trademark, service mark or similar right of the
Borrower or any of its Subsidiaries or the Guarantor, (e) the Borrower and
the Guarantor entering into or performing this Agreement or any of the other
Loan Documents, (f) any actual or alleged violation of any law, ordinance,
code, order, rule, regulation, approval, consent, permit or license relating
to the Real Estate, or (g) with respect to the Borrower and its Subsidiaries
and the Guarantor and their respective properties and assets, the violation
of any Environmental Law, the Release or threatened Release of any Hazardous
Substances or any action, suit, proceeding or investigation brought or
threatened with respect to any Hazardous Substances (including, but not
limited to claims with respect to wrongful death, personal injury or damage
to property), in each case including, without limitation, the reasonable fees
and disbursements of counsel and allocated costs of internal counsel incurred
in connection with any such investigation, litigation or other proceeding;
PROVIDED, HOWEVER, that the Borrower shall not be obligated under this
Section 16 to indemnify any Person for liabilities arising from such Person's
own gross negligence or willful misconduct. In litigation, or the
preparation therefor, the Banks and the Agent shall be entitled to select a
single law firm as their own counsel and, in addition to the foregoing
indemnity, the Borrower agrees to pay promptly the reasonable fees and
expenses of such counsel. If, and to the extent that the obligations of the
Borrower under this Section 16 are unenforceable for any reason, the Borrower
hereby agrees to make the maximum contribution to the payment in satisfaction
of such obligations which is permissible under applicable law. The
provisions of this '16 shall survive the repayment of the Loans and the
termination of the obligations of the Banks hereunder.

Section 17. SURVIVAL OF COVENANTS, ETC.

All covenants, agreements, representations and warranties made herein,
in the Notes, in any of the other Loan Documents or in any documents or other
papers delivered by or on behalf of the Borrower or any of its Subsidiaries
or the Guarantor pursuant hereto or thereto shall be deemed to have been
relied upon by the Banks and the Agent, notwithstanding any investigation
heretofore or hereafter made by any of them, and shall survive the making by
the Banks of any of the Loans, as herein contemplated, and shall continue in
full force and effect so long as any amount due under this Agreement, the
Notes, the Letters of Credit or any of the other Loan Documents remains
outstanding or any Bank has any obligation to make any Loans or the Agent has
any obligation to issue any Letters of Credit. The indemnification
obligations of the Borrower provided herein and the other Loan Documents
shall survive the full repayment of

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amounts due and the termination of the obligations of the Banks hereunder
and thereunder to the extent provided herein and therein. All statements
contained in any certificate or other paper delivered to any Bank or the
Agent at any time by or on behalf of the Borrower or any of its Subsidiaries
or the Guarantor pursuant hereto or in connection with the transactions
contemplated hereby shall constitute representations and warranties by the
Borrower or such Subsidiary or the Guarantor hereunder.

Section 18. ASSIGNMENT AND PARTICIPATION.

Section 18.1. CONDITIONS TO ASSIGNMENT BY BANKS. Except as provided
herein, each Bank may assign to another bank or other entity all (but not
less than all) of its interests, rights and obligations under this Agreement
(including all of its Commitment Percentage and Commitment and the same
portion of the Loans at the time owing to it, and the Notes held by it);
provided that (a) the Agent shall have given its prior written consent to
such assignment, which consent shall not be unreasonably withheld (provided
that such consent shall not be required for any assignment to another Bank,
to a bank which is under common control with the assigning Bank or to a
wholly-owned Subsidiary of such Bank provided that such assignee shall remain
a wholly-owned Subsidiary of such Bank), (b) the Borrower shall have given
its prior written consent to such assignment, which consent shall not be
unreasonably withheld or delayed (provided that such consent shall not be
required if a Default or Event of Default shall have occurred and be
continuing or for any assignment to another Bank, to a bank which is under
common control with the assigning Bank or to a wholly-owned Subsidiary of
such Bank provided that such assignee shall remain a wholly-owned Subsidiary
of such Bank), (c) each such assignment shall be of all the assigning Bank's
rights and obligations under this Agreement, (d) the parties to such
assignment shall execute and deliver to the Agent, for recording in the
Register (as hereinafter defined), a notice of such assignment, together with
any Notes subject to such assignment, (e) in no event shall any voting,
consent or approval rights of a Bank be assigned to any Person controlling,
controlled by or under common control with, or which is not otherwise free
from influence or control by, the Borrower or the Guarantor, which rights
shall instead be allocated PRO RATA among the other remaining Banks, (f) such
assignee shall have a net worth as of the date of such assignment of not less
than $500,000,000, and (g) such assignment is subject to the terms of any
intercreditor agreement among the Banks and the Agent. Upon such execution,
delivery, acceptance and recording, of such notice of assignment, (i) the
assignee thereunder shall be a party hereto and all other Loan Documents
executed by the Banks and, to the extent provided in such assignment, have
the rights and obligations of a Bank hereunder, (ii) the assigning Bank
shall, to the extent provided in such assignment and upon payment to the
Agent of the registration fee referred to in Section 18.2, be released from
its obligations under this Agreement, and (iii) the Agent may unilaterally
amend SCHEDULE 1 to reflect such assignment. In connection with each
assignment, the assignee shall represent and warrant to the Agent, the
assignor and each other Bank as to whether such assignee is controlling,
controlled by, under common control with or is not otherwise free from
influence or control by, the Borrower and the Guarantor.

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Section 18.2. REGISTER. The Agent shall maintain a copy of each
assignment delivered to it and a register or similar list (the "Register")
for the recordation of the names and addresses of the Banks and the
Commitment Percentages of, and principal amount of the Loans owing to the
Banks from time to time. The entries in the Register shall be conclusive, in
the absence of manifest error, and the Borrower, the Agent and the Banks may
treat each Person whose name is recorded in the Register as a Bank hereunder
for all purposes of this Agreement. The Register shall be available for
inspection by the Borrower and the Banks at any reasonable time and from time
to time upon reasonable prior notice. Upon each such recordation, the
assigning Bank agrees to pay to the Agent a registration fee in the sum of
$2,000.

Section 18.3. NEW NOTES. Upon its receipt of an assignment executed by
the parties to such assignment, together with each Note subject to such
assignment, the Agent shall (a) record the information contained therein in
the Register, and (b) give prompt notice thereof to the Borrower and the
Banks (other than the assigning Bank). Within five Business Days after
receipt of such notice, the Borrower, at its own expense, shall execute and
deliver to the Agent, in exchange for each surrendered Note, a new Note to
the order of such assignee in an amount equal to the amount assumed by such
assignee pursuant to such assignment, and shall cause the Guarantor to
deliver to the Agent an acknowledgment in form and substance satisfactory to
the Agent to the effect that the Guaranty extends to and is applicable to
each new Note. Such new Note shall provide that it is a replacement for the
surrendered Note, shall be in an aggregate principal amount equal to the
aggregate principal amount of the surrendered Note, shall be dated the
effective date of such assignment and shall otherwise be in substantially the
form of the assigned Note. The surrendered Note shall be canceled and
returned to the Borrower.

Section 18.4. PARTICIPATIONS. Each Bank may sell participations to one
or more banks or other entities in all or a portion of such Bank's rights and
obligations under this Agreement and the other Loan Documents; PROVIDED that
(a) any such sale or participation shall not affect the rights and duties of
the selling Bank hereunder to the Borrower, (b) such sale and participation
shall not entitle such participant to any rights or privileges under this
Agreement or the Loan Documents (including, without limitation, the right to
approve waivers, amendments or modifications), (c) such participant shall
have no direct rights against the Borrower or the Guarantor except the rights
granted to the Banks pursuant to Section 13, and (d) such participant shall
not be a Person controlling, controlled by or under common control with, or
which is not otherwise free from influence or control by, the Borrower or the
Guaranty.

Section 18.5. PLEDGE BY BANK. Any Bank may at any time pledge all or
any portion of its interest and rights under this Agreement (including all or
any portion of its Note) to any of the twelve Federal Reserve Banks organized
under Section 4 of the Federal Reserve Act, 12 U.S.C. Section 341. No such
pledge or the enforcement thereof shall release the pledgor Bank from its
obligations hereunder or under any of the other Loan Documents.

Section 18.6. NO ASSIGNMENT BY BORROWER. The Borrower shall not assign
or transfer any of its rights or obligations under any of the Loan Documents
without the prior written consent of each

<PAGE>

of the Banks.

Section 18.7. DISCLOSURE. The Borrower agrees that in addition to
disclosures made in accordance with standard banking practices any Bank may
disclose information obtained by such Bank pursuant to this Agreement to
assignees or participants and potential assignees or participants hereunder
provided the Borrower receives prior notice of such disclosures unless such
participant or assignee is one of the Banks.

Section 19. NOTICES.

Each notice, demand, election or request provided for or permitted to be
given pursuant to this Agreement (hereinafter in this Section 19 referred to
as "Notice"), but specifically excluding to the maximum extent permitted by
law any notices of the institution or commencement of foreclosure
proceedings, must be in writing and shall be deemed to have been properly
given or served by personal delivery or by sending same by overnight courier
or by depositing same in the United States Mail, postpaid and registered or
certified, return receipt requested, or as expressly permitted herein, by
telegraph, telecopy, telefax or telex, and addressed as follows:

If to the Agent or FNBB:

The First National Bank of Boston
100 Federal Street
Boston, Massachusetts 02110
Attn: Real Estate Division
(617) 434-2200
(617) 434-7108 (FAX)

With a copy to:

The First National Bank of Boston
700 N. Pearl, Suite 1840
Dallas, Texas 75201
Attn: Helen H. Delph, Vice President
(214) 720-3836
(214) 871-7328 (FAX)

and to:

The First National Bank of Boston
115 Perimeter Center Place, N.E., Suite 500
Atlanta, Georgia 30346
Attn: Elaine Hansard
(770) 393-4676

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(770) 390-8434 (FAX)

If to the Borrower:

Meridian Industrial Trust, Inc.
455 Market Street, 17th Floor
San Francisco, California 94105
Attn: Allen J. Anderson, Chief Executive Officer
(415) 281-3900
(415) 284-2840 (FAX)

if to a Bank now a party to this Agreement, at the address set forth below
the signature of such Bank attached to this Agreement, and to each other Bank
which may hereafter become a party to this Agreement at such address as may
be designated by such Bank. Each Notice shall be effective upon being
personally delivered or upon being sent by overnight courier or upon being
deposited in the United States Mail as aforesaid or, if sent by facsimile
transmission, upon receipt of such transmission as evidenced by the
confirmation notice. The time period in which a response to such Notice must
be given or any action taken with respect thereto (if any), however, shall
commence to run from the date of receipt if personally delivered, sent by
overnight courier or sent by facsimile transmission, or if so deposited in
the United States Mail, the earlier of three (3) Business Days following such
deposit or the date of receipt as disclosed on the return receipt. Rejection
or other refusal to accept or the inability to deliver because of changed
address for which no notice was given shall be deemed to be receipt of the
Notice sent. By giving at least fifteen (15) days prior Notice thereof, the
Borrower, a Bank or Agent shall have the right from time to time and at any
time during the term of this Agreement to change their respective addresses
and each shall have the right to specify as its address any other address
within the United States of America.

Section 20. RELATIONSHIP.

The relationship between each Bank and the Borrower is solely that of a
lender and borrower, and nothing contained herein or in any of the other Loan
Documents shall in any manner be construed as making the parties hereto
partners, joint venturers or any other relationship other than lender and
borrower.

Section 21. GOVERNING LAW; CONSENT TO JURISDICTION AND SERVICE.

THIS AGREEMENT AND EACH OF THE OTHER LOAN DOCUMENTS EXCEPT AS OTHERWISE
SPECIFICALLY PROVIDED THEREIN, ARE CONTRACTS UNDER THE LAWS OF THE
COMMONWEALTH OF MASSACHUSETTS AND SHALL FOR ALL PURPOSES BE CONSTRUED IN
ACCORDANCE WITH AND GOVERNED BY THE LAWS OF SUCH COMMONWEALTH (EXCLUDING THE
LAWS APPLICABLE TO CONFLICTS OR

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CHOICE OF LAW). THE BORROWER AGREES THAT ANY SUIT FOR THE ENFORCEMENT OF
THIS AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS MAY BE BROUGHT IN THE
COURTS OF THE COMMONWEALTH OF MASSACHUSETTS OR ANY FEDERAL COURT SITTING
THEREIN AND CONSENTS TO THE NONEXCLUSIVE JURISDICTION OF SUCH COURT AND THE
SERVICE OF PROCESS IN ANY SUCH SUIT BEING MADE UPON THE BORROWER BY MAIL AT
THE ADDRESS SPECIFIED IN Section 19. THE BORROWER HEREBY WAIVES ANY
OBJECTION THAT IT MAY NOW OR HEREAFTER HAVE TO THE VENUE OF ANY SUCH SUIT OR
ANY SUCH COURT OR THAT SUCH SUIT IS BROUGHT IN AN INCONVENIENT COURT.

Section 22. HEADINGS.

The captions in this Agreement are for convenience of reference only and
shall not define or limit the provisions hereof.

Section 23. COUNTERPARTS.

This Agreement and any amendment hereof may be executed in several
counterparts and by each party on a separate counterpart, each of which when so
executed and delivered shall be an original, and all of which together shall
constitute one instrument. In proving this Agreement it shall not be necessary
to produce or account for more than one such counterpart signed by the party
against whom enforcement is sought.

Section 24. ENTIRE AGREEMENT, ETC.

The Loan Documents and any other documents executed in connection
herewith or therewith express the entire understanding of the parties with
respect to the transactions contemplated hereby. Neither this Agreement nor
any term hereof may be changed, waived, discharged or terminated, except as
provided in Section 27.

Section 25. WAIVER OF JURY TRIAL.

EACH OF THE BORROWER, THE AGENT AND THE BANKS HEREBY WAIVES ITS RIGHT TO
A JURY TRIAL WITH RESPECT TO ANY ACTION OR CLAIM ARISING OUT OF ANY DISPUTE
IN CONNECTION WITH THIS AGREEMENT, ANY NOTE OR ANY OF THE OTHER LOAN
DOCUMENTS, ANY RIGHTS OR OBLIGATIONS HEREUNDER OR THEREUNDER OR THE
PERFORMANCE OF SUCH RIGHTS AND OBLIGATIONS. THE BORROWER (A) CERTIFIES THAT
NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY BANK OR THE AGENT HAS
REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH BANK OR THE AGENT WOULD NOT,
IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B)
ACKNOWLEDGES THAT THE

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AGENT AND THE BANKS HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT AND THE
OTHER LOAN DOCUMENTS TO WHICH THEY ARE PARTIES BY, AMONG OTHER THINGS, THE
WAIVER AND CERTIFICATIONS CONTAINED IN THIS Section 25.

Section 26. DEALINGS WITH THE BORROWER.

The Banks and their affiliates may accept deposits from, extend credit to
and generally engage in any kind of banking, trust or other business with the
Borrower, its Subsidiaries, the Guarantor or any of their affiliates regardless
of the capacity of the Bank hereunder.

Section 27. CONSENTS, AMENDMENTS, WAIVERS, ETC.

Except as otherwise expressly provided in this Agreement, any consent or
approval required or permitted by this Agreement may be given, and any term
of this Agreement or of any other instrument related hereto or mentioned
herein may be amended, and the performance or observance by the Borrower of
any terms of this Agreement or such other instrument or the continuance of
any Default or Event of Default may be waived (either generally or in a
particular instance and either retroactively or prospectively) with, but only
with, the written consent of the Majority Banks. Notwithstanding the
foregoing, none of the following may occur without the written consent of
each Bank: (a) any change in the rate of interest on and the term of the
Notes; (b) any change in the amount of the Commitments of the Banks; (c) any
forgiveness, reduction or waiver of the principal of any unpaid Loan or any
interest thereon or fee payable under the Loan Documents; (d) any change in
the amount of any fee payable to a Bank or the Agent hereunder; (e) any
postponement of any date fixed for any payment of principal of or interest on
the Loan; (f) any extension of the Maturity Date; (g) any change in the
manner of distribution of any payments to the Banks; (h) any release of the
Borrower or the Guarantor; (i) except as permitted herein or in that certain
Intercreditor Agreement, the sale, transfer or assignment of the Loan
Documents or any interest therein; (j) any written modification to or waiver
of the definition of the term "Borrowing Base" or any defined term used
within such definition; (k) any amendment of the (i) definition of Majority
Banks, (ii) any requirement for consent by all of the Banks, (iii) the
provisions of Section 14.9 regarding the appointment of the Co-Agent as
successor Agent, (iv) Section 27, or (v) any provision of this Agreement or
the Loan Documents which requires the approval of the Majority Banks to
require a lesser number of Banks to approve such action; and (l) approval of
the terms relating to the Debentures. The amount of the Agent's fee payable
for the Agent's account and the provisions of Section 14 may not be amended
without the written consent of the Agent. No waiver shall extend to or
affect any obligation not expressly waived or impair any right consequent
thereon. No course of dealing or delay or omission on the part of the Agent
or any Bank in exercising any right shall operate as a waiver thereof or
otherwise be prejudicial thereto. No notice to or demand upon the Borrower
shall entitle the Borrower to other or further notice or demand in similar or
other circumstances.

Section 28. SEVERABILITY.

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<PAGE>

The provisions of this Agreement are severable, and if any one clause or
provision hereof shall be held invalid or unenforceable in whole or in part in
any jurisdiction, then such invalidity or unenforceability shall affect only
such clause or provision, or part thereof, in such jurisdiction, and shall not
in any manner affect such clause or provision in any other jurisdiction, or any
other clause or provision of this Agreement in any jurisdiction.

Section 29. NO UNWRITTEN AGREEMENTS.

THE WRITTEN LOAN DOCUMENTS REPRESENT THE FINAL AGREEMENT BETWEEN THE
PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR
SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL
AGREEMENTS BETWEEN THE PARTIES.

Section 30. TIME OF THE ESSENCE.

Time is of the essence with respect to each and every covenant, agreement
and obligation of the Borrower under this Agreement and the other Loan
Documents.

IN WITNESS WHEREOF, the undersigned have duly executed this Agreement as a
sealed instrument as of the date first set forth above.

MERIDIAN INDUSTRIAL TRUST, INC.,
a Maryland corporation

By: /S/ MILTON K. REEDER [SEAL]
---------------------------
Title: President

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THE FIRST NATIONAL BANK OF
BOSTON, individually and as Agent

By: /S/ HELEN DELPH
---------------------------
Title: Vice President

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<PAGE>

TEXAS COMMERCE BANK NATIONAL ASSOCIATION,
individually and as Co-Agent

By: ____________________________________

Its: ______________________________

Texas Commerce Bank National
Association
717 Travis, 7th Floor- South
Real Estate Department
Houston, Texas 7702
Attn: Catherine A. Arnold,
Senior Vice President
(713) 216-5391
(713) 216-7713 (FAX)

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NATIONSBANK OF TEXAS, N.A.

By: JULIE O.C. WALLIS
--------------------------
Its: VICE PRESIDENT
---------------------

NationsBank of Texas, N.A.
Real Estate Banking Group
901 Main Street, 51st Plaza
Dallas, Texas 75202-3714
Attn: Julie Wallis, Vice President
(214) 508-2541
(214) 508-0085 (FAX)

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<PAGE>

EXHIBIT A

FORM OF AMENDED AND RESTATED NOTE

$25,000,000.00 March __, 1996

FOR VALUE RECEIVED, the undersigned MERIDIAN INDUSTRIAL TRUST, INC., a
Maryland corporation, hereby promises to pay to ______________________________
or order, in accordance with the terms of that certain First Amended and
Restated Revolving Credit Agreement dated March ___, 1996 (the "Credit
Agreement"), as from time to time in effect, among the undersigned, The First
National Bank of Boston, for itself and as Agent, and such other Banks as may
be from time to time named therein, to the extent not sooner paid, on or
before the Maturity Date the principal sum of Twenty-Five Million and No/100
Dollars ($25,000,000.00), or such amount as may be advanced by the payee
hereof under the Credit Agreement with daily interest from the date hereof,
computed as provided in the Credit Agreement, on the principal amount hereof
from time to time unpaid, at a rate per annum on each portion of the
principal amount which shall at all times be equal to the rate of interest
applicable to such portion in accordance with the Credit Agreement, and with
interest on overdue principal and, to the extent permitted by applicable law,
on overdue installments of interest and late charges at the rates provided in
the Credit Agreement. Interest shall be payable on the dates specified in
the Credit Agreement, except that all accrued interest shall be paid at the
stated or accelerated maturity hereof or upon the prepayment in full hereof.
Capitalized terms used herein and not otherwise defined herein shall have the
meanings set forth in the Credit Agreement.

Payments hereunder shall be made to The First National Bank of Boston, as
Agent for the payee hereof, 100 Federal Street, Boston, Massachusetts 02110.

This Note is one of one or more Notes evidencing borrowings under and is
entitled to the benefits and subject to the provisions of the Credit Agreement.
The principal of this Note may be due and payable in whole or in part prior to
the maturity date stated above and is subject to mandatory prepayment in the
amounts and under the circumstances set forth in the Credit Agreement, and may
be prepaid in whole or from time to time in part, all as set forth in the Credit
Agreement.

Notwithstanding anything in this Note to the contrary, all agreements
between the Borrower and the Banks and the Agent, whether now existing or
hereafter arising and whether written or oral, are hereby limited so that in no
contingency, whether by reason of acceleration of the maturity of any of the
Obligations or otherwise, shall the interest contracted for, charged or received
by the Banks exceed the maximum amount permissible under applicable law. If,
from any circumstance whatsoever, interest would otherwise be payable to the
Banks in excess of the maximum lawful amount, the interest payable to the Banks
shall be reduced to the maximum amount permitted under applicable law; and if
from any circumstance the Banks shall ever

<PAGE>

receive anything of value deemed interest by applicable law in excess of the
maximum lawful amount, an amount equal to any excessive interest shall be
applied to the reduction of the principal balance of the Obligations and to
the payment of interest or, if such excessive interest exceeds the unpaid
balance of principal of the Obligations, such excess shall be refunded to the
Borrower. All interest paid or agreed to be paid to the Banks shall, to the
extent permitted by applicable law, be amortized, prorated, allocated and
spread throughout the full period until payment in full of the principal of
the Obligations (including the period of any renewal or extension thereof) so
that the interest thereon for such full period shall not exceed the maximum
amount permitted by applicable law. This paragraph shall control all
agreements between the Borrower and the Banks and the Agent.

In case an Event of Default shall occur, the entire principal amount of
this Note may become or be declared due and payable in the manner and with
the effect provided in said Credit Agreement.

This Note shall be governed by and construed in accordance with the laws
of the Commonwealth of Massachusetts (without giving effect to the conflict
of laws rules of any jurisdiction).

The undersigned maker and all guarantors and endorsers, hereby waive
presentment, demand, notice, protest, notice of intention to accelerate the
indebtedness evidenced hereby, notice of acceleration of the indebtedness
evidenced hereby and all other demands and notices in connection with the
delivery, acceptance, performance and enforcement of this Note, except as
specifically otherwise provided in the Credit Agreement, and assent to
extensions of time of payment or forbearance or other indulgence without
notice.

This Note is a note executed in amendment and restatement of that
certain Note from the undersigned to ________________________________ dated
February 26, 1996 in the face principal amount of $16,666,666.67.

IN WITNESS WHEREOF the undersigned has by its duly authorized officers,
executed this Note under seal as of the day and year first above written.

MERIDIAN INDUSTRIAL TRUST, INC.,
a Maryland corporation

By:___________________________[SEAL]
Title:

<PAGE>

EXHIBIT B

FORM OF REQUEST FOR LOAN

The First National Bank of Boston
700 N. Pearl, Suite 1840
Dallas, Texas 75201
Attn: Helen H. Delph, Vice President
(214) 871-7328 (FAX)

Texas Commerce Bank National Association
717 Travis, 7th Floor-South
Real Estate Department
Houston, Texas 77002
Attn: Catherine A. Arnold
(713) 216-2713 (FAX)

NationsBank of Texas, N.A.
Real Estate Banking Group
901 Main Street, 51st Plaza
Dallas, Texas 75202-3714
Attn: Julie Wallis
(214) 508-0085 (FAX)

Ladies and Gentlemen:

Pursuant to the provisions of Section 2.6 of the First Amended and
Restated Revolving Credit Agreement dated March __, 1996, as from time to
time in effect (the "Credit Agreement"), among Meridian Industrial Trust,
Inc. (the "Borrower"), The First National Bank of Boston, for itself and as
Agent and the other Banks from time to time party thereto, the Borrower
hereby requests and certifies as follows:

1. LOAN. The Borrower hereby requests a Loan under Section 2.1 of
the Credit Agreement:

Principal Amount: $_______________

Type (Eurodollar, Base Rate):

Drawdown Date: _______________ , 19___

Interest Period:

<PAGE>

by credit to the general account of the Borrower with the Agent at the
Agent's Head Office.
2. USE OF PROCEEDS. Such Loan shall be used for the following
purposes permitted by Section 7.11 of the Credit Agreement:

[Describe]

3. NO DEFAULT. The undersigned Authorized Officer of the Borrower
certifies that the Borrower is and will be in compliance with all covenants
under the Loan Documents after giving effect to the making of the Loan
requested hereby.

4. UNENCUMBERED OPERATING PROPERTIES. The undersigned Authorized
Officer of the Borrower certifies that the Borrower is and will be in
compliance with Section 9.4 of the Credit Agreement after giving effect to
the making of the Loan requested hereby. Attached hereto as SCHEDULE A is a
list of each of the Unencumbered Operating Properties, their location, the
year in which each property was built, the Gross Rentable Area in each such
property, the Asset Value of each such property, the average occupancy for
each of the Unencumbered Operating Properties for the last two (2) fiscal
quarters and the average occupancy for such period for all of the
Unencumbered Operating Properties, the Net Operating Income and Operating
Cash Flow for each of the Unencumbered Operating Properties, and calculations
evidencing the Borrower's compliance with Section 9.4.

5. REPRESENTATIONS TRUE. Each of the representations and warranties made
by or on behalf of the Borrower and its Subsidiaries and the Guarantor contained
in the Credit Agreement, in the other Loan Documents or in any document or
instrument delivered pursuant to or in connection with the Credit Agreement was
true as of the date as of which it was made and shall also be true at and as of
the Drawdown Date for the Loan requested hereby, with the same effect as if made
at and as of such Drawdown Date (except to the extent of changes resulting from
transactions contemplated or permitted by the Credit Agreement and the other
Loan Documents and changes occurring in the ordinary course of business that
singly or in the aggregate are not materially adverse, and except to the extent
that such representations and warranties relate expressly to an earlier date)
and no Default or Event of Default has occurred and is continuing.

6. OTHER CONDITIONS. All other conditions to the making of the Loan
requested hereby set forth in Section 11 of the Credit Agreement have been
satisfied.

7. DRAWDOWN DATE. Except to the extent, if any, specified by notice
actually received by the Agent prior to the Drawdown Date specified above, the
foregoing representations and warranties shall be deemed to have been made by
the Borrower on and as of such Drawdown Date.

8. DEFINITIONS. Terms defined in the Credit Agreement are used herein
with the meanings so defined.

<PAGE>

IN WITNESS WHEREOF, I have hereunto set my hand this _____ day of
_______________, 199__.

MERIDIAN INDUSTRIAL TRUST, INC.,
a Maryland corporation

By: ____________________________[SEAL]
Title: _____________________

The undersigned Authorized Officer of the Guarantor joins in the execution
hereof to certify that since the date of the last Compliance Certificate
delivered pursuant to the Credit Agreement, there have been no material
changes that could cause a Default or Event of Default to occur after giving
effect to the making of the Loan requested hereby.

___________________________________,
a __________________________________

By:_________________________________
Name:
Title:

[CORPORATE SEAL]

<PAGE>

EXHIBIT C

FORM OF LETTER OF CREDIT REQUEST

The First National Bank of Boston
700 N. Pearl, Suite 1840
Dallas, Texas 75201
Attn: Helen H. Delph, Vice President
(214) 871-7328 (FAX)

Texas Commerce Bank National Association
717 Travis, 7th Floor-South
Real Estate Department
Houston, Texas 77002
Attn: Catherine A. Arnold
(713) 216-2713 (FAX)

NationsBank of Texas, N.A.
Real Estate Banking Group
901 Main Street, 51st Plaza
Dallas, Texas 75202-3714
Attn: Julie Wallis
(214) 508-0085 (FAX)

Ladies and Gentlemen:

Pursuant to the provisions of Section 2.9 of the First Amended and
Restated Revolving Credit Agreement dated March ___, 1996, as from time to
time in effect (the "Credit Agreement"), among Meridian Industrial Trust,
Inc. (the "Borrower"), the First National Bank of Boston, for itself and as
Agent and the other Banks from time to time party thereto, the Borrower
hereby requests and certifies as follows:

1. LETTER OF CREDIT. The Borrower hereby requests a Letter of Credit to
be issued under Section 2.9 of the Credit Agreement:

Principal Amount: $

Beneficiary:

2. USE OF PROCEEDS. Such Letter of Credit shall be used for the
following purposes permitted by Section 2.9 and Section 7.11 of the Credit
Agreement:

<PAGE>

[Describe]
3. NO DEFAULT. The undersigned Authorized Officer of the Borrower
certifies that the Borrower is and will be in compliance with all covenants
under the Loan Documents after giving effect to the making of the Loan
requested hereby.

4. UNENCUMBERED OPERATING PROPERTIES. The undersigned Authorized
Officer of the Borrower certifies that the Borrower is and will be in
compliance with Section 9.4 of the Credit Agreement after giving effect to the
making of the Loan requested hereby. Attached hereto as SCHEDULE A is a list
of each of the Unencumbered Operating Properties, their location, the year in
which each property was built, the Gross Rentable Area in each such property,
the Asset Value of each such property, the average occupancy for each of the
Unencumbered Operating Properties for the last two (2) fiscal quarters and
the average occupancy for such period for all of the Unencumbered Operating
Properties, the Net Operating Income and Operating Cash Flow for each of the
Unencumbered Operating Properties, and calculations evidencing the Borrower's
compliance with Section 9.4.

5. REPRESENTATIONS TRUE. Each of the representations and warranties
made by or on behalf of the Borrower and its Subsidiaries and the Guarantor
contained in the Credit Agreement, in the other Loan Documents or in any
document or instrument delivered pursuant to or in connection with the Credit
Agreement was true as of the date as of which it was made and shall also be
true at and as of the Drawdown Date for the Loan requested hereby, with the
same effect as if made at and as of such Drawdown Date (except to the extent
of changes resulting from transactions contemplated or permitted by the
Credit Agreement and the other Loan Documents and changes occurring in the
ordinary course of business that singly or in the aggregate are not
materially adverse, and except to the extent that such representations and
warranties relate expressly to an earlier date) and no Default or Event of
Default has occurred and is continuing.

6. OTHER CONDITIONS. All other conditions to the making of the Loan
requested hereby set forth in Section 11 of the Credit Agreement have been
satisfied.

7. DRAWDOWN DATE. Except to the extent, if any, specified by notice
actually received by the Agent prior to the Drawdown Date specified above,
the foregoing representations and warranties shall be deemed to have been
made by the Borrower on and as of such Drawdown Date.

8. DEFINITIONS. Terms defined in the Credit Agreement are used herein
with the meanings so defined.

<PAGE>

IN WITNESS WHEREOF, I have hereunto set my hand this _____ day of
_______________, 199__.

MERIDIAN INDUSTRIAL TRUST, INC., a Maryland corporation

By: ________________________________[SEAL]
Title: ________________________________

___________________________________,
a _________________________________

By: _________________________________
Name:
Title:

[CORPORATE SEAL]

<PAGE>

EXHIBIT D

FORM OF
COMPLIANCE CERTIFICATE

The First National Bank of Boston,
for itself and as Agent
700 N. Pearl, Suite 1840
Dallas, Texas 75201
Attn: Helen H. Delph
(214) 871-7328 (FAX)

Texas Commerce Bank National Association
717 Travis, 7th Floor-South
Real Estate Department
Houston, Texas 77002
Attn: Catherine A. Arnold
(713) 216-7713 (FAX)

NationsBank of Texas, N.A.
Real Estate Banking Group
901 Main Street, 51st Plaza
Dallas, Texas 75202-3714
Attn: Julie Wallis
(214) 508-0085 (FAX)

Ladies and Gentlemen:

Reference is made to the First Amended and Restated Revolving Credit
Agreement dated March __, 1996 (the "Credit Agreement") by and among Meridian
Industrial Trust, Inc. (the "Borrower"), The First National Bank of Boston,
for itself and as Agent, and the other Banks from time to time party thereto.
Terms defined in the Credit Agreement and not otherwise defined herein are
used herein as defined in the Credit Agreement.

Pursuant to the Credit Agreement, the Borrower and the Guarantor are
furnishing to you herewith (or has most recently furnished to you) the
financial statements of the Borrower and its Subsidiaries and the Guarantor
for the fiscal period ended _______________, 199__ (the "Balance Sheet
Date"). Such financial statements have been prepared in accordance with
generally accepted accounting principles and present fairly the financial
position of the Borrower and its Subsidiaries and the Guarantor covered
thereby at the date thereof and the results of their operations for the
periods covered thereby, subject in the case of interim statements only to
normal year-end audit adjustments.

<PAGE>

This certificate is submitted in compliance with requirements of Section
7.4(e), Section 7.5(d) and Section 10.10 of the Credit Agreement. If this
certificate is provided under a provision other than Section 7.4(e), the
calculations provided below are made using the financial statements of the
Borrower and its Subsidiaries and the Guarantor as of the Balance Sheet Date
adjusted in the best good-faith estimate of the Borrower and the Guarantor to
give effect to the making of a Loan, extension of the Maturity Date,
acquisition or disposition of property or other event that occasions the
preparation of this certificate; and the nature of such event and the
Borrower's and the Guarantor's estimate of its effects are set forth in
reasonable detail in an attachment hereto. The undersigned officers of the
Borrower and the Guarantor are Authorized Officers of the Borrower and the
Guarantor .

The undersigned Authorized Officers have caused the provisions of the
Credit Agreement and the Guaranty to be reviewed and have no knowledge of any
Default or Event of Default. (Note: If the signer does have knowledge of any
Default or Event of Default, the form of certificate should be revised to
specify the Default or Event of Default, the nature thereof and the actions
taken, being taken or proposed to be taken by the Borrower and the Guarantor
with respect thereto.)

The Borrower and the Guarantor are providing the following information to
demonstrate compliance as of the date hereof with the following covenants (to
the extent the Certificate requests a ratio for the previous three quarters and
three quarters have not elapsed since the Closing Date, the Borrower should
specify only such ratios as are then available):

1. Section 7.5(d). TRANSFERS AND ENCUMBRANCES.

Describe sales, encumbrances, refinances
and other transfers referred to in Section 7.5(d).

2. Section 7.15. UNENCUMBERED OPERATING PROPERTIES.

A. Value of Industrial Properties

1. Total Asset Value of
Unencumbered Operating
Properties constituting
industrial properties $___________

2. Total Asset Value of all
Unencumbered Operating
Properties (after one-time
market adjustment of $______) $___________

<PAGE>

Ratio of A.1 to A.2 ___________%
(shall be at least 70%;
75% after the first anniversary
of the Closing Date)

Ratio for previous three
quarters
__________, __________, __________

B. Geographic Distribution

1. Attach schedules for each
metropolitan area showing
total Asset Value for each
such area $___________

2. Total Asset Value of
all Unencumbered Operating
Properties (after one-time
market adjustment) $___________

Ratio of B.1 to B.2 ___________%
(shall not exceed 20%;
30% for Memphis, Tenn.)

Ratio for previous three
quarters
__________, __________, ___________

C. Leases

1. Economic Leases

(a) Total Gross Rentable Area
of Unencumbered Operating
Properties subject to Leases
paying rent __________

(b) Total Gross Rentable Area
of Unencumbered Operating
Properties __________

Ratio of C.1(a) to C.1(b) _________%

<PAGE>

(shall be at least 85%)
Ratio for previous three quarters
__________, __________, ___________

2. All Leases

(a) Total Gross Rentable Area
of Unencumbered Operating
Properties subject to Leases
in which tenants are in occupancy __________

(b) Total Gross Rentable Area
of Unencumbered Operating
Properties __________

Ratio of C.2(a) to C.2(b) _________%
(shall be at least 77%)

Ratio for previous three quarters
__________, __________, __________

3. Tenants

(a) Total Gross Cash Receipts
generated by Unencumbered
Operating Properties $__________

(b) Does any single tenant
account for more than 7% of
C.3(a) (10% if S&P rating of
BBB- or better)? __________

List top five tenant with respect to
Gross Cash Receipts

3. Section 8.1(f). NON-RECOURSE INDEBTEDNESS.

A. Amount of Non-recourse Indebtedness
pursuant to Section 8.1(f) $____________

Amount may not exceed $20,000,000

<PAGE>

The amount for the previous
three quarters __________, __________, __________

4. Section 8.7. DISTRIBUTIONS.

A. Amount of Distributions for
Quarter most recently ended $____________

B. Funds from Operations for
Quarter most recently ended $____________

C. Cash Available for Distribution for
Quarter most recently ended $____________

D. Minimum Distributions required
to maintain REIT status of the
Borrower $___________

E. A is _______% of B

For the first quarter in which this
Compliance Certificate is submitted,
A may not exceed the greater of
(i) 95% of B or (ii) D; thereafter,
A may not exceed the greater of (i)
85% of B or (ii) D.

F. A is ____% of C

In 1996, A may not exceed the greater of
(a) 110% of C or (b) D; thereafter, A may
not exceed the greater of (a) 100% of C
or (b) D.

5. Section 9.1. LIABILITIES TO TANGIBLE NET WORTH RATIO.

A. Consolidated Total Liabilities
per balance sheet $____________

B. Consolidated Tangible Net Worth $____________

Ratio of A to B ____________

<PAGE>

Ratio of A to B may not exceed 0.75 to 1.

The ratio of A to B for the
previous three quarters __________, __________, __________

6. Section 9.2. DEBT COVERAGE.

A. Funds from Operations

Consolidated Net Income for
most recent quarter $____________

Plus depreciation and amortization $____________

Plus expensed interest $____________

Plus amortized portion of $____________
Initial Loan Fees

Subtotal for most recent quarter $___________

Funds from Operations
for three prior quarters:

Quarter ended __________ $___________

Total $___________

B. Debt Service for four prior
quarters

Principal Paid $___________

Interest Paid $___________

Total $___________

A divided by B (expressed as a percentage) __________%

<PAGE>

A must equal or exceed 250% of B.

Coverage for previous
three quarters __________, __________, __________

7. Section 9.3. FIXED CHARGE COVERAGE.
A. Cash Available for Distribution

Funds from Operations for
quarter ending ________ $__________

Minus Capital Improvement Reserve $__________
($0.15 x Total Gross Rentable Area)

Minus actual tenant improvements and
leasing commissions
(attach itemization) $__________

Plus expensed interest $__________

Subtotal for most recent quarter $__________

Cash Available for Distribution
for three prior quarters:

Quarter ended __________ $__________

Total $__________

B. Debt Service for four prior
quarters

Principal Paid $__________

Interest Paid $__________

Total $__________

<PAGE>

A divided by B (expressed as a percentage)
A must equal or exceed 175% of total of B.

8. Section 9.4. BORROWING BASE. (Attach separate
worksheet for
each Unencumbered Operating
Property)

A. Aggregate of all Borrowing Bases
(per attached worksheet) $__________

B. Total Outstanding principal
balance of Loans (after giving
effect to any Loan Request) and
Outstanding Letters of Credit $__________

B may not exceed A.

9. Section 9.5. TANGIBLE NET WORTH

Consolidated Tangible Net Worth

A. Consolidated Total Assets per
balance sheet $__________

One-time market adjustment $__________

Consolidated Total Assets after
one-time market adjustment $__________

Minus Consolidated Total
Liabilities per balance sheet $__________

Minus aggregate book value of
intangible assets $__________

Minus asset write-up amounts,
if any $__________

Total $__________

Consolidated Tangible Net Worth may not be less
than $155,000,000.00 plus the amount of any net
proceeds received from any Equity Offering subsequent

<PAGE>

to March 1, 1996.

10. REAL ESTATE ASSETS

A. Section 9.6(A). Partnerships/Joint Ventures

1. Total Asset Value of Borrower's
partnership and joint venture
interests (excluding Subsidiaries
that are 100% owned, directly or
indirectly by Borrower) $__________

2. Total Asset Value of all
Unencumbered Operating Properties
(after one-time market adjustment
of $____________) $__________

A.1 may not exceed 10% of A.2

B. Section 9.7(B). Land

1. Total Asset Value of Borrower's
non-income producing land assets $__________

2. Total Asset Value of all Unencumbered
Operating Properties (after one-time
market adjustment) $__________

B.1 may not exceed 3% of B.2

C. Section 8.9. Development

1. Total Asset Value of Borrower's
Real Estate under development $__________

2. Total Asset Value of all Unencumbered
Operating Properties (after one-time
market adjustment of $____________) $__________

C.1 may not exceed 10% of C.2

<PAGE>

IN WITNESS WHEREOF, we have hereunto set our hands this ___ day of
_______________________, 199__.

MERIDIAN INDUSTRIAL TRUST, INC., a Maryland corporation

By: ________________________________[SEAL]
Title: ________________________________

DFW NINE, A CALIFORNIA LIMITED PARTNERSHIP,
a California limited partnership

By:______________________________,
a California corporation

By:_______________________________
Title:_______________________________

[CORPORATE SEAL]

<PAGE>

BORROWING BASE WORKSHEET

Prepare spread sheet showing following information for all Unencumbered
Operating Properties:

A. Asset Value

1. Asset Value of Unencumbered
Operating Property

2. 50% of (1)

B. Net Operating Income

1. Gross Cash Receipts

(a) Gross Cash Receipts of
Unencumbered Operating
Property for quarter
ending ________
[Attach worksheet in form
and substance satisfactory
to the Agent]

(b) Gross Cash Receipts of
Unencumbered Operating
Property for prior quarters:

Quarter ended __________

Total Gross Cash Receipts

2. Operating Expenses

(a) Operating Expenses of Unencumbered
Operating Property for quarter
ending __________
<PAGE>

(b) Operating Expenses of Unencumbered
Operating Property for prior
quarters

Quarter ended ___________

3. Net Operating Income

(a) Total Gross Cash Receipts minus
Total Operating Expenses

(b) Capital Improvement Reserve of
$0.15 multiplied by Gross Rentable
Area of Unencumbered Operating
Property

Total Net Operating Income equals
3(a) minus 3(b)

4. Divide total on line 3 by 10.5%
if Initial Unencumbered Operating
Property or after acquired Unencumbered
Operating Property which does not
constitute a Qualifying Property (see 5)

5. Divide total on line 3 by 9.75% if
Qualifying Property

Test for Qualifying Property

(a) Age
(Must not exceed 12 years)

(b) Gross Rentable Area
(Must not be less than 50,000 s.f.)

2
<PAGE>
(d) Must meet 2 of the following 3
requirements

(1) s.f. of finished out air
conditioned office space
(Must not exceed 20% of
total Gross Rentable Area)

(2) ceiling clearance height
(must not be less than 22 feet)

(3) average Gross Rentable Area
covered by each Lease (must
not be less than 20,000 s.f.)

C. Debt Service Test

1. Gross Cash Receipts (See B.1. above)

2. Operating Expenses (See B.2 above)

3. Net Operating Income (See B.3 above)

4. Divide total on line 3 by 1.75

5. Divide total on line 4 by 12

6. Constant based on 10 year Treasury
Obligations (yield supplied by Agent)
+ 2.0% and 25 year mortgage style
amortization

7. Total on line 5 divided by constant
on line 6, which total is
multiplied by 12, equals Debt Service
Coverage Amount

D. Lesser of A, B and C is the Borrowing Base for
an Unencumbered Operating Property

3
<PAGE>

SCHEDULE 1

BANKS AND COMMITMENTS

NAME AND ADDRESS COMMITMENT COMMITMENT PERCENTAGE
- ---------------- ---------- ---------------------

The First National Bank of $25,000,000.00 33.333%
Boston
100 Federal Street
Boston, Massachusetts 02110
Attn.: Real Estate Division

Eurodollar Lending Office
Same as above

Texas Commerce Bank $25,000,000.00 33.333%
National Association
717 Travis, 7th Floor-South
Real Estate Department
Houston, Texas 77002
Attn.: Catherine A. Arnold,
Senior Vice President

Eurodollar Lending Office
Same as above

NationsBank of Texas, N.A. $25,000,000.00 33.333%
Real Estate Banking Group
901 Main Street, 51st Plaza
Dallas, Texas 75202-3714
Attn.: Julie Wallis

Eurodollar Lending Office
Same as above
______________
Total Commitment $75,000,000.00

Commitment Percentages may not equal 100% due to rounding.
<PAGE>

SCHEDULE 2

INITIAL UNENCUMBERED OPERATING PROPERTIES

NAME OWNER
- ------------------------- -------------------------

4000 Air Park Cove Guarantor
Airport Building #3 Guarantor
Airport Building #14 Guarantor
Airport Building #16A Guarantor
Airport Building #16B Guarantor
Airport Building #17 Guarantor
El Dorado/Roeser Borrower
Chatsworth Borrower
Scripps Ranch Borrower
Bedford Park Guarantor
Palisades I & II Guarantor
Northgate 4 & 5 Guarantor
Northgate 28 Guarantor
Las Colinas 4 & 5 Guarantor
Valley Branch I & II Guarantor
Beltline Guarantor
Great Southwest 4 Guarantor
Olive Branch (expansion) Borrower
1550 Heil Quaker Guarantor
1600 Corporate Place Guarantor
Hennessey Warehouse Guarantor
4013 Premier Guarantor
Live Oak Parkway Borrower
Park Ten Center Borrower
4030 Phoenix Plaza Borrower
Phoenix Deer Valley Borrower
Phoenix N. 23rd Borrower
Phoenix N. 27th Borrower
Phoenix Plaza One Borrower
Phoenix Plaza Two Borrower
Phoenix Plaza Three Borrower
Phoenix W. Weldon Borrower
Phoenix W. Fairmont Borrower
Cypress B Borrower
Moorpark Borrower
Golden Cove Borrower
Nancy Ridge Two Borrower
North Irvine Borrower
Regal Empress Guarantor
Las Colinas I Guarantor
San Carlos Borrower
Meridian Village Borrower

<PAGE>
SCHEDULE 3

ADJUSTED ASSET VALUE OF REAL ESTATE
<PAGE>

SUMMARY OF MARKET AND BOOK VALUES

<TABLE>
<CAPTION>
PRELIMINARY
MARKET BOOK
PROPERTY CITY STATE VALUE VALUE ADJUSTMENT % VAR
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
UNSECURED
Beltline Carrollton TX 1,938,673 1,617,016 321,657 16.6%
Great Southwest 4 Arlington TX 1,850,865 1,543,777 307,088 16.6%
Las Colinas 1 Irving TX 947,757 790,509 157,248 16.6%
Las Colinas 4 & 5 Irving TX 2,339,746 1,951,544 388,202 16.6%
Northgate 28 Dallas TX 1,115,582 930,489 185,093 16.6%
Northgate 4 & 5 Dallas TX 1,983,176 1,654,135 329,041 16.6%
Palisades I & II Plano TX 2,806,973 2,341,251 465,722 16.6%
Regal Empress Dallas TX 2,095,450 1,747,781 347,669 16.6%
Valley Branch I & II Farmers Branch TX 2,340,401 1,952,091 388,310 16.6%

Total Dallas 17,418,623 14,528,593 2,890,030 16.6%
---------------------------------------

Live Oak Parkway Norcross GA 4,165,000 3,473,959 691,041 16.6%
4000 Air Park Cove Memphis TN 1,886,000 1,573,082 312,918 16.6%
4013 Premier Memphis TN 2,071,000 1,727,388 343,612 16.6%
Airport Building #14 Memphis TN 2,907,000 2,616,048 290,952 10.0%
Airport Building #16A Memphis TN 1,541,797 1,387,483 154,314 10.0%
Airport Building #16B Memphis TN 493,000 443,657 49,343 10.0%
Airport Building #17 Memphis TN 2,281,325 2,052,994 228,331 10.0%
Airport Building #3 Memphis TN 1,120,000 1,007,903 112,097 10.0%
Olive Branch Olive Branch MS 8,500,000 6,700,000 1,800,000 21.2%
(expansion)
1550 Heil Quaker La Vergne TN 4,150,000 3,461,448 688,552 16.6%
1600 Corporate Place La Vergne TN 1,700,000 1,417,943 282,057 16.6%
Hennessy Warehouse La Vergne TN 1,680,000 1,401,261 278,739 16.6%

Total Mid South 32,495,122 27,263,166 5,231,956 16.1%
---------------------------------------

Bedford Park Bedford IL 3,615,000 3,015,213 599,787 16.6%

Total Midwest 3,615,000 3,015,213 599,787 16.6%
---------------------------------------

<PAGE>

<S> <C> <C> <C> <C> <C> <C>
Meridian Village Bellingham WA 7,500,000 6,255,629 1,244,371 16.6%
San Carlos San Carlos CA 9,264,879 7,727,686 1,537,193 16.6%

Total Northwest 16,764,879 13,983,315 2,781,564 16.6%
---------------------------------------
4030 Phoenix Plaza Phoenix AZ 156,328 130,391 25,937 16.6%
El Dorado/Roeser Phoenix AZ 2,476,525 2,228,658 247,867 10.0%
Park Ten Center Chandler AZ 1,209,888 1,009,148 200,740 16.6%
Phoenix Deer Valley Phoenix AZ 374,858 312,663 62,195 16.6%
Phoenix N. 23rd Phoenix AZ 677,240 564,875 112,365 16.6%
Phoenix N. 27th Phoenix AZ 1,006,540 839,539 167,001 16.6%
Phoenix Plaza One Phoenix AZ 918,000 765,689 152,311 16.6%
Phoenix Plaza Three Phoenix AZ 1,891,000 1,577,253 313,747 16.6%
Phoenix Plaza Two Phoenix AZ 1,168,000 974,210 193,790 16.6%
Phoenix W. Fairmont Phoenix AZ 250,000 208,521 41,479 16.6%
Phoenix W. Weldon Phoenix AZ 55,557 46,339 9,218 16.6%

Total Phoenix 10,183,936 8,657,286 1,526,650 15.0%
---------------------------------------
Chatsworth Chatsworth CA 3,000,000 2,502,252 497,748 16.6%
Cypress B Cypress CA 3,500,000 2,919,294 580,706 16.6%
Golden Cove Palos Verdes CA 5,291,216 4,761,635 529,581 10.0%
Moorpark Moorpark CA 5,064,813 4,224,479 840,334 16.6%
Nancy Ridge Two San Diego CA 328,595 274,076 54,519 16.6%
North Irvine Santa Ana CA 2,902,507 2,612,004 290,503 10.0%
Scripps Ranch San Diego CA 10,124,996 9,111,617 1,013,379 10.0%
---------------------------------------

Total Southern California 30,212,127 26,405,357 3,806,770 12.6%
---------------------------------------

Total Unsecured 110,689,687 93,852,930 16,836,757 15.2%
---------------------------------------

<PAGE>

<S> <C> <C> <C> <C> <C> <C>
PRUDENTIAL
Centreport 17 Fort Worth TX 2,147,569 1,791,253 356,316 16.6%
Great Southwest 110 Arlington TX 3,320,682 2,769,727 550,955 16.6%
Northgate International Garland TX 8,536,000 7,119,740 1,416,260 16.6%
Regal Row 201 Dallas TX 1,400,000 1,167,717 232,283 16.6%
Valwood 20 Farmers Branch TX 3,637,067 3,033,619 603,448 16.6%
Wildwood/Pioneer Irving TX 5,665,000 4,725,085 939,915 16.6%

Total Dallas 24,706,318 20,607,141 4,099,177 16.6%
---------------------------------------

Marietta Trade Ctr Marietta GA 22,242,000 18,551,694 3,690,306 16.6%
Birmingham I Birmingham AL 1,752,000 1,461,315 290,685 16.6%
Birmingham II Birmingham AL 1,620,000 1,351,216 268,784 16.6%
8215 Building Madison AL 639,000 532,980 106,020 16.6%
Progress I & II Huntsville AL 3,672,000 3,062,756 609,244 16.6%
Baxter Little Rock AR 1,500,000 1,251,126 248,874 16.6%
Port Distribution Little Rock AR 3,670,000 3,061,088 608,912 16.6%
Delp Distribution Memphis TN 8,100,000 6,756,080 1,343,920 16.6%
Olive Branch Olive Branch MS 11,520,000 9,608,647 1,911,353 16.6%
Willow Lake Memphis TN 4,661,000 3,887,665 773,335 16.6%

Total Mid South 59,376,000 49,524,567 9,851,433 16.6%
---------------------------------------

1000 Lunt Elk Grove IL 2,915,000 2,431,355 483,645 16.6%
1090 Pratt Elk Grove IL 737,000 614,720 122,280 16.6%
1100 Pratt Elk Grove IL 1,027,000 856,604 170,396 16.6%
1180 Pratt Elk Grove IL 633,000 527,975 105,025 16.6%
1201 Busse Elk Grove IL 469,000 391,185 77,815 16.6%
17025 Wallace South Holland IL 2,101,000 1,752,410 348,590 16.6%
17129 Wallace South Holland IL 1,974,000 1,646,482 327,518 16.6%
1815 Landmeier Elk Grove IL 2,039,000 1,700,697 338,303 16.6%
2375 Touhy Ave Elk Grove Village IL 1,339,000 1,116,838 222,162 16.6%

<PAGE>

<S> <C> <C> <C> <C> <C> <C>
3400 West Lake Glenview IL 3,031,000 2,528,108 502,892 16.6%
5101 W. 122nd Street Alsip IL 3,100,000 2,585,660 514,340 16.6%
700 Pratt Elk Grove IL 2,118,000 1,766,590 351,410 16.6%
801 Lunt Elk Grove IL 998,000 832,416 165,584 16.6%
900 Pratt Elk Grove IL 895,000 746,505 148,495 16.6%
Lombard I Lombard IL 6,369,000 5,312,280 1,056,720 16.6%
Pontiac Pontiac MI 3,057,000 2,549,794 507,206 16.6%
Troy Tech II Troy MI 7,804,000 6,509,191 1,294,809 16.6%

Total Midwest 40,606,000 33,868,810 6,737,190 16.6%
---------------------------------------

Park At Woodinville Woodinville WA 13,759,608 11,476,667 2,282,941 16.6%
Seatac Village Federal Way WA 10,700,000 8,924,698 1,775,302 16.6%

Total Northwest 24,459,608 20,401,365 4,058,243 16.6%
---------------------------------------

Cypress A Cypress CA 1,826,136 1,523,151 302,985 16.6%
Cypress C Cypress CA 1,897,734 1,582,869 314,865 16.6%
Valencia Valencia CA 5,854,526 4,883,166 971,360 16.6%

Total Southern California 9,578,396 7,989,186 1,589,210 16.6%
---------------------------------------

Total Prudential 158,726,322 132,391,069 26,335,253 16.6%
---------------------------------------

Total for All Assets 269,416,009 226,243,999 43,172,010 16.0%
---------------------------------------
---------------------------------------
</TABLE>

<PAGE>

SCHEDULE 6.3

TITLE TO PROPERTIES; LEASES

NONE.

<PAGE>

SCHEDULE 6.7

LITIGATION

NONE.

<PAGE>

SCHEDULE 6.19

SUBSIDIARIES OF THE BORROWER

THE BORROWER HAS A 100% OWNERSHIP INTEREST (DIRECTLY OR INDIRECTLY) IN THE
FOLLOWING ENTITIES:

1. DFW Nine, A California Limited Partnership, a California limited
partnership;

2. Progress Center/Alabama Limited Partnership, a California limited
partnership;

3. 6834 Limited Partnership, an Illinois limited partnership (to be
dissolved after consolidation);

4. IndTennCo Limited Partnership, a California limited partnership
(to be merged into (2) and dissolved after consolidation);

5. Metro- Sierra Limited Partnership, a California limited partnership
(to be merged into (2) and dissolved after consolidation);

6. Dallas Nine Corp., a Nevada corporation (to be merged into (8) after
consolidation);

7. Metroplex Co., a Nevada corporation (to be merged into (8) after
consolidation);

8. Metroplex Co., a California corporation (general partner of (1) after
consolidation);

9. 6834 Corporation, an Illinois corporation (general partner of (3); to
be dissolved after consolidation);

10. Mem-Ind Corporation, a Nevada corporation (general partner of (4); to
be dissolved after consolidation);

11. Texmet Corporation, a California corporation (general partner of (5);
to be dissolved after consolidation); and

12. Pro-Sierra Corporation, a California corporation (general partner
of (2)).

THE BORROWER'S OWNERSHIP IN THE FOLLOWING ENTITIES IS AS SHOWN:

1. Sierra Capital/Cherry Hill Associates, Ltd., a California limited
partnership (a dormant shell); 75% general partner interest;

2. Sierra Capital/Greentree Limited Partnership, a California limited
partnership (a dormant shell); 99% general partner interest;
and

3. Sierra Ridglea Associates, Ltd., a Texas limited partnership (a dormant
shell); Borrower - 70% limited partner interest; Guarantor - 5% general
partner interest.

<PAGE>

AMENDED AND RESTATED

LOAN ADMINISTRATION AGREEMENT

BETWEEN

THE PRUDENTIAL INSURANCE COMPANY OF AMERICA,

AS LENDER

AND

MERIDIAN INDUSTRIAL TRUST, INC.
INDTENNCO LIMITED PARTNERSHIP
METRO-SIERRA LIMITED PARTNERSHIP, AND
PROGRESS CENTER/ALABAMA LIMITED PARTNERSHIP

AS BORROWER

DATED AS OF FEBRUARY 23, 1996

(LOAN NOS. 6-100-886 AND 6-100-887)

LENDER'S RIGHT TO SELL THE NOTES HEREIN DESCRIBED
MAY BE SUBJECT TO BORROWER'S RIGHT OF
FIRST NEGOTIATION DESCRIBED IN SUBSECTION 2.4

<PAGE>

MERIDIAN INDUSTRIAL TRUST, INC.

LOAN ADMINISTRATION AGREEMENT

TABLE OF CONTENTS

(Not Part of Agreement)

Page

RECITALS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

Section 1. GENERAL DEFINITIONS . . . . . . . . . . . . . . . . . . . . 2
1.1 General Terms . . . . . . . . . . . . . . . . . . . . . . . 2
1.2 Other Terms . . . . . . . . . . . . . . . . . . . . . . . . 13

Section 2. INITIAL NOTES AND COLLATERAL DOCUMENTS;
MANDATORY PREPAYMENT . . . . . . . . . . . . . . . . . . . . 13
2.1 Notes and Collateral Documents Executed as
of the Effective Date . . . . . . . . . . . . . . . . . . . 13
2.2 Mandatory Prepayment . . . . . . . . . . . . . . . . . . . . 13
2.3 Assumption of Notes and Loan Documents . . . . . . . . . . . 13
2.4 Right of First Negotiation to Purchase Notes . . . . . . . . 14

Section 3. SECURITY POOL COVENANTS . . . . . . . . . . . . . . . . . . 15
3.1 Covenants . . . . . . . . . . . . . . . . . . . . . . . . . 15
3.2 Delivery of Reports and Information . . . . . . . . . . . . 16
3.3 Determination of Appraised Value . . . . . . . . . . . . . . 17
3.4 Determination of Net Operating Income . . . . . . . . . . . 18

Section 4. EXCHANGE RIGHTS AND SUBSTITUTION RIGHTS IN
THE SECURITY POOL . . . . . . . . . . . . . . . . . . . . . 18
4.1 Lien Releases and Increases in the Letter of
Credit . . . . . . . . . . . . . . . . . . . . . . . . . . 18
4.2 Facilities Added to the Security Pool
and Reductions in the Letter of Credit . . . . . . . . . . . 20
4.3 Facilities Substituted into the Security Pool . . . . . . . 21
4.4 Requirements for all Properties Added to the Security Pool . 22
4.5 Letter of Credit . . . . . . . . . . . . . . . . . . . . . . 24

<PAGE>

Section 5. RELEASE OF FACILITIES FROM THE SECURITY POOL . . . . . . . . 24
5.1 Lien Releases . . . . . . . . . . . . . . . . . . . . . . . 24
5.2 Lien Releases Applicable to Tenant's
Exercise of Purchase Options in their Leases . . . . . . . . 26
5.3 Material Damage or Destruction . . . . . . . . . . . . . . . 26
5.4 Meridian Village Lien Release . . . . . . . . . . . . . . . 27

Section 6. REPRESENTATIONS AND WARRANTIES . . . . . . . . . . . . . . . 28
6.1 Reaffirmation of Warranties and
Representations; Survival of Warranties and
Representations. . . . . . . . . . . . . . . . . . . . . . . 28
6.2 Ownership of Metro-Sierra, Progress Center
and IndTennCo . . . . . . . . . . . . . . . . . . . . . . . 28
6.3 Mutual Benefits . . . . . . . . . . . . . . . . . . . . . . 28
6.4 Qualification as a REIT; Publicly Traded
Company . . . . . . . . . . . . . . . . . . . . . . . . . . 29
6.5 ERISA . . . . . . . . . . . . . . . . . . . . . . . . . . . 29

Section 7. LEASING AND AGREEMENTS . . . . . . . . . . . . . . . . . . . 31
7.1 Leasing . . . . . . . . . . . . . . . . . . . . . . . . . . 31
7.2 Non-Disturbance Agreements . . . . . . . . . . . . . . . . . 33
7.3 Smith's Purchase Option . . . . . . . . . . . . . . . . . . 34

Section 8. CASUALTIES AND CONDEMNATION . . . . . . . . . . . . . . . . 35
8.1 Insurance Proceeds . . . . . . . . . . . . . . . . . . . . . 35
8.2 Additional Provisions Relating to
Condemnation . . . . . . . . . . . . . . . . . . . . . . . . 39

Section 9. EVENT OF DEFAULT . . . . . . . . . . . . . . . . . . . . . . 39
9.1 Definition . . . . . . . . . . . . . . . . . . . . . . . . 39
9.2 Bankruptcy . . . . . . . . . . . . . . . . . . . . . . . . 41
9.3 Acceleration . . . . . . . . . . . . . . . . . . . . . . . 42
9.4 Definition of Materiality in Certain Circumstances . . . . 43

Section 10 LIMITATION ON PERSONAL LIABILITY . . . . . . . . . . . . . 43
10.1 Limited Recourse . . . . . . . . . . . . . . . . . . . . . 43
10.2 Limitations on Non-Recourse . . . . . . . . . . . . . . . . 43
10.3 Further Limitation. . . . . . . . . . . . . . . . . . . . . 45

Section 11. WAIVERS . . . . . . . . . . . . . . . . . . . . . . . . . . 45

ii
<PAGE>

11.1 Waiver of Subrogation and Contribution . . . . . . . . . . . 45
11.2 Obligations Independent; Waivers . . . . . . . . . . . . . . 47
11.3 Independent Access to Financial Information . . . . . . . . 49
11.4 Multiple Obligations . . . . . . . . . . . . . . . . . . . . 50
11.5 Application of Foreclosure Proceeds . . . . . . . . . . . . 50

Section 12. MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . 50
12.1 Amendments and Waivers . . . . . . . . . . . . . . . . . . . 50
12.2 Independence of Covenants . . . . . . . . . . . . . . . . . 51
12.3 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . 51
12.4 Survival of Warranties and Certain
Agreements . . . . . . . . . . . . . . . . . . . . . . . . . 51
12.5 Failure or Indulgence Not Waiver; Remedies
Cumulative . . . . . . . . . . . . . . . . . . . . . . . . . 51
12.6 Severability . . . . . . . . . . . . . . . . . . . . . . . . 52
12.7 Headings . . . . . . . . . . . . . . . . . . . . . . . . . . 52
12.8 Applicable Law . . . . . . . . . . . . . . . . . . . . . . . 52
12.9 Successors and Assigns; Subsequent Holders
of Notes . . . . . . . . . . . . . . . . . . . . . . . . . . 52
12.10 Consent to Jurisdiction and Service of
Process; Waiver of Jury Trial . . . . . . . . . . . . . . . 53
12.11 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . 53
12.12 Exhibits and Schedules . . . . . . . . . . . . . . . . . . . 54

Exhibit A . . . . . . . . . . . . . . . . . . . . Appraised Value
Exhibit B . . . . . . . . . . . . . . . . . Compliance Certificate
Exhibit C . . . . . . . . . . . . . . . . . Initial Security Pool
Exhibit D . . . . . . . . . . . . . . . . . . Collateral Documents
Exhibit E . . . . . . . . . . . . . . . .Notice of Deemed Approval
Exhibit F . . . . . . . . . . . . Approved Consolidation Documents

iii

<PAGE>

Exhibit 10.17

MERIDIAN INDUSTRIAL TRUST, INC.

AMENDED AND RESTATED LOAN ADMINISTRATION AGREEMENT

THIS AMENDED AND RESTATED LOAN ADMINISTRATION AGREEMENT (this
"Agreement") is made as of the 23rd day of February, 1996 (the "Effective
Date") by and among MERIDIAN INDUSTRIAL TRUST, INC., a Maryland corporation,
METRO-SIERRA LIMITED PARTNERSHIP, a California limited partnership, PROGRESS
CENTER/ALABAMA LIMITED PARTNERSHIP, a California limited partnership, and
INDTENNCO LIMITED PARTNERSHIP, a California limited partnership
(collectively, "Borrower") in favor of THE PRUDENTIAL INSURANCE COMPANY OF
AMERICA, a New Jersey corporation ("Lender").

RECITALS

A. Meridian Point Realty Trust VII Co., a Missouri corporation ("Trust
VII"), and its Affiliates Metro-Sierra Limited Partnership, a California
limited partnership ("Metro-Sierra") and Progress Center/Alabama Limited
Partnership, a California limited partnership ("Progress Center") and Lender
entered into a Loan Administration Agreement dated as of May 31, 1995, as
amended from time to time (the "Trust VII Loan Agreement"), whereby Lender
agreed to lend to Trust VII $41.0 million (the "Trust VII Loan").

B. Meridian Point Realty Trust VI Co., a Missouri corporation ("Trust
VI"), and its Affiliate IndTennCo Limited Partnership, a California limited
partnership and Lender entered into a Loan Administration Agreement dated as
of May 31, 1995, as amended from time to time (the "Trust VI Loan
Agreement"), whereby Lender agreed to lend to Trust VI $25.1 million (the
"Trust VI Loan", and collectively with the Trust VII Loan, the "Loan").

C. As provided in the Merger Agreement, Trust VI, Trust VII and other
applicable parties have merged into Meridian Industrial Trust, Inc. ("MIT").
This Agreement amends and restates and consolidates the Trust VI Loan

<PAGE>

Agreement and the Trust VII Loan Agreement as result of such merger.

D. The Loan is evidenced in part by fifteen (15) promissory notes in
the initial aggregate principal amount of $66.1 million (collectively the
"Notes").

E. The Notes are secured by, among other things, certain first priority
and second priority Deeds of Trust and Mortgages, as applicable, each as
hereinafter defined, for the benefit of Lender. The properties encumbered by
the Deeds of Trusts or Mortgages are referred to herein as the "Security
Pool".

F. Borrower has requested that it have certain rights to sell
properties in the Security Pool for the two (2) year period following the
Effective Date and, in exchange for Lender releasing its lien on such
property, provide Lender with a letter of credit in an amount equal to the
net sales proceeds resulting from such sale. MIT thereafter desires certain
rights during such two (2) year period to acquire replacement properties, to
include such properties in the Security Pool and to reduce the letter of
credit in an amount equal to the acquisition price of such properties.

G. In addition to the acquisition of replacement properties, MIT has
requested that it have certain rights to substitute properties it hereafter
acquires into the Security Pool for the two (2) year period following the
Effective Date in consideration of Lender releasing its lien on one or more
properties then in the Security Pool.

H. Borrower and Lender desire to provide for the administration of the
Loan in respect of the matters set forth above and in respect of certain
other matters all as set forth in this Agreement.

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

1. GENERAL DEFINITIONS

<PAGE>

1.1 GENERAL TERMS.

In addition to other capitalized terms defined herein, when used
herein the following terms shall have the following meanings:

"AFFILIATE", as applied to any Person, means any other Person
directly or indirectly controlling, controlled by, or under common control
with, that Person. For the purposes of this definition, "control"
(including, with correlative meanings, the terms "controlling", "controlled
by" and "under common control with"), as applied to any Person, means the
possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of that Person, whether through the
ownership of voting securities or by contract or otherwise.

"AGREEMENT" means this Amended and Restated Loan Administration
Agreement dated as of February 23, 1996, as it may be amended, supplemented
or otherwise modified from time to time.

"ALTA/ACSM SURVEY" means with respect to a Facility an ALTA/ACSM
Land Title Survey prepared for and certified to Lender by a registered land
surveyor approved by Lender. The ALTA/ACSM Survey shall comply with the
survey requirements set forth in the Term Sheet, as such requirements may be
amended, modified or supplemented by Lender from time to time.

"ANNUAL FINANCIALS" means audited consolidated and consolidating
annual financial statements for Borrower and its Subsidiaries for the
immediately preceding calendar year, audited by certified public accountants
approved by Lender, in form and substance satisfactory to Lender, showing all
elements of income and expenses for Borrower.

"APPRAISAL INFORMATION" means, with respect to any Facility, a
ten-year projected discounted cash flow analysis for such Facility, with
assumptions, copies of any internal or external appraisals prepared by or on
behalf of or delivered to Borrower during the preceding year, the then
current Rent Roll, revenue and expense budgets for the then

<PAGE>

current calendar year, projected revenue and expense budgets for such
Facility for the next succeeding calendar year and such additional
information as Lender may request.

"APPRAISED VALUE" means, with respect to any Facility, the estimated
fair market value of such Facility as determined by Lender in its sole
discretion and, with respect to all of the Facilities, the aggregate of
values plus the amount of the Letter of Credit and the Damage Letter of
Credit, subject to SECTION 3.3 hereof. Appraised Value of a Facility shall
also include any Net Proceeds held by Lender with respect to such Facility.
For purposes of this Agreement, Lender has determined that the Appraised
Value of the Facilities as of the Closing Date is as set forth on EXHIBIT A
attached hereto and such determination will not be changed prior to March 31,
1996.

"ASBESTOS BULK SURVEY" means, with respect to a Facility, a survey,
if requested by Lender, by an asbestos consultant approved by Lender to
determine the presence of asbestos containing materials. Any Asbestos Bulk
Survey shall comply with the Asbestos Bulk Survey Scope of Work Guidelines
attached to the Term Sheet, as the same may be amended, modified or
supplemented by Lender from time to time.

"ASSIGNMENT OF AGREEMENTS" means an assignment of agreements
executed and delivered by Borrower in connection with a Facility, modified by
Lender to reflect the laws of the state where the Facility is located and
otherwise as Lender deems necessary or appropriate in its sole discretion, as
amended, supplemented, restated, or otherwise modified from time to time in
accordance with the provisions hereof or thereof.

"ASSIGNMENT OF LESSOR'S INTEREST IN LEASES" means an assignment of
lessor's interest in leases executed and delivered by Borrower in connection
with a Facility, modified by Lender to reflect the laws of the state where
the Facility is located and otherwise as Lender deems necessary or
appropriate in its sole discretion, as amended, supplemented, restated, or
otherwise modified from time to time in accordance with the provisions hereof
or thereof.

<PAGE>

"BANKRUPTCY CODE" means Title 11 of the United States Code entitled
"Bankruptcy", as now and hereafter in effect, or any successor statute.

"BORROWER" means collectively and where the context requires,
individually, Meridian Industrial Trust, Inc., a Maryland corporation, and
its Subsidiaries Metro-Sierra Limited Partnership, a California limited
partnership, Progress Center/Alabama Limited Partnership, a California
limited partnership, IndTennCo, a California limited partnership.

"CLOSING" or "CLOSING DATE" means May 31, 1995.

"COLLATERAL DOCUMENTS" means, collectively, the Deeds of Trust, the
Mortgages, the Assignments of Lessor's Interest in Leases, the Assignments of
Agreements, the Financing Statements and all other instruments or documents
now or hereafter granting Liens on property of Borrower or any of its
Subsidiaries for the benefit of Lender.

"COMPLIANCE CERTIFICATE" means a certificate in substantially the
form of EXHIBIT B attached hereto, satisfactory to Lender and delivered by
Borrower to Lender pursuant to this Agreement.

"CRE DEBT" means the existing loan from Citicorp Real Estate, Inc.
to Borrower, in the approximate outstanding principal amount of $4.5 million,
which loan is secured in part by a first mortgage lien on Marietta Trade
Center.

"DEBT SERVICE" means the interest payments on the Loan for the
applicable period.

"DEEDS OF TRUST" means the two (2) deeds of trust, security
agreement, and fixture filing with assignment of rents, executed and
delivered by Borrower, as "Trustor" to the benefit of Lender as "Beneficiary"
(and the two (2) Deeds to Secure Debt encumbering the Marietta Trade Center)
for each Facility, as applicable, modified to reflect the laws of the state
where the Facility is located and otherwise in a form satisfactory to Lender
and as amended,

<PAGE>

supplemented, restated, or otherwise modified from time to time in accordance
with the provisions hereof or thereof.

"DUE DILIGENCE DOCUMENTS" means the following: (i) Asbestos Bulk
Survey, (ii) Environmental Site Assessment, (iii) Environmental
Questionnaire, (iv) Estoppel Certificates, (v) ALTA/ACSM Survey, (vi)
Engineering Report, (vii) Land Use Certificate, (viii) Rent Roll, (ix)
Inventory of Personal Property, (x) preliminary title report together with
copies of all underlying exceptions, (xi) three (3) years of operating
statements, (xii) site plan, (xiii) the terms of the proposed purchase,
including copies of any signed letters of intent or agreements of purchase
and sale, (xiv) an appraisal of the property prepared by a member of the
Appraisal Institute (MAI), if available, (xv) leases and, if available, lease
abstracts, (xvi) a ten-year discounted cash flow model with assumptions,
(xvii) evidence that the property is a modern industrial warehouse located in
a major market in the continental United States, (xviii) evidence that the
Acquisition Committee of the Board of Directors of Borrower has approved the
property for acquisition, and (xix) such other documents, information and
certificates as Lender may require.

"EFFECTIVE DATE" means the date of this Agreement.

"ENGINEERING REPORT" means a comprehensive structural evaluation of
a Facility prepared by a third party engineer approved by Lender. Any
Engineering Report shall comply with the Guidelines for Engineering Report
attached to the Term Sheet, as the same may be amended, modified or
supplemented by Lender from time to time.

"ENVIRONMENTAL QUESTIONNAIRE" means with respect to a Facility an
Environmental Questionnaire prepared by Borrower in the form attached to the
Term Sheet, as the same may be amended, modified or supplemented by Lender
from time to time.

"ENVIRONMENTAL SITE ASSESSMENT" means with respect to a Facility an
assessment by an environmental consultant approved by Lender to determine the
presence of hazardous material and/or wastes. Any Environmental Site
Assessment shall comply with the Environmental Site Assessment Scope of Work
Guidelines attached to the Term Sheet, as the same may

<PAGE>

be amended, modified or supplemented by Lender from time to time.

"ESTOPPEL CERTIFICATE" means with respect to a Facility a duly
executed Estoppel Certificate by the applicable tenants substantially in the
form previously delivered by Lender to Borrower for execution by tenants at
the Facilities, as the same may be amended, modified or supplemented by
Lender from time to time.

"EVENT OF DEFAULT" has the meaning ascribed to such term in
SUBSECTION 9.1.

"FACILITIES" means any and all real property, (including, without
limitation, all buildings, fixtures or other improvements located thereon)
now or hereafter included in the Security Pool.

"FINANCING STATEMENTS" means, with respect to a Facility, a UCC-1
Financing Statement executed and delivered by each Borrower, as amended,
supplemented, restated, or otherwise modified from time to time in accordance
with the provisions hereof or thereof.

"FISCAL QUARTER" means the three (3) month periods ending March 31,
June 30, September 30, and December 31 for any applicable year.

"FRAUDULENT CONVEYANCE INDEMNITY AGREEMENT" means the Fraudulent
Conveyance Indemnity Agreement executed by Borrower in favor of Lender of
even date herewith.

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

"HAZARDOUS SUBSTANCES AGREEMENTS" means the Hazardous Substances
Remediation and Indemnification

<PAGE>

Agreements executed and delivered by Borrower to Lender for each Facility in
a form satisfactory to Lender and as amended, supplemented, restated, or
otherwise modified from time to time in accordance with the provisions hereof
or thereof.

"INDEBTEDNESS" means the principal of and all other amounts,
payments and premiums due under the Notes, and all other indebtedness of
Borrower to Lender and additional advances under, evidenced by and/or secured
by the Loan Documents, plus interest on all such amounts.

"INTERNAL REVENUE CODE" means the Internal Revenue Code of 1986, as
amended to the date hereof and from time to time hereafter.

"INVENTORY OF PERSONAL PROPERTY" means a detailed inventory of
Borrower's Personal Property at or used in connection with a Facility, in
form and substance acceptable to Lender. Such inventory shall include a
detailed description, including make, model and serial numbers where
applicable, of all furniture, furnishings, fixtures and equipment necessary
for the operation of the Facility.

"LAND USE CERTIFICATE" means with respect to a Facility a Land Use
Certificate prepared by Borrower substantially in the form required by Lender
at Closing, as the same may be amended, modified or supplemented by Lender
from time to time.

"LAWS AND RESTRICTIONS" means all federal, state, regional, county,
local and other laws, regulations, orders, codes, ordinances, rules, statutes
and policies, restrictive covenants and other title encumbrances, permits and
approvals relating to the development, occupancy, ownership, management, use,
and/or operation of the applicable Facility, or otherwise affecting all or
any part of the applicable Facility, or applicable to Borrower.

"LEASE" means any and all leasehold interests, including subleases
and tenancies following attornment, now or hereafter covering any part of a
Facility.

<PAGE>

"LETTER OF CREDIT" means one or more irrevocable letters of credit
in favor of Lender issued by Wells Fargo Bank, N.A., or such other banking
institution approved by Lender from time to time, with an initial expiry date
no earlier than June 30, 1998. The Letter of Credit shall secure Borrower's
obligations under the Loan Documents and the Hazardous Substances Agreements.

"LENDER" means The Prudential Insurance Company of America, a New
Jersey corporation, and its successors and assigns.

"LIEN" means any mortgage, deed of trust, pledge security interest,
encumbrance, lien or charge of any kind (including any agreement to give any
of the foregoing, any conditional sale or other title retention agreement,
any financing lease in the nature thereof, and the filing of or agreement to
give any financing statement under the Uniform Commercial Code of any
jurisdiction.

"LOAN" has the meaning ascribed to such term in Recital B, which
Loan is evidenced by the Notes, as the same may be amended, supplemented or
restated from time to time.

"LOAN DOCUMENTS" means this Agreement, the Notes, the Collateral
Documents and any other document or certificate executed and delivered by
Borrower to Lender in connection with the transactions contemplated by this
Agreement, with the exception of the Hazardous Substances Agreements.

"LOAN TO APPRAISAL RATIO" means, as of any date of determination,
the ratio, expressed as a percentage, of the outstanding principal balance of
the Loan as of such date to the most recent Appraised Value of the
Facilities.

"MARIETTA TRADE CENTER" means the Facility owned by Borrower and
located at U.S. Highway 41 and Roswell Road in Marietta, Georgia.

"MATURITY DATE" means the tenth anniversary of the Effective Date.

<PAGE>

"MERGER AGREEMENT" means the Agreement and Plan of Merger by and
among Trust VI, Trust VII, MIT and Meridian Point Realty Trust IV Co., dated
May 31, 1995, setting forth the terms and conditions of the Merger
Transaction.

"MERGER TRANSACTION" means the merger by and among Trust VI, Trust
VII and other applicable parties into MIT as described in the Merger
Agreement.

"MERIDIAN VILLAGE" means the Facility owned by Borrower and located
at Guide Meridian and Telegraph Road in Bellingham, Washington.

"MORTGAGES" means the two (2) mortgages, security agreement, and
fixture filing with assignment of rents, executed and delivered by Borrower
as "Mortgagor" to the benefit of Lender as "Mortgagee", for each Facility, as
applicable, modified to reflect the laws of the state where the Facility is
located and otherwise in a form satisfactory to Lender and as amended,
supplemented, restated, or otherwise modified from time to time in accordance
with the provisions hereof or thereof.

"NET OPERATING INCOME" means, for any four (4) Fiscal Quarter
period, the gross annual income realized from operations of the Facilities in
such period, subtracting therefrom all necessary and ordinary operating
expenses for such calendar year, including, but not limited to, utilities,
administrative, cleaning, landscaping, security, repairs and maintenance,
management fees, real estate and other taxes, assessments and insurance, but
excluding therefrom, deductions for federal, state and other income taxes,
debt service expense, depreciation or amortization of capital expenditures
(including, but not limited to, tenant improvement allowances and leasing
commissions) and other similar non-cash items (all as determined in
accordance with GAAP). Upon Lender's request, Borrower shall provide Lender
with such calculations and supporting worksheets and schedules, in reasonable
detail, to support Borrower's calculation of Net Operating Income. Net
Operating Income shall include rental abatement insurance proceeds actually
received by Borrower applicable to a Facility, apportioned for the period of
the loss covered.

<PAGE>

"NET PROCEEDS" has the meaning ascribed to such term in SUBSECTION
8.1C.

"NET SALES PROCEEDS" means the proceeds (whether in the form of
cash or seller financing) realized from the sale of each of the Facilities
initially included in the Security Pool, less (i) all ordinary and reasonable
marketing and selling expenses paid to third parties; (ii) any repayment of
all or a portion of the then outstanding principal balance of the CRE Debt
(including prepayments of the CRE Debt from the proceeds of a sale of other
than Marietta Trade Center); and (iii) any repayment elected by Borrower of
all or any portion of one or more of the Notes, together with any applicable
Prepayment Premium.

"NOTES" has the meaning ascribed to such term in Recital B, and
consists of the fifteen (15) promissory notes of Borrower issued and
outstanding as of the Effective Date, as follows: (i) Promissory Note
(Alabama) in the original principal amount of $1,318,000, (ii) Promissory
Note (Mississippi) in the original principal amount of $4,269,000, (iii)
Promissory Note (Tennessee) in the original principal amount of $1,471,000,
(iv) Promissory Note (Texas) in the original principal amount of $397,000,
(v) Promissory Note (Washington) in the original principal amount of
$7,211,000, (vi) Promissory Note (Illinois) in the original principal amount
of $10,434,000, (vii) Promissory Note (Alabama) in the original principal
amount of $1,976,000, (viii) Promissory Note (Arkansas) in the original
principal amount of $2,491,000, (ix) Promissory Note (California) in the
original principal amount of $3,689,000, (x) Promissory Note (Georgia) in the
original principal amount of $5,030,000, (xi) Promissory Note (Michigan) in
the original principal amount of $4,359,000, (xii) Promissory Note (Nevada)
in the original principal amount of $4,886,000, (xiii) Promissory Note
(Tennessee) in the original principal amount of $3,162,000, (xiv) Promissory
Note (Texas) in the original principal amount of $10,377,000, and (xv)
Promissory Note (Washington) in the original principal amount of $5,030,000,
as each may be amended, amended and restated, supplemented or otherwise
modified from time to time.
11
<PAGE>

"OBLIGATIONS" means all monetary and non-monetary obligations of
every nature of Borrower from time to time to be performed by Borrower under
any of the Loan Documents and the Hazardous Substances Agreements, whether
for principal, interest, fees, expenses, indemnification or otherwise.

"PARADISE MARKETPLACE" means the Facility owned by Borrower and
located at 3830 East Flamingo Road in Las Vegas, Nevada.

"PERSON" means and includes natural persons, corporations, limited
partnerships, general partnerships, joint stock companies, limited liability
companies, joint ventures, associations, companies, trusts, banks, trust
companies, land trusts, business trusts, REITs or other organizations,
whether or not legal entities, and governments and agencies and political
subdivisions thereof.

"POTENTIAL EVENT OF DEFAULT" means a condition or event that, after
notice or lapse of time or both, would constitute an Event of Default;
provided no Potential Event of Default shall be deemed to have occurred prior
to Lender giving Borrower notice thereof if required by any applicable Loan
Document.

"PREPAYMENT PREMIUM" means the payment owed by Borrower to Lender in
connection with the prepayment of the Loan, calculated in accordance with
each Note.

"PROCESSING FEE" means a non-refundable fee of Ten Thousand Dollars
($10,000).

"PROJECTED ANNUAL RENTAL INCOME" means the projected annual gross
rental income generated by the Facilities then in the Security Pool for the
then-current calendar year (as determined by Lender in its sole discretion
with reference to the then-current Rent Roll and with reasonable rollover and
re-tenanting assumptions), including, but not limited to, CAM (common area
maintenance) charges collected from tenants, operating expense reimbursements
and imputed interest on the Letter of Credit.

"PROJECTED DEBT SERVICE" means the projected interest payment on the
Loan for the immediately following
12
<PAGE>

calendar year, assuming no reduction in the principal balance of the Loan, as
determined by Lender in its sole discretion.

"PROJECTED NET OPERATING INCOME" means, for the applicable calendar
year, the Projected Annual Rental Income in such calendar year, subtracting
therefrom all necessary and ordinary operating expenses for such calendar
year, including, but not limited to, utilities, administrative, cleaning,
landscaping, security, repairs and maintenance, management fees, real estate
and other taxes, assessments and insurance, but excluding therefrom,
deductions for federal, state and other income taxes, debt service expense,
depreciation or amortization of capital expenditures and other similar
non-cash items (all as determined by Lender in its sole discretion). Gross
income shall be determined in a manner consistent with GAAP. Projected Net
Operating Income may include remaining rental abatement insurance proceeds
for casualty events having already occurred.

"PROPOSED FACILITY" means a property that Borrower is proposing to
add to the Security Pool in accordance with the terms of SECTION 4 hereof.

"PROPOSED FACILITY CLOSING DOCUMENTS" means the Deeds of Trust or
Mortgages, as applicable, the Assignment of Agreements, the Assignment of
Lessor's Interest in Leases, the Financing Statement, the Hazardous
Substances Agreements, and all other instruments or documents now or
hereafter granting liens on the Proposed Facility for the benefit of Lender.
Each such document shall be substantially in the form delivered by Borrower
at Closing, modified to reflect the laws of the state where the Facility is
located and otherwise in form satisfactory to Lender. Proposed Facility
Closing Documents shall also include such endorsements to the existing Title
Policies or new Title Policies referencing the Proposed Facility as Lender
shall require in its sole discretion and legal opinions of counsel acceptable
to Lender opining on the due authorization, execution, delivery,
enforceability and such other matters as Lender shall require with respect to
the Proposed Facility Closing Documents and any other documents or agreements
executed by Borrower in connection therewith.
13
<PAGE>

"QUARTERLY FINANCIALS" means consolidated and consolidating
quarterly financial statements for Borrower and its Subsidiaries for the
immediately preceding Fiscal Quarter, prepared in accordance with GAAP and
certified by the chief financial officer of Borrower, in form and substance
satisfactory to Lender, showing all elements of income and expenses for
Borrower.

"REIT" means real estate investment trust, as defined under
paragraph 856 of the Internal Revenue Code.

"RENT ROLL" means a certificate signed in the name of Borrower by
its president or one of its Vice Presidents setting forth a comprehensive
list of the Facilities and each of the leases pertaining thereto and
containing the following information: (i) each tenant's name and location,
(ii) the net rentable square footage covered by each lease, (iii) the annual
rental rate per square foot per tenant, (iv) the aggregate annual base rent
per tenant and for the Facilities, (v) all items of additional rent, (vi) the
term and the commencement and expiration dates of each lease and any
termination options, (vii) any option(s) to renew and/or any option(s) to
terminate granted to any tenant, (viii) the security deposit held for each
lease, (ix) any free rent, moving allowances or other tenant concessions
granted to any tenant and any obligations of such tenant assumed by Borrower,
(x) the tenant's reimbursement obligation for operating expenses (triple net,
modified gross, etc.) and (xi) any right of first refusal or any right or
option to purchase all or any portion of the Facilities granted thereunder.
The Rent Roll shall also include certified copies of all leases at the
Facility or Proposed Facility, as applicable, which have not previously been
certified to Lender.

"RELEASE PRICE" means with respect to a Facility, the product
obtained by multiplying one hundred twenty-five percent (125%) by the product
of (A) a fraction, the numerator of which is the outstanding principal
balance of the Loan and the denominator of which is the Appraised Value of
the all the Facilities, based on the most recent Appraised Values, multiplied
by (B) the Appraised Value of the Facility. For example, if the current
outstanding principal balance of the Loan was $40 million and the
14
<PAGE>

Appraised Value of the Facilities was $100 million, then the Release Price
for a Facility with an Appraised Value of $5 million would be $2.5 million
(125% X [40/100 X $5 million]).

"SECURITY POOL" means, collectively, each Facility on which Lender
has a Lien as security for the Loan, as the same may change from time to time
in accordance with the terms and conditions hereof. The Facilities in the
Security Pool as of the date hereof are set forth on EXHIBIT C attached
hereto.

"SECURITY POOL COVENANTS" has the meaning ascribed to such term in
SUBSECTION 3.1.

"SUBSIDIARY" means, with respect to any Person, any corporation,
partnership, association, joint venture or other business entity of which
more than 50% of the total voting power of shares of stock or other ownership
interests entitled (without regard to the occurrence of any contingency) to
vote in the election of the Person or Persons (whether directors, managers,
trustees or other Persons performing similar functions) having the power to
direct or cause the direction of the management and policies thereof is at
the time owned or controlled, directly or indirectly, by that Person or one
or more of the other Subsidiaries of that Person or a combination thereof.

"TITLE COMPANY" means Chicago Title Insurance Company.

"TITLE POLICY" means each Lender's ALTA (Form B-1970) Lender's
Policy of title insurance in the amount of the Loan issued by the Title
Company to Lender, dated as of the time of recording of the applicable Deeds
of Trust or Mortgages, as applicable, showing Lender as insured with a first
priority lien (except as to Marietta Trade Center which shall be a second
priority lien) and title to the Facility vested fee simple in Borrower, with
such endorsements and in form acceptable to Lender in its sole discretion.

15
<PAGE>

1.2 OTHER TERMS.

References to "Sections" and "subsections" shall be to Sections and
subsections, respectively, of this Agreement unless otherwise specifically
provided. Any of the terms defined in SUBSECTION 1.1 or elsewhere in this
Agreement may, unless the context otherwise requires, be used in the singular
or the plural, depending on the reference.

2. INITIAL NOTES AND COLLATERAL DOCUMENTS;
MANDATORY PREPAYMENT

2.1. NOTES AND COLLATERAL DOCUMENTS EXECUTED AS OF THE EFFECTIVE DATE.

A. Effective as of the Effective Date, Borrower has executed and
delivered to Lender the Notes in the aggregate principal amount of $66.1
million.

B. Effective as of the Effective Date, Borrower has executed and
delivered to Lender as security for the Loan the Collateral Documents and
Hazardous Substances Agreements more particularly described in EXHIBIT D
attached hereto.

2.2 MANDATORY PREPAYMENT.

Notwithstanding any term or provision contained herein or in any of the
Notes, and as a material inducement to Lender making the Loan described
herein, if at any time the then outstanding principal amount of all Notes is
less than $20 million in the aggregate, then Borrower shall immediately
prepay all amounts under and owing with respect to the Notes and the Loan
Documents, including, without limitation, all accrued and unpaid interest
thereon and any Prepayment Premium due in connection therewith.

2.3 ASSUMPTION OF NOTES AND LOAN DOCUMENTS.

MIT, as successor-in-interest by merger to Trust VI and Trust VII hereby
confirms its assumption and agreement to perform all existing and future
obligations, terms and conditions required under the Notes and the Loan
Documents and the Hazardous Substances Agreements, including, without

16
<PAGE>

limitation, all obligations relating to the due and punctual payment of
principal and interest under the Notes as though MIT had executed such
documents on the Closing Date, such that all of the debts, liabilities,
duties and obligations of Borrower may be enforced directly against MIT to
the same extent as if those debts and obligations had been incurred and
contracted by MIT.

2.4 RIGHT OF FIRST NEGOTIATION TO PURCHASE NOTES.

A. At any time and from time to time, and except as limited below,
Borrower shall have the rights granted in this SUBSECTION 2.4 to negotiate to
acquire the Notes. Upon Lender's election, in its sole discretion, to sell
the Notes to a third party which is not an Affiliate of Lender, Lender shall
give Borrower written notice (the "Offer Notice") setting forth the terms and
conditions (the "Offer Price") pursuant to which Lender would be willing to
sell the Notes to a third party. The Offer Price to Borrower shall not be
higher to reflect the requirement to pay the Prepayment Premium or that
Borrower is both a borrower and purchaser of the Notes. Notwithstanding the
foregoing, the Offer Price may be at a premium above or discount below par to
reflect then current market conditions, as determined by Lender, including
without limitation, that the Notes are fixed rate notes and are not
prepayable without payment of the Prepayment Premium.

B. Upon Borrower's receipt of the Offer Notice, Borrower shall have the
right to either (i) unconditionally accept in writing the Offer Price, in
which case Lender shall be bound to sell the Notes to Borrower and Borrower
shall be bound to purchase the Notes from Lender on the terms and conditions
provided in the Offer Notice (and Borrower's default on its obligation to
purchase the Notes shall be an Event of Default hereunder and without
limiting Lender's remedies, Borrower's rights under this SUBSECTION 2.4 shall
terminate); or (ii) elect to meet with Lender to attempt to arrive at a
mutually acceptable price and other terms and conditions for the acquisition
of the Notes, in which case the parties agree to negotiate in good faith to
arrive at a mutually agreeable price and other terms and conditions for the
purchase and sale of the Notes.

17
<PAGE>

C. If within two (2) weeks after Borrower's receipt of the Offer Notice
(the "Negotiation Period") Borrower has not elected to unconditionally accept
the Offer Price and for whatever reason the parties have not otherwise agreed
on mutually acceptable terms and conditions for the purchase of the Notes,
then Lender shall be entitled, for a period of six (6) months from end of the
Negotiation Period, but not obligated, to sell or enter into a contract to
sell the Notes to a third party at such price and upon such terms and
conditions as Lender in its sole discretion shall determine, including,
without limitation, an amount and terms and conditions materially more
favorable to the prospective purchaser but consistent with the good faith
principles specified above (and close such sale within twelve (12) months
from the end of the negotiation Period). Upon Lender entering into a
contract to sell the Notes to a third party, Borrower's right of first
negotiation with respect to the Notes shall terminate subject to the right of
reoffer described in the immediately succeeding sentence. If Lender has not
entered into a contract to sell (or sold) the Notes to a third party within
six (6) months of expiration of the Negotiation Period (or having entered
into a contract within six (6) months has not thereafter closed within twelve
(12) months from the end of the Negotiation Period), Borrower's rights under
this SUBSECTION 2.4 shall again apply.

D. Borrower's rights under this SUBSECTION 2.4 are expressly conditioned
upon, at the time Borrower receives the Offer Notice, there being no Event of
Default or Potential Event of Default (unless prior to the expiration of the
Negotiation Period no Event of Default or Potential Event of Default then
exists).

E. If at any time during the term of this Agreement there is an Event of
Default or Potential Event of Default respecting any monetary obligation to
Lender in any Loan Document for a period of thirty (30) days past the date
such obligation was owing, then Borrower's rights under this SUBSECTION 2.4
shall terminate and be of no further force and effect.

F. Borrower acknowledges and agrees that the restrictions set forth in
this SUBSECTION 2.4 shall not apply to the sale of any participation interest
in the Notes (or any Note) or any transfer of the Notes

18
<PAGE>

(or any Note) to any Affiliate of Lender.

3. SECURITY POOL COVENANTS

3.1 COVENANTS.

The following on-going covenants of Borrower (the "Security Pool
Covenants") shall be met with reference to the Facilities at each of the
following dates: (1) the date of determination as specified herein; (2) the
date of any substitution or exchange in accordance with the procedures set
forth in SECTION 4; (3) the date of any Lien Release; (4) the date of any
determination by Lender of Appraised Value; (5) the date of any lease
revision contemplated by SUBSECTION 7.1B; and (6) the date of determination
as provided in SUBSECTION 8.1C(ix).

A. The Loan to Appraisal Ratio as determined by Lender shall not exceed
50% at any time.

B. The ratio of Net Operating Income to Debt Service shall be no less
than 2.2 to 1.0, which shall be measured at the end of each Fiscal Quarter,
on an historical rolling four Fiscal Quarter basis.

C. The ratio of Projected Net Operating Income to Projected Debt
Service shall be no less than 2.2 to 1.0, which shall be measured annually at
the beginning of each calendar year commencing January 1, 1996.

D. The ratio of (i) Net Operating Income LESS all tenant improvement
costs and leasing commissions actually expended for the period and an annual
capital expenditure reserve of $.17 per square foot of leasable area of the
Facilities in the Security Pool to (ii) the Debt Service shall be no less
than 1.7 to 1.0. This ratio shall be measured at the end of each Fiscal
Quarter, on an historical rolling four Fiscal Quarter basis.

19
<PAGE>

3.2 DELIVERY OF REPORTS AND INFORMATION.

A. Within forty-five (45) days after the close of each Fiscal Quarter,
Borrower shall deliver a Compliance Certificate to Lender, certified by the
chief financial officer of Borrower as true and correct. In addition, within
ninety (90) days after the close of each calendar year, Borrower shall
deliver to Lender the Annual Financials.

B. Within sixty (60) days following the end of each calendar year,
Borrower shall deliver the Appraisal Information for each Facility to Lender.

C. Within five (5) years after Lender's receipt of any statement,
Lender may, upon at least five (5) days' prior notice to Borrower, inspect
and make copies of Borrower's books, records and income tax returns with
respect to the Facilities, for the purpose of verifying any such statement.
At any time during the term of the Loan, upon fifteen (15) day's prior
written notice from Lender, Borrower shall submit to Lender any additional
financial information which has been reasonably requested by Lender.

D. Promptly upon their becoming available, Borrower shall deliver to
Lender copies of (a) all financial statements, reports, notices and proxy
statements sent or made available generally by Borrower to its security
holders or by any Subsidiary of Borrower to its security holders other than
Borrower or another Subsidiary of Borrower, (b) all regular and periodic
reports and all registration statements (other than on Form S-8 or a similar
form) and prospectuses, if any, filed by Borrower or any of its Subsidiaries
with any securities exchange or with the Securities and Exchange Commission
or any governmental or private regulatory authority, and (c) all press
releases and other statements made available generally by Borrower or any of
its Subsidiaries to the public concerning material developments in the
business of Borrower or any of its Subsidiaries.

E. Promptly upon receipt thereof, Borrower shall deliver to Lender final
copies of all reports submitted to Borrower

<PAGE>

by independent certified public accountants in connection with each annual,
interim or special audit of the financial statements of Borrower and its
Subsidiaries made by such accountants, including, without limitation, any
comment letter submitted by such accountants to management in connection with
their annual audit.

3.3 DETERMINATION OF APPRAISED VALUE.

A. Within forty-five (45) days following receipt by Lender of full and
complete Appraisal Information for each of the Facilities, Lender shall (i)
review the Appraisal Information and determine, in its sole discretion, the
Appraised Value of each Facility and (ii) notify Borrower of its
determination of such value; provided Lender's failure to so notify Borrower
within such period shall not be deemed to be a default by Lender hereunder or
a waiver of any of the Security Pool Covenants and shall result in an
extension of the forty-five (45) day period until the date Lender notifies
Borrower of its determination of the Appraised Values. Fifteen (15) days
after the date Lender notifies Borrower of its determination of the Appraised
Value, such Appraised Value shall become effective and final for purposes of
calculating the Loan to Appraisal Ratio. For purposes of this Agreement,
Lender has determined the Appraised Value of the Facilities as of the date of
Closing and no changes shall be made in such Appraised Value prior to March
31, 1996. In addition, from and after March 31, 1996, Lender shall have the
right from time to time to cause one or more of the Facilities to be
reappraised if in Lender's reasonable judgment there has been a material
adverse change in the value of one or more of the Facilities to be
reappraised.

B. If the Marietta Trade Center is encumbered by the CRE Debt, then the
Appraised Value of such Facility shall be deemed for purposes of this
Agreement to be 80% of the difference between the property's Appraised Value
as determined by Lender and the then outstanding principal balance of the CRE
Debt.

C. The Appraised Value of Marietta Trade Center and Paradise
Marketplace shall not, for purposes of this Agreement, be included in the
calculation of Appraised Value

<PAGE>

at such time as the outstanding principal balance of the Loan is less than
$30 million.

D. The Appraised Value of the Facilities shall be deemed for purposes of
this Agreement to include the amount of the Letter of Credit or any Damage
Letter of Credit as of the applicable date.

3.4 DETERMINATION OF NET OPERATING INCOME.

A. The Net Operating Income and the Projected Net Operating Income of
Marietta Trade Center and Paradise Marketplace shall not, for purposes of
this Agreement, be included in the calculation of Net Operating Income for
any of the prior four Fiscal Quarters or Projected Net Operating Income for
the applicable calendar year at such time as the outstanding principal
balance of the Loan is less than $30 million.

B. If the Marietta Trade Center is encumbered by the CRE Debt, then the
Net Operating Income and Projected Net Operating Income for such Facility
shall be deemed for purposes of this Agreement to be 80% of the difference
between the actual Net Operating Income or Projected Net Operating Income for
such property and the amount of debt service attributable to the CRE Debt,
assuming a 10% debt constant.

C. For purposes of determining Net Operating Income and Projected Net
Operating Income for purposes of this Agreement, the income of the Facilities
shall be deemed to include imputed interest equal to six percent (6%) per
annum of the amount of the Letter of Credit (or any funds held by or for the
benefit of Lender pursuant to SUBSECTION 4.2D), as adjusted from time to time.

4. EXCHANGE RIGHTS AND SUBSTITUTION RIGHTS IN THE SECURITY POOL

For the twenty-four (24) month period immediately following the Effective
Date, Borrower shall have the substitution and exchange rights set forth in
this SECTION 4. Following such twenty-four (24) month period, Borrower

<PAGE>

shall have no further rights under this SECTION 4, including, without
limitation, the right to complete substitutions or exchanges previously
approved by Lender but not completed by such date.

4.1 LIEN RELEASES AND INCREASES IN THE LETTER OF CREDIT.

For the period from the Effective Date through and including the second
anniversary thereof, Borrower shall have the right to sell a Facility which
is initially included in the Security Pool and to post with Lender a Letter
of Credit in an amount (or if previously posted, increase the amount thereof
by an amount) equal to the Net Sales Proceeds, in which case Lender shall
release concurrently its Lien on the Facility sold (the "Lien Release"),
subject to satisfaction by Borrower of each and every condition precedent set
forth in SUBSECTION 4.1A.

A. The conditions precedent to Lender's obligations under this
SUBSECTION 4.1 are as follows:

(i) Lender shall have received thirty (30) days prior written notice
from Borrower of the proposed sale of the Facility for which a Lien Release
is being requested pursuant to this SUBSECTION 4.1, together with a $5,000
processing fee which shall be fully earned upon each delivery of the Lien
Release;

(ii) there shall exist no Event of Default or Potential Event of
Default;

(iii) Lender shall have determined, in its sole discretion, that
the Security Pool Covenants shall continue to be met, after giving effect to
the release of the Facility for which a Lien Release is being requested,
PROVIDED, HOWEVER, that if one or more of the Security Pool Covenants is not
satisfied and Borrower may, through the prepayment of principal outstanding
under the Loan, satisfy such Security Pool Covenant(s), then Borrower may
qualify for a Lien Release by paying down a portion of the outstanding
principal balance of the Loan which Lender determines is necessary to satisfy
the Security Pool Covenant(s) (and paying any Prepayment Premium applicable

<PAGE>

thereto), PROVIDED FURTHER, HOWEVER, that Lender shall advise Borrower in
writing of its determination within fourteen (14) days after Borrower submits
to Lender in detail satisfactory to Lender, in its sole discretion,
Borrower's written analysis of the effect of the release of the Facility upon
the Security Pool Covenants;

(iv) Lender shall receive, at Borrower's sole cost and expense,
such endorsement(s) to the Title Policy as Lender may deem reasonably
necessary to ensure the Deeds of Trust or Mortgages, as applicable,
encumbering the Facilities not so released remain valid Liens against such
properties notwithstanding any such release of a Facility, subject only to
such title exceptions as were originally shown in the Title Policy; and

(v) Lender shall receive, at Borrower's sole cost and expense, a
new Letter of Credit or amendment to the existing Letter of Credit increasing
the amount of the Letter of Credit by the Net Sales Proceeds applicable to
the Facility for which the Lien is released.

B. In addition to the $5,000 processing fee applicable to a Lien
Release, Borrower shall pay, prior to any Lien being released, all costs and
expenses incurred by Lender in connection with any requested Lien Release,
including, without limitation, all reasonable legal, accounting, appraisal,
title company, recording and filing fees and costs, whether such Lien Release
is actually consummated.

C. Notwithstanding the rights granted Borrower under this SUBSECTION
4.1, Borrower will not permit the Letter of Credit (including any letter of
credit delivered to Lender in accordance with the provisions of SUBSECTION
5.3) to exceed at anytime the lesser of (A) 50% of the then outstanding
principal balance of the Loan or (B) $36 million (the "Maximum Letter of
Credit Amount"). Borrower's rights under this SUBSECTION 4.1 are expressly
conditioned upon any proposed increase in the Letter of Credit not causing
the amount of the Letter of Credit to exceed the Maximum Letter of Credit
Amount.

4.2 FACILITIES ADDED TO THE SECURITY POOL AND REDUCTIONS IN THE LETTER
OF CREDIT.

<PAGE>

A. Borrower shall have the right to reduce the amount of the Letter of
Credit upon the acquisition of a Proposed Facility and the inclusion of such
Proposed Facility in the Security Pool, which shall be subject to and in
accordance with the procedures and conditions set forth in SUBSECTION 4.4.
The maximum reduction in the Letter of Credit upon the inclusion of a
Proposed Facility in the Security Pool shall be the lesser of the Proposed
Facility's Appraised Value or the acquisition cost of such property,
including normal and customary closing costs, as determined by Prudential in
its sole discretion.

B. Twenty-four (24) months following the Effective Date or earlier upon
Borrower's election to waive its rights under SECTION 4, Borrower shall pay
to Lender 62.5% of the then current amount of the Letter of Credit as a
principal repayment, subject to the Prepayment Premium and a $5,000
processing fee, and Lender shall concurrently, provided there is then no
Event of Default or Pending Event of Default, return the Letter of Credit to
Borrower.

C. If at anytime Standard & Poor's credit rating of the issuer of the
Letter of Credit falls below BBB+, then within thirty (30) days of Lender's
written notice requesting a substitute Letter of Credit, Borrower shall
deliver to Lender a substitute Letter of Credit in form and content
satisfactory to Lender, issued by an issuer with a Standard & Poor's credit
rating of at least A, and Lender will concurrently release the Letter of
Credit being replaced to Borrower.

D. Lender shall have the right, in its sole discretion, upon not less
than thirty (30) days prior written notice to Borrower, to require that
Borrower substitute cash collateral for the Letter of Credit. If Lender
elects to have cash substituted for the Letter of Credit, then the cash shall
be held by Lender or in an account at a bank qualified to do business in
California and acceptable to Lender and in which Lender is granted a first
priority security interest. Any such amount shall be deposited in an interest
bearing account with interest accruing for the benefit of Borrower. Imputed
interest on such funds at the rate of six (6%) per annum shall be included in
the

<PAGE>

calculation of Net Operating Income and Projected Net Operating Income. Any
such deposit of cash shall be subject to further increases, decreases and
applications against the outstanding principal balance of the Loan
substantially in accordance with the procedures respecting the Letter of
Credit. Lender shall not assess any set-up or account fee with respect to
any funds deposited directly with Lender.

4.3 FACILITIES SUBSTITUTED INTO THE SECURITY POOL.

For the twenty-four (24) month period following the Effective Date,
Borrower shall have the right to substitute a Proposed Facility for a
Facility, and Lender shall release its Lien on the Facility then in the
Security Pool, which substitution and release shall be subject to and
accordance with the conditions and procedures set forth in SUBSECTIONS 4.3
and 4.4. In addition, Borrower shall have the right to add a Proposed
Facility to the Security Pool in accordance with the procedures set forth in
SUBSECTION 4.4 to ensure on-going compliance with the Security Pool Covenants.

A. The conditions precedent to Lender's obligations under this SUBSECTION
4.3 are as follows:

(i) Lender shall have received not less than ninety (90) days
written notice from Borrower prior to the date Borrower proposes granting a
Lien on a Proposed Facility pursuant to this SUBSECTION 4.3, together with a
Processing Fee which shall be fully earned upon submittal of such request to
Lender (and no Processing Fee shall be applied as a credit against any
subsequent Processing Fee payable hereunder);

(ii) there shall exist no Event of Default or Potential Event of
Default;

(iii) the Proposed Facility shall have sufficient Net Operating
Income and Projected Net Operating Income such that the Security Pool
Covenants continue to be satisfied and are not otherwise materially and
adversely affected, in Lender's sole discretion;

<PAGE>

(iv) the Proposed Facility shall have an Appraised Value equal to
or greater than the Appraised Value of the Facility being released; and

(v) Lender shall receive, at Borrower's sole cost and expense, such
endorsement(s) to the Title Policy as Lender may deem reasonably necessary to
ensure the Deeds of Trust or Mortgages, as applicable, encumbering the
Facilities not so released remain valid Liens against such properties
notwithstanding any such release of a Facility, subject only to such title
exceptions as were originally shown in the Title Policy.

B. In addition to the Processing Fee, Borrower shall pay, on or before
the proposed substitution is completed, all costs and expenses incurred by
Lender in connection with any requested substitution, including, without
limitation, all reasonable legal, accounting, appraisal, title company,
recording and filing fees and costs, whether such substitution is actually
consummated.

4.4 REQUIREMENTS FOR ALL PROPERTIES ADDED TO THE SECURITY POOL.

A. Not less than ninety (90) days prior to the date Borrower proposes
to add a Proposed Facility to the Security Pool, Borrower shall submit a
summary report describing basic information for the Proposed Facility,
including property type and description, location, tenant mix, leasing
information, estimated value and other general information. Lender shall
then use reasonable efforts to inform Borrower within three (3) weeks after
receiving such summary report, on a non-binding basis, if such property would
be acceptable for inclusion in the Security Pool assuming it meets Lender's
then current environmental, engineering and underwriting standards and is
otherwise acceptable to Lender in its sole discretion ("Preliminary
Approval"). After Preliminary Approval of a Proposed Facility, and not less
than forty-five (45) days prior to the date Borrower proposes adding a
Proposed Facility to the Security Pool, Borrower shall submit the Due
Diligence Documents to Lender, together with a Processing Fee (PROVIDED,
HOWEVER, that Estoppel Certificates shall be submitted not less than fourteen
(14) days prior to the date Borrower proposes

<PAGE>

adding a Proposed Facility to the Security Pool). All Proposed Facilities
added to the Security Pool shall meet Lender's then current environmental,
engineering and underwriting standards and otherwise be acceptable to Lender
in its sole discretion. Upon receipt of full and complete Due Diligence
Documents and such other documents as Lender shall reasonably require, and
upon confirmation by Lender that it has received all such documentation,
Lender shall have three (3) weeks to inform Borrower if such property is
acceptable for inclusion in the Security Pool. If Lender does not notify
Borrower within such three (3) week period of Lender's decision, then
Borrower shall provide Lender written notice in the form of EXHIBIT E
attached hereto. If Lender has not approved or disapproved such Proposed
Facility within seven (7) days of receipt of such notice, then the Proposed
Facility shall be deemed approved by Lender.

B. Prior to any Proposed Facility being added to the Security Pool,
Borrower shall have delivered to Lender the Proposed Facility Closing
Documents, in form and substance satisfactory to Lender.

C. Each time a Proposed Facility is added to the Security Pool in
accordance with the provisions of SUBSECTIONS 4.2, 4.3 or 5.3, Borrower shall
pay Lender a fee equal to 0.6% of the gross purchase price of the Proposed
Facility (but in no event less than $10,000); provided the Processing Fee
previously submitted to Prudential with respect to such Proposed Facility
shall be applied against the 0.6% fee. Notwithstanding the foregoing,
Borrower shall have no obligation to pay Lender the 0.6% fee with respect to
a Facility being added to the Security Pool solely for purposes of ensuring
on-going compliance with the Security Pool Covenants.

D. Borrower shall pay, on or before the addition of any Proposed
Facility to the Security Pool, all costs and expenses incurred by Lender in
connection with any request that a Proposed Facility be added to the Security
Pool, including, without limitation, all reasonable legal, accounting,
appraisal, title company, recording and filing fees and costs, whether such
Proposed Facility is actually added to the Security Pool.

<PAGE>

E. Borrower's rights under SUBSECTIONS 4.1, 4.2 and 4.3 (excluding
Borrower's rights to add additional Facilities to the Security Pool to ensure
on-going compliance with the Security Pool Covenants) shall terminate and be
of no further force and effect following the earlier to occur of:

(i) the date that the sum of (a) the cumulative gross purchase
prices of properties added to the Security Pool pursuant to SUBSECTION 4.3
and (b) the initial amount of and the cumulative increases in the Letter of
Credit (without giving regard to any reductions pursuant to SUBSECTION 4.1)
exceeds $40 million (inclusive of all prior transactions of Trust VI and
Trust VII as separate entities) or if a transaction proposed under SUBSECTION
4.1 or 4.3 would cause such threshold to be exceeded; or

(ii) the date of the closing of the fourth separate transaction
whereby Borrower adds one or more Facilities to the Security Pool pursuant to
SUBSECTIONS 4.2 or 4.3.

4.5 LETTER OF CREDIT. Lender may, at its option and in addition to other
rights and remedies it may have hereunder or under any of the Loan Documents,
upon the occurrence of an Event of Default, unconditionally draw on the
Letter of Credit in any amount up to the full stated amount thereof and apply
the proceeds of such draw or draws in any manner determined by Lender,
including, at the option of Lender in its sole discretion, (i) paying down
the outstanding principal balance of one or more of the Notes (and paying any
Prepayment Premium applicable thereto), and/or (ii) paying or satisfying, in
a manner and fashion satisfactory to Lender in its sole discretion, any
obligations owing under the Notes or any one of them, whether for principal
or interest, or under any of the Loan Documents and/or under the Hazardous
Substances Agreements.

5. RELEASE OF FACILITIES FROM THE SECURITY POOL

5.1 LIEN RELEASES.

In addition to the Lien Releases executed by Lender in accordance with
the provisions of SECTION 4, Lender shall

<PAGE>

also concurrently release its Liens encumbering one or more of the
Facilities, subject to the satisfaction by Borrower of each and every
condition precedent set forth in SUBSECTION 5.1A.

A. The conditions precedent to Lender's obligations under this SECTION
5 are as follows:

(i) Lender shall have received thirty (30) days prior written notice
from Borrower of the proposed partial repayment of the Loan (which shall be
in an amount required by clause (iii) below) and the identification of the
Facility or Facilities for which a Lien Release is being requested, together
with a processing fee equal to $5,000, which shall be fully earned upon
delivery of the Lien Release by Lender;

(ii) there shall exist no Event of Default or Potential Event of
Default;

(iii) Borrower shall have paid in full the Release Price
attributable to the particular Facility or Facilities for which a Lien
Release is being requested, plus payment of any applicable Prepayment Premium
attributable thereto;

(iv) the outstanding principal balance of the Loan, after giving
effect to the application of the Release Price as herein provided, shall
continue to be equal to or greater than $20 million;

(v) Borrower shall provide evidence, in form and substance
satisfactory to Lender in its sole discretion that the Security Pool
Covenants shall continue to be met, after giving effect to the release of the
Facility, PROVIDED, HOWEVER, that if one or more of the Security Pool
Covenants is not satisfied and Borrower may, through the prepayment of
principal outstanding under the Loan, satisfy such Security Pool Covenant(s),
then Borrower may qualify for a Lien Release by paying down a portion of the
outstanding principal balance of the Loan which Lender determines is
necessary to satisfy the Security Pool Covenant(s) (and paying any Prepayment
Premium applicable thereto); PROVIDED FURTHER, HOWEVER, that Lender shall
advise Borrower of its determination within fourteen (14) days after Borrower

<PAGE>

submits to Lender, in detail satisfactory to Lender, in its sole discretion,
its written analysis of the effect of the release of the Facility upon the
Security Pool Covenants; and

(vi) Lender shall receive, at Borrower's sole cost and expense,
such endorsement(s) to the Title Policy as Lender may deem reasonably
necessary to insure the Deeds of Trust or Mortgages, as applicable,
encumbering the Facilities not so released remain valid liens against such
properties notwithstanding any such release of a Facility, subject only to
such title exceptions as were originally shown in the Title Policy.

B. In addition to the $5,000 processing fee applicable to a Lien
Release, Borrower shall pay, on or before the date any Lien Release is
granted, all costs and expenses incurred by Lender in connection with any
requested Lien Release, including, without limitation, all reasonable legal,
accounting, appraisal, title, recording and filing fees and costs, whether
such Lien Release is actually consummated.

C. The Release Price shall be applied first against the Note for the
state in which the Facility being released is located, with the balance
applied against such other Notes as Lender in its sole discretion shall
determine.

<PAGE>

5.2 LIEN RELEASES APPLICABLE TO TENANT'S EXERCISE OF PURCHASE OPTIONS IN
THEIR LEASES.

If (i) Smith's Food & Drugs, Inc. ("Smith's") (with respect to Paradise
Marketplace), (ii) Woodbridge Group (with respect to Troy Tech II), (iii)
Globe Industries, Inc. (with respect to Troy Tech II), or (iv) Mitsubishi
Motors of America Credit, Inc. (with respect to Cypress A) exercises its
respective purchase option contained in its lease, then Borrower shall be
obligated to pay Lender the Release Price, together with the applicable
Prepayment Premium, for the applicable Facility, which payment shall be made
to Lender on or before the closing date for the transfer to such tenant of
its leased premises. Lender's obligation to execute a Lien Release in
accordance with this SUBSECTION 5.2 shall otherwise be in accordance with and
subject to the terms and conditions of SUBSECTION 5.1A (i), (iii) and (vi)
(or SUBSECTION 4.1A (i), (iii), (iv) AND (v) if applicable (provided the
execution of a Lien Release shall not constitute a waiver by Lender of any
Event of Default or Potential Event of Default that may then exist or occur
as a result of such release).

5.3 MATERIAL DAMAGE OR DESTRUCTION.

In the event of any material damage or destruction to a Facility and
provided Borrower does not intend to rebuild or restore such Facility, or
upon a material taking by any public or quasi-public authority through
condemnation, eminent domain or deed in lieu thereof, and not withstanding
anything to the contrary contained in SECTION 8 hereof, Borrower shall have
the right to elect not to repair or rebuild the Facility and to deposit with
Lender an irrevocable letter of credit in favor of Lender and otherwise in
form and content satisfactory to Lender in its sole discretion, with an
expiry date not less than thirteen (13) months from its issuance (the "Damage
Letter of Credit"). The Damage Letter of Credit shall secure Borrower's
obligations hereunder and shall be in an amount equal to the Appraised Value
of such Facility, without regard to any damage or destruction. Upon Lender's
receipt of the Damage Letter of Credit, Lender shall (i) release the Net
Proceeds to Borrower, (ii) release the Lien on the Facility so damaged,
destroyed or taken in accordance with

<PAGE>

the procedures set forth in SUBSECTION 5.1A (without regard to the payment of
the Release Price or payment of the $5,000 processing fee) and (iii) permit
Borrower to add an additional Facility to the Security Pool and reduce the
Damage Letter of Credit in accordance with the procedures set forth in
SUBSECTION 4.2 (without regard to the twenty-four (24) month period referred
to therein). Borrower's rights under this SUBSECTION 5.3 must be exercised,
if at all, by Borrower delivering the Damage Letter of Credit to Lender
within one hundred twenty (120) days of the date of the damage, destruction
or taking and the exchange rights shall terminate twelve (12) months
following the delivery of the Damage Letter of Credit to Lender. At the
expiration of the twelve (12) month period referenced herein Borrower shall
pay to Lender, as a prepayment under the Notes, the outstanding and undrawn
amount of the Damage Letter of Credit, together with any applicable
Prepayment Premium. Lender may, at its option and in addition to other
rights and remedies it may have hereunder or under any of the Loan Documents,
upon the occurrence of an Event of Default, unconditionally draw on the
Damage Letter of Credit in any amount up to the full stated amount thereof
and apply the proceeds of such draw or draws in any manner determined by
Lender, including, at the option of Lender in its sole discretion, (i) paying
down the outstanding principal balance of one or more of the Notes, and/or
(ii) paying or satisfying, in a manner and fashion satisfactory to Lender in
its sole discretion, any obligations owing under the Notes or any one of
them, whether for principal or interest, or under any of the Loan Documents
and/or under the Hazardous Substances Agreements.

5.4 MERIDIAN VILLAGE LIEN RELEASE.

A. Concurrent with the execution of this Agreement, Lender shall release
its Lien on Meridian Village, subject to the following conditions:

(i) there shall exist no Event of Default or Potential Event of
Default;

(ii) Borrower shall provide evidence, in form and substance
satisfactory to Lender in its sole discretion that

<PAGE>

the Security Pool Covenants shall continue to be met, after giving effect to
the release of Meridian Village;

(iii) Lender shall receive, at Borrower's sole cost and expense,
such endorsement(s) to the Title Policy as Lender may deem reasonably
necessary to insure the Deeds of Trust or Mortgages, as applicable,
encumbering the Facilities not so released remain valid liens against such
properties notwithstanding any such release of a Facility, subject only to
such title exceptions as were originally shown in the Title Policy; and

(iv) Borrower shall pay, on or before the date any Lien Release is
granted, all costs and expenses incurred by Lender in connection with any
requested Lien Release, including, without limitation, all reasonable legal,
accounting, appraisal, title, recording and filing fees and costs.

6. REPRESENTATIONS AND WARRANTIES

6.1 REAFFIRMATION OF WARRANTIES AND REPRESENTATIONS; SURVIVAL OF
WARRANTIES AND REPRESENTATIONS.

Any delivery of a Loan Document during the term of this Agreement shall
constitute (i) a warranty and representation by Borrower to Lender that there
does not then exist an Event of Default or Potential Event of Default, and
(ii) a reaffirmation as of the date of said Loan Document of the
representations and warranties of Borrower contained in this SECTION 6 and in
each Loan Document and Hazardous Substances Agreement. All representations
and warranties of Borrower contained in this Agreement shall survive the
execution, delivery and acceptance thereof by the parties hereto and the
Effective Date.

6.2 OWNERSHIP OF METRO-SIERRA, PROGRESS CENTER AND INDTENNCO.

All of the partnership interests, both limited and general, of
Metro-Sierra, Progress Center and IndTennCo are held and owned, directly or
indirectly, by MIT and shall

<PAGE>

continue to be so held during the term of the Loan. In no event shall
Borrower convey, transfer or consent to transfer, whether by sale,
assignment, pledge, hypothecation, operation of law or otherwise, any direct
or indirect partnership interest in Metro-Sierra, Progress Center or
IndTennCo.

6.3 MUTUAL BENEFITS.

MIT, Metro-Sierra, Progress Center and IndTennCo (i) are engaged in
related businesses, (ii) shall each derive substantial benefit from the
ownership and operation of the Facilities, and (iii) could not enjoy and
derive such benefits without obtaining the proceeds of the Loan.
Accordingly, each of MIT, Metro-Sierra, Progress Center and IndTennCo
represents, warrants and agrees that the proceeds of the Loan shall be used
to refinance existing indebtedness which, in each case, was used for, will be
used for, and has or will directly or indirectly benefit the operations of
the Facilities, and that each of MIT, Metro-Sierra, Progress Center and
IndTennCo will derive substantial, direct and indirect benefit from the Loan.
Without limiting the generality of the foregoing, each of MIT, Metro-Sierra,
Progress Center and IndTennCo acknowledge that it would not be able to obtain
mortgage loan financing from Lender at the interest rate of the Loan and on
the same terms and conditions of the Term Sheet absent the grant of all of
the collateral provided Lender by the Loan Documents and that such proceeds
as above described shall directly and substantially benefit each of MIT,
Metro-Sierra, Progress Center and IndTennCo.

6.4 QUALIFICATION AS A REIT; PUBLICLY TRADED COMPANY.

At all times Borrower shall cause to be done all things necessary to
maintain, preserve and renew its corporate existence and qualification as a
REIT. Without limiting the foregoing and regardless of REIT laws, at all
times Borrower shall comply with the following: (i) the stock of Borrower
shall be owned by 100 or more persons; and (ii) five or fewer persons shall
not own, in the aggregate, fifty percent (50%) or more of the stock of
Borrower (by value), directly or indirectly, actually or constructively. At
all times Borrower shall cause to be done all things necessary to

<PAGE>

maintain, preserve and renew its status as a publicly traded corporation
listed on the American Stock Exchange or the New York Stock Exchange and in
compliance with the rules and regulations of the Securities and Exchange
Commission.

6.5 ERISA.

A. Lender represents and warrants to Borrower that, as of the date of
this Agreement and throughout the term of the Loan, the source of funds from
which Lender extends the Loan is its General Account, which is subject to the
claims of its general creditors under state law; Lender further represents
and warrants that it meets conditions for application of the general
exemption in Section I of the Proposed Class Exemption for Certain
Transactions Involving Insurance Company General Accounts (59 Fed. Reg. 43134
(1994)) ("Class Exemption").

B. Borrower represents and warrants to Lender that, as of the date of
this Agreement and throughout the term of the Loan, (i) Borrower is not an
"employee benefit plan" as defined in Section 3(3) of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA"), which is subject to Title
I of ERISA, and (ii) the assets of Borrower do not constitute "plan assets"
of one or more such plans within the meaning of 29 C.F.R. Section 2510.3-101.

C. Borrower represents and warrants to Lender that, as of the date of
this Agreement Borrower is not a "governmental plan" within the meaning of
Section 3(32) of ERISA.

D. Borrower covenants and agrees to deliver to Lender such
certifications or other evidence from time to time throughout the term of the
Loan, as requested by Lender in its sole discretion, that (i) Borrower is not
an "employee benefit plan" or a "governmental plan"; and (ii) one or more of
the following circumstances is true:

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

(2) Less than twenty-five percent (25%) of all equity interests in
Borrower are held by

<PAGE>

"benefit plan investors" within the meaning of 29 C.F.R.
Section 2510.3-101(f)(2);

(3) Borrower qualifies as an "operating company" or a "real estate
operating company" within the meaning of 29 C.F.R. Section
2510.3-101(c) or (e); or

(4) No equity interest in Borrower is held directly or indirectly by
an employee benefit plan subject to ERISA.

E. Any of the following shall constitute an Event of Default entitling
Lender to exercise any and all remedies to which it may be entitled under the
Loan Documents: (i) the failure of any representation or warranty made by
Borrower under this SUBSECTION 6.5 to be true and correct in all respects,
(ii) the failure of Borrower to provide Lender with the written
certifications and evidence referred to above, or (iii) assuming that the
Class Exemption referred to in SUBSECTION 6.5A is granted in substantially
the form proposed and relying on Lender's representations in SUBSECTION 6.5A,
the consummation by Borrower of a transaction which would cause the Agreement
or any exercise of Lender's rights under the Loan Documents to constitute a
non-exempt prohibited transaction under ERISA, subjecting Lender to liability
for violation of ERISA.

F. Borrower shall indemnify, protect and defend and hold Lender harmless
from and against all loss, cost, damage and expense (including attorneys'
fees and costs incurred in the investigation, defense and settlement of
claims and losses incurred in correcting any prohibited transaction or in the
sale of a prohibited loan, and in obtaining any individual prohibited
transaction exemption under ERISA that may be reasonably required, as
determined by Lender) that Lender may incur, directly or indirectly, as a
result of a default under SUBSECTION 6.5E; provided that this SUBSECTION 6.5
shall not apply to any loss, cost or damage or expense that is the result of
the failure of representation or warranty made by Lender under this
SUBSECTION 6.5 to be true and correct in all respects. This indemnity shall
survive any termination, satisfaction or foreclosure of the Mortgage.

<PAGE>

G. Anything in PARAGRAPH 4.2 of any of the Deeds of Trust or Mortgages
or elsewhere in the Loan Documents to the contrary notwithstanding, no sale,
assignment or transfer of any direct or indirect interest in Borrower shall
be permitted which would negate Borrower's representations in this SUBSECTION
6.5 or cause this Agreement (or any exercise of Lender's rights under the
Loan Documents) to constitute a violation of any provision of ERISA, as
reasonably determined by Lender.

H. Anything in PARAGRAPH 4.2 of any of the Deeds of Trust or Mortgages
or elsewhere in the Loan Documents to the contrary notwithstanding, no direct
or indirect transfer of the Property or any interest therein including a
junior lien or leasehold interest, shall be permitted which would cause this
Agreement (or any exercise of Lender's rights under the Loan Documents) to
constitute a violation of ERISA or any applicable state statute regulating a
governmental plan, as reasonably determined by Lender.

I. Anything in this Agreement to the contrary notwithstanding, not less
than fifteen (15) days before consummation of a transfer of title to any
Facility or of an interest in Borrower, or of any direct or indirect right,
title or interest in either of them, excluding transfers of publicly-traded
interests, or of the placing of any lien or encumbrance on any Facility,
Borrower shall obtain from the proposed transferee or lienholder a
representation to Lender in form and substance satisfactory to Lender that
SUBSECTION 6.5D will be true after the transfer; and further provided that
any proposed lienholder agrees that any direct or indirect transfer of its
lien or any interest herein will be governed by this SUBSECTION 6.5.

7. LEASING AND AGREEMENTS

7.1 LEASING.

A. Borrower may enter into new Leases of space in the Facilities without
the prior written consent of Lender if no Event of Default or Potential Event
of Default shall then exist, and each of the following conditions has been
satisfied: (i) the term of such new Lease, including

<PAGE>

extension options, does not exceed ten (10) years; (ii) such new Lease is for
less than 50,000 gross leasable square feet for industrial properties and
less than 15,000 gross leasable square feet for retail properties; (iii) the
rental provisions contained in such new Lease are fair market rental rates
for comparable rental space in the applicable market; (iv) such new Lease is
drafted, negotiated, documented and entered into by Borrower in accordance
with Approved Manager Business Practices (as defined below); and (v) any new
Lease of space in a Facility shall not contain any option or other right to
acquire all or any part of the Facility, require Lender following any
foreclosure, transfer by deed in lieu of foreclosure or similar transfer to
undertake or be bound by any obligation to construct improvements or
otherwise expend funds which are capital in nature, except for items of
ordinary maintenance and repair, or contain an asbestos, environmental, or
hazardous substances indemnification in favor of a tenant unless such
indemnification would be extinguished by foreclosure, transfer by deed in
lieu of foreclosure, or similar transfer of the Facility. Any existing Lease
of space or new Lease of space in a Facility that complies with each of the
terms set forth in SUBSECTION 7.1A(i) through (v) inclusive shall be
hereinafter referred to as an "Approved Lease".

B. In addition, if no Event of Default or Potential Event of Default
then exists, then Borrower may, without the prior written consent of Lender,
amend or modify or alter in any manner, terminate, revise, excuse, condone,
discount, set-off, compromise or in any other manner release or discharge
tenants under any Approved Lease so long as the Security Pool Covenants
continue to be satisfied after giving affect to the amendment or
modification, any such amendment or modification is consistent with Approved
Manager Business Practices (as defined below), and any such modification or
amendment would not cause such Lease to fail to satisfy the minimum
requirements for qualification as an Approved Lease as set forth in
SUBSECTION 7.1A(i) through (v) inclusive, hereof. As used herein, "Approved
Manager Business Practices" shall mean the ordinary business practices and
procedures employed in good faith by the manager of the Facilities in
connection with the leasing of space in, and the management of, first class
industrial or retail properties, as applicable. If no Event of Default or

<PAGE>

Potential Event of Default then exists, Borrower may terminate any Approved
Lease, without the consent of Prudential, if such termination is based on
Approved Manager Business Practices and if the Security Pool Covenants shall
continue to be satisfied after giving affect to the termination.

C. Borrower shall not, without the prior written consent of Lender, (1)
except as permitted by the foregoing provisions of this SUBSECTION 7.1 which
apply to Approved Leases or as may be required under the terms of any
existing Lease, lease any part of a Facility or renew or extend any Leases;
(2) except as permitted by the foregoing provisions of this SUBSECTION 7.1
which apply to Approved Leases or as may be required under the terms of any
existing Lease, terminate, amend, modify or alter in any manner any Leases,
or waive, excuse, condone, discount, set off, compromise, or in any manner
release or discharge tenants under any Leases from any obligations,
covenants, conditions and agreements by such tenants to be kept, or account
or consent to any surrender of the Leases (except as required by terms of the
Lease); (3) receive or collect any rents for a period of more than one month
in advance; (4) further assign the Leases or pledge, transfer, mortgage or
otherwise encumber or assign future payments of rents, (5) except as
permitted by the foregoing provisions of this SUBSECTION 7.1 which apply to
Approved Leases, commence an action of ejectment or summary proceedings for
dispossession of the tenants under any Leases; (6) consent to a change in the
permitted use of the premises; (7) except as permitted by the foregoing
provisions of this SUBSECTION 7.1 which apply to Approved Leases or as may be
required under the terms of any existing Lease, consent to any subletting of
a Facility or any part thereof, or to assignment of the leases by lessees
thereunder or to any assignment or further subletting by any sublessees; or
(8) undertake any action with respect to any Lease which constitutes an
Approved Lease that would cause such Lease to no longer constitute an
Approved Lease.

D. Lender's consent to the execution, amendment, modification or
termination of a Lease shall be granted or denied within five (5) business
days after Lender receives a SECOND written request for such consent (which
second written request shall be given not less than fifteen (15)

<PAGE>

business days after the first such request) stating that it is a second
notice and specifying the provision of the Loan Administration Agreement
pursuant to which it is given. If Lender fails to grant or deny such consent
within the above-specified time period, such Lease or Lease amendment,
modification or termination shall be deemed to have been approved by Lender.
Lender's processing fees for each proposed Lease or Lease amendment,
modification or termination reviewed by Lender is $500, which amount shall be
payable by Lender on demand, in addition to Lender's reasonable attorneys'
fees and expenses incurred in connection with such review, whether or not
such consent is granted. No fee shall be due or payable in connection with
any execution, amendment, modification or termination of a Lease for which no
Lender review or consent is required under this SUBSECTION 7.1.

7.2 NON-DISTURBANCE AGREEMENTS.

A. For any Approved Lease and any other lease approved by Landlord in
writing (collectively, a "Qualifying Lease"), and provided that in the
negotiation of said Lease Borrower uses commercially reasonable efforts not to
agree to obtain the agreement of Lender to execute a non-disturbance agreement
with the tenant thereunder, Lender agrees to enter into an agreement with the
tenant under any Qualifying Lease (providing said tenant shall have first
executed said agreement), prepared on Lender's then current standard form of
non-disturbance and attornment agreement from time to time in effect (the
"Standard Non-Disturbance Form"), whereby Lender agrees that in the exercise of
any foreclosure remedies Lender will not disturb such tenant in its possession
of the demised premises, provided that the tenant thereunder is not then in
default under its respective Lease. Upon request of Borrower, Lender will
provide Borrower with a copy of its current Standard Non-Disturbance Form.
Notwithstanding anything in the foregoing to the contrary, Lender shall not
agree to be:

(i) liable for (a) any act, neglect, fault or omission of any prior
lessor (including Borrower) or (b) any breach of any representation or warranty
of any prior lessor (including Borrower) contained in the Lease; or

<PAGE>

(ii) subject to any offsets, defenses or rights of offset (whether
arising under the Lease, at law, in equity or otherwise) which the tenant might
have against any such prior lessor (including Borrower); or

(iii) bound by any prepayment of rent for more than one (1) calendar
month; or

(iv) bound by any representation or warranty of any prior lessor
(including Borrower) pursuant to the Lease; or

(v) bound by any amendment or change in any term of the Lease or by
any waiver of any term of the Lease which was not approved in writing by
Borrower; or

(vi) liable for the return of any security deposit delivered to any
prior lessor (including Borrower) unless such security deposit shall have been
separately delivered to Lender; or

(vii) bound by any obligation to construct improvements or otherwise
expend funds which are capital in nature, except for items of ordinary
maintenance and repair; or

(viii) bound by any option or other right to acquire all or any part
of a Facility; or

(ix) bound by any asbestos, environmental or hazardous substances
indemnification in favor of a tenant.

Borrower shall pay Lender the lease review fee provided in SUBSECTION
7.1 in connection with the review of the applicable Lease and/or the preparation
of any non-disturbance agreement, in addition to Lender's reasonable attorney's
fees and expenses incurred in connection with the review and preparation,
whether or not such non-disturbance agreement is executed.

7.3 SMITH'S PURCHASE OPTION.

Pursuant to a Fourth Amendment to Lease dated September 20, 1994, Borrower
paid to Smith's $25,000 to obtain the

<PAGE>

right to cancel the purchase option contained in the Smith's lease, which
right must be exercised prior to September 19, 1995. Borrower covenants and
agrees that during its ownership of Paradise Marketplace it shall either (i)
maintain in effect a written agreement with Smith's to unconditionally
terminate Smith's purchase option for an amount not to exceed $600,000 (and
pay any option fee or other consideration necessary to extend such option),
or (ii) exercise its right to terminate Smith's purchase option by paying
Smith's the contract amount. Borrower shall provide evidence to Lender of
its compliance with the provisions of this SUBSECTION 7.3 on an on-going
basis.

8. CASUALTIES AND CONDEMNATION

8.1 INSURANCE PROCEEDS.

With respect to any loss or damage to a Facility caused by fire or other
casualty exceeding in any one instance the sum of Two Hundred Fifty Thousand
Dollars ($250,000):

A. Borrower will notify Lender in writing promptly after loss or damage
caused by fire or other casualty to all or any part of a Facility, and prior to
the making of any repairs thereto. Borrower will furnish to Lender within sixty
(60) days after such loss or damage (i) preliminary plans and specifications for
the repair and reconstruction of the Facility (the "Preliminary Plans and
Specifications"); and (ii) evidence satisfactory to Lender (1) of the cost of
repair or reconstruction in accordance with the Preliminary Plans and
Specifications, (2) that sufficient funds are available and/or committed for the
benefit of Lender, including insurance proceeds, funds provided by Borrower,
payment and performance bond, or otherwise, to complete such repair or
reconstruction, and (3) that such repair or reconstruction may be completed in
accordance with all applicable Laws and Restrictions within the time frame
described in SUBSECTION 8.1C.(v) and that all necessary permits and approvals
have been or will be obtained.

B. All insurance proceeds on account of any damage to a Facility shall be
payable to, and deposited with, Lender.

<PAGE>

Lender, at its sole option, may (i) subject to SUBSECTION 8.1C, apply such
insurance proceeds in payment of the Indebtedness or in satisfaction of any
other Obligation in such order as Lender may determine, (ii) use such
insurance proceeds to repair or reconstruct the Improvements, (iii) release
such insurance proceeds to Borrower for repair or reconstruction of the
Improvements in accordance with the procedures described in SUBSECTION 8.1E,
or (iv) divide such proceeds in any manner among any such application, use or
release. No such application, use or release shall, however, extend or
postpone the due date of any installments under the Note or change the amount
of such installments or cure or waive any Event of Default or notice of Event
of Default under the Loan Documents or invalidate any act done pursuant to
such notice.

C. Notwithstanding the provisions of SUBSECTION 8.1B, if all or any part
of a Facility is damaged or destroyed (and Borrower has not made an election
under SUBSECTION 5.3 not to repair or rebuild) or any part of a Facility is
taken by any public or quasi-public authority through condemnation, eminent
domain, deed in lieu thereof, or otherwise, Lender shall make the net amount of
all insurance proceeds and condemnation awards received by Lender after
deduction of Lender's reasonable costs and expenses, if any, in collection of
the same and costs associated with Lender's review of the Preliminary Plans and
Specifications and other costs associated with disbursement of such proceeds
(the "Net Proceeds"), available for the repair and reconstruction of a Facility
(or so much thereof as was not condemned) pursuant to the procedures described
in SUBSECTION 8.1E, provided that (i) no Event of Default or Potential Event of
Default shall have occurred and shall be continuing, (ii) Borrower has complied
with the provisions of SUBSECTION 8.1A and Lender has approved in its reasonable
discretion the Preliminary Plans and Specifications, (iii) Borrower shall
proceed with the reconstruction of a Facility as nearly as possible to the
condition it was in immediately prior to the occurrence of such casualty or
taking or better (the "Occurrence") and in accordance with the Preliminary Plans
and Specifications (and any changes thereto reasonably approved by Lender) as
promptly as is practicable after the Occurrence, but in no event later than
three (3) months after the Occurrence, (iv) Lender shall be satisfied that no

<PAGE>

Leases with an aggregate rentable square footage of fifty percent (50%) or
more of the total rentable square feet contained in the Facility prior to the
Occurrence, shall be terminated as a result of the Occurrence, (v) Lender
shall be satisfied that such reconstruction can be completed no later than
twelve (12) months after the Occurrence (or such longer period as may be
required in Lender's reasonable discretion, up to a maximum period of
eighteen (18) months) (vi) Lender shall be satisfied that the reconstruction
can be completed at a cost which does not exceed the Net Proceeds or, in the
event the cost of such restoration exceeds the Net Proceeds, Borrower shall
have satisfied the requirements set forth in SUBSECTION 8.1F(i) or SUBSECTION
8.1F(ii), (vii) Lender shall be satisfied that Borrower (whether with rental
loss insurance proceeds or otherwise) will continue to be able to timely pay
all payments as they become due on the Indebtedness during such period of
repair and reconstruction, (viii) Borrower shall cause such reconstruction to
be completed with due diligence as promptly as possible after commencement,
but in no event later than twelve (12) months after the Occurrence (or such
longer period as may be required in Lender's reasonable discretion, up to a
maximum period of eighteen (18) months), (ix) Lender determines that repair
or reconstruction is economically feasible and that the Security Pool
Covenants shall continue to be satisfied at all times, and (x) Borrower shall
have entered into a general construction contract acceptable in all respects
to Lender for completion of the repair or reconstruction, which contract must
include provision for a retainage of not less than ten percent (10%) until
full completion of the repair or reconstruction.

D. Lender shall be entitled to settle and adjust all insurance claims
during an Event of Default or Potential Event of Default and Lender's written
consent shall be required for any claims for damages of more than $500,000, and
Lender may deduct and retain from the proceeds of any insurance the amount of
all reasonable expenses incurred by Lender in connection with any settlement or
adjustment.

E. The Net Proceeds and any additional funds deposited by Borrower with
Lender shall constitute additional security for the Loan and shall, if the
amount is over $500,000, be deposited in an interest-bearing account. Borrower
shall

<PAGE>

execute, deliver, file and/or record, at its own expense, such documents and
instruments as Lender deems necessary or advisable to grant to Lender a
perfected, first priority security interest in the Net Proceeds and such
additional funds. Lender shall pay the Net Proceeds to the Borrower from
time to time during the course of the restoration, subject to the following
terms and conditions:

(1) The work shall be administered and overseen by an architect or
engineer approved by Lender ("Architect"). Complete copies of the
final plans and specifications for the work (the "Final Plans and
Specifications"), approved by all governmental authorities whose
approval is required, and bearing the sealed and signed approval
thereof by the Architect and accompanied by the Architect's
signed estimate of the entire cost of completing the work, shall
be delivered to Borrower;

(2) Each request for payment shall be made upon seven (7) days' prior
notice to Lender and shall be accompanied by a certificate to be
made by the Architect stating that (i) all of the work completed
has been done in compliance with the Plans and Specifications, as
approved by Lender, (ii) the sum requested is justly required to
reimburse Borrower for payments by Borrower to, or is justly due
to, the contractor, subcontractors, materialmen, laborers,
engineers, architects or other persons rendering services and
materials for the work (giving a brief description of such
services and materials) and, when added to all sums previously
paid out by Lender, does not exceed the value of the work done to
the date of such certificate, and (iii) the amount of such
proceeds remaining with Lender are sufficient on completion of
the work to pay for the same in full (giving in such reasonable
detail as Lender may require an estimate of the cost of such
completion);

<PAGE>

(3) Each request shall be accompanied by waivers of lien satisfactory to
Lender covering that part of the work for which payment or
reimbursement is being requested and, if required by Lender, by a
search prepared by a title company satisfactory to Lender, that
there has not been filed with respect to the Facility any
mechanics', materialmen's or other lien;

(4) The request for any payment after the work has been completed shall be
accompanied by a copy of any certificate or certificates required
by any Laws and Restrictions for legal occupancy of the
Improvements;

(5) Borrower shall deliver to Lender certified or photostatic copies of
all permits and approvals required by any Laws and Restrictions
in connection with the commencement and conduct of the work; and

(6) Borrower shall deliver to Lender a surety bond for and/or guaranty of
the payment for and completion of the work, which bond or
guaranty shall be in form and substance satisfactory to Lender
and in an amount not less than the Architect's estimate of the
entire cost of completing the work.

F. Notwithstanding anything to the contrary contained herein, or in any of
the insurance policies, all proceeds paid to Borrower under such policies shall
immediately be delivered to Lender. If the Net Proceeds exceed the costs of
completion of the restoration of a Facility, such excess proceeds shall belong
and be retained by and/or paid over to Lender to be applied against the
Indebtedness. If at any time the Net Proceeds shall not, in Lender's opinion,
be sufficient to pay in full the balance of the costs which will be incurred in
connection with the repair and reconstruction of a Facility and all payments as
they come due on the Indebtedness and all other obligations which are or may be
secured by a lien on a Facility during the reconstruction period, Borrower
shall, prior to receiving any further disbursement, either (i) complete, using
its own

<PAGE>

funds and not borrowed funds, such portion of the reconstruction as shall be
sufficient to render the Net Proceeds sufficient to complete the
reconstruction, or (ii) deposit the deficiency with Lender before any further
disbursement of the Net Proceeds shall be made, which deficiency deposit
shall be held by Lender in an interest bearing special account and shall be
disbursed on the same conditions applicable to the Net Proceeds. Lender
shall remit to Borrower the balance, if any, of any such deficiency deposit
remaining after completion of the reconstruction.

8.2 ADDITIONAL PROVISIONS RELATING TO CONDEMNATION.
Borrower, immediately upon obtaining knowledge of the commencement of any
proceedings for the condemnation of an entire Facility or any material part
thereof, will notify Lender of the pendency of such proceedings. Lender may
participate in any such proceedings and Borrower from time to time will deliver
to Lender all instruments requested by Lender to permit such participation. In
the event of such condemnation proceedings, the award or compensation payable is
hereby assigned to and shall be paid to Lender. Lender shall be under no
obligation to question the amount of any such award or compensation and may
accept the same in the amount in which the same shall be paid. In any such
condemnation proceedings the Lender may be represented by counsel selected by
the Lender, the cost of such counsel to be borne by Borrower. The proceeds of
any award or compensation so received shall, at the option of Lender, either be
applied to the prepayment of the Indebtedness or be paid over to the Borrower
for restoration of the Improvements in accordance with the provisions of
SUBSECTION 8.1C. Borrower hereby unconditionally and irrevocably waives all
rights of a property owner under applicable law providing for the allocation of
condemnation proceeds between a property owner and a lien holder.

9. EVENT OF DEFAULT

9.1 DEFINITION. If one or more of the following events shall have
occurred and be continuing:

<PAGE>

A. Borrower shall fail to pay within five (5) days of the date when due
any part of the Indebtedness;

B. Borrower shall be in default under any of the Security Pool Covenants;

C. Subject to SUBSECTION 9.4, Borrower shall fail to timely observe,
perform or discharge any Obligation or any material obligations on its part to
be performed or observed under any other agreement relating to a Facility
(including, without limitation, obligations under the CRE Debt) other than as
described in SUBSECTIONS 9.1A, C, D, E, F, G, H, I AND J, and any such failure
shall remain unremedied for thirty (30) days or such lesser period as may be
otherwise specified in the applicable Loan Document or agreement (the "Grace
Period") after notice to Borrower of the occurrence of such failure; provided,
however, that the Grace Period may be extended to ninety (90) days if: (a)
Lender determines in good faith that (i) such default cannot be cured within the
Grace Period but can be cured within ninety (90) days, (ii) no lien or security
interest created by the Loan Documents shall be impaired prior to the completion
of such cure, and (iii) Lender's immediate exercise of any remedies provided
hereunder or by law is not necessary for the protection or preservation of a
Facility or Lender's security interest therein, and (b) Borrower shall
immediately commence and diligently pursue the cure of such default;

D. Borrower shall fail to timely observe, perform or discharge any
provision of paragraph 4.2 of any Deed of Trust or Mortgage;

E. Borrower, as lessor or sublessor, as the case may be, shall assign the
rents or income of a Facility or any part thereof (other than to Lender) without
first obtaining the written consent of Lender;

F. Default by Borrower after the expiration of all applicable grace or
cure periods under any agreement other than the Loan Documents to which Borrower
is a party, which agreement relates to the borrowing of money by Borrower from
any Person, and such default might have a material adverse

<PAGE>

effect upon the value or the operation of a Facility, or the security for the
Loan;

G. Any representation or warranty made by Borrower in, under or pursuant
to the Loan Documents was false or misleading in any material respect as of the
date on which such representation or warranty was made or deemed remade;

H. Any claim or lien shall be filed against a Facility or any part
thereof, whether or not such lien shall be prior to this Mortgage, which shall
be maintained for a period of thirty (30) days without discharge, satisfaction
or adequate bonding;

I. Any of the Loan Documents, the Hazardous Substances Agreements or the
Fraudulent Conveyance Indemnity Agreement, at any time after their respective
execution and delivery and for any reason, other than an act or omission of
Lender, shall cease to be in full force and effect or be declared null and void,
or shall cease to constitute valid and subsisting liens and/or valid and
perfected security interests in and to a Facility, or Borrower shall contest or
deny in writing that it has any further liability or obligation under any of the
Loan Documents; or

J. Default by Borrower after the expiration of all applicable grace or
cure periods, if any, under the Hazardous Substances Agreements or the
Fraudulent Conveyance Indemnity Agreement,

THEN and in any such event Lender may, by written notice delivered to
Borrower, declare Borrower to be in default. Upon the occurrence of
such event and the giving of such notice where required, the same
shall constitute an event of default (an "Event of Default").

9.2 BANKRUPTCY. It shall constitute an Event of Default and a bankruptcy
default (a "Bankruptcy Default") hereunder without the requirement of any notice
if one or more of the following events shall have occurred and be continuing:

A. Borrower, or any general partner of Borrower, any parent company of
such partner, or any other owner of a Facility or any interest therein, if other
than a Loan Party

<PAGE>

(individually, an "Affected Party," collectively, the "Affected Parties"),
generally fails to pay its debts as they become due or admits in writing its
inability to pay its debts, or makes a general assignment for the benefit of
creditors;

B. Any Affected Party commences any case, proceeding or other action
seeking reorganization, arrangement, adjustment, liquidation, dissolution or
composition of it or its debts under any law relating to bankruptcy, insolvency,
reorganization or relief of debtors, or seeks to have an order for relief
entered against it as debtor, or seeks appointment of a receiver (a "Receiver"),
for it or for all of any substantial part of its property (collectively, a
"Proceeding");

C. Any Affected Party shall take any action to authorize any of the
actions set forth above in clause (2);

D. Any Proceeding is commenced against any Affected Party, and such
Proceeding (i) results in an entry of an order for relief against it which is
not fully stayed within seven (7) business days after the entry thereof, or (ii)
remains undismissed for an aggregate of forty-five (45) days (whether or not
consecutive); or

E. A Receiver shall have been appointed with respect to (i) any Affected
Party; or (ii) all or any substantial part of the property of any Affected
Party.

9.3 ACCELERATION. Upon the occurrence of a Bankruptcy Default, all of the
Indebtedness shall become immediately due and payable together with any
prepayment fee due in accordance with the terms of the Notes, without
presentment, demand, protest or notice of any kind. Upon the occurrence of any
other Event of Default, Lender may at any time declare all of the Indebtedness
to be due and payable and the same shall thereupon become immediately due and
payable, together with any prepayment fee due in accordance with the terms of
the Notes, without any further presentment, demand, protest or notice of any
kind. Upon the occurrence of an Event of Default, Lender may, in its sole
discretion, also do any of the following:

<PAGE>

(i) in person, by agent, or by a Receiver, and without regard
to the adequacy of security, the solvency of Borrower or
the condition of the Facilities, enter upon and take
possession of one or more of the Facilities, or any part
thereof, in its own name and do any acts which Lender
deems necessary to preserve the value, marketability or
rentability of such Facilities; sue for or otherwise collect the
rents, issues and profits therefrom, including those past due
and unpaid, and apply the same, less costs and expenses of
operation and collection, including reasonable attorneys'
fees, against the Indebtedness, all in such order as
Lender may determine. The entering upon and taking
possession of said property, the collection of such rents,
issues and profits and the application thereof as aforesaid
shall not cure or waive any default or notice of default hereunder
or invalidate any act done pursuant to such notice;

(ii) commence an action to foreclose one or more of the Deeds of Trust or
Mortgages in the manner provided thereunder or by law;

(iii) with respect to any Personalty (as defined in the applicable Deed
of Trust or Mortgage, proceed as to both the real and personal
property in accordance with Lender's rights and remedies in respect of
the Facility, or proceed to sell said Personalty separately and
without regard to the Land in accordance with Lender's rights and
remedies as to personal property;

(iv) deliver to Borrower a written declaration of default and demand for
sale, and a written notice of default and election to cause one or
more of the Facilities to be sold, which notice Lender shall cause to
be duly filed for record.

<PAGE>

9.4 DEFINITION OF MATERIALITY IN CERTAIN CIRCUMSTANCES.

Lender hereby confirms that for purposes of SUBSECTION 9.1C of this
Agreement, an Event of Default shall not exist for any breach of a "non-material
obligation". For purposes of this SUBSECTION 9.4, a "non-material obligation"
shall mean an agreement the breach of which would not have a material adverse
effect upon the business, properties or condition (financial or otherwise) or
the operations of Borrower as a whole, or upon the Security Pool, as a whole.
Notwithstanding the foregoing, in no event shall any of the following agreements
be considered a "non-material obligation": (i) the Loan Documents, (ii) the
Hazardous Substances Agreements, (iii) the Fraudulent Conveyance Indemnity
Agreement, (iv) any obligations related to the CRE Debt, (v) any leases with
respect to any Facility, (vi) any agreement which relates to the borrowing of
money by Borrower, and (vi) any reciprocal easement agreement affecting a
Facility.

10. LIMITATION ON PERSONAL LIABILITY

THE PROVISIONS OF THIS SECTION 10 SHALL CONTROL AND SUPERSEDE ANY CONTRARY
PROVISION IN ANY LOAN DOCUMENT OR HAZARDOUS SUBSTANCES AGREEMENT RESPECTING THE
PERSONAL LIABILITY OF BORROWER.

10.1 LIMITED RECOURSE. Except as expressly set forth in SUBSECTION 10.2, the
recourse of Lender with respect to the Indebtedness shall be solely to the
property encumbered by the Deeds of Trust and/or Mortgages and any Letter of
Credit or other sums or other property then on deposit with or in which Lender
then has a security interest.

10.2 LIMITATIONS ON NON-RECOURSE. Notwithstanding anything to the contrary
contained in any Loan Document, nothing shall be deemed in any way to impair,
limit or prejudice at any time or from time to time the rights of Lender:

(i) in foreclosure proceedings or in any ancillary proceedings brought
to facilitate Lender's foreclosure on one or more Facilities or any portion
thereof;

<PAGE>

(ii) to recover from Borrower damages or costs (including without
limitation reasonable attorneys fees) incurred by Lender as a result of
waste by Borrower;

(iii) to recover from Borrower any condemnation or insurance proceeds
attributable to the Property which were not paid to Lender or used to
restore in accordance with the terms of this Agreement.

(iv) to recover from Borrower any rents, profits, security deposits,
advances, rebates, prepaid rents or other similar sums attributable to the
Facilities collected by or for the Borrower following an Event of Default
and not properly applied to the reasonable fixed and operating expenses of
the applicable Facility, including payments of the Loan;

(v) to pursue the personal liability of Borrower under the provisions of
SUBSECTION 6.5 hereof, including any indemnification provisions under said
subsection;

(vi) to exercise any specific rights or remedies afforded Lender under
any other provisions of the Loan Documents that are not inconsistent
with SUBSECTION 10.1 hereof;

(vii) to recover from Borrower the amount of any unpaid taxes,
assessments, utility charges, and/or the proceeds of any purchase option
exercised by any tenant under a Lease and not paid to Lender effecting any
Facility and to collect from Borrower any sums expended by Lender necessary
to fulfill the obligations of Borrower, as lessor, under any leases
affecting the Facility prior to foreclosure;

(viii) to pursue any personal liability of Borrower under the Hazardous
Substances Agreements;

(ix) to pursue any personal liability of Borrower under the Fraudulent
Conveyance Indemnity Agreement

<PAGE>

(x) executed by Borrower in favor of Lender as of the Effective Date;
to recover from Borrower all legal fees and costs (including any allocated
costs of in-house counsel to the extent not redundant with services
performed by outside counsel) and other expenses incurred by Lender in
enforcing any right it may have under the Loan Documents following an Event
of Default;

(xi) to recover from Borrower for all damages incurred by Lender as a
result of Borrower's execution, amendment, modification or termination of
any Lease without the prior written consent of Lender if such consent is
required under the terms of this Agreement; and

(xii) to recover from Borrower for all damages incurred by Lender as a
result of any material misrepresentation by Borrower in connection with
any Facility or the Loan Documents.

10.3 FURTHER LIMITATION. The agreement contained in this SECTION 10 to limit
the personal liability of Borrower shall become either null and void and of no
further force of effect (as to SUBSECTIONS i and ii) or limited as provided
below (as to SUBSECTIONS III and IV) in the event:

(i) of any breach or violation of PARAGRAPH 4.2 of any Deed of Trust or
Mortgage; or

(ii) of any fraud by Borrower in connection with the Facilities or the
Loan Documents; or

(iii) that a default shall have occurred under a Hazardous Substances
Agreement, unless prior to the expiration of any cure period relating to
such default, (i) such default shall have been duly and completely cured
and (ii) any claims by any party arising out of or relating to such
default, which are pending, threatened, or reasonably anticipated against
Borrower, or the Facility shall have been

<PAGE>

duly paid, settled or waived (provided such recourse liability shall be
limited to the Appraised Value of the Facility without regard to any
environmental impairment); or

(iv) any Facility is determined to be "environmentally impaired" pursuant
to the provisions of Section 726.5 of the California Code of Civil
Procedure or any other similar state statute in the jurisdiction where the
Facility is located (provided such recourse liability in connection with
such Facility shall be limited to the Appraised Value of the Facility
without regard to any environmental impairment).

11. WAIVERS

11.1 WAIVER OF SUBROGATION AND CONTRIBUTION.

A. Each of MIT, Metro-Sierra, Progress Center and IndTennCo hereby
absolutely and irrevocably waives any and all (a) rights which it may have or
may now or hereafter acquire by way of subrogation, reimbursement or
indemnity against each other by virtue of any action taken by Lender with
respect to any of its rights or remedies under any of the Loan Documents or
otherwise (including, without limitation, by reason of any payments made by
MIT, Metro-Sierra, Progress Center or IndTennCo as the case may be, with
respect to any of the Notes), and (b) other claims or rights against each
other relating to this Agreement, the Loan Documents or any of the
obligations of each other to Lender.

B. EACH OF MIT, METRO-SIERRA, PROGRESS CENTER AND INDTENNCO
ACKNOWLEDGES AND AGREES THAT PURSUANT TO THE FOREGOING PARAGRAPH, IT HAS
WAIVED, AMONG OTHER SPECIFIC RIGHTS GRANTED TO IT AT LAW OR IN EQUITY, ITS
RIGHTS, IF ANY TO SUBROGATION, REIMBURSEMENT AND/OR INDEMNITY AGAINST EACH OF
THE OTHER BORROWERS. SUCH WAIVER INCLUDES, WITHOUT LIMITATION, A WAIVER OF
EACH OF MIT, METRO-SIERRA, PROGRESS CENTER AND INDTENNCO RIGHTS THROUGH
SUBROGATION, AFTER PAYMENT OF ITS OBLIGATIONS UNDER ANY OF THE LOAN DOCUMENTS
TO WHICH IT IS A PARTY AND THE APPLICATION OF SUCH PAYMENT

<PAGE>

BY LENDER TO THE INDEBTEDNESS EVIDENCED BY ANY NOTE WITH RESPECT TO WHICH IT IS
NOT THE MAKER, TO BE SUBSTITUTED IN PLACE OF LENDER WITH RESPECT TO THE
OBLIGATIONS OF SUCH OTHER BORROWER SUCH THAT IT COULD SUCCEED TO LENDER'S
RIGHTS, REMEDIES AND/OR SECURITY RELATING TO SUCH OBLIGATIONS AND ASSERT A CLAIM
AGAINST SUCH OTHER BORROWER. CERTAIN AUTHORITIES HAVE DETERMINED THAT, IN THE
ABSENCE OF AN EFFECTIVE WAIVER, PARTICULAR ACTIONS OF A LENDER THAT IMPAIR OR
DESTROY A GUARANTOR'S OR OTHER SURETY'S SUBROGATION RIGHTS COULD PROVIDE SUCH
GUARANTOR OR OTHER SURETY WITH A DEFENSE TO THE PAYMENT AND PERFORMANCE OF ITS
OBLIGATIONS UNDER ITS GUARANTY OR OTHER SURETY OBLIGATION. BY WAY OF
EXAMPLE, BUT NOT OF LIMITATION, COURTS HAVE HELD THAT, ABSENT AN EFFECTIVE
WAIVER, A GUARANTOR OR OTHER SURETY MAY BE EXONERATED FROM ITS OBLIGATIONS
UNDER A GUARANTY OR OTHER SURETY OBLIGATION, AS APPLICABLE, IF A LENDER
COMPROMISES OR EXTINGUISHES THE GUARANTOR'S OR OTHER SURETY'S, AS THE CASE
MAY BE, SUBROGATION RIGHTS BY ELECTING TO FORECLOSE NON-JUDICIALLY, BY POWER
OF SALE, ON REAL PROPERTY SECURITY THEREBY INVOKING THE DEFICIENCY BAR OF
CALIFORNIA CODE OF CIVIL PROCEDURE SECTION 580D. EACH OF MIT, METRO-SIERRA,
PROGRESS CENTER AND INDTENNCO AGREES THAT SUCH DEFENSES ARE INAPPLICABLE IN
LIGHT OF ITS IRREVOCABLE WAIVER OF SUBROGATION, REIMBURSEMENT AND/OR
INDEMNITY RIGHTS AGAINST EACH OTHER SET FORTH IN THE FOREGOING PARAGRAPH AND
THAT NO ACTION BY LENDER IN ENFORCING ITS RIGHTS AND REMEDIES AGAINST SUCH
OTHER BORROWER OR OTHERWISE MAY COMPROMISE OR EXTINGUISH SUCH RIGHTS BECAUSE
EACH SUCH RIGHT HAS BEEN IRREVOCABLY WAIVED BY IT HEREUNDER. EACH OF MIT,
METRO-SIERRA, PROGRESS CENTER AND INDTENNCO HEREBY ACKNOWLEDGES THAT IT HAS
BEEN NOTIFIED OF THE NATURE OF ALL OF ITS RIGHTS AND DEFENSES AS A GUARANTOR
OR SURETY AND HAS KNOWINGLY AND WITH THE ADVICE OF LEGAL COUNSEL WAIVE SUCH
RIGHTS AND DEFENSES AS SET FORTH HEREIN. EACH OF THE WAIVERS CONTAINED
HEREIN WERE SEPARATELY BARGAINED FOR.

INITIALS:
------- ------- ------- -------

<PAGE>

11.2 OBLIGATIONS INDEPENDENT; WAIVERS.

A. Each of MIT, Metro-Sierra, Progress Center and IndTennCo agrees that
(i) its obligations and liabilities under any of the Loan Documents to which it
is a party are joint and several and are independent of and in addition to the
undertakings of any other Borrower pursuant to the Loan Documents to which such
other Borrower is a party, any Note(s) made and delivered by such other Borrower
in connection therewith or any other collateral security given to secure the
same, (ii) a separate action may be brought to enforce the provisions of such
Loan Documents whether any other Borrower is a party in any such action or not,
(iii) Lender may at any time, or from time to time, in its sole discretion (a)
extend or change the time of payment and/or performance and/or the manner, place
or terms of payment and/or performance of all or any of the obligations secured
by such Loan Documents; (b) exchange, release and/or surrender all or any of the
collateral security, or any part thereof, by whomsoever deposited, which is now
or may hereafter be held by the Lender in connection with all or any of such
obligations; (c) sell and/or purchase all or any such collateral at public or
private sale, or at any broker's board, in the manner permitted by law and after
giving any notice which may be required, and after deducting all costs and
expenses of every kind for collection, sale or delivery, the net proceeds of any
such sale may be applied by Lender upon all or any of such sale may be applied
by Lender upon all or any of such obligations; and (d) settle or compromise with
such other Borrower, and/or any other person liable thereon, any and all of such
obligations, and/or subordinate the payment of same, or any part thereof, to the
payment of any other debts or claims, which may at any time be due or owing to
Lender and/or any other person or corporation, and (iv) Lender shall be under no
obligation to marshal any assets in favor of MIT, Metro-Sierra, Progress Center
or IndTennCo as the case may be, or in payment of any or all of such
Obligations.

B. Each of MIT, Metro-Sierra, Progress Center and IndTennCo hereby
waives (i) presentment, demand, protest, notice of acceptance, notice of
dishonor, notice of nonperformance and any other notice with respect to any
of the obligations secured by any of the Loan Documents to

<PAGE>

which it is a party and this Agreement, and promptness in commencing suit
against any party thereto or liablethereon, and/or in giving any notice to or
making any claim or demand hereunder upon it, (ii) any right to require Lender
to (a) proceed against other Borrower liable with respect to such obligations,
(b) proceed against or exhaust any security held from such other Borrower, or
(c) pursue any remedy in Lender's power whatsoever; (iii) any defense arising
by reason of any disability or other defense of such other Borrower or by reason
of the cessation from any cause whatsoever of the liability of such other
Borrower other than full payment of such obligations; (iv) any defense it may
acquire by reason of Lender's election of any remedy against it or any other
Borrower or both, including, without limitation, any defense which, absent this
waiver, it would have that its obligations and liabilities under the Loan
Documents to which it is a party could be exonerated based upon Lender's
election to foreclose on its collateral by conducting a non-judicial
foreclosure under the power of sale set forth in any Deed of Trust even
though certain of its rights may thereby be impaired or extinguished under
applicable law (including, without limitation, an anti-deficiency statutes of
the States of Arkansas, Georgia, Michigan, Nevada, Washington, Tennessee,
Alabama,

<PAGE>

Illinois, Mississippi, Washington, and/or Texas; (v) without
limiting the waivers made in clause (iv) above, all rights and defenses
arising out of an election of remedies by the creditor, even though that
election of remedies, such as a nonjudicial foreclosure with respect to
security for a guaranteed obligation, has destroyed the guarantor's right of
subrogation and reimbursement against the principal by the operation of
section 280d of the California Code of Civil Procedure or otherwise; (vi) to
the fullest extent permitted by applicable law, all rights and benefits
purporting to reduce a guarantor's obligations in proportion to the principal
obligation (including, without limitation, those set forth in Section 2809 of
the California Civil Code and any similar law in the States of Arkansas,
Georgia, Michigan, Nevada, Washington, Tennessee, Alabama, Illinois,
Mississippi, Washington, and/or Texas; (vii) to the fullest extent permitted
by law, all rights and benefits under (a) Section 580a of the California Code
of Civil Procedure, and/or any other similar law in the States of Arkansas,
Georgia, Michigan, Nevada, Washington, Tennessee, Alabama, Illinois,
Mississippi, Washington, and/or Texas, purporting to limit the amount of any
deficiency judgment which might be recoverable following the occurrence of a
trustee's sale under a deed of trust, (b) Section 580b of the California Code
of Civil Procedure and/or any other similar law in the States of Arkansas,
Georgia, Michigan, Nevada, Washington, Tennessee, Alabama, Illinois,
Mississippi, Washington, and/or Texas stating that no deficiency may be
recovered on a real property purchase money obligation, (c) Section 580d of
the California Code of Civil Procedure and/or any other similar law in the
States of Arkansas, Georgia, Michigan, Nevada, Washington, Tennessee,
Alabama, Illinois, Mississippi, Washington, and/or Texas stating that no
deficiency may be recovered on a note secured by a deed of trust on real
property in case such real property is sold under the power of sale contained
in such deed of trust, and (d) Section 726 of the California Code of Civil
Procedure and/or any other similar law in the States of Arkansas, Georgia,
Michigan, Nevada, Washington, Tennessee, Alabama, Illinois, Mississippi,
Washington, and/or Texas stating that there may be but one form of action on an
indebtedness secured by real property, if such sections, or any of them, have
any application hereto or any application to the undersigned; (viii) to the
fullest extent permitted by law, (a) any defense arising as a result of Lender's
election, in any proceeding instituted under the Bankruptcy Code, of the
application of Section 1111(b)(2) of the Bankruptcy Code, (b) any defense based
on any borrowing or grant or a security interest under Section 364 of the
Bankruptcy Code, and (c) without limiting the generality of the foregoing or
any other provision hereof, all rights and benefits which might otherwise be
available to the undersigned under California Civil Code Sections 2810, 2819,
2822, 2839, 2845, 2849, 2850, 2899, and 3433, and/or any other similar law in
the States of Arkansas, Georgia, Michigan, Nevada, Washington, Tennessee,
Alabama, Illinois, Mississippi, Washington, and/or Texas; and (ix) the
benefit of any statute of limitations affecting its liability under any of
the Loan Documents to which it is a party or the enforcement thereof,
including, without limitation, any rights arising under applicable law
(including, without limitation, Section 359.5 of the California Code of Civil
Procedure).

11.3 INDEPENDENT ACCESS TO FINANCIAL INFORMATION.

<PAGE>

Each of MIT, Metro-Sierra, Progress Center and IndTennCo warrants that (i)
to the extent any of the Loan Documents to which it is a party secure the
obligations of any other Borrower to Lender, such Loan Documents were executed
and/or amended at the request of such other Borrower, (ii) Lender has made no
representation to Borrower, Metro-Sierra, Progress Center or IndTennCo as to the
creditworthiness of any other Borrower, and (iii) it has established adequate
means of obtaining from each other Borrower on a continuing basis financial and
other information pertaining to such other Borrower's financial condition. Each
of MIT, Metro-Sierra, Progress Center and IndTennCo agrees to keep adequately
informed from such means as it deems appropriate of any facts, events or
circumstances which might in any way affect its risks and liabilities under such
Loan Documents and further agrees that Lender shall have no further obligation
to disclose to it information or materials required in the course of Lender's
relationship with such other Borrower.

11.4 MULTIPLE OBLIGATIONS.

Borrower understands, acknowledges and agrees that each of the Notes is a
separate and distinct legal obligation and that the execution of a single Loan
Administration Agreement and references herein to the "Loan" is for purposes of
administrative convenience only. Borrower further understands, acknowledges and
agrees that the occurrence of an Event of Default under any of the Notes or
other Loan Documents shall constitute an Event of Default under all other Notes
and other Loan Documents and shall entitle Lender to exercise all of its rights
and remedies under all of the Loan Documents, including, without limitation,
accelerating the Maturity Date of any or all of the Notes and foreclosing the
liens of any or all of the Deeds of Trust or Mortgages in such order and manner
as Lender may elect in its sole and absolute discretion.

11.5 APPLICATION OF FORECLOSURE PROCEEDS.

In the event of a foreclosure (non-judicial or judicial) of any of the
Deeds of Trust or Mortgages encumbering any of the Facilities, Borrower agrees
that

61
<PAGE>

Lender shall have full and complete discretion to apply any proceeds from
the sale of the applicable Facility, after payment of any and all costs of
foreclosure, attorneys' and trustee's fees, and after satisfaction of the
foreclosed obligation (any such remaining proceeds being defined as the "Excess
Proceeds") to the prepayment or repayment (together with applicable Prepayment
Premium, if any) of the indebtedness evidenced by any of the other Notes
Borrower hereby irrevocably assigns, transfers and conveys to Lender any and all
of its right, title and interest in and to the Excess Proceeds and consents to
the prepayment or repayment of indebtedness hereinabove provided. Borrower
hereby waives any right to require Lender to (i) marshal any assets of Borrower
(including, without limitation, the Facilities or (ii) any right to require a
sale in inverse order of alienation in the event of foreclosure of the liens and
security interests created by the Deeds of Trust, the Mortgages or any of the
other Loan Documents.

12. MISCELLANEOUS

12.1 AMENDMENTS AND WAIVERS.

No amendment, modification, termination or waiver of any provision of this
Agreement any loan document or of the Notes, or consent to any departure by
Borrower therefrom, shall in any event be effective without the written
concurrence of Lender. No amendment, modification, termination or waiver of any
provision of any Note shall be effective without the written concurrence of the
holder of that Note. Any waiver or consent shall be effective only in the
specific instance and for the specific purpose for which it was given. No
notice to or demand on Borrower in any case shall entitle Borrower to any other
or further notice or demand in similar or other circumstances. Any amendment,
modification, termination, waiver or consent effected in accordance with this
SUBSECTION 12.1 shall be binding upon each holder of the Notes at the time
outstanding, each future holder of the Notes, and, if signed by Borrower, on
Borrower. In the event of any inconsistency between the terms and conditions of
the other Loan Documents and this Agreement, the terms and conditions of this
Agreement shall control.

62
<PAGE>

12.2 INDEPENDENCE OF COVENANTS.

All covenants hereunder shall be given independent effect so that if a
particular action or condition is not permitted by any of such covenants, the
fact that it would be permitted by an exception to, or be otherwise within the
limitations of, another covenant shall not avoid the occurrence of an Event of
Default or Potential Event of Default if such action is taken or condition
exists.

12.3 NOTICES.

Unless otherwise specifically provided herein, any notice or other
communication herein required or permitted to be given shall be in writing and
may be personally served, telecopied, telexed or sent by United States mail or
courier service and shall be deemed to have been given when delivered in person,
receipt of telecopy or telex or four (4) days after depositing it in the United
States mail, registered or certified, with postage prepaid and properly
addressed; PROVIDED that notices to Lender shall not be effective until received
by the person to whom the correspondence is addressed. For the purposes hereof,
the addresses of the parties hereto (until notice of a change thereof is
delivered as provided in this SUBSECTION 12.3) shall be as set forth next to
each party's name on the signature pages hereof.

12.4 SURVIVAL OF WARRANTIES AND CERTAIN AGREEMENTS.
All agreements, representations and warranties made herein shall survive
the execution and delivery of this Agreement, the making of the Loans hereunder
and the execution and delivery of the Notes.

<PAGE>

12.5 FAILURE OR INDULGENCE NOT WAIVER; REMEDIES
CUMULATIVE.

No failure or delay on the part of Lender or any holder of any Note in the
exercise of any power, right or privilege hereunder or under the Notes shall
impair such power, right or privilege or be construed to be a waiver of any
default or acquiescence therein, nor shall any single or partial exercise of any
such power, right or privilege preclude other or further exercise thereof or of
any other right, power or privilege. All rights and remedies existing under
this Agreement and the Notes are cumulative to, and not exclusive of, any rights
or remedies otherwise available.

12.6 SEVERABILITY.

In case any provision in or obligation under this Agreement or the Notes
shall be invalid, illegal or unenforceable in any jurisdiction, the validity,
legality and enforceability of the remaining provisions or obligations, or of
such provision or obligation in any other jurisdiction, shall not in any way be
affected or impaired thereby.

12.7 HEADINGS.

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

12.8 APPLICABLE LAW.

THIS AGREEMENT AND EACH OTHER LOAN DOCUMENT (EXCEPT TO THE EXTENT SUCH
OTHER LOAN DOCUMENT CONTAINS A CONTRARY EXPRESS CHOICE OF LAW PROVISION) SHALL
BE GOVERNED BY, AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE
INTERNAL LAWS OF THE STATE OF CALIFORNIA, WITHOUT REGARD TO CONFLICTS OF LAWS
PRINCIPLES.

12.9 SUCCESSORS AND ASSIGNS; SUBSEQUENT HOLDERS OF NOTES.

This Agreement shall be binding upon the parties hereto and their
respective successors and assigns and shall

<PAGE>

inure to the benefit of the parties hereto and the successors and assigns of
Lender. The terms and provisions of this Agreement shall inure to the
benefit of any assignee or transferee of the Notes, and in the event of such
transfer or assignment, the rights and privileges herein conferred upon
Lender shall automatically extend to and be vested in such transferee or
assignee, all subject to the terms and conditions hereof. Borrower's rights
or any interest therein hereunder may not be assigned without the prior
written consent of Lender.

<PAGE>

12.10 CONSENT TO JURISDICTION AND SERVICE OF PROCESS;
WAIVER OF JURY TRIAL.

All judicial proceedings arising out of or relating to this Agreement, any
Note or other Loan Document or any Obligation may be brought only in any state
or Federal court of competent jurisdiction in the State of California and by
execution and delivery of this Agreement, Borrower accepts for itself and in
connection with its properties, generally and unconditionally, the nonexclusive
jurisdiction of the aforesaid courts and waives any defense of forum non
conveniens, and irrevocably agrees to be bound by any judgment rendered thereby
in connection with this Agreement, such Note, such other Loan Document or such
Obligation; provided, however, Lender in its sole discretion shall have the
right to commence proceedings with respect to any Collateral Document (and the
Note governed by the laws of such state) in the state where the Facility secured
by such Collateral Document is located. ALL PARTIES TO THIS AGREEMENT
IRREVOCABLY WAIVE ALL RIGHT TO TRIAL BY JURY IN ANY JUDICIAL PROCEEDING ARISING
OUT OF OR RELATING TO THIS AGREEMENT, ANY NOTE OR ANY OBLIGATION. Borrower
designates and appoints Robert Dobbin on the date hereof, with offices at
Meridian Point Properties, 50 California Street, Suite 1600, San Francisco, CA
94111, and such other Persons as may hereafter be selected by Borrower
irrevocably agreeing in writing to so serve, as its agent to receive on its
behalf service of all process in any such proceedings in any such court, such
service being hereby acknowledged by Borrower to be effective and binding
service in every respect. A copy of any such process so served shall be mailed
by registered mail to Borrower at its address provided in the applicable
signature page hereto, except that unless otherwise provided by applicable law,
any failure to mail such copy shall not affect the validity of service of
process. If any agent appointed by Borrower refuses to accept service, Borrower
hereby agrees that service upon it by mail shall constitute sufficient notice.
Nothing herein shall affect the right to serve process in any other manner
permitted by law or shall limit the right of Lender to bring proceedings against
Borrower in the courts of any other jurisdiction.

<PAGE>

12.11 COUNTERPARTS.

This Agreement and any amendments, waivers, consents or supplements may be
executed in any number of counterparts and by different parties hereto in
separate counterparts, each of which when so executed and delivered shall be
deemed an original, but all such counterparts together shall constitute but one
and the same Agreement.

12.12 EXHIBITS AND SCHEDULES.

The exhibits and schedules annexed hereto are incorporated herein and
shall be a part of this Agreement.

IN WITNESS WHEREOF, this Agreement has been duly executed by a duly
authorized officer of each of Borrower (or Borrower's general partner) and
Lender as of the date first above written.

MERIDIAN INDUSTRIAL TRUST, INC.

455 Market Street By: /s/ Milton K. Reeder
------------------------------
17th Floor Printed Name: Milton K. Reeder
--------------------
San Francisco, CA 94105 Title: President
-----------------------------

INDTENNCO LIMITED PARTNERSHIP

By: Mem-Ind Corporation
Its General Partner

455 Market Street By: /s/ Milton K. Reeder
-------------------------
17th Floor Printed Name: Milton K. Reeder
----------------
San Francisco, CA 94105 Title: President
----------------------

METRO-SIERRA LIMITED PARTNERSHIP

By: Texmet Corporation
Its General Partner

<PAGE>

455 Market Street By: /s/ Milton K. Reeder
-------------------------
17th Floor Printed Name: Milton K. Reeder
----------------
San Francisco, CA 94105 Title: President
-----------------------

PROGRESS CENTER/ALABAMA LIMITED
PARTNERSHIP

By: Pro-Sierra Corporation
Its General Partner

455 Market Street By: /s/ Milton K. Reeder
-------------------------
17th Floor Printed Name: Milton K. Reeder
----------------
San Francisco, CA 94105 Title: President
----------------------

[Signatures continued on the next page]

<PAGE>

[Signatures continued from the previous page]

THE PRUDENTIAL INSURANCE COMPANY
OF AMERICA

Four Embarcadero Center By: /S/ FRED VAN OVERBEEK
Suite 2700 Printed Name: Fred van Overbeek
San Francisco, CA 94111 Title: Vice-President
Attention: Vice President,
Mortgage Capital

with a copy to:

The Prudential Insurance
Company of America
Four Embarcadero Center
Suite 2700
San Francisco, CA 94111
Attention: Regional Counsel

<PAGE>

EXHIBIT A
APPRAISED VALUE

Property Name: Appraised Value (000's)

INDUSTRIAL

Olive Branch 10,850
Lombard I 4,500
700 Pratt 1,700
900 Pratt 750
1090 Pratt 637
1100 Pratt 1,000
1180 Pratt 390
801 Lunt 1,004
1201 Busse 414
5101 W. 122nd Street 3,150
17025 Wallace 1,700
17129 Wallace 1,800
1000 Lunt 2,850
3400 West Lake 3,300
1815 Landmeier 1,929
2375 Touhy Ave 1,394
Birmingham I 1,700
Birmingham II 1,650
Delp Distribution 6,600
Pontiac 2,600
Port Distribution 3,800
Baxter 1,400
Valencia 4,800
Great Southwest 110 2,900
Wildwood/Pioneer 5,050
Northgate International 8,350
Valwood 20 3,350
Centreport 17 2,014
Park at Woodinville 10,500
-------
Total Industrial: $92,082

RETAIL

Seatac Village $10,761

A-1

<PAGE>

Meridian Village 7,567
Marietta Trade Center 8,400*
Paradise Marketplace 10,200
-------
Total Retail: $36,928

*$15,000,000 value for this property is reduced by the amount of Citicorp's $4.5
million first mortgage. The remainder is then multiplied by .8 as provided in
SUBSECTION 3.3B of the Loan Administration Agreement.

A-2

<PAGE>

LIGHT INDUSTRIAL/OFFICE

Willow Lake $3,738
Regal Row 201 1,009
Troy Tech II 6,500
Progress I 1,695
Progress II 2,000
8215 Building 430
Cypress A 1,400
Cypress C 1,500
-------
Total Light Industrial/Office: $18,272
- -------------------------------------------------
Total Meridian Industrial Trust $147,282

B-1

<PAGE>

EXHIBIT B
COMPLIANCE CERTIFICATE

I refer to the Loan Administration Agreement dated as of May 31, 1995
between The Prudential Insurance Company of America ("Lender"), as lender, and
Meridian Industrial Trust, Inc., a Maryland corporation, and Metro-Sierra
Limited Partnership, Progress/Center Limited Partnership and IndTennCo Limited
Partnership, collectively as borrower (as amended, supplemented or otherwise
modified from time to time, the "Loan Agreement"). Capitalized terms used in
this Certificate are used as defined in the Loan Agreement.

THE UNDERSIGNED HEREBY CERTIFIES TO LENDER THAT :

(1) I am the duly appointed Chief Financial Officer of Meridian
Industrial Trust, Inc., a Maryland corporation ("Borrower");

(2) To the best of my knowledge, each of the representations and
warranties of Borrower contained in the Loan Agreement is true, correct and
complete in all material respects as of the date of this Certificate;

(3) No Event of Default or Potential Event of Default has occurred
and is continuing under the Loan Agreement; and

(4) As of the date of this Certificate, Borrower and its subsidiaries
are in compliance with the provisions of SUBSECTION 4 of the Loan Agreement, as
supported by the computations set forth in Attachment No. 1 hereto.

Dated: _____, _____ MERIDIAN INDUSTRIAL TRUST,

By:__________________________
Title: Chief Financial Officer

B-1
B-1

<PAGE>

MERIDIAN INDUSTRIAL TRUST, INC.
ATTACHMENT NO. 1
TO COMPLIANCE CERTIFICATE

(The Certificate attached hereto is as of ______________, and pertains
to the twelve month period from _______________ to _______________.)

1. LOAN TO APPRAISAL RATIO
[NOT TO EXCEED 50%]

(a) Indebtedness: _________

(b) Appraised Value of the _________
Facilities:
(as determined by Lender)

2. NET OPERATING INCOME TO DEBT SERVICE
[MINIMUM RATIO: 2.2:1.0]

(a) Net Operating Income: _________

(b) Debt Service: _________

3. PROJECTED NET OPERATING INCOME TO DEBT SERVICE
[MINIMUM RATIO: 2.2:1.0]

(a) Projected Net Operating Income: _________

(b) Projected Debt Service: _________

B-2
B-2

<PAGE>

4. CASH FLOW TO DEBT SERVICE
[MINIMUM RATIO: 1.7 TO 1.0]

(a) Net Operating Income: _________

(b) Tenant Improvement Costs: _________

(d) Capital Expenditure Reserve: _________
(17CENTS/per square foot)

(e) (a)-(b)-(c)-(d) _________

(f) Debt Service: _________

(g) (e)/(f) _________

5. LETTER OF CREDIT
[NOT TO EXCEED $36 MILLION]

(a) Letter of Credit: ________

6. AVAILABLE EXCHANGE RIGHTS
[NOT TO EXCEED $40 MILLION]

(a) Initial Amount of Letter of Credit: _________

(b) Aggregate of Increases in _________
Letter of Credit (without
regard to decreases):

(c) Appraised Value of properties _________
substituted into Security Pool
pursuant to subsection 4.3 of Loan
Administration Agreement:

B-3
B-3
<PAGE>

(d) (a) + (b) + (c) _________

[see Available Substitution and Exchange Rights Log attached hereto]
B-4
B-4

<PAGE>

Available Substitution and Exchange Rights Log

(a) (b) (c)
Initial Dollar Current Value of
Amount Increase Decrease Amount Substitution
Date of LC in LC in LC of LC per Sec.4.3

Sum of (a) and cumulative amount of (b) & cumulative amount of (c) is
$________. (Not to exceed $40 million).

All rights to substitute & exchange properties under Section 4.1, 4.2, and
4.3 of the Loan Administration Agreement expires on or before May 31, 1997.

C-5

B-5

<PAGE>

EXHIBIT C
INITIAL SECURITY POOL

INDUSTRIAL STATE

Delp Distribution Tennessee
Pontiac Michigan
Port Distribution Arkansas
Baxter Arkansas
Valencia California
Great Southwest 110 Texas
Wildwood/Pioneer Texas
Northgate International Texas
Valwood 20 Texas
Centreport 17 Texas
Park at Woodinville Washington
Olive Branch Mississippi
Lombard I Illinois
700 Pratt Illinois
900 Pratt Illinois
1090 Pratt Illinois
1100 Pratt Illinois
1180 Pratt Illinois
801 Lunt Illinois
1201 Busse Illinois
5101 W. 122nd Street Illinois
17025 Wallace Illinois
17129 Wallace Illinois
1000 Lunt Illinois
3400 West Lake Illinois
1815 Landmeier Illinois
2375 Touhy Ave Illinois
Birmingham I Alabama
Birmingham II Alabama

RETAIL

Seatac Village Washington
Meridian Village Washington
Marietta Trade Center Georgia
Paradise Marketplace Nevada

C-1

<PAGE>

LIGHT INDUSTRIAL/OFFICE

Willow Lake Tennessee
Regal Row 201 Texas
Troy Tech II Michigan
Progress I Alabama
Progress II Alabama
8215 Building Alabama
Cypress A California
Cypress C California

C-2

C-2
<PAGE>
EXHIBIT D
COLLATERAL DOCUMENTS EXECUTED AS OF THE EFFECTIVE DATE

TRUST VI TRANSACTION

13 ENTITY LEVEL CLOSING ITEMS

.1 LOAN DOCUMENTS

1. Loan Administration Agreement
2. Promissory Note - Alabama
3. Promissory Note - Illinois
4. Promissory Note - Mississippi
5. Promissory Note - Tennessee
6. Promissory Note - Texas
7. Promissory Note - Washington
8. Contribution Agreement
9. Fraudulent Conveyance Indemnity Agreement
10. Agreement to Execute Intercreditor Agreement
11. Post-Closing Actions Agreement

B. SECURITY AND RELATED DOCUMENTS
JEFFERSON COUNTY, ALABAMA (OWNED BY TRUST VI)

12. First Mortgage, Security Agreement and Fixture Filing with
Assignment of Rents (202819)
13. First Assignment of Lessor's Interest in Leases
14. Second Mortgage, Security Agreement and Fixture Filing with
Assignment of Rents (203970)
15. Second Assignment of Lessor's Interest in Leases
16. Assignment of Agreements
17. Hazardous Substances Remediation and Indemnification Agreement
18. UCC-1 - Alabama
19. UCC-1 - Missouri
20. Land Use Certification - Birmingham I
21. Land Use Certification - Birmingham II

COOK COUNTY, ILLINOIS (OWNED BY TRUST VI)

D-1

D-1
<PAGE>

1. First Mortgage, Security Agreement and Fixture Filing with
Assignment of Rents (202649)
2. First Assignment of Lessor's Interest in Leases
3. Second Mortgage, Security Agreement and Fixture Filing with
Assignment of Rents (203961)
4. Second Assignment of Lessor's Interest in Leases
5. Assignment of Agreements
6. Hazardous Substances Remediation and Indemnification Agreement
7. UCC-1 - Illinois
8. UCC-1 - Missouri
9. Land Use Certification - 700 Pratt
10. Land Use Certification - 900 Pratt
11. Land Use Certification - 1090 Pratt
12. Land Use Certification - 1100 Pratt
13. Land Use Certification - 1180 Pratt
14. Land Use Certification - 801 Lunt
15. Land Use Certification - 1201 Busse
16. Land Use Certification - 5101 West 122nd
17. Land Use Certification - 17025 Wallace
18. Land Use Certification - 17129 Wallace
19. Land Use Certification - 1000 Lunt
20. Land Use Certification - 3400 West Lake
21. Land Use Certification - 1815 Landmeier
22. Land Use Certification - 2375 Touhy

DUPAGE COUNTY, ILLINOIS (OWNED BY TRUST VI)

1. First Mortgage, Security Agreement and Fixture Filing with
Assignment of Rents
2. First Assignment of Lessor's Interest in Leases
3. Second Mortgage, Security Agreement and Fixture Filing with
Assignment of Rents
4. Second Assignment of Lessor's Interest in Leases
5. Assignment of Agreements
6. Hazardous Substances Remediation and Indemnification Agreement
7. UCC-1 - Illinois
8. UCC-1 - Missouri
9. Land Use Certification - Lombard I

D-2

D-2
<PAGE>

DESOTO COUNTY, MISSISSIPPI (OWNED BY TRUST VI)

1. First Deed of Trust, Security Agreement and Fixture Filing with
Assignment of Rents (202839)
2. First Assignment of Lessor's Interest in Leases
3. Second Deed of Trust, Security Agreement and Fixture Filing with
Assignment of Rents (203940)
4. Second Assignment of Lessor's Interest in Leases
5. Assignment of Agreement
6. Hazardous Substances Remediation and Indemnification Agreement
7. UCC-1 - Mississippi
8. UCC-1 - Missouri
9. Land Use Certification - Olive Branch

SHELBY COUNTY, TENNESSEE (OWNED BY ITC)

1. First Deed of Trust, Security Agreement and Fixture Filing with
Assignment of Rents (204188)
2. First Assignment of Lessor's Interest in Leases
3. Second Deed of Trust, Security Agreement and Fixture Filing with
Assignment of Rents (204180)
4. Second Assignment of Lessor's Interest in Leases
5. Fixture Filing (First)
6. Fixture Filing (Second)
7. Assignment of Agreement
8. Hazardous Substances Remediation and Indemnification Agreement
9. UCC-1 - California
10. UCC-1 - Tennessee
11. Land Use Certification - Willow Lake

DALLAS COUNTY, TEXAS (OWNED BY ITC)

D-3

D-3
<PAGE>

1. First Deed of Trust, Security Agreement and Fixture Filing with
Assignment of Rents (204184)
2. First Assignment of Lessor's Interest in Leases
3. Second Deed of Trust, Security Agreement and Fixture Filing with
Assignment of Rents (204193)
4. Second Assignment of Lessor's Interest in Leases
5. Fixture Filing (First)
6. Fixture Filing (Second)
7. Assignment of Agreement
8. Hazardous Substances Remediation and Indemnification Agreement
9. UCC-1 - California
10. UCC-1 - Texas
11. Land Use Certification - Regal Row

KING AND WHATCOM COUNTIES, WASHINGTON (OWNED BY TRUST VI)

1. First Deed of Trust, Security Agreement and Fixture Filing with
Assignment of Rents (202787)
2. First Assignment of Lessor's Interest in Leases
3. Second Deed of Trust, Security Agreement and Fixture Filing with
Assignment of Rents (203945)
4. Second Assignment of Lessor's Interest in Leases
5. Assignment of Agreement
6. Hazardous Substances Remediation and Indemnification Agreement
7. UCC-1 - Missouri
8. UCC-1 - Washington
9. Land Use Certification - Meridian Village
10. Land Use Certification - Seatac Village

TRUST VII TRANSACTION

14 CLOSING DOCUMENTS

.1 LOAN/SECURITY DOCUMENTS

D-4

D-4
<PAGE>

1. Loan Administration Agreement
2. Promissory Note - Alabama
3. Promissory Note - Arkansas
4. Promissory Note - California
5. Promissory Note - Georgia
6. Promissory Note - Michigan
7. Promissory Note - Nevada
8. Promissory Note - Tennessee
9. Promissory Note - Texas
10. Promissory Note - Washington
11. Contribution Agreement
12. Fraudulent Conveyance Indemnity Agreement
13. Post-Closing Actions Agreement

B. SECURITY AND RELATED DOCUMENTS
MADISON COUNTY, ALABAMA (OWNED BY PC/ALP)

1. First Mortgage, Security Agreement and Fixture Filing with
Assignment of Rents (204220)
2. First Assignment of Lessor's Interest in Leases
3. Second Mortgage, Security Agreement and Fixture Filing with
Assignment of Rents (204227)
4. Second Assignment of Lessor's Interest in Leases
5. Assignment of Agreement
6. Hazardous Substances Remediation and Indemnification Agreement
7. UCC-1 - Alabama
8. UCC-1 - California
9. Land Use Certification - Progress I
10. Land Use Certification - Progress II
11. Land Use Certification - 8215 Building

PULASKI COUNTY, ARKANSAS (OWNED BY TRUST VII)

1. First Deed of Trust, Security Agreement and Fixture Filing with
Assignment of Rents (202823)
2. First Assignment of Lessor's Interest in Leases

D-5

D-5
<PAGE>
3. Second Deed of Trust, Security Agreement and Fixture Filing with
Assignment of Rents (203975)
4. Second Assignment of Lessor's Interest in Leases
5. Assignment of Agreement
6. Hazardous Substances Remediation and Indemnification Agreement
7. UCC-1 - Arkansas
8. UCC-1 - California
9. Land Use Certification - Baxter
10. Land Use Certification - Port Distribution

LOS ANGELES AND ORANGE COUNTIES, CALIFORNIA (OWNED BY TRUST VII)

1. First Deed of Trust, Security Agreement and Fixture Filing with
Assignment of Rents
2. First Assignment of Lessor's Interest in Leases
3. Second Deed of Trust, Security Agreement and Fixture Filing with
Assignment of Rents
4. Second Assignment of Lessor's Interest in Leases
5. Assignment of Agreement
6. Hazardous Substances Remediation and Indemnification Agreement
7. UCC-1 - California
8. UCC-1 - Missouri
9. Land Use Certification - Cypress A
10. Land Use Certification - Cypress C
11. Land Use Certification - Valencia
12. Letter to Tenant Regarding Purchase Option - Mitsubishi Motors

COBB COUNTY, GEORGIA (OWNED BY TRUST VII)

1. Second Deed to Secure Debt and Security Agreement with Assignment
of Rents (202623)
2. Second Assignment of Lessor's Interest in Leases
3. Third Deed to Secure Debt and Security Agreement with Assignment
of Rents (203976)

D-6

D-6
<PAGE>
4. Third Assignment of Lessor's Interest in Leases
5. Fixture Filing (Second)
6. Fixture Filing (Third)
7. Assignment of Agreement
8. Hazardous Substances Remediation and Indemnification Agreement
9. UCC-1 - Georgia
10. UCC-1 - Missouri
11. Land Use Certification - Marietta Trade Center
12. Termination of Intercreditor Agreement
13. Subordination Agreement

OAKLAND COUNTY, MICHIGAN (OWNED BY TRUST VII)

1. First Mortgage, Security Agreement and Fixture Filing with
Assignment of Rents (202831)
2. First Assignment of Lessor's Interest in Leases
3. Second Mortgage, Security Agreement and Fixture Filing with
Assignment of Rents (203969)
4. Fixture Filing (First)
5. Fixture Filing (Second)
6. Second Assignment of Lessor's Interest in Leases
7. Assignment of Agreement
8. Hazardous Substances Remediation and Indemnification Agreement
9. UCC-1 - Michigan
10. UCC-1 - Missouri
11. Land Use Certification - Pontiac
12. Land Use Certification - Troy Tech
13. Letter to Tenant Regarding Purchaser Option - Globe Industries
14. Letter to Tenant Regarding Purchase Option - Woodbridge Holdings

CLARK COUNTY, NEVADA (OWNED BY TRUST VII)

1. First Deed of Trust, Security Agreement and Fixture Filing with
Assignment of Rents (202773)
2. First Assignment of Lessor's Interest in Leases

D-7

<PAGE>
3. Second Deed of Trust, Security Agreement and Fixture Filing with
Assignment of Rents (204142)
4. Second Assignment of Lessor's Interest in Leases
5. Assignment of Agreement
6. Hazardous Substances Remediation and Indemnification Agreement
7. UCC-1 - Missouri
8. UCC-1 - Nevada
9. Land Use Certification - Paradise Marketplace

SHELBY COUNTY, TENNESSEE (OWNED BY PC/ALP)

1. First Deed of Trust, Security Agreement and Fixture Filing with
Assignment of Rents (202796)
2. First Assignment of Lessor's Interest in Leases
3. Second Deed of Trust, Security Agreement and Fixture Filing with
Assignment of Rents (204147)
4. Second Assignment of Lessor's Interest in Leases
5. Fixture Filing (First)
6. Fixture Filing (Second)
7. Assignment of Agreement
8. Hazardous Substances Remediation and Indemnification Agreement
9. UCC-1 - California
10. UCC-1 - Tennessee
11. Land Use Certification - Delp

DALLAS AND TARRANT COUNTIES, TEXAS (OWNED BY MS)

1. First Deed of Trust, Security Agreement and Fixture Filing with
Assignment of Rents (202804)
2. First Assignment of Lessor's Interest in Leases
3. Second Deed of Trust, Security Agreement and Fixture Filing with
Assignment of Rents (204163)

D-8
D-8

<PAGE>

4. Second Assignment of Lessor's Interest in Leases
5. Fixture Filing (First)
6. Fixture Filing (Second)
7. Assignment of Agreement
8. Hazardous Substances Remediation and Indemnification Agreement
9. UCC-1 - California
10. UCC-1 - Texas
11. Land Use Certification - Great Southwest 110
12. Land Use Certification - Wildwood/Pioneer
13. Land Use Certification - Northgate
14. Land Use Certification - Valwood 20
15. Land Use Certification - Centreport 17

KING COUNTY, WASHINGTON (OWNED BY TRUST VII)

1. First Deed of Trust, Security Agreement and Fixture Filing with
Assignment of Rents (204235)
2. First Assignment of Lessor's Interest in Leases
3. Second Deed of Trust, Security Agreement and Fixture Filing with
Assignment of Rents (204237)
4. Second Assignment of Lessor's Interest in Leases
5. Assignment of Agreement
6. Hazardous Substances Remediation and Indemnification Agreement
7. UCC-1 - Missouri
8. UCC-1 - Washington
9. Land Use Certification - Park at Woodinville

D-9
D-9

<PAGE>

EXHIBIT E
NOTICE OF DEEMED APPROVAL

[DATE]

SECOND NOTICE

URGENT: PROPERTY WILL BE SUBSTITUTED
INTO PRUDENTIAL COLLATERAL POOL
IF NO RESPONSE GIVEN WITHIN 7 DAYS

The Prudential Insurance Company
of America
Four Embarcadero Center, Suite 2700
San Francisco, California 94111

Attention: Vice President
Mortgage Capital

Re: Loan Administration Agreement by and between Meridian Industrial
Trust, Inc., as Borrower, and The Prudential Insurance Company of
America, as Lender
-----------------------------------------------------------------

Ladies and Gentlemen:

Reference is made to SUBSECTION 4.4A of the above-captioned Loan
Administration Agreement, and capitalized terms used herein are as defined
therein.

Pursuant to the Loan Administration Agreement, Lender had three (3)
weeks to inform Borrower if a proposed substitute facility described on SCHEDULE
1 was acceptable for inclusion in the Security Pool.

As of this date Lender has not informed Borrower of its approval or
disapproval of such proposed facility.

E-1
E-1

<PAGE>

LENDER HAS SEVEN DAYS FROM RECEIPT OF THIS LETTER TO APPROVE OR
DISAPPROVE THE PROPOSED SUBSTITUTE FACILITY. FAILURE TO RESPOND WILL RESULT IN
A DEEMED APPROVAL.

MERIDIAN INDUSTRIAL TRUST, Inc.

BY: _____________________
ITS:_____________________

cc: The Prudential Insurance Company
of America
Four Embarcadero Center, Suite 2700
San Francisco, California 94111
Attention: Regional Counsel

E-2
E-2

<PAGE>

SCHEDULE 1

DESCRIPTION OF PROPOSED
SUBSTITUTE FACILITY

E-3
E-3

<PAGE>

EXHIBIT F
APPROVED CONSOLIDATION DOCUMENTS

Agreement and Plan of Merger among Trust IV, Trust VI, Trust VII and
MIT dated as of May 31, 1995.

Amended and Restated Loan Administration Agreement between Prudential
and MIT, IndTennCo, Limited Partnership, Metro-Sierra Limited Partnership and
Progress Center/Alabama Limited Partnership, dated as of May 31, 1995
("Consolidation Credit Agreement")

Articles of Incorporation of MIT dated ___________, 1995

Bylaws of MIT dated ____________, 1995

Opinion(s) of Counsel for MIT, to be dated as of the Merger Date, to
the effect that:

(a) MIT is duly organized, validly existing and in good standing in
jurisdiction of organization and is duly authorized to transact
business in all other jurisdiction where failure to be so
authorized would have a material adverse effect on MIT;

(b) The execution, delivery and performance by MIT of the
Consolidation Credit Agreement, and the assumption and
performance by MIT of the Notes and the Collateral Documents, are
within the corporate powers of MIT and have been duly authorized
by MIT;

(c) The Consolidation Credit Agreement, the Notes and the Collateral
Documents constitute legally valid and binding obligations of
MIT, enforceable against MIT in accordance with their respective
terms;

F-1

<PAGE>

(d) All consents, authorizations and approvals required for the
execution and delivery by MIT of the Consolidation Credit
Agreement, and the assumption by MIT of the obligations under the
Notes and the Collateral Documents, have been obtained;

(e) The execution, delivery and performance by MIT of the
Consolidation Credit Agreement, and the assumption and
performance by MIT of the Notes and the Collateral Documents, do
not violate, constitute a default under or conflict with the
Articles of Incorporation or Bylaws of MIT, or any material term
of any material agreement to which MIT is a party, or any
judgment, decree, order, statute or regulation by MIT is bound or
to which any of its assets is subject, where such violation,
default or conflict would have a material adverse effect on the
financial condition or operations of MIT.

F-2

<PAGE>

ASSIGNMENT OF LIMITED PARTNERSHIP INTEREST
in
MIT SECURED L.P.

This Assignment of Limited Partnership Interest (the "Assignment") is
entered into as of the 31st day of December, 1996 by and among Meridian
Industrial Trust, Inc. (the "Assignor"), MIT-SLP, Inc., a California corporation
(the "Assignee"), and MIT Secured Inc., a California corporation (formerly known
as "Pro-Sierra Corporation") (the "General Partner").

RECITALS

Assignor is a limited partner of MIT Secured L.P., a California limited
partnership (formerly known as "Progress Center/Alabama Limited Partnership, a
California Limited Partnership") under the Agreement of Limited Partnership of
Progress Center/Alabama Limited Partnership entered into as of December 3,
1987, as amended (the "Agreement").

ASSIGNMENT

NOW THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:

Pursuant to Sections 7.02 and 7.03 of the Agreement, (i) the Assignor
hereby assigns and transfers all of its rights, title, interest and obligations
under the Agreement to the Assignee and (ii) the Assignee hereby accepts,
adopts, approves and agrees to be bound by the terms of the Agreement, and
hereby agrees to assume and timely perform all obligations of the Assignor under
the Agreement.

The General Partner signs this agreement only for the purpose of (i)
consenting to the substitution of the Assignee for the Assignor; (ii) waiving
any requirements for opinions; and (iii) acknowledging that all requirements for
the substitution of the Assignee for the Assignor have been accomplished to its
satisfaction and thus acknowledging that the Assignee shall have all rights and
obligations of a Limited Partner under the terms and provisions of the
Agreement.

This Assignment shall be governed by and construed in accordance with the
laws of the state of California and the United States.

<PAGE>

IN WITNESS WHEREOF, the parties have executed this Assignment of Limited
Partnership Interest as of the December 31, 1996

ASSIGNOR:

MERIDIAN INDUSTRIAL TRUST, INC.

By: /s/ Allen J. Anderson
---------------------
Allen J. Anderson
Chairman & Chief Executive Officer

ASSIGNEE:

MIT-SLP, INC.

By: /s/ Robert A. Dobbin
--------------------
Robert Dobbin
Secretary

GENERAL PARTNER:

MIT Secured, Inc.

By: /s/ Milton K. Reeder
--------------------
Milton K. Reeder
Treasurer

<PAGE>

ASSIGNMENT OF LIMITED PARTNERSHIP INTEREST
in
MIT UNSECURED L.P.

This Assignment of Limited Partnership Interest (the "Assignment") is
entered into as of the 31st day of December, 1996, by and among Meridian
Industrial Trust, Inc. (the "Assignor"), MIT-ULP, Inc., a California
corporation (the "Assignee"), and MIT Unsecured, Inc., a California corporation
(formerly known as"Metroplex Co.") (the "General Partner").

RECITALS

Assignor is a limited partner of MIT Unsecured L.P., a California limited
partnership, (formerly known as "DFW Nine, a California Limited Partnership")
under the Agreement of Limited Partnership of DFW Nine entered into as of April
15, 1987, as amended (the "Agreement").

ASSIGNMENT

NOW THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:

Pursuant to Sections 7.02 and 7.03 of the Agreement, (i) the Assignor
hereby assigns and transfers all of its rights, title, interest and obligations
under the Agreement to the Assignee and (ii) the Assignee hereby accepts, adopts
approves and agrees to be bound by the terms of the Agreement, and hereby
agrees to assume and timely perform all obligations of the Assignor under the
Agreement.

This Assignment shall be governed by and construed in accordance with the
laws of the state of California and the United States.

<PAGE>

IN WITNESS WHEREOF, the parties have executed this Assignment of Limited
Partnership Interest as of the December 31, 1996.

ASSIGNOR:

MERIDIAN INDUSTRIAL TRUST, INC.

By: /s/ Allen J. Anderson
---------------------
Allen J. Anderson
Chairman & Chief Executive Officer

ASSIGNEE:

MIT-ULP, INC.

By: /s/ Robert A. Dobbin
--------------------
Robert Dobbin
Secretary

GENERAL PARTNER:

MIT Unsecured, Inc.

By: /s/ Milton K. Reeder
--------------------
Milton K. Reeder
Treasurer