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<SEC-DOCUMENT>0001009448-08-000071.txt : 20080707
<SEC-HEADER>0001009448-08-000071.hdr.sgml : 20080704
<ACCEPTANCE-DATETIME>20080707105114
ACCESSION NUMBER:		0001009448-08-000071
CONFORMED SUBMISSION TYPE:	8-K
PUBLIC DOCUMENT COUNT:		3
CONFORMED PERIOD OF REPORT:	20080630
ITEM INFORMATION:		Entry into a Material Definitive Agreement
ITEM INFORMATION:		Financial Statements and Exhibits
FILED AS OF DATE:		20080707
DATE AS OF CHANGE:		20080707

FILER:

	COMPANY DATA:	
		COMPANY CONFORMED NAME:			CVD EQUIPMENT CORP
		CENTRAL INDEX KEY:			0000766792
		STANDARD INDUSTRIAL CLASSIFICATION:	SPECIAL INDUSTRY MACHINERY, NEC [3559]
		IRS NUMBER:				112621692
		STATE OF INCORPORATION:			NY
		FISCAL YEAR END:			1231

	FILING VALUES:
		FORM TYPE:		8-K
		SEC ACT:		1934 Act
		SEC FILE NUMBER:	001-16525
		FILM NUMBER:		08940136

	BUSINESS ADDRESS:	
		STREET 1:		1860 SMITHTOWN AVE
		CITY:			RONKONKOMA
		STATE:			NY
		ZIP:			11779-7321
		BUSINESS PHONE:		6319817081

	MAIL ADDRESS:	
		STREET 1:		1860 SMITHTOWN AVE
		CITY:			RONKONKOMA
		STATE:			NY
		ZIP:			11779-7321
</SEC-HEADER>
<DOCUMENT>
<TYPE>8-K
<SEQUENCE>1
<FILENAME>cvd8k63008.txt
<DESCRIPTION>CVD 8K 6 30 08
<TEXT>



                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                              WASHINGTON, DC 20549


                                    FORM 8-K


                             CURRENT REPORT PURSUANT
                          TO SECTION 13 OR 15(D) OF THE
                         SECURITIES EXCHANGE ACT OF 1934


     Date of report (Date of earliest event reported):        June 30, 2008

                           CVD EQUIPMENT CORPORATION
- -------------------------------------------------------------------------------
             (Exact Name of Registrant as Specified in Its Charter)

                                    New York
- -------------------------------------------------------------------------------
         (State or Other Jurisdiction of Incorporation or Organization)

       1-16525                                       11-2621692
      -----------                                   ------------
   (Commission File Number)                  (IRS Employer Identification No.)

                 1860 Smithtown Ave., Ronkonkoma, New York 11779
          (Address of Principal Executive Offices, Including Zip Code)


                                 (631) 981-7081
- -------------------------------------------------------------------------------
              (Registrant's Telephone Number, Including Area Code)


- -------------------------------------------------------------------------------
         (Former Name or Former Address, if Changed Since Last Report)

      Check the appropriate box below if the Form 8-K filing is intended to
   simultaneously satisfy the filing obligation of the registrant under any of
         the following provisions (see General Instruction A.2. below):

[_]  Written  communications  pursuant to Rule 425 under the  Securities Act (17
     CFR 230.425)

[_]  Soliciting  material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
     240.14a-12)

[_]  Pre-commencement   communications  pursuant  to  Rule  14d-2(b)  under  the
     Exchange Act (17 CFR 240.14d-2(b))

[_]  Pre-commencement   communications  pursuant  to  Rule  13e-4(c)  under  the
     Exchange Act (17 CFR 240.13e-4(c))


<PAGE>


Item 1.01 Entry into a Material Definitive Agreement.

On June 30, 2008, CVD Equipment  Corporation (the  "Registrant")  entered into a
Consolidation,  Extension  and  Modification  Agreement  (the  "Agreement")  and
Consolidated and Restated  Mortgage Note (the "Note") each with Capital One, N.A
(the "Bank"). The Agreement consolidated various notes and mortgages relating to
Registrant's property known as 1117 Old Kings Highway, Saugerties, New York (the
"Premises")  into a  single  note in the  principal  sum of Eight  Hundred  Five
Thousand  Dollars  ($805,000),   of  which  $16,936.50   represented  additional
borrowings incurred by the Registrant. Principal and interest payments are to be
made in equal consecutive monthly installments of $5,903.27 commencing on August
1, 2008 and continuing for 119 months, with a final balloon payment being due on
July 1, 2018,  equal to the remaining unpaid principal on the maturity date. The
principal  sum bears  interest  at a fixed  annual  rate of  6.20%.  The Note is
secured  by a  first  priority  mortgage  lien  on  the  Premises,  all  of  the
Registrant's  monies,  deposits or other sums held by the Bank on  deposit,  the
Agreement,  an assignment  of the leases and rents from the Premises,  a lien on
the  Registrant's  personal  property,  and  $500,000 of the  proceeds of a life
insurance  policy which is owned by the Registrant and issued on the life of the
Registrant's Chief Executive Officer, Leonard A. Rosenbaum.

The  obligation  of the  Registrant  to pay the  amounts  outstanding  under the
Agreement  and Note may be  accelerated  upon the  occurrence  of an  "Event  of
Default" as defined in the Agreement.

The foregoing  description of the Agreement and the Note described above is only
a summary and is not  intended to be  complete  description  of all of the terms
thereof.  You are encouraged to read the documents in their entirety.  A copy of
the same is  attached as an exhibit to this  Current  Report on Form 8-K and the
text is hereby incorporated by reference.  Certain capitalized terms used herein
but not defined shall have the meaning ascribed to them in the Agreement.

Item 9.01 Financial Statements and Exhibits.

     (c) Exhibits.

10.1 Consolidation,  Extension and Modification Agreement between the Registrant
     and Capital One, N.A.

10.2 Consolidated and Restated Mortgage Note.



                                       1
<PAGE>



                                   SIGNATURES

     Pursuant to the  requirements  of the Securities  Exchange Act of 1934, the
registrant  has duly  caused  this  report  to be  signed  on its  behalf by the
undersigned hereunto duly authorized.


                                           CVD EQUIPMENT CORPORATION


Date: July 7, 2008                            /s/ Leonard A. Rosenbaum
                                           -------------------------------
                                           Name:  Leonard A. Rosenbaum
                                           Title: Chairman, President, and
                                                  Chief Executive Officer


















                                       2
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10
<SEQUENCE>2
<FILENAME>exhibit101.txt
<DESCRIPTION>EXHIBIT 10.1 CONSOLIDATION, EXT & MODIFICATION AGMT
<TEXT>
Exhibit 10.1

              CONSOLIDATION, EXTENSION AND MODIFICATION AGREEMENT

     AGREEMENT  made the 30th day of June,  2008,  by and between  CAPITAL  ONE,
N.A.,  having  an office  at 275  Broadhollow  Road,  Melville,  New York  11747
(hereinafter,  at times, the "Mortgagee") and CVD EQUIPMENT  CORPORATION,  a New
York corporation with an address at 1860 Smithtown Avenue,  Ronkonkoma, New York
11779 (hereinafter, at times, the "Mortgagor").

                              W I T N E S S E T H:

     WHEREAS,  the Mortgagor is the owner of the premises  located at, and known
as, 1117 Old Kings Highway,  Town of Saugerties,  County of Ulster, and State of
New York and formally  described on the Tax Maps of the said County of Ulster as
Section  17.4,  Block 2, Lot 31 and  described in Schedule A annexed  hereto and
made  a  material  part  hereof  (hereinafter   referred  to  at  times  as  the
"Premises"); and

     WHEREAS,  the Mortgagee is the owner and holder of the following  notes and
mortgages, to wit:

     (1) a Note dated  November 14, 1988 made by Kidco Realty Corp.  in favor of
Dutchess Bank & Trust Company, in the principal sum of Five Hundred Thousand and
00/100 ($500,000.00) Dollars and interest thereon Note (the "1988 Note"); and

     (2) a Mortgage  dated  November  14,  1988 made by Kidco  Realty  Corp.  to
Dutchess Bank & Trust Company in the principal sum of  $500,000.00  and recorded
in the office of the Ulster  County  Clerk on  November  16, 1988 in Liber 1905,
page 293 (the "1988 Mortgage"); and

     (3) a Note dated April 29, 1999 made by CVD Equipment  Corporation in favor
of Kidco  Realty,  Ltd.,  in the  principal sum of Six Hundred Two Thousand Five
Hundred Three and 13/100  ($602,503.13)  Dollars and interest thereon (the "Kid1
Note");  which such 1988 Note and Kid1 Note were  consolidated and superseded by
an Amended  Restated  and  Consolidated  Promissory  Note made by CVD  Equipment
Corporation in favor of Kidco Realty, Ltd., in the principal sum of Nine Hundred
Thousand  and 00/100  ($900,000.00)  Dollars  and  interest  thereon  (the "1999
Note"); and

     (4) a Mortgage  dated April 29, 1999 made by CVD Equipment  Corporation  to
Kidco Realty Ltd. in the principal sum of $602,503.13 and recorded in the office
of the Ulster  County  Clerk on June 3, 1999 in Liber 4099,  page 105 (the "1999
Mortgage"); and

which such 1988 Mortgage and 1999 Mortgage were  consolidated by a Consolidation
Agreement  dated  April 29,  1999 (the "1999  CEMA"),  made by and  between  CVD
Equipment  Corporation  and Kidco Realty Ltd., and recorded in the office of the
Ulster  County  Clerk on June 3, 1999 in Liber 2927,  page 239, to form a single
lien in the consolidated amount of $900,000.00; and

which such Consolidation  Agreement was corrected by a Correction  Consolidation
Agreement  made by and between Kidco Realty Ltd. and CVD  Equipment  Corporation
dated as of April 29, 1999 and recorded in the office of the Ulster County Clerk
on March 13, 2001 in Liber 3137, page 261;

which such 1988 Mortgage and 1999 Mortgage, as consolidated,  are being assigned
by Kidco  Realty Ltd.,  as  assignor,  to Capital  One,  N.A.,  as assignee,  by
Assignment of Mortgage dated June _____,  2008, and to be recorded in the Office
of the Ulster County Clerk simultaneously herewith (the "Assignment"); and

which such 1988 Mortgage and 1999 Mortgage,  as  consolidated,  have a principal
balance of $788,063.50 as of the date hereof; and



                                       1
<PAGE>

     (5) a Note dated June 30, 2008 made by CVD Equipment  Corporation  in favor
of Capital One, N.A., in the principal  amount of Sixteen  Thousand Nine Hundred
Thirty Six and 50/100  ($16,936.50)  Dollars  and  interest  thereon  (the "2008
Note"); and

     (6) a  Mortgage  and  Security  Agreement  dated  June 9,  2008 made by CVD
Equipment  Corporation,  as  mortgagor,  in  favor  of  Capital  One,  N.A.,  as
mortgagee,  in the principal  amount of Sixteen Thousand Nine Hundred Thirty Six
and 50/100 ($16,936.50)  Dollars and interest thereon, and to be recorded in the
Office of the Ulster County Clerk simultaneously herewith (the "2008 Mortgage").

     (the 1988 Mortgage, the 1999 Mortgage, the 1999 CEMA and the 2008 Mortgage,
are hereinafter referred to, collectively, as the "Mortgage", and the 1988 Note,
the Kid1 Note the 1999 Note and the 2008 Note, as replaced by a Consolidated and
Restated Mortgage Note dated June 30, 2008 made by CVD Equipment  Corporation in
favor of Capital  One,  N.A.,  in the  principal  amount of Eight  Hundred  Five
Thousand  and  00/100   ($805,000.00)   Dollars,  are  hereinafter  referred  to
collectively as the "Note"); and

     WHEREAS,  there is now due and  owing on the  Note  and  Mortgage,  without
offset,  deduction  or  counterclaim  the  principal  sum of EIGHT  HUNDRED FIVE
THOUSAND AND 00/100 ($805,000.00) DOLLARS; and

     WHEREAS,  the  Mortgagee  and the  Mortgagor  have  mutually  agreed to (1)
consolidate,  coordinate,  combine and spread the liens of the  Mortgage and the
Note; (2) extend the payment of the indebtedness secured by the Mortgage and the
Note;  and (3) modify,  amend and restate the terms of the Mortgage and the Note
in the manner hereinafter set forth.

     NOW, THEREFORE,  in pursuance of said agreement and in consideration of the
sum of One ($1.00) Dollar and other valuable  consideration each to the other in
hand paid, receipt and sufficiency of which is hereby acknowledged,  the parties
hereto mutually covenant and agree as follows:

     A. That the liens of the  Mortgage  and the Note are  hereby  consolidated,
coordinated,  combined  and  spread  so  that  together  they  shall  constitute
hereinafter in law but one mortgage,  a single lien covering and encumbering the
Premises  securing the  principal  sum of EIGHT HUNDRED FIVE THOUSAND AND 00/100
($805,000.00)  DOLLARS  together  with the interest  accruing from and after the
date hereof.

     B. That the terms,  covenants  and  provisions of the Mortgage and the Note
are  hereby  modified,  amended  and  restated  so that  henceforth  the  terms,
covenants and provisions of this Agreement shall supersede the terms,  covenants
and provisions of the Mortgage and Note and the terms,  covenants and provisions
of the  Mortgage  and  Note  shall  read the  same as the  following  paragraphs
contained in this Agreement, and the Mortgage and Note, as so modified,  amended
and  restated,  are  hereby  ratified  and  confirmed  in  all  respects  by the
Mortgagors.  All references to the  "Mortgage" and the "Note" shall  hereinafter
refer to the same as  coordinated,  combined,  consolidated,  spread,  modified,
amended and restated pursuant to the provisions of this Agreement.

     C. For value received,  the Mortgagor  agrees to pay all sums due and owing
under  the  Note and all sums  secured  by the  Mortgage  on July 1,  2018  (the
"Maturity Date");  PROVIDED,  HOWEVER,  that the Mortgagor  meanwhile repays the
total [consolidated]  principal sum of the Note in the sum of EIGHT HUNDRED FIVE
THOUSAND AND 00/100  ($805,000.00)  DOLLARS with interest  thereon in accordance
with the terms as stated in the Consolidated and Restated  Mortgage Note made by
the Mortgagor in favor of the Mortgagee  even date herewith (the "Note") and the
schedule A attached thereto and made a material part thereof, the terms of which
are incorporated herein by reference.



                                       2
<PAGE>

THE  [Consolidated and Restated] NOTE SHALL MATURE ON JULY 1, 2018 WITH ALL SUMS
OF PRINCIPAL, ACCRUED INTEREST AND RELATED CHARGES DUE AND OWING ON SUCH DATE.

Payments shall be applied first to interest on unpaid  principal  balance of the
Note to the date payment is received by the  Mortgagee  and then to reduction of
principal.  Interest  shall be calculated on a 360 day year and actual number of
days elapsed.

Notwithstanding the foregoing, if (i) there shall occur an "Event of Default" as
described in the Note or below or (ii) the Maturity  Date shall occur,  or (iii)
any sum shall not be paid when it is due hereunder, then from and after any such
occurrence or nonpayment  the  undersigned  shall pay interest to the Holder (or
the Mortgagee) on demand,  on the entire principal amount then outstanding under
the Note and/or the Mortgage at the highest rate permitted by law.

In the event of the  occurrence  of any  default  under the Note,  then,  at the
option of the holder of the Note, the entire principal  balance and interest due
shall  forthwith  become due and payable.  Neither delay in asserting this right
nor the  acceptance of past due payments or the imposition of late charges shall
be deemed a waiver thereof. Upon the happening of any default, the holder of the
Note shall have, in addition to all other rights and remedies, the remedies of a
secured  party under the New York  Uniform  Commercial  Code with respect to any
collateral  security.  Interest on the indebtedness  evidenced by the Note after
default or maturity  shall be due and payable at the Note rate of interest  plus
5.00%,  or the  highest  rate  allowed by law,  computed  from the date to which
interest  was  last  credited,   to  the  date  actual  payment  of  the  entire
indebtedness.

All of the other terms and  conditions  of the Note are  incorporated  herein by
reference with the same force and effect as if set forth at length herein.


                              Certain Definitions

     The  Mortgagor and the  Mortgagee  agree that unless the context  otherwise
specifies  or  requires,  the  following  terms shall have the  meanings  herein
specified,  such definitions to be applicable equally to the singular and to the
plural forms of such terms.

     "Chattels" means all fixtures, fittings, appliances,  apparatus, equipment,
machinery and articles of personal property,  and replacements  thereof owned by
Mortgagor,  other  than those  owned by  lessees,  now or at any time  hereafter
affixed to,  attached to, placed upon or used in any way in connection  with the
complete  and  comfortable  use,  enjoyment,   occupancy  or  operation  of  the
Improvements on the Premises.

     "Events of Default" means the events and circumstances described as such in
Section 2.01 hereof.

     "Guarantor"  means the party or parties who have  guaranteed the payment of
the Note.

     "Improvements"  means  all  structures  and  buildings,   and  replacements
thereof,  now or hereafter  located upon the Premises,  including all equipment,
apparatus,  machinery and fixtures of every kind and nature  whatsoever  forming
part of said structures and/or buildings.

     "Intangibles"  means all  "general  intangibles"  (as such  quoted  term is
defined in the Uniform  Commercial  Code of the state  wherein the  Premises are
located) in any way relating to the Premises and/or the  Improvements  and which
the Mortgagor owns, all licenses,  trade names,  good will and books and records


                                       3
<PAGE>

relating to the business  operated or to be operated on the Premises or any part
thereof,  and all unearned  premiums,  accrued,  accruing or to accrue under all
insurance  policies  now or  hereafter  obtained by the  Mortgagor  insuring the
Mortgaged  Property,  as  hereinafter  defined,  and all rights and  interest of
Mortgagor thereunder.

     "Involuntary  Rate" means the Interest  Rate provided in the Note plus five
(5%) percent, but in no event to exceed the maximum rate allowed by law.

     "Premises" means the premises described in Schedule A hereto, including all
of the air space,  easements,  rights,  privileges,  royalties and appurtenances
thereunto  belonging or in any way appertaining,  and all of the estate,  right,
title, interest,  claim or demand whatsoever of the Mortgagor therein and in the
streets,  alleys  and ways  adjacent  thereto,  either at law or in  equity,  in
possession or expectancy, now or hereafter acquired.

     All terms of this Mortgage which are not defined above have the meaning set
forth in this Mortgage.


                                Granting Clause

     NOW,  THEREFORE,  the Mortgagor,  in  consideration  of the premises and in
order to secure  payment of both the  principal of the Note and the interest and
any other sums payable  thereon,  and/or under this Mortgage and the performance
and  observance  of all the  provisions  hereof and of the Note,  including  the
payment  of any  sums  advanced  by the  Mortgagee  pursuant  to  this  Mortgage
(collectively,  all of  such  obligations  are  hereinafter  referred  to as the
"Indebtedness"),  hereby  gives,  grants,  bargains,  sells,  warrants,  aliens,
promises,  releases,  conveys,  assigns,  transfers,  mortgages,   hypothecates,
deposits,  pledges,  sets over and confirms  unto the  Mortgagee all its estate,
right,  title  and  interest  in,  to and  under  any and  all of the  following
described  property  (the  "Mortgaged  Property"),  whether now owned or held or
hereafter acquired:

     (a) the Premises;

     (b) the Improvements;

     (c) the Chattels;

     (d) the Intangibles;

     (e) all proceeds of the conversion, voluntary or involuntary, of any of the
foregoing  into  cash  or  liquidated  claims,  including,  without  limitation,
proceeds of hazard and title insurance and condemnation awards;

     (f) all leases and lettings of the  Premises now or hereafter  entered into
and all right, title and interest of the Mortgagor thereunder, including without
limitation, cash or securities deposited thereunder to secure performance by the
lessees of their obligations thereunder,  whether such cash or securities are to
be held until the  expiration  of the terms of such  leases or applied to one or
more of the installments of rent coming due immediately  prior to the expiration
of such terms,  subject to the Mortgagor's  right to possess and apply such cash
or securities prior to an Event of Default, including,  further, the right, upon
the  happening  of an Event  of  Default,  to  receive  and  collect  the  rents
thereunder.

     TO HAVE AND TO HOLD unto the Mortgagee,  its successors and assigns forever


                                       4
<PAGE>

together with all the Improvements  now or hereafter  erected on the Premises to
its and their own proper use and behoof. Further, the Mortgagor does for itself,
its successors and assigns, covenant with the said Mortgagee, its successors and
assigns,  that at and until the ensealing of these presents it is well seized of
the Premises in fee simple,  and has good right to bargain and sell the same and
that the same are free  from  all  encumbrances  whatsoever  except  such as are
listed as  exceptions  to title in the title  policy  insuring  the lien of this
Mortgage (the "Permitted Encumbrances").

     And  furthermore,  the Mortgagor does by these presents bind itself and its
successors and assigns  forever to warrant and defend the Premises  described in
Schedule A to the Mortgagee,  its successors and assigns, against all claims and
demands whatsoever except as mentioned herein.


                                   ARTICLE I

                     Particular Covenants of the Mortgagor

                 The Mortgagor covenants and agrees as follows:

     SECTION 1.01. The Mortgagor  represents and warrants that it has a good and
marketable  title to an  indefeasible  fee estate in the Premises  subject to no
lien,  charge or  encumbrance,  except the  Permitted  Encumbrances,  if any are
specifically stated in this Mortgage  ("Permitted  Encumbrances");  that it will
own the Chattels  free and clear of liens and claims;  that this Mortgage is and
will remain a valid and enforceable first lien on the Mortgaged Property subject
only to the  exceptions  referred to above;  that the  execution and delivery of
this  Mortgage and the Note has been duly  authorized  by the Mortgagor and that
there  is no  provision  in any  document  that  evidences  or  establishes  the
existence  of the  Mortgagor  requiring  further  consent for such action by any
other entity or person;  that it is duly organized,  validly  existing and is in
good standing under the laws of the state of its formation or incorporation,  as
the  case  may  be;  that it has (i)  all  necessary  licenses,  authorizations,
registrations, permits and/or approvals and (ii) full power and authority to own
its  properties  and  carry  on its  business  as  presently  conducted  and the
execution and delivery by it of and performance of its obligations  under,  this
Mortgage and the Note will not result in the  Mortgagor  being in default  under
any provisions of any document which  evidences or establishes  the existence of
the Mortgagor or of any mortgage,  credit or other  agreement to which Mortgagor
is a party or which affects the Mortgagor or the Premises,  or any part thereof;
that it will preserve such title,  and will forever  warrant and defend the same
to the Mortgagee,  and will forever warrant and defend the validity and priority
of the lien hereof  against  the claims of all  persons  and parties  whomsoever
except for the Permitted Encumbrances.

     SECTION 1.02. The Mortgagor  will, at the sole cost of the  Mortgagor,  and
without expense to the Mortgagee,  do, execute,  acknowledge and deliver all and
every such further acts, deeds, conveyances,  mortgages, assignments, notices of
assignment,  transfers and  assurances as the Mortgagee  shall from time to time
reasonably require, for the better assuring, conveying, assigning,  transferring
and  confirming  unto the Mortgagee  the property and rights hereby  conveyed or
assigned or intended now or hereafter so to be, or which the Mortgagor may be or
may hereafter become bound to convey or assign to the Mortgagee, or for carrying
out the intention or facilitating the performance of the terms of this Mortgage,
or for filing,  registering  or recording  this  Mortgage  and, on demand,  will
execute and deliver and hereby  authorizes  the Mortgagee to execute and file in
the name of the  Mortgagor  to the  extent it may  lawfully  do so,  one or more
financing  statements,  chattel mortgages or comparable security  instruments to
evidence more  effectively  the lien hereof upon the  Mortgaged  Property or any
part thereof.


                                       5
<PAGE>

     SECTION 1.03.  (a) The Mortgagor  forthwith upon the execution and delivery
of this  Mortgage,  and  thereafter  from time to time,  upon  reasonable  prior
notice, will cause this Mortgage, and any security instrument creating a lien or
evidencing  the lien hereof upon the Chattels  and/or the  Intangibles  and each
instrument of further assurance to be filed,  registered and/or recorded in such
manner and in such  places as may be  required  by any  present or future law in
order to publish  notice of and fully to protect the lien hereof  upon,  and the
interest of the Mortgagee in, the Mortgaged Property.

     (b) The Mortgagor will pay all filing,  registration or recording fees, and
all expenses incident to the execution and acknowledgment of this Mortgage,  any
mortgage  supplemental  hereto,  any  security  instrument  with  respect to the
Chattels or the Intangibles,  and any instrument of further  assurance,  and all
federal,  state,  county and  municipal  stamp  taxes and other  taxes,  duties,
impositions,  assessments  and charges  arising out of or in connection with the
execution and delivery of the Note,  this Mortgage or any mortgage  supplemental
hereto,  any  security  instrument  with  respect  to the  Chattels  and/or  the
Intangibles or any instrument of further assurance.

     SECTION  1.04.  (a)  The  Mortgagor  shall  make  punctual  payment  of the
principal  and  interest and all other sums to become due in respect of the Note
at the time and place and in the manner specified in the Note,  according to the
true  intent and  meaning  thereof,  all in any coin or  currency  of the United
States of America  which at the time of such  payment  shall be legal tender for
the payment of public and private debts.

     (b) (i) The Mortgagor agrees that in addition to all payments of principal,
interest, and/or related charges payable to the Mortgagee under the terms of the
Note and/or hereunder,  the Mortgagor will pay to the Mortgagee,  at the time of
the  monthly  payments  due  to the  Mortgagee  under  the  terms  of the  Note,
one-twelfth  (1/12) of the total  annual  [real  estate]  taxes and  one-twelfth
(1/12) of the annual fire  insurance  premiums  upon the  Mortgaged  Property as
estimated by the  Mortgagee.  If, at any time,  the aforesaid sum is found to be
insufficient to pay said taxes and fire insurance  premiums,  or the tax reserve
or fire insurance reserve, in the opinion of the Mortgagee is insufficient,  the
Mortgagor  agrees to pay such  deficiency  on five (5) days'  notice in  default
whereof,  the whole of the principal sum remaining unpaid,  and accrued interest
shall, at the option of the Mortgagee,  immediately become due and payable.  All
of such funds shall be held in a trust account for the payment of said taxes and
fire insurance premiums as they become due.

     (c) All payments  mentioned in the preceding  subsection of this  paragraph
and all  payments  to be made  under  the  Note  secured  hereby  shall be added
together and the aggregate  amount  thereof shall be paid by the Mortgagor  each
month to be applied by the  Mortgagee to the  following  items in the order that
may be determined at the option of the Mortgagee: (i) taxes,  assessments,  fire
and other hazard insurance premiums; (ii) unpaid late charges; (iii) interest on
the Note secured  hereby;  and (iv)  reduction of the principal  balance of said
Note.

     (d) Any excess  funds in the real  estate tax and  insurance  escrow  funds
shall be credited by the  Mortgagee  to  subsequent  real  estate  taxes  and/or
insurance  payments  to be made by the  Mortgagor,  or against  the  outstanding
principal and accrued  interest due on the Note guaranteed and secured hereby at
the time of any  satisfaction  thereof,  and if none,  then the  balance of said
escrow shall be refunded to the Mortgagor.

     SECTION 1.05. (a) (i) The Mortgagor, if a corporation,  will, so long as it


                                       6
<PAGE>

is owner of the Mortgaged Property or any part thereof,  do all things necessary
to preserve and keep in full force and effect its existence,  franchises, rights
and privileges as a business or stock corporation under the laws of the state of
its  incorporation  and will comply  with all  regulations,  rules,  ordinances,
statutes,  orders and decrees of any governmental  authority or court applicable
to the Mortgagor or to the Mortgaged Property or any part thereof.

     (ii) The Mortgagor,  if a limited liability company, will, so long as it is
owner of the Mortgaged Property or any part thereof,  do all things necessary to
preserve and keep in full force and effect its existence, franchises, rights and
privileges  as a limited  liability  company  under the laws of the state of its
establishment and will comply with all regulations, rules, ordinances, statutes,
orders and decrees of any  governmental  authority  or court  applicable  to the
Mortgagor or to the Mortgaged Property or any part thereof.

     (b) Nothing in this Section 1.05 shall  require the payment or discharge of
any  obligation  imposed  upon  the  Mortgagor  by this  Section  so long as the
Mortgagor  shall in good faith and at its own  expense  contest  the same or the
validity thereof by appropriate legal proceedings which shall operate to prevent
the collection  thereof or other realization  thereon and the sale or forfeiture
of the  Premises or any part thereof to satisfy the same,  provided  that during
such  contest  the  Mortgagor  shall,  at the option of the  Mortgagee,  provide
security   satisfactory  to  the  Mortgagee,   assuring  the  discharge  of  the
Mortgagor's  obligation  hereunder  and of any  additional  charge,  penalty  or
expense  arising  from or incurred  as a result of such  contest;  and  provided
further  that if,  at any  time,  payment  of any  obligation  imposed  upon the
Mortgagor by subsection  (a) of this Section  shall become  necessary to prevent
the delivery of a tax deed, or its equivalent, conveying the Mortgaged Property,
or any part thereof,  because of  non-payment,  then the Mortgagor shall pay the
same in  sufficient  time to  prevent  the  delivery  of  such  tax  deed or its
equivalent.

     SECTION 1.06. All right,  title and interest of the Mortgagor in and to all
extensions,  improvements,  betterments,  renewals, substitutes and replacements
of, and all additions and  appurtenances  to, the Mortgaged  Property  hereafter
acquired by, or released to, the Mortgagor, or constructed,  assembled or placed
by the Mortgagor on the Premises or any part thereof, and all conversions of the
security  constituted  thereby,  immediately  upon  such  acquisition,  release,
construction,  assembling,  placement or conversion,  as the case may be, and in
each such case,  without any further mortgage,  conveyance,  assignment or other
act by the Mortgagor, shall become subject to the lien of this Mortgage as fully
and completely,  and with the same effect,  as though now owned by the Mortgagor
and  specifically  described in the granting  clause hereof,  but at any and all
times the  Mortgagor  will execute and deliver to the Mortgagee any and all such
further  assurances,  mortgages,  conveyances  or  assignments  thereof  as  the
Mortgagee may require for the purpose of expressly and  specifically  subjecting
the same to the lien of this Mortgage.

     SECTION 1.07. (i) (a) The Mortgagor,  from time to time when the same shall
become  due and  payable,  will pay and  discharge  all taxes of every  kind and
nature, all general and special  assessments,  levies,  permits,  inspection and
license  fees,  all water and sewer  rents  and  charges,  and all other  public
charges whether of a like or different nature,  imposed upon or assessed against
the  Mortgaged  Property,  or any part  thereof,  or upon the  revenues,  rents,
issues,  income and profits of the Mortgaged  Property,  or any part thereof, or
arising in respect of the occupancy,  use or possession  thereof.  The Mortgagor
will,  upon the  request of the  Mortgagee,  deliver to the  Mortgagee  receipts
evidencing the payment of all such taxes,  assessments,  levies, fees, rents and
other public charges imposed upon or assessed against the Mortgaged Property, or
any part thereof, or the revenues, rents, issues, income or profits thereof.

     (b) The  Mortgagor  will pay,  from time to time when the same shall become
due,  all lawful  claims and demands of  mechanics,  materialmen,  laborers  and


                                       7
<PAGE>

others,  which  claims and  demands,  if unpaid,  might result in, or permit the
creation of, a lien on the  Mortgaged  Property or any part  thereof,  or on the
revenues,  rents,  issues,  income and profits arising  therefrom and in general
will do or  cause  to be done  everything  necessary  so  that  the  lien of the
Mortgage shall be fully preserved, at the cost of the Mortgagor, without expense
to the Mortgagee.

     (c) Nothing in this Section  shall  require the payment or discharge of any
obligation  imposed upon the  Mortgagor by this Section so long as the Mortgagor
shall in good  faith and at its own  expense  contest  the same or the  validity
thereof by  appropriate  legal  proceedings  which shall  operate to prevent the
collection  thereof or other  realization  thereon and the sale or forfeiture of
the Premises or any part thereof to satisfy the same;  provided that during such
contest the Mortgagor  shall, at the option of the Mortgagee,  provide  security
satisfactory  to the  Mortgagee,  assuring  the  discharge  of  the  Mortgagor's
obligation  hereunder and of any additional  charge,  penalty or expense arising
from or incurred as a result of such contest;  and provided  further that if, at
any time, payment of any obligation imposed upon the Mortgagor by subsection (a)
of this Section shall become necessary to prevent the delivery of a tax deed, or
its equivalent,  conveying the Mortgaged Property, or any part thereof,  because
of  non-payment,  then the Mortgagor  shall pay the same in  sufficient  time to
prevent the delivery of such tax deed or its equivalent.

     (ii) (a) At any time during the term of the Mortgage,  the Mortgagee  shall
have the right to require the Mortgagor to establish an escrow in a sum equal to
the  taxes and  special  assessments  next due on the  premises  covered  by the
Mortgage, plus the premiums that will next become due and payable on policies of
fire and other hazard insurance on the premises  covered hereby.  In such event,
Mortgagor agrees to pay to the Mortgagee,  together with the monthly payments of
principal and interest  recited in the  promissory  note of even date  herewith,
additional  sums (a) to  initially  create an escrow  fund which in  Mortgagee's
opinion based on the real estate taxes and insurance premiums next to become due
will be  sufficient  to pay said real estate  taxes and  insurance  by their due
date; and thereafter to (b) pay to Mortgagee in escrow monthly  installments  of
one-twelfth of the annual real estate taxes and insurance  premiums so that said
real estate taxes and insurance premiums shall be paid on a timely basis as they
become due and payable.

     (b) All payments  mentioned in the preceding  subsection of this  paragraph
and all payments to be made under the  promissory  note secured  hereby shall be
added  together and the aggregate  amount thereof shall be paid by the Mortgagor
each month to be applied by the  Mortgagee to the  following  items in the order
that may be determined at the option of the Mortgagee:  (i) taxes,  assessments,
fire and other  hazard  insurance  premiums;  (ii)  unpaid late  charges;  (iii)
interest on the  promissory  note  secured  hereby;  and (iv)  reduction  of the
principal balance of said promissory note.

     (c) Any excess funds in the real estate tax and insurance escrow fund shall
be credited by the  Mortgagee to subsequent  real estate taxes and/or  insurance
payments to be made by the Mortgagor,  or against the outstanding  principal and
accrued interest due on the promissory note guaranteed and secured hereby at the
time of any satisfaction  thereof,  and if none, then the balance of said escrow
shall be refunded to the Mortgagor.

     SECTION  1.08.  The  Mortgagor  will pay any and all taxes,  charges,  fees
and/or  levies  by  reason  of the  Mortgagee's  ownership  of the  Note or this
Mortgage  and/or  resulting  from the  exercise by the  Mortgagee  of any of its
rights  and/or  remedies  provided  for under this  Mortgage,  except for income
taxes. The obligations  assumed by the Mortgagor  pursuant to this Section shall
survive the exercise by the Mortgagee of any of its rights and/or remedies under
this Mortgage.

     SECTION 1.09. (a) The Mortgagor  shall keep the  Improvements  and Chattels
insured  against  damage  by fire and  other  hazards  covered  by the  standard


                                       8
<PAGE>

extended coverage  insurance  policy,  and each policy shall be endorsed to name
the Mortgagee as an insured  thereunder,  as its interest may appear,  with loss
payable to the Mortgagee,  without  contribution  or  assessment,  pursuant to a
standard mortgage endorsement  substantially equivalent to the New York standard
mortgagee endorsement. All insurance policies and endorsements required pursuant
to this  Section  1.09 shall be fully paid for,  nonassessable  and contain such
provisions  and  expiration  dates and be in such form and amounts and issued by
such insurance  companies  satisfactory to the Mortgagee.  Without  limiting the
foregoing,  each policy shall specifically  provide that (i) such policy may not
be canceled  except upon thirty (30) days' prior written notice to the Mortgagee
and that no act or thing done by the Mortgagor  shall  invalidate  the policy as
against the Mortgagee  and (ii) any and all  insurance  proceeds will be paid to
the  Mortgagee  so long as  Mortgagee  certifies  to the insurer that the unpaid
Indebtedness exceeds the proceeds of insurance.  In addition,  the Mortgagee may
require the  Mortgagor  to carry such other  insurance on the  Improvements  and
Chattels in such amounts as Mortgagee  may, from time to time,  reasonably  deem
necessary to protect against  insurable  casualties  (including risks of war and
nuclear  explosion)  which at the time are commonly  insured against relating to
Premises similarly situated. The Mortgagor will assign and deliver the policy or
policies of all such insurance to the Mortgagee,  which policy or policies shall
have endorsed  thereon an endorsement  substantially  equivalent to the New York
standard  mortgagee  endorsement  in the name of the  Mortgagee,  so and in such
manner and form that the Mortgagee and its  successors  and assigns shall at all
times have and hold said policy or policies as collateral  and further  security
for the payment of the Indebtedness  until the full payment of the Indebtedness.
In  addition,  from  time to time,  upon  occurrence  of any  change in the use,
operation or value of the Premises,  or in the  availability of insurance in the
area in which the Premises are located,  the  Mortgagor  shall,  within five (5)
days after demand by the Mortgagee, take out such additional amounts and/or such
other kinds of insurance as the Mortgagee may reasonably require.

     (b) The Mortgagor shall not take out separate insurance  concurrent in form
or contributing  in the event of loss with that required to be maintained  under
this Section,  unless the Mortgagee is included  thereon as a named insured with
loss payable to the Mortgagee  under the standard  mortgage  endorsement  of the
character above described.  The Mortgagor shall immediately notify the Mortgagee
whenever any such separate  insurance is taken out and shall promptly deliver to
the Mortgagee the policy or policies of such insurance.

     (c) If the Premises,  or any part thereof, are located in an area which has
been  identified  by the Secretary of Housing and Urban  Development  as a flood
hazard area, the Mortgagor will keep,  for as long as any  Indebtedness  remains
unpaid, the Improvements  covered by flood insurance in an amount at least equal
to the full amount of the Note or the maximum  limit of coverage  available  for
the  Premises  under  the  National  Flood  Insurance  Act of 1968 and the Flood
Disaster  Protection  Act of 1973, as the same may have been or may hereafter be
amended or modified (and any successor act thereto), whichever is less.

     (d) The  Mortgagor  shall  give the  Mortgagee  prompt  notice  of any loss
covered  by  insurance  and the  Mortgagee  shall  have  the  right  to join the
Mortgagor in adjusting any loss in excess of $50,000.  Notwithstanding  anything
to the contrary  contained  herein or in Section 254 of the Real Property Law of
the State of New York or any other  provision of applicable law, the proceeds of
insurance  policies  coming into the  possession of the  Mortgagee  shall not be
deemed  trust  funds  and the  Mortgagee  shall  have  the  option  in its  sole
discretion to apply any insurance  proceeds it may receive pursuant  hereto,  or
otherwise,  to the payment of the  Indebtedness  or to allow all or a portion of
such proceeds to be used for the restoration of the Mortgaged  Property.  In the
event any such insurance proceeds shall be used to reduce the Indebtedness,  the


                                       9
<PAGE>

same  shall be applied  by the  Mortgagee,  after the  deduction  therefrom  and
repayment to the Mortgagee of any and all costs incurred by the Mortgagee in the
recovery thereof, in any manner it shall designate including but not limited to,
the  application  of  such  proceeds  to the  then  unpaid  installments  of the
principal  balance  due under the Note in the inverse  order of their  maturity,
such that the regular  payments,  if any, under the Note shall not be reduced or
altered in any manner.

     (e) The Mortgagor shall give the Mortgagee  prompt written notice of damage
to or  destruction  of the  Improvements  and Chattels or any part thereof,  The
insurance  proceeds  may,  in  Mortgagee's  discretion,  be  made  available  to
Mortgagor  following  Mortgagee's  assessment  of the damage,  and pursuant to a
mutually agreed upon payment schedule.  In the event insurance proceeds are made
available  to  Mortgagor  following  damage  to the  Premises,  Mortgagor  shall
promptly  commence and diligently  continue to perform the repairs,  restoration
and  rebuilding  of the portion of the  Improvements  and Chattels so damaged or
destroyed  (hereinafter  the  "Work")  so as to  restore  the  Improvements  and
Chattels  in full  compliance  with  all  legal  requirements  and so  that  the
Mortgaged  Property shall be at least equal in value and general utility as they
were prior to such damage or destruction,  and if such damage or destruction, in
the reasonable judgment of the Mortgagee,  shall exceed Fifty Thousand ($50,000)
Dollars (hereinafter,  collectively "Major Work"), the Mortgagor shall, prior to
the  commencement  of the work,  furnish to the Mortgagee for its approval:  (1)
complete plans and  specifications  for the Work, with satisfactory  evidence of
the  approval  thereof (i) by all  governmental  authorities  whose  approval is
required and (ii) by an architect  satisfactory  to the Mortgagee  (hereinafter,
the  "Architect")  and which  shall be  accompanied  by the  Architect's  signed
estimate,  bearing the  Architect's  seal, of the entire cost of completing  the
Work; (2) certified or photo static copies of all permits and approvals required
by law in connection  with the  commencement  and conduct of the Work; and (3) a
surety bond or guaranty of the  payment for and  completion  of the Work,  which
bond or guaranty shall be in form  satisfactory to Mortgagee and shall be signed
by surety or sureties,  or guarantor or guarantors,  as the case may be, who are
acceptable  to the  Mortgagee,  and in an amount  not less than the  Architect's
estimate of the entire cost of completing the Work, less the amount of insurance
proceeds  and  Mortgagor  deposits,  if  any,  then  held by the  Mortgagee  for
application toward the cost of the Work. The Mortgagor shall not commence any of
the Work until the Mortgagor  shall have complied with  applicable  requirements
referred to in this subsection (e), and after  commencing the Work the Mortgagor
shall perform the Work diligently and in good faith in accordance with the plans
and specifications referred to in this subsection (e), if applicable.

     (f) Subject to the provisions of Section  1.09(e)  above,  if the insurance
proceeds, less the cost, if any, to the Mortgagee of such recovery and of paying
out such proceeds (including  reasonable  attorneys' fees and expenses allocable
to  inspecting  the Work and the plans  and  specifications  therefor)  are made
available to Mortgagor, then such net proceeds shall be paid towards restoration
of the  Improvements  and  Chattels or if such  insurance  proceeds  are applied
toward such  restoration,  then such insurance  proceeds shall be applied by the
Mortgagee as follows:

     (i) To the  payment of the cost of the Work and shall be paid out from time
to time to the Mortgagor and/or,  at the Mortgagee's  option exercised from time
to time,  directly to the contractor,  subcontractors,  material men,  laborers,
engineers,  architects and other persons rendering services or materials for the
Work, as said Work  progresses  except as otherwise  hereinafter  provided,  but
subject  to the  following  conditions,  any of which the  Mortgagee  may freely
waive:

     (A) If the Work to be done is Major Work, as  determined by the  Mortgagee,
the Architect shall be in charge of the Work;



                                       10
<PAGE>

     (B) Each  request for payment  shall be made on seven (7) days prior notice
to the Mortgagee and shall be  accompanied  by a certificate of the Architect if
one is required  under  subsection  (f) above,  otherwise by a certificate of an
officer of the  Mortgagor,  stating (i) that all of the Work  completed has been
done in  compliance  with  the  approved  plans  and  specifications,  if any be
required  under said  subsection  (f), and in accordance  with all provisions of
law;  (ii) the sum  requested is justly  required to reimburse the Mortgagor for
payments  by  the   Mortgagor   to,  or  is  justly  due  to,  the   contractor,
subcontractor,  materialmen,  laborers,  engineers,  architects or other persons
rendering services or materials for the Work (giving a brief description of such
services and  materials),  and that when added to all sums,  if any,  previously
paid out by the Mortgagee  does not exceed the value of the Work done to date of
such certificate,  and (iii) that the amount of such proceeds and other deposits
remaining in the hands of the Mortgagee  will be sufficient on completion of the
Work to pay  for the  same in full  (giving  in such  reasonable  detail  as the
Mortgagee may require an estimate of the cost of such completion);

     (C) Each request shall be accompanied by waivers of liens  satisfactory  to
the Mortgagee covering that part of the Work previously paid for, if any, and by
a search prepared by the title company which insured the lien of the Mortgage or
by other evidence  satisfactory to the Mortgagee,  that there has not been filed
with respect to the Mortgaged  Property or any part thereof any mechanic's  lien
or other lien or instrument for the retention of title in respect of any part of
the Work not  discharged  of record and that there exist no  encumbrances  on or
affecting the Mortgaged Property or any part thereof other than encumbrances, if
any,  existing  as of the date  hereof  and  which  have  been  approved  by the
Mortgagee;

     (D) The request for any payment after the Work has been completed  shall be
accompanied by a copy of all  certificates,  permits,  licenses,  waivers and/or
other  documents  required by law to render  occupancy  of the  Premises  and/or
Improvements legal; and

     (ii) Upon  completion  of the Work and  payment in full  therefor,  or upon
failure on the part of the Mortgagor to commence,  as provided in subsection (f)
of this Section, or diligently to continue the Work, or at any time upon request
by the  Mortgagor,  the Mortgagee may apply the amount of any such proceeds then
or thereafter in the hands of the Mortgagee to the payment of the  Indebtedness,
provided,  however,  that nothing herein  contained  shall prevent the Mortgagee
from  applying at any time the whole or any part of such  proceeds to the curing
of any default under this Mortgage or the Note.

     SECTION 1.10.  If the Mortgagor  shall fail to perform any of the covenants
contained in Section 1.01, 1.03, 1.05, 1.07, 1.08, 1.09, 1.12, 1.19 or 1.22, the
Mortgagee  may,  upon ten (10)  days  prior  written  notice  to  Mortgagor  and
Mortgagor's failure to perform within that time period, make advances to perform
the same in its  behalf,  and all  sums so  advanced  shall  be a lien  upon the
Mortgaged  Property and shall be secured  hereby.  The  Mortgagor  will repay on
demand all sums so advanced on its behalf with interest at the Involuntary Rate.
The  provisions of this Section shall not prevent any default in the  observance
of any covenant  contained in said Section 1.01,  1.03,  1.05, 1.07, 1.08, 1.09,
1.12, 1.19 or 1.22 from constituting an Event of Default.

     SECTION  1.11.  (a) The Mortgagor  will keep adequate  records and books of
account in accordance  with generally  accepted  accounting  principles and will
permit the Mortgagee,  by its agents,  accountants  and attorneys,  to visit and
inspect the Premises and examine its records and books of account and to discuss
its affairs,  finances and accounts with the officers of the Mortgagor,  at such
reasonable times as may be requested by the Mortgagee.



                                       11
<PAGE>

     (b) The Mortgagor shall provide the Mortgagee  during the term of the Note,
with the following:  (i) SEC 10-K reports including audited  consolidated fiscal
financial  statements  of the Mortgagor  prepared by a firm or certified  public
accountants acceptable to the Mortgagee with an unqualified opinion,  within one
hundred  five  (105) days of its fiscal  year end;  and (ii) SEC 10-Q  quarterly
financial  statements  of the  Mortgagor  within sixty (60) days of each quarter
end; and (iii)  compliance  and  covenant  calculations  for the  Mortgagor on a
quarterly  basis to be  submitted  with  each of the  afore-mentioned  financial
statements.  All  financial  statements  of the  Mortgagor  shall be prepared in
accordance with generally accepted accounting principles,  shall be delivered in
duplicate.  Such  statements  shall be accompanied by a certificate of the chief
financial or accounting  officer of the Mortgagor  stating that s/he knows of no
Event of Default which has occurred and is continuing,  or, if any such Event of
Default has  occurred  and is  continuing,  specifying  the nature and period of
existence  thereof and what action the  Mortgagor  has taken or proposes to take
with  respect  thereto,  and,  except as otherwise  specified,  stating that the
Mortgagor  has  fulfilled  all its  obligations  under this  Mortgage  which are
required to be fulfilled on or prior to the date of such certificate.

     (c) The Mortgagor,  within ten (10) days upon request by mail, will furnish
a written statement duly acknowledged of the amount due whether for principal or
interest on the Note and whether any offsets,  counterclaims  or defenses  exist
against the Mortgagee, or the Indebtedness, or any part thereof.

     SECTION  1.12.  The  Mortgagor  will not commit any waste on the  Mortgaged
Property,  or any part  thereof,  or make any change in the use of the Mortgaged
Property, or any part thereof,  which will in any way increase any ordinary fire
or other hazard arising out of construction or operation. The Mortgagor will, at
all times,  maintain the  Improvements in good operating order and condition and
will promptly  make,  from time to time,  all repairs,  renewals,  replacements,
additions  and  improvements  in  connection  therewith  which  are  needful  or
desirable to such end. The Improvements shall not be demolished or substantially
altered,  nor shall any Chattels be removed without the prior written consent of
the Mortgagee  except where  appropriate  replacements  free of superior  title,
liens and claims are  immediately  made having value at least equal to the value
of the removed Chattels.

     SECTION 1.13. The Mortgagor,  immediately  upon obtaining  knowledge of the
institution of any proceedings for the  condemnation of the Premises or any part
thereof,  will notify the  Mortgagee  of the pendency of such  proceedings.  The
Mortgagee may participate in any such proceedings and the Mortgagor from time to
time will deliver to the  Mortgagee  all  instruments  requested by it 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 the Mortgagee.
The  Mortgagee  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  Mortgagee  may be
represented by counsel  selected by the Mortgagee.  The proceeds of any award or
compensation  so  received  shall  be  applied  toward  the  restoration  of the
Mortgaged  Property pursuant to the same terms,  provisions and conditions which
are  applicable  to the use of insurance  proceeds as set forth in Sections 1.09
(d),  (e) and (f) herein  provided  that the  Mortgagor  has met the  conditions
contained in Sections 1.09 (d), (e) and (f) or, if the Mortgagor has not met the
conditions  contained  in Sections  1.09 (d), (e) and (f), to the payment of the
Indebtedness, notwithstanding the fact that the Indebtedness may not then be due
and payable,  or to the restoration of the  Improvements.  In the event that any
portion of the condemnation  awards or compensation or interest thereon, if any,
shall be used to reduce the Indebtedness, same shall be applied by the Mortgagee
in any manner it shall designate, including, but not limited to, the application


                                       12
<PAGE>

of such award or compensation  to the then unpaid  installments of the principal
balance due under the Note in the inverse order of their  maturity such that the
regular  payments  under the Note shall not be reduced or altered in any manner.
The Mortgagor,  upon request by the Mortgagee,  shall make,  execute and deliver
any and all  instruments  requested for the purpose of confirming the assignment
of the aforesaid  awards and compensation to the Mortgagee free and clear of any
liens,  charges or encumbrances of any kind or nature whatsoever.  The Mortgagee
shall  not be  limited  to the  interest  paid on the  proceeds  of any award or
compensation,  but shall be entitled to the payment by the Mortgagor of interest
at the applicable rate provided for in the Note.

     SECTION 1.14.  (a) The Mortgagor  will not (i) execute an assignment of the
rents,  or any part  thereof,  from the Premises  unless such  assignment  shall
provide that it is subordinate to the assignment  contained in this Mortgage and
any assignment  executed  pursuant hereto, or (ii) except where the lessee is in
default thereunder, terminate or consent to the cancellation or surrender of any
lease of the  Premises,  or any part  thereof,  now  existing or hereafter to be
made,  having an unexpired term of two (2) years or more,  except that any lease
may be canceled  provided  that  promptly  after the  cancellation  or surrender
thereof a new lease is entered into with a new lessee having a credit  standing,
in the reasonable judgment of the Mortgagee,  at least equivalent to that of the
lessee whose lease was canceled,  on  substantially  the same or better terms as
the  terminated  or  canceled  lease,  or (iii)  modify  any such lease so as to
shorten the unexpired  term thereof or so as to decrease the amount of the rents
payable  thereunder,  or (iv) accept prepayments of any installments of rents to
become due under such leases,  except  prepayments in the nature of security for
the performance of the lessees thereunder, or (v) in any other manner materially
impair the value of the  Mortgaged  Property or the security of this Mortgage in
the reasonable judgment of the Mortgagee.

     (b) The  Mortgagor  will not  execute  any  lease  of all or a  substantial
portion of the Premises  except for actual  occupancy by the lessee  thereunder,
and will at all times promptly and faithfully  perform, or cause to be performed
promptly,  all of the  covenants,  conditions  and  agreements  contained in all
leases of the Premises,  or any part thereof1 now or hereafter existing,  on the
part of the lessor  thereunder to be kept and performed and will at all times do
all things necessary to compel performance by the lessee under each lease of all
obligations, covenants and agreements by such lessee to be performed thereunder,
If any of such leases provide for the giving by the lessee of certificates  with
respect to the status of such leases,  the Mortgagor shall exercise its right to
request  such  certificates  within five (5) days of any demand  therefor by the
Mortgagee.

     (c) The Mortgagor  shall furnish to the Mortgagee,  within thirty (30) days
after a request by the Mortgagee to do so, a written  statement  containing  the
names of all lessees of the Premises,  the terms of their respective leases, the
space occupied and the rentals payable thereunder not more than once per year.

     SECTION 1.15. To the extent not so provided by applicable law each lease of
the Premises,  or of any part  thereof,  shall provide that, in the event of the
enforcement  by the  Mortgagee  of the  remedies  provided for by law or by this
Mortgage,  the lessee  thereunder will, upon request of any person succeeding to
the  interest of the  Mortgagor as a result of such  enforcement,  automatically
become the lessee of said successor in interest,  without change in the terms or
other  provisions  of such lease,  provided,  however,  that said  successor  in
interest  shall not be bound by (i) any payment of rent or  additional  rent for
more than one month in advance, except prepayments in the nature of security for
the performance by said lessee of its obligations  under said lease, or (ii) any
amendment or modification of the lease made without the consent of the Mortgagee
or such successor in interest. If the Premises, or any part thereof, are located
within the State of New York,  then reference is hereby made to Section 291-f of


                                       13
<PAGE>

the Real  Property Law of the State of New York,  for purposes of obtaining  for
the Mortgagee the benefit of Section  291-f in  connection  with this  Mortgage.
Each such lease shall  provide that upon request by such  successor in interest,
such lessee shall execute and deliver an instrument  or  instruments  confirming
such attornment.

     SECTION 1.16.  (a) The Mortgagor  represents and warrants that, to the best
of  Mortgagor's  knowledge,  the Mortgaged  property is not now and has not ever
been used to generate,  manufacture,  refine,  transport,  treat, store, handle,
dispose,  transfer,  produce,  process  or in any manner  deal  with,  Hazardous
Materials (as hereinafter  defined),  and that no Hazardous  Materials have ever
been installed,  placed, or in any manner dealt with on the Mortgaged  property,
and that no owner of the Mortgaged property or any tenant, subtenant,  occupant,
prior  tenant,  prior  subtenant  or prior  occupant  has received any notice or
advice from any  governmental  agency or any tenant,  subtenant or occupant with
regard to Hazardous Materials on, from or affecting the Mortgaged property.  The
Mortgagor  shall  covenant  that the  Mortgaged  Property  shall be kept free of
Hazardous  Materials,  and shall not be used to generate,  manufacture,  refine,
transport,  treat, store, handle, dispose, transfer,  produce, process or in any
manner deal with,  Hazardous  Materials,  and the  Mortgagor  shall not cause or
permit,  as a result of any intentional or unintentional  act or omission on the
part of the Mortgagor or any tenant or subtenant or occupant,  the  installation
of Hazardous  Materials in the Mortgaged  Property or onto any other property or
suffer the  presence of  Hazardous  Materials  on the  Mortgaged  Property.  The
Mortgagor agrees to comply with and ensure compliance by all tenants, subtenants
and occupants with all  applicable  federal,  state and local laws,  ordinances,
rules and regulations,  with respect to Hazardous Materials,  and agrees to keep
the  Mortgaged  Property  free and clear of any liens  imposed  pursuant to such
laws,  ordinances,  rules  and  regulations.  In the  event  that the  Mortgagor
received  or receive  any notice or advice  from any  governmental  agency,  any
tenant,  subtenant or occupant  with regard to Hazardous  Materials  on, from or
affecting  the Mortgaged  property,  the  Mortgagor  shall agree to  immediately
notify the Mortgagee in writing.  The  Mortgagor  shall conduct and complete all
investigations,  studies, sampling, and testing, and all remedial,  removal, and
other actions necessary to clean up and remove all Hazardous Materials, on, from
or affecting the Mortgaged  Property in accordance with all applicable  federal,
state, and local laws, ordinances,  rules, regulations,  and policies and to the
satisfaction  of the Mortgagee.  For these  purposes,  "Hazardous  Materials" or
"Hazardous   Material"  shall  include,   without   limitation,   any  flammable
explosives,   radioactive  materials,   hazardous  wastes,  hazardous  or  toxic
substances, or related or similar materials, asbestos or any material containing
asbestos, or any other substance or material as defined by any federal, state or
local  environmental  law,  ordinance,  rule, or regulation  including,  without
limitation, the Comprehensive  Environmental Response Compensation and Liability
Act of 1980,  as amended  (42 U.S.C.  Sections  9601,  et seq.),  the  Hazardous
Materials Transportation Act, as amended (49 U.S.C. Sections 1801, et seq.), the
Resource  Conservation and Recovery Act, as amended (42 U.S.C. Sections 6901, et
seq.),  and in the regulations  adopted and  publications  promulgated  pursuant
thereto.  These  obligations  and liabilities of the Mortgagor shall survive any
foreclosure  involving the Mortgaged  property or the delivery of a deed in lieu
of foreclosure.

     (b) The Mortgagor shall protect,  indemnify and save harmless the Mortgagee
from and against  all  liabilities,  obligations,  claims,  damages,  penalties,
causes of action,  costs and expenses  (including without limitation  reasonable
attorney's fees and expenses),  imposed upon or incurred by or asserted  against
the Mortgagee by reason of (A) the presence, disposal, escape, seepage, leakage,
spillage,  discharge,  emission, release, or threatened release of any Hazardous
Materials on, from or affecting the  Mortgaged  property or any other  property;
(B) any personal injury  (including  wrongful death) or property damage (real or
personal) arising out of or related to such Hazardous Materials; (C) any lawsuit
brought or threatened,  settlement reached, or government order relating to such
Hazardous  Materials;  or  (D)  any  violation  of  laws,  orders,  regulations,


                                       14
<PAGE>

requirements,   or  demands  of  government  authorities,  or  any  policies  or
requirements  of the  Mortgagee  which are based upon or in any  related to such
Hazardous Materials including, without limitation,  attorney or consultant fees,
investigation and laboratory fees, court costs, and litigation expenses.

     (c) To enforce  Mortgagor's  obligations under this section,  the Mortgagee
may conduct or cause to be conducted  future  environmental  audits and tests of
the Mortgaged property from time to time as it deems necessary in its reasonable
discretion. The Mortgagor shall pay the cost of such audits or tests. Should the
Mortgagee  in its  reasonable  discretion  believe  there  to be a use of,  or a
condition  existing on, the Mortgaged  Property  which would violate  applicable
federal,  state or local laws, or which would constitute a dangerous,  unhealthy
or  noxious  use  thereof  or  condition  thereon,  or which  would give rise to
potential liability for Hazardous Materials, the Mortgagee may, but shall not be
obligated to,  perform or cause to be performed any remedial  action,  including
but not limited to removal and clean-up,  which the Mortgagee in its  reasonable
discretion  believes  necessary  under the  circumstances.  The Mortgagor  shall
reimburse the Mortgagee for any such reasonable expenses incurred, regardless of
whether the Mortgagor  would have  ultimately  been  responsible  for such costs
under applicable law.

     SECTION 1.17. (a) Subject to the conditions specified in the next paragraph
of this Section,  the Mortgagee  will,  upon request of the  Mortgagor,  execute
subordination,  non-disturbance  and attornment  agreements  with lessees of the
Premises, which agreements shall provide that, in the event the Mortgagee or any
purchaser  at  foreclosure  shall  succeed to the  Mortgagor's  interest  in the
Premises, the leases of such lessees will remain in full force and effect and be
binding upon the Mortgagee or such  purchaser and such lessee as though each was
the original party thereto.

     (b) The Mortgagee's  obligation to execute such agreements shall be subject
to the following  conditions:  (i) the credit of the lessee and the terms of the
lease shall be  satisfactory  to Mortgagee,  (ii) the Mortgagee  shall have been
provided with a standard form of lease to be used in connection with the leasing
of the  Premises and shall have  approved the same,  (iii) upon each request for
such an agreement  the Mortgagee  shall  receive a  counterpart  of the executed
lease in which  all  changes  from  the  standard  form  shall be  indicated  by
appropriate  markings,  such markings to be certified to be true and complete by
the responsible  officer of the Mortgagor or by its counsel,  (iv) the Mortgagee
shall receive a letter,  signed by the Mortgagor and addressed to the lessee, to
be forwarded to the lessee by the Mortgagee,  giving notice of the assignment of
each lease  provided  for herein,  and (v) there has not  occurred  any Event of
Default under this Mortgage or any event which with notice,  the passage of time
or both would become an Event of Default under this Mortgage.

     (c)  Notwithstanding  anything to the contrary,  as of right, the Mortgagee
agrees by the  acceptance  hereof to grant  Non-Disturbance  Agreements  for all
existing  or future  tenants of the  Mortgaged  Property if such  tenants  shall
request such Agreement, and said tenants are rated AAA-1 by Dun & Bradstreet (or
successor) and their leases are as a result of an arms-length negotiation.

     SECTION 1.18.  In the event any payment  provided for herein or in the Note
shall  become  overdue for a period in excess of ten (10) days, a late charge of
four cents  ($0.04) for each dollar so overdue shall become  immediately  due to
the  Mortgagee  for the purpose of defraying  the expenses  incident to handling
such  delinquent  payment,  and such  charge  shall be  deemed to be part of the
Indebtedness  and therefore  secured by the lien of this Mortgage.  Late charges
shall be payable  with the next  installment  of principal  and/or  interest due
under the Note.




                                       15
<PAGE>

     SECTION 1.19. The Mortgagor,  in compliance with Section 13 of the Lien Law
of the State of New York, will receive the advances secured by this Mortgage and
will hold the right to receive such advances as a trust fund to be applied first
for the purpose of paying the cost of improvement  and will apply the same first
to the payment of the cost of improvement  before using any part of the total of
the same for any other purpose.

     SECTION  1.20.  The Mortgagor  agrees that it shall  indemnify and hold the
Mortgagee  harmless  against any loss or liability,  cost or expense,  including
without  limitation,  any  judgments,  reasonable  attorneys'  fees, the cost of
appeal  bonds  and  printing,  arising  out of or  relating  to any  proceedings
instituted  by any claimant  alleging  priority  over the lien of this  Mortgage
and/or if the  Premises  or any part  thereof is within the State of New York by
any  claimant  alleging a violation  by the  Mortgagor  or the  Mortgagee of any
section of Article 3-A of the Lien Law of the State of New York.

     SECTION  1.21.  The  Mortgagor   shall  (i)  execute  and  deliver  to  the
appropriate  governmental authority any affidavit,  instrument,  document and/or
filing  required  pursuant to any  applicable  statute,  ordinance,  rule and/or
regulation.

     SECTION 1.22. The Mortgagor  expressly  covenants and agrees to pay in full
the  reasonable  fees and expenses of the  Mortgagee's  outside  legal  counsel,
promptly upon the receipt of a statement  therefor,  which are incurred prior to
and after the date hereof and which fees and expenses  arise in connection  with
any matter  incidental to the  enforcement of the loan which is evidenced by the
Note and secured by this Mortgage resulting from the Mortgagor's breach.

     SECTION 1.23. The Mortgagor  expressly covenants and represents that at all
times during the term of the Note, it shall comply with the following  financial
covenants, to wit:

     (a) Mortgagor  shall  maintain a Maximum  Leverage of 1.20:1.  For purposes
hereof, the term "Maximum Leverage" shall mean the ratio of total liabilities of
the Mortgagor divided by its tangible net worth at all times; and

     (b)  Mortgagor  shall  maintain a minimum  Debt Service  Coverage  Ratio of
1.25:1.  For  purposes  hereof,  the term  "Debt  Service  Coverage"  shall mean
earnings of the Mortgagor before interest,  taxes, depreciation and amortization
for the previous  twelve month period,  divided by the interest  expense for the
prior twelve (12) month  period and  aggregate  principal  payments of loans and
capitalized  leases  scheduled  to be paid over the  ensuing  twelve  (12) month
period,  exclusive  of any balloon or maturity  balance of (i) any loans made by
the Mortgagee to the Mortgagor including, without limitation, the loan evidenced
by the Note; and (ii) the GE Capital  mortgage loan made to the  Mortgagor,  and
exclusive of the principal balance due at the maturity of the Note.

                               (End of Article I)


                                   ARTICLE II

                         Events of Default and Remedies

     SECTION  2.01.  If one or more of the  following  Events of  Default  shall
happen, that is to say:

     (a) if (i) default  shall be made in the payment of any  interest due under


                                       16
<PAGE>

the Note, or in the payment of any  installment of principal due under the Note,
in either such case, when and as the same shall become due and payable, and such
default  shall have  continued  for a period of ten (10) days;  or (ii)  default
shall be made in any other payment of the principal of the Note, when and as the
same shall become due and payable,  whether at maturity or by acceleration or as
part of any  prepayment  or  otherwise,  in each  case,  as in the Note and this
Mortgage  provided  or default in the payment of any other  Indebtedness  due to
Mortgagee under this Mortgage and such default shall have continued for a period
of ten (10)  days;  or (iii)  default  shall be made in the  payment  of any tax
required by Section 1.07 to be paid and said default shall have  continued for a
period of twenty (20) days; or

     (b) if default shall be made in the due  observance or  performance  of any
covenant,  term or agreement on the part of the  Mortgagor  contained in Section
1.01,  1.03,  or 1.08,  and such default  shall have  continued  for a period of
twenty (20) days after notice  specifying  such default shall have been given to
the  Mortgagor  by the  Mortgagee,  (i) unless such term,  covenant or agreement
cannot be  complied  with or such  default be cured in such  period and (ii) the
Mortgagor  has  commenced  compliance  with such term,  covenant or agreement or
curing such default and continues to  diligently  prosecute  such  compliance or
curing such default; or

     (c) if any  material  representation  made in Section  1.01 shall have been
false when made; or

     (d) if default shall be made in the due  observance or  performance  of any
other  covenant,  term or agreement on the part of the Mortgagor in the Note, or
in this Mortgage  contained,  and such default shall have continued for a period
of twenty (20) days after notice  specifying  such default shall have been given
to the Mortgagor by the Mortgagee,  unless (i) such term,  covenant or agreement
cannot be  complied  with or such  default be cured in such  period and (ii) the
Mortgagor  has  commenced  compliance  with such term,  covenant or agreement or
curing such default and continues to  diligently  prosecute  such  compliance or
curing such default; or

     (e) if by the  order  of a court  of  competent  jurisdiction,  a  trustee,
receiver or liquidator of the Mortgaged Property, or any part thereof, or of the
Mortgagor shall be appointed and such order shall not be discharged or dismissed
within sixty (60) days after such appointment; or

     (f) if the Mortgagor  shall  commence a voluntary case under any applicable
bankruptcy, insolvency or other similar law now or hereafter in effect, or shall
consent  to the entry of an order for  relief in an  involuntary  case under any
such  law  or  to  the  appointment  of  or  taking  possession  by a  receiver,
liquidator,  assignee,  trustee,  custodian,   sequestrator  (or  other  similar
official) of the Mortgagor or of any substantial part of its property, or if the
Mortgagor shall make any general assignment for the benefit of creditors,  or if
the Mortgagor shall fail generally to pay its debts as such debts become due, or
if the Mortgagor  shall take any action in  furtherance of any of the foregoing;
or

     (g) if any of the creditors of the  Mortgagor  shall  commence  against the
Mortgagor an  involuntary  case under any applicable  bankruptcy,  insolvency or
other  similar  law now or  hereafter  in effect  and if such case  shall not be
discharged or dismissed within sixty (60) days after the date on which such case
was commenced; or

     (h) if final  judgment  for the  payment  of money in  excess of the sum of
$25,000  in the  aggregate  shall be  rendered  against  the  Mortgagor  and the
Mortgagor  shall not  discharge  the same or cause it to be discharged or bonded


                                       17
<PAGE>

within sixty (60) days from the entry thereof,  or shall not appeal therefrom or
from the order,  decree or process upon which or pursuant to which said judgment
was  granted,  based or entered,  and secure a stay of  execution  pending  such
appeal; or

     (i)  destruction  of all  or a  material  portion  of  the  premises,  said
determination to be made in the sole discretion of the Mortgagee; or

     (j) intentionally omitted; or

     (k) intentionally omitted; or

     (l) if the Mortgagor sells,  transfers,  assigns,  conveys or encumbers the
Premises or any part thereof or any interest  therein  without the prior written
consent of the Mortgagee; or

     (m) if any default occurs after applicable grace periods, if any, under any
mortgage that is subordinate to the lien of this Mortgage or the mortgagee under
any subordinate  mortgage commences a foreclosure action in connection with said
mortgage,  it being  further  agreed by the  Mortgagor  that an Event of Default
hereunder shall  constitute an Event of Default under any such other mortgage or
deed of trust held by the Mortgagee; or

     (n) if the Mortgagor defaults under any other agreement with the Mortgagee;
or

     (o) if Mortgagor pays out any cash dividends on its common stock during the
term of the Note; and

     (p) intentionally omitted; or

     (q) if any  representation  or warranty of  Mortgagor  in any  certificate,
report, financial statement or other instrument furnished in connection with the
making of the Note,  this Mortgage,  or any related loan  document,  shall prove
false  or  misleading  in  any  material  respect  or  shall  have  omitted  any
substantial contingent or unliquidated liability or claim;

     (r) if it shall be illegal for the  Mortgagor to pay any tax referred to in
Section 1.08 hereof or if the payment of such tax by the Mortgagor  would result
in the violation of the usury laws of the State of New York; or

     (s) if any person or entity having or claiming an interest in the Mortgagor
or the  Mortgaged  Property  commences  an  action  or  proceeding  against  the
Mortgagor,  the Mortgaged Property or any person or entity having or claiming an
interest in the Mortgagor or the Mortgaged Property; or

     (t) if any  proceedings  are commenced for the  condemnation of any part of
the Mortgaged  Premises,  which  condemnation  would have, in the opinion of the
Mortgagee,  a material  adverse  effect on the value of the  remaining  security
hereunder; or

     (u) the  actual or  threatened  alteration,  demolition  or  removal of the
Improvements  erected  or to be  erected  upon  the  Premises  or the  Mortgaged
Property; or




                                       18
<PAGE>

     (v) if any  easement  over,  across  or under or  otherwise  affecting  the
Mortgaged  Property  or  any  portion  thereof  shall  be  granted  without  the
Mortgagee's prior written consent; or

     (w) if there occurs any other event,  which if unremedied,  would require a
material  and adverse  change in the survey  delivered  to  Mortgagee at time of
closing; or

     (x) failure of the  Mortgagor,  during the term of the Note,  to maintain a
Maximum  Leverage of 1.20:1.  For purposes hereof,  the term "Maximum  Leverage"
shall  mean the  ratio of total  liabilities  of the  Mortgagor  divided  by its
tangible net worth at all times; or

     (y) failure of the  Mortgagor,  during the term of the Note,  to maintain a
minimum Debt Service  Coverage Ratio of 1.25:1.  For purposes  hereof,  the term
"Debt Service  Coverage" shall mean earnings of the Mortgagor  before  interest,
taxes,  depreciation  and  amortization  for the previous  twelve month  period,
divided by the  interest  expense  for the prior  twelve  (12) month  period and
aggregate  principal  payments of loans and capitalized  leases  scheduled to be
paid over the ensuing  twelve  (12) month  period,  exclusive  of any balloon or
maturity  balance  of (i) any  loans  made  by the  Mortgagee  to the  Mortgagor
including,  without  limitation,  the loan  evidenced  by the  Note and  secured
hereby;  and  (ii) the GE  Capital  mortgage  loan  made to the  Mortgagor,  and
exclusive of the principal balance due at the maturity of the Note;

     (z) Mortgagor  shall fail to pay its debts,  liabilities and obligations to
the  Mortgagee  as and when due and payable,  or  Mortgagor  fails to perform or
observe any term, covenant, or condition on its part to be performed or observed
under any agreement or instrument  relating to any such debts,  liabilities  and
obligations  when  required to be performed  or observed,  if the effect of such
failure to perform or observe is to  accelerate,  or to permit the  acceleration
after the giving of notice or passage of time,  or both, of the maturity of such
debts,  liabilities and  obligations,  whether or not such failure to perform or
observe  shall  be  waived  by  the  holder  of  such  debts,   liabilities  and
obligations, or any such debts, liabilities and obligations shall be declared to
be due and  payable,  or be  required  to be prepaid  (other than by a regularly
scheduled  required  prepayment)  prior to the stated  maturity  of such  debts,
liabilities and obligations;

     (aa) If Mortgagor  shall be in default  under the Note,  or under any other
mortgage, instrument or document evidencing, securing or guaranteeing payment of
the Mortgage Amount, in whole or in part, or otherwise executed and delivered in
connection  with the Note,  this  Mortgage  or the loan  evidenced  and  secured
thereby or hereby;

     (bb) if the Mortgagor, or any affiliate of the Mortgagor,  shall default in
the payment of any  indebtedness,  including,  without  limitation,  any and all
other  indebtedness  now or hereafter  owed to the Mortgagee or a default in the
performance  of  any  term,  covenant,   condition  or  agreement  of  any  such
indebtedness,  if the  effect of such  default  is to permit  the holder of such
indebtedness to accelerate the maturity thereof; and

     (cc) if the Mortgaged  Property  shall become  subject (i) to any tax lien,
other  than a lien for  local  real  estate  taxes and  assessments  not due and
payable, or (ii) to any lis pendens,  notice of pendency,  stop order, notice of
intention to file mechanic's or materialman's lien,  mechanic's or materialman's
lien or other  lien of any  nature  whatsoever  and the same shall not either be
discharged of record or in the alternative  insured over to the  satisfaction of
Mortgagee  by the title  company  insuring  the lien of this  Mortgage  within a
period of thirty (30) days after the same is filed or recorded, and irrespective
of whether the same is superior or  subordinate in lien or other priority to the
lien of this  Mortgage  and  irrespective  of  whether  the same  constitutes  a
perfected or inchoate lien or encumbrance on the Mortgaged Property or is only a
matter of record or notice;


                                       19
<PAGE>

     (dd) if  Mortgagor  shall fail to maintain  its  business in good  standing
under the  applicable  regulations of the agencies or  governmental  authorities
having  jurisdiction  thereof,  or its failure to receive and maintain  whatever
licenses are required, or shall be required, for the ownership,  maintenance and
operation of the Mortgaged Property;

then and in every such case:

     I. During the continuance of any such Event of Default,  the Mortgagee,  by
written notice given to the Mortgagor,  may declare the entire  principal of the
Note then outstanding (if not then due and payable),  and all accrued and unpaid
interest thereon,  together with all other  Indebtedness,  to be due and payable
immediately,  and upon any such  declaration  the  principal  of the Note,  said
accrued and unpaid interest thereon, and all other Indebtedness shall become and
be immediately due and payable, anything in the Note, or in this Mortgage to the
contrary notwithstanding;

     II.  During the  continuance  of any such Event of Default,  the  Mortgagee
personally,  or by its agents or  attorneys,  may enter into and upon all or any
part of the  Premises,  and each and every part  thereof,  and may  exclude  the
Mortgagor,  its agents and servants wholly therefrom; and having and holding the
same, may use, operate, manage and control the Premises and conduct the business
thereof,  either  personally  or by  their  superintendents,  managers,  agents,
servants,  attorneys or receivers;  and upon every such entry, the Mortgagee, at
the expense of the Mortgaged  Property,  from time to time,  either by purchase,
repairs or  construction,  may  maintain  and  restore the  Mortgaged  Property,
whereof it shall become possessed as aforesaid, may complete the construction of
any of the  Improvements  and in the  course  of such  completion  may make such
changes in the contemplated Improvements as it may deem desirable and may insure
the same;  and  likewise,  from time to time,  at the  expense of the  Mortgaged
Property,  the Mortgagee may make all necessary or proper repairs,  renewals and
replacements   and  such  useful   alterations,   additions,   betterments   and
improvements thereto and thereon as to it may seem advisable;  and in every such
case the  Mortgagee  shall have the right to manage and  operate  the  Mortgaged
Property and to carry on the business thereof and exercise all rights and powers
of the  Mortgagor  with respect  thereto  either in the name of the Mortgagor or
otherwise as it shall deem best; and the Mortgagee  shall be entitled to collect
and receive all  earnings,  revenues,  rents,  issues  profits and income of the
Mortgaged  Property and every part thereof,  all of which shall for all purposes
constitute  property  of the  Mortgagor;  and in  furtherance  of such right the
Mortgagee  may  collect  the  rents  payable  under all  leases of the  Premises
directly  from the  lessees  thereunder  upon notice to each such lessee that an
Event of Default exists hereunder accompanied by a demand on such lessee for the
payment to the Mortgagee of all rents due and to become due under its lease, and
the Mortgagor FOR THE BENEFIT OF MORTGAGEE AND EACH SUCH LESSEE hereby covenants
and agrees that the lessee  shall be under no duty to question  the  accuracy of
the Mortgagee's  statement of default and shall  unequivocally  be authorized to
pay said rents to the Mortgagee  without regard to the truth of the  Mortgagee's
statement of default and  notwithstanding  notices from the Mortgagor  disputing
the existence of an Event of Default such that the payment of rent by the lessee
to the Mortgagee pursuant to such a demand shall constitute  performance in full
of the  lessee's  obligation  under the lease  for the  payment  of rents by the
lessee to the  Mortgagor;  and after  deducting the expenses of  conducting  the
business  thereof  and  of all  maintenance,  repairs,  renewals,  replacements,
alterations,  additions,  betterments and improvements and amounts  necessary to
pay for taxes, assessments, insurance and prior or other proper charges upon the
Mortgaged  Property,  or any  part  thereof,  as  well as  just  and  reasonable
compensation  for the services of the Mortgagee and for all attorneys,  counsel,
agents,  clerks,  servants  and  other  employees  by it  properly  engaged  and
employed,  the Mortgagee  shall apply the moneys arising as aforesaid,  first to


                                       20
<PAGE>

the payment of the principal of the Note and the interest  thereon,  when and as
the  same  shall  become  payable,  and  second  to the  payment  of  any  other
Indebtedness and sums required to be paid by the Mortgagor under this Mortgage.

     III. The Mortgagee,  with or without entry,  personally or by its agents or
attorneys,  insofar as applicable,  may:

     (1)  sell  the  Mortgaged  Property,  or any part  thereof,  to the  extent
permitted and pursuant to the procedures provided by law, and all estate, right,
title and interest,  claim and demand therein,  and right of redemption thereof,
at one or more sales as an entity or in parcels, and at such time and place upon
such terms and after such notice thereof as may be required or permitted by law;
or

     (2) institute  proceedings for the complete or partial  foreclosure of this
Mortgage; or

     (3) take such steps to protect and  enforce  its rights  whether by action,
suit or  proceeding  in equity  or at law for the  specific  performance  of any
covenant,  condition or agreement in the Note, or in this Mortgage, or in aid of
the execution of any power herein granted, or for any foreclosure hereunder,  or
for the  enforcement  of any  other  appropriate  legal or  equitable  remedy or
otherwise as the Mortgagee shall elect; or

     (4) the  Mortgagee  also  shall  have such  other  rights  and/or  remedies
provided to a mortgagee and/or a secured party by the Uniform Commercial Code as
that model  statute is enacted  and in effect in the  jurisdiction  wherein  the
Premises are situated.

     IV.  The  Mortgagor  covenants  to pay  the  indebtedness  as  hereinbefore
provided  and as  provided  in the  Note  and  notwithstanding  anything  to the
contrary contained herein,  during the continuance of any such Event of Default,
the Mortgagee personally, or by its agents or attorneys, may enter into and upon
all or any part of the Premises,  and each and every part thereof,  and sell and
dispose of same,  along with any  benefit and equity of  redemption  of the said
Mortgagor, its heirs, executors, administrators,  successors or assigns therein,
at public auction,  according to the act in such case made and provided,  as the
attorney of the  Mortgagor  for that purpose duly  authorized,  constituted  and
appointed, to make and deliver to the purchaser or purchasers thereof a good and
sufficient  deed or deeds of  conveyance  for the same in fee simple  which such
sale so to be made  shall  forever  be a  perpetual  bar both in law and  equity
against the Mortgagor,  its heirs, successors and assigns, and against all other
persons claiming or to claim the Premises, or any part thereof by, from or under
him, them or any of them.

     SECTION  2.02.  (a) The Mortgagee may adjourn from time to time any sale by
it to be made under or by virtue of this  Mortgage by  announcement  at the time
and place  appointed  for such sale or for such  adjourned  sale or sales;  and,
except as otherwise provided by any applicable  provision of law, the Mortgagee,
without further notice or publication,  may make such sale at the time and place
to which the same shall be so adjourned.

     (b) Upon the completion of any sale or sales made by the Mortgagee under or
by  virtue  of this  Article  II,  the  Mortgagee,  or an  officer  of any court
empowered  to do so,  shall  execute and deliver to the  accepted  purchaser  or
purchasers a good and sufficient instrument, or good and sufficient instruments,
conveying,  assigning and transferring all estate,  right, title and interest in
and to the  property  and  rights  sold and shall  execute  and  deliver  to the
appropriate  governmental authority any affidavit,  instrument,  document and/or
filing  required  pursuant to any  applicable  statute,  ordinance,  rule and/or
regulation.  As long as the loan  secured by this  Mortgage  remains  unpaid the


                                       21
<PAGE>

Mortgagee is hereby  irrevocably  appointed the true and lawful  attorney of the
Mortgagor,   in  its  name  and  stead,  to  make  all  necessary   conveyances,
assignments,  transfers and  deliveries of the Mortgaged  Property and rights so
sold and for that purpose the Mortgagee may execute all necessary instruments of
conveyance,   assignment  and  transfer,   including,  without  limitation,  any
affidavit,  instrument,  document or filing required  pursuant to any applicable
statute,  rule or  regulation,  and may substitute one or more persons with like
power,  the Mortgagor hereby ratifying and confirming all that its said attorney
or  such  substitute  or  substitutes   shall  lawfully  do  by  virtue  hereof.
Nevertheless the Mortgagor,  if so requested by the Mortgagee,  shall ratify and
confirm any such sale or sales by executing  and  delivering to the Mortgagee or
to such purchaser or purchasers all such instruments as may be advisable, in the
reasonable judgment of the Mortgagee, for that purpose, and as may be designated
in such request.  Any such sale or sales made under or by virtue of this Article
II, whether made under or by virtue of judicial  proceedings or of a judgment or
decree of foreclosure and sale,  shall operate to divest all the estate,  right,
title,  interest,  claim and demand whatsoever,  whether at law or in equity, of
the  Mortgagor  in and to the  properties  and  rights  so sold,  and shall he a
perpetual  bar both at law and in equity  against the  Mortgagor and against any
and all persons  claiming or who may claim the same, or any part thereof,  from,
through or under the Mortgagor.

     (c) In the event of any sale made  under or by  virtue of this  Article  II
(whether  made under or by virtue of  judicial  proceedings  or of a judgment or
decree of foreclosure and sale),  the entire  principal of, and interest on, the
Note, if not previously due and payable,  and all other sums required to be paid
by the  Mortgagor  pursuant  to this  Mortgage,  immediately  thereupon,  shall,
anything  in the Note,  or in this  Mortgage  to the  contrary  notwithstanding,
become due and payable.

     (d) The  purchase  money  proceeds  or avails of any sale made  under or by
virtue of this Article II,  together  with any other sums which then may be held
by the  Mortgagee  under this  Mortgage,  whether  under the  provisions of this
Article II or otherwise, shall be applied as follows:

     First:  To the payment of the costs and  expenses of such sale,  including,
but not limited to, the reasonable compensation to the Mortgagee, its agents and
counsel,  and any sums that may be due under  and/or  pursuant  to any  statute,
rule,  regulation  and/or law which imposes any tax, charge,  fee and/or levy in
connection  with and/or  arising from the  exercise of any right  and/or  remedy
under this Mortgage or the  requirement  that any sum be paid in order to record
and/or  file any  deed,  instrument  of  transfer  or  other  such  document  in
connection with any such sale and of any judicial  proceedings  wherein the same
may be made, and of all expenses,  liabilities  and advances made or incurred by
the Mortgagee  under this  Mortgage,  together with interest at the  Involuntary
Rate on all advances made by the Mortgagee and all taxes or assessments,  except
any taxes,  assessments or other charges subject to which the Mortgaged Property
shall have been sold.

     Second:  To the payment of the whole amount then due,  owing or unpaid upon
the Note  for  principal,  interest,  other  indebtedness,  and any  other  sums
required to be paid  thereunder  with  interest on the unpaid  principal  at the
Involuntary Rate from and after the happening of any Event of Default  described
in clause (a) of Section 2.01 from the due date of any such payment of principal
until the same is paid.

     Third:  To the payment of the whole  amount then due,  owing or unpaid upon
any  other  note  held by the  Mortgagee  made by either  the  Mortgagor  or any
guarantor  hereof and secured by this Mortgage for principal and interest,  with
interest  on the unpaid  principal  at the  Involuntary  Rate from and after the
happening  of any Event of Default  described in clause (a) of Section 2.01 from


                                       22
<PAGE>

the due date of any such payment of principal until the same is paid.

     Fourth:  To the  payment  of any  other  Indebtedness  and any  other  sums
required to be paid by the Mortgagor pursuant to any provision of this Mortgage,
or the Note.

     Fifth: To the payment of the surplus, if any, to Mortgagor.

     (e) Upon any sale made under or by virtue of this Article II,  whether made
under or by  virtue  of  judicial  proceedings  or of a  judgment  or  decree of
foreclosure  and sale,  the  Mortgagee  may bid for and  acquire  the  Mortgaged
Property  or any part  thereof  and in lieu of  paying  cash  therefor  may make
settlement  for the purchase  price by crediting  upon the  indebtedness  of the
Mortgagor secured by this Mortgage the net sales price after deducting therefrom
the  expenses  of the sale and the costs of the  action and any other sums which
the Mortgagee is authorized to deduct under this Mortgage.

     SECTION  2.03.  (a) In case an Event of Default  described in clause (a) of
Section 2.01 shall have happened and be continuing, then, upon written demand of
the  Mortgagee,  the Mortgagor  will pay to the Mortgagee the whole amount which
then shall have become due and payable on the Note, for principal or interest or
both,  as the case may be, and after the happening of said Event of Default will
also pay to the Mortgagee  interest at the  Involuntary  Rate on the then unpaid
principal  of the  Note,  and the  sums  required  to be  paid by the  Mortgagor
pursuant to any provision of this Mortgage, and in addition thereto such further
amount as shall be  sufficient  to cover the costs and  expenses of  collection,
including reasonable compensation to the Mortgagee,  its agents, and counsel and
any expenses  incurred by the  Mortgagee  hereunder.  In the event the Mortgagor
shall fail forthwith to pay such amounts upon such demand,  the Mortgagee  shall
be entitled and empowered to institute  such action or  proceedings at law or in
equity as may be advised by its  counsel for the  collection  of the sums so due
and unpaid,  and may  prosecute  any such action or  proceedings  to judgment or
final  decree,  and may enforce any such  judgment or final  decree  against the
Mortgagor and collect,  out of the property of the Mortgagor  wherever situated,
as well as out of the Mortgaged Property,  in any manner provided by law, moneys
adjudged or decreed to be payable.

     (b) The Mortgagee shall be entitled to recover judgment as aforesaid either
before or after or during the pendency of any proceedings for the enforcement of
the provisions of this Mortgage;  and the right of the Mortgagee to recover such
judgment  shall  not be  affected  by any  entry  or sale  hereunder,  or by the
exercise  of any  other  right,  power  or  remedy  for the  enforcement  of the
provisions of this Mortgage,  or the foreclosure of the lien hereof;  and in the
event  of a sale of the  Mortgaged  Property,  or any part  thereof,  and of the
application  of the  proceeds  of sale,  as in this  Mortgage  provided,  to the
payment of the debt hereby  secured,  the Mortgagee shall be entitled to enforce
payment of, and to receive all amounts  then  remaining  due and unpaid upon the
Note, and to enforce  payment of all other charges,  payments and due under this
Mortgage,  and shall be entitled to recover judgment for any portion of the debt
remaining  unpaid,  with  interest  at the  Involuntary  Rate.  In  case  of the
commencement of any case against the Mortgagor under any applicable  bankruptcy,
insolvency,  or other similar law now or hereafter in effect or any  proceedings
for its  reorganization  or involving the  liquidation  of its assets,  then the
Mortgagee  shall be entitled to prove the whole amount of principal and interest
due upon the Note to the full amount thereof,  and all other  payments,  charges
and costs due under this  Mortgage,  without  deducting  therefrom  any proceeds
obtained  from the sale of the  whole  or any  part of the  Mortgaged  Property,
provided,  however, that in no case shall the Mortgagee receive a greater amount
than such principal and interest and such other payments, charges and costs from
the aggregate  amount of the proceeds of the sale of the Mortgaged  Property and
the distribution from the estate of the Mortgagor.


                                       23
<PAGE>

     (c) No  recovery  of  any  judgment  by the  Mortgagee  and no  levy  of an
execution  under any  judgment  upon the  Mortgaged  Property  or upon any other
property of the Mortgagor shall affect in any manner or to any extent,  the lien
of this Mortgage upon the Mortgaged Property, or any part thereof, of any liens,
rights,  powers or remedies of the Mortgagee hereunder,  but such liens, rights,
powers and remedies of the Mortgagee shall continue unimpaired as before.

     (d) Any moneys thus  collected  by the  Mortgagee  under this  Section 2.03
shall  be  applied  by the  Mortgagee  in  accordance  with  the  provisions  of
subsection (d) of Section 2.02.

     SECTION 2.04.  After the happening of any Event of Default and  immediately
upon the  commencement  of any action,  suit or other legal  proceedings  by the
Mortgagee to obtain judgment for the principal of, or interest on, the Note, and
all other  Indebtedness  and other  sums  required  to be paid by the  Mortgagor
pursuant to any provision of this Mortgage, or of any other nature in aid of the
enforcement of the Note or of this  Mortgage,  the Mortgagor will (a) consent to
the  service of  process as  provided  in Section  3.12 and enter its  voluntary
appearance  in such  action,  suit or  proceeding,  and (b) if  required  by the
Mortgagee,  consent  to  the  appointment  of a  receiver  or  receivers  of the
Mortgaged  Property,  or any part thereof,  and of all the  earnings,  revenues,
rents, issues,  profits and income thereof.  After the happening of any Event of
Default and during its continuance,  or upon the commencement of any proceedings
to foreclose this Mortgage or to enforce the specific  performance  hereof or in
aid thereof or upon the commencement of any other judicial proceeding to enforce
any right of the  Mortgagee,  the  Mortgagee  shall be entitled,  as a matter of
right, if it shall so elect, without the giving of notice to any other party and
without   regard  to  the  adequacy  or  inadequacy  of  any  security  for  the
Indebtedness, forthwith either before or after declaring the unpaid principal of
the  Note to be due and  payable,  to the  appointment  of  such a  receiver  or
receivers.

     SECTION 2.05.  Notwithstanding the appointment of any receiver,  liquidator
or trustee of the Mortgagor,  or of any of their  property,  or of the Mortgaged
Property  or any part  thereof,  the  Mortgagee  shall  be  entitled  to  retain
possession  and  control  of all  property  now or  hereafter  held  under  this
Mortgage.

     SECTION 2.06. No remedy herein  conferred upon or reserved to the Mortgagee
is intended to be exclusive of any other remedy or remedies,  and each and every
such 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.
No delay or omission of the  Mortgagee to exercise  any right or power  accruing
upon any Event of Default  shall  impair  any such  right or power,  or shall be
construed  to be a waiver  of any  such  Event of  Default  or any  acquiescence
therein,  and every power and remedy given by this Mortgage to the Mortgagee may
be  exercised  from  time to time as often  as may be  deemed  expedient  by the
Mortgagee.  Nothing in this Mortgage or in the Note shall affect the  obligation
of the  Mortgagor  to pay the  principal  of, and  interest  on, the Note in the
manner and at the time and place therein respectively expressed.

     SECTION 2.07. The Mortgagor will not at any time insist upon, or plead,  or
in any manner  whatever  claim or take any benefit or  advantage  of any stay or
extension  or  moratorium  law,  any  exemption  from  execution  or sale of the
Mortgaged  Property or any part thereof,  wherever  enacted,  now or at any time
hereafter in force,  which may affect the covenants and terms of  performance of
this  Mortgage,  nor claim,  take or insist upon any benefit or advantage of any
law now or hereafter in force  providing  for the  valuation or appraisal of the
Mortgaged  Property,  or any part  thereof,  prior to any sale or sales  thereof
which may be made pursuant to any provision  herein,  or pursuant to the decree,
judgment or order of any court of competent  jurisdiction;  nor,  after any such
sale or sales,  claim or  exercise  any right under any  statute  heretofore  or


                                       24
<PAGE>

hereafter  enacted to redeem the  property  so sold or any part  thereof and the
Mortgagor  hereby  expressly  waives all benefit or advantage of any such law or
laws,  and covenants  not to hinder,  delay or impede the execution of any power
herein  granted  or  delegated  to the  Mortgagee,  but to suffer and permit the
execution of every power as though no such law or laws had been made or enacted.
The Mortgagor,  for itself and all who may claim under it, waive,  to the extent
that it lawfully  may,  all right to have the  Mortgaged  Property,  or any part
thereof, marshaled upon any foreclosure hereof.

     SECTION 2.08.  During the continuance of any Event of Default,  and pending
the exercise by the Mortgagee of its right to exclude the Mortgagor  from all or
any part of the Premises,  the Mortgagor  agrees to pay the fair and  reasonable
rental value for the use and  occupancy of the Mortgaged  Property,  or any part
thereof that is in its possession for such period,  and upon default of any such
payment,  will vacate and surrender possession of the Mortgaged Property, or any
part thereof, to the Mortgagee or to a receiver,  if any, and in default thereof
may be  evicted  by any  summary  action  or  proceeding  for  the  recovery  of
possession of the Premises for non-payment of rent, however designated.

     SECTION 2.09. In the event of any Event of Default  hereunder and resulting
foreclosure  of the  within  Mortgage,  any  interest  of the  Mortgagor  in any
insurance  policy  insuring all or any portion of the Premises shall pass to the
purchaser of the Premises at the time of foreclosure sale.

                              (End of Article II)

                                  ARTICLE III

                                 Miscellaneous

     SECTION 3.01. In the event any one or more of the  provisions  contained in
this Mortgage or in the Note shall for any reason be held to be invalid, illegal
or unenforceable in any respect, such invalidity, illegality or unenforceability
shall,  at the option of the Mortgagee,  not affect any other  provision of this
Mortgage,  but this Mortgage  shall be construed as if such invalid,  illegal or
unenforceable provision had never been contained herein or therein.

     SECTION 3.02. All notices hereunder shall be in writing and shall be deemed
to have been  sufficiently  given or served  for all  purposes  three days after
being sent by registered or certified  mail,  return receipt  requested,  to any
party hereto at its address above stated (in the case of the  Mortgagee,  to the
attention of Real Estate  Banking  Department) or at such other address of which
any party shall have  notified  any other party giving such notice in writing as
aforesaid.

     SECTION 3.03.  All covenants  hereof shall be construed as affording to the
Mortgagee  rights  additional to and not exclusive of the rights conferred under
the  provisions of Sections 254 and 273 of the Real Property Law of the State of
New York, or any other applicable law.

     SECTION  3.04.  All  of  the  grants,  terms,  conditions,  provisions  and
covenants of this  Mortgage  shall run with the land,  shall be binding upon the
Mortgagor and shall inure to the benefit of the Mortgagee, subsequent holders of
this Mortgage and their  respective  successors and assigns.  For the purpose of
this  Mortgage,  the term  "Mortgagor"  shall include and refer to the mortgagor
named  herein,  any  subsequent  owner of the  Mortgaged  Property,  or any part
thereof,  and  their  respective  heirs,   executors,   legal   representatives,
successors  and  assigns.  If  there  is more  than  one  Mortgagor,  all  their


                                       25
<PAGE>

undertakings hereunder shall be deemed joint and several.

     SECTION 3.05. The enforcement of this Mortgage shall be governed, construed
and interpreted by the laws of the State where the Premises are located. Nothing
in this Mortgage,  the Note or in any other agreement  between the Mortgagor and
the  Mortgagee  shall  require the Mortgagor to pay, or the Mortgagee to accept,
interest  in an amount  which  would  subject  the  Mortgagee  to any penalty or
forfeiture  under  applicable law. In the event that the payment of any charges,
fees or other sums due hereunder or under the Note or any such other  agreement,
which are or could be held to be in the  nature  of  interest  and  which  would
subject the Mortgagee to any penalty or forfeiture  under  applicable law, then,
ipso facto,  the  obligations  of the  Mortgagor to make such  payment  shall be
reduced  to the  highest  rate  authorized  under  applicable  law.  Should  the
Mortgagee receive any payment which is or would be in excess of the highest rate
authorized  under law, such payment shall have been, and shall be deemed to have
been,  made  in  error,  and  shall  automatically  be  applied  to  reduce  the
outstanding balance of the Indebtedness.

     SECTION 3.06.  This Mortgage and all of the terms,  covenants,  provisions,
conditions  and grants  contained in this Mortgage  cannot be altered,  amended,
waived,  modified or  discharged  orally,  and no executory  agreement  shall be
effective to modify, waive or discharge, in whole or in part, anything contained
in this  Mortgage  unless it is in writing and signed by the party  against whom
enforcement of the modification,  alteration,  amendment, waiver or discharge is
sought.

     SECTION  3.07.  The Mortgagor  acknowledges  that they have received a true
copy of this Mortgage.

     SECTION 3.08. This Mortgage may be executed in any number of  counterparts,
and  each  of such  counterparts  shall  for all  purposes  be  deemed  to be an
original,  and all such counterparts  shall together  constitute but one and the
same mortgage.

     SECTION 3.09.  All covenants  hereof shall be construed as affording to the
Mortgagee  rights  additional to and not exclusive of the rights conferred under
the provisions of any applicable law.

     SECTION  3.10.  The  information  set forth on the  cover  hereof is hereby
incorporated herein.

     SECTION 3.11. The Mortgagor  expressly agree,  intending that the Mortgagee
rely thereon,  that this Mortgage also shall constitute a "security  agreement,"
as such term is  defined  in the  Uniform  Commercial  Code in the  jurisdiction
wherein the Premises are situated (the "Code").  In accordance with Article 9 of
the Uniform Commercial Code and Revised Article 9 thereof,  the Mortgagor hereby
authorizes the Mortgagee to file such financing statements or amendments thereof
as may be necessary in the form provided in Article 9 of the Uniform  Commercial
Code and Revised Article 9 to perfect the security  interests  herein created in
the collateral hereinafter described. The Mortgaged Property includes, and shall
be deemed to include,  inter alia, the Chattels and the Intangibles,  regardless
of whether  they are held or hereafter  acquired,  of the  Mortgagor  in, to and
under the Mortgaged  Property.  By executing and delivering  this Mortgage,  the
Mortgagor have granted, in the same manner and with the same effect described in
the Granting Clause hereof, to the Mortgagee, as additional security, a security
interest in the Chattels and the  Intangibles  which are subject to the Code. If
any Event of Default shall occur,  the Mortgagee  shall have, in addition to any
and all other rights and remedies set forth in this  Mortgage,  and may exercise
without demand, any and all rights and remedies granted to a secured party under
the Code,  including,  but not limited to, the right to take  possession  of the
Chattels and the  Intangibles,  or any part thereof,  and the right to advertise
and sell the Chattels and the Intangibles,  or any part thereof, pursuant to and


                                       26
<PAGE>

in  accordance  with  the  power  of sale  provided  for in this  Mortgage.  The
Mortgagor  agrees  that any  notice  of sale or  other  action  intended  by the
Mortgagee with respect to the Chattels and the Intangibles, or any part thereof,
shall constitute  reasonable notice if it is sent to the Mortgagor not less than
ten (10) days prior to any such sale or  intended  action.  The  proceeds of any
such sale of the Chattels and the  Intangibles,  or any part  thereof,  shall be
applied in the manner set forth in clauses First through  Fourth of Section 2.02
(d) of this Mortgage.

     In  accordance  with Article 9 of the Uniform  Commercial  Code and Revised
Article 9 thereof,  the  Mortgagor  hereby  authorize the Mortgagee to file such
financing  statements  or  amendments  thereof as may be  necessary  in the form
provided in Article 9 of the Uniform  Commercial  Code and Revised  Article 9 to
perfect the security  interests  herein  created in the  collateral  hereinafter
described.

     SECTION 3.12. The Mortgagor  agrees to submit to personal  jurisdiction  in
the State of New York in any action or  proceeding  arising out of the Mortgage.
In  addition,  Mortgagor  waives any right to a trial by jury or to  interpose a
counterclaim  in any action brought by the Mortgagee to enforce its rights under
the Note or this Mortgage.

     SECTION  3.13.  This  Mortgage  does not cover  real  property  principally
improved or to be improved by one or more structures containing in the aggregate
more than six (6)  residential  dwelling  units,  each having their own separate
cooking facilities.

     SECTION  3.14.  The loan  secured  hereby was  approved and extended by the
Mortgagee,  in part,  in  reliance  upon the  credit,  financial  capacity,  and
property management expertise of the Mortgagor.  Accordingly,  in the event that
the Mortgagor shall either sell,  convey or alienate the subject Premises or any
part  thereof,  or any interest  therein,  the loan secured  hereby shall become
immediately due and payable.

     SECTION  3.15.  The  Mortgagee  reserves the right to  participate  out any
portion of the loan secured hereby.  Accordingly,  the Mortgagor hereby grant to
the Mortgagee the right to distribute  without  further notice to the Mortgagor,
and at the Mortgagee's sole discretion any information relative to this Mortgage
or any document executed in connection therewith,  including without limitation,
costs estimates, income pro formas and financial statements,  including, but not
limited to, those supplied to the Mortgagee by the Mortgagor.

     SECTION 3.16. The Mortgagee may, in the event that the Mortgagee reasonably
determines  that the value of the Premises has decreased,  require the Mortgagor
to provide the  Mortgagee  with an appraisal  or  appraisals  subsequent  to the
closing of the Loan, but not more than one (1) time in any calendar year. In the
event that said appraisal or appraisals  indicate that the value of Premises has
decreased  so that the loan to value ratio at that time is  unacceptable  to the
Mortgagee,  then the  Mortgagor  shall either (i) make payments to the Mortgagee
reducing  the  amount of the Loan to a point  where  the loan to value  ratio is
acceptable  to the  Mortgagee;  (ii)  provide the  Mortgagee  with liens  and/or
security interests in such additional collateral in all respects satisfactory to
the Mortgagee as will reduce the loan to value ratio to a percentage  acceptable
to the  Mortgagee;  or (iii)  repay the Loan in full.  All costs of such  future
appraisals shall be paid by the Mortgagor.

     SECTION 3.17. INTENTIONALLY OMITTED

     SECTION 3.18 Upon the occurrence of an Event of Default in the  performance


                                       27
<PAGE>

of any of the Mortgagor's  covenants or agreements herein, the Mortgagee may, at
its  option,  pay or  perform  the same and the  amount  or cost  thereof,  with
interest at the Involuntary Rate, shall immediately be due from the Mortgagor to
the  Mortgagee.  If the Mortgagor  shall fail to perform any of its  obligations
under this Mortgage, then the Mortgagee may make advances to perform the same on
its  behalf  and,  to the  extent  that any such  amounts  or costs  paid by the
Mortgagee shall constitute  payment of (i) taxes,  charges or assessments  which
may be imposed by law upon the  Premises;  (ii)  premiums on insurance  policies
covering the  Premises;  (iii)  expenses  incurred in upholding  the lien of the
Mortgage,  including,  but not  limited to the  expenses  of any  litigation  to
prosecute  or defend  the  rights and lien  created  by the  Mortgage;  (iv) any
amount, costs or charge to which the Mortgagee becomes subrogated, upon payment,
whether under recognized principles of law or equity, or under express statutory
authority; or (v) any amount pursuant to the provisions provided for herein that
shall become  effective after the occurrence of an Event of Default then, and in
each such event,  such amounts or costs,  together with interest  thereon at the
Involuntary Rate, shall be added to the indebtedness secured hereby and shall be
secured by the Mortgage .

     SECTION 3.19.  If at any time  Mortgagor  believes  that  Mortgagee has not
acted  reasonably in granting or  withholding  any approval or consent under the
Note,  this  Mortgage  or any other  document  or  instrument  now or  hereafter
executed and delivered in connection  therewith or otherwise with respect to the
loan  secured  hereby,  as to which  approval or consent  either  Mortgagee  has
expressly  agreed to act reasonably,  or absent such  agreement,  a court of law
having  jurisdiction  over the subject  matter  would  require  Mortgagee to act
reasonably,  then Mortgagors' sole remedy shall be to seek injunctive  relief or
specific  performance  and no action for  monetary  damages or punitive  damages
shall in any event or under any circumstance be maintained by Mortgagor  against
Mortgagee.

     SECTION  3.20.  Anything in this  Mortgage or the other Loan  Documents (as
defined below) to the contrary  notwithstanding,  Mortgagor  shall indemnify and
hold  Mortgagee  harmless  and defend it at  Mortgagor's  sole cost and  expense
against any loss or liability,  cost or expense (including  without  limitation,
reasonable  attorneys'  fees and  disbursements  of Mortgagee's  counsel whether
in-house  staff,  retained  firms,  or  otherwise)  and  all  claims,   actions,
procedures  and  suits  arising  out of or in  connection  with (a) any  ongoing
matters arising out of the transaction  contemplated by this Mortgage,  the Note
and any other document or instrument now or hereafter  executed and/or delivered
in  connection  with the  Indebtedness  (hereinafter  referred  to as the  "Loan
Documents") and the Indebtedness  (including,  but not limited to, all costs and
any  reappraisals  of the  Mortgaged  Property or any other  collateral  for the
Indebtedness),  (b) any amendment to, or restructuring  of, the Indebtedness and
the Loan Documents, (c) any and all lawful action that may be taken by Mortgagee
in connection  with the  enforcement  of the  provisions of this Mortgage or the
Note or any of the  other  Loan  Documents,  whether  or not  suit is  filed  in
connection  with the same, or in connection  with the  Mortgagor,  any Guarantor
and/or any partner,  joint venturer or shareholder thereof becoming a party to a
voluntary or  involuntary  federal or state  bankruptcy,  insolvency  or similar
proceeding, and (d) the past, current and/or future sale or offering for sale of
limited  partnership  interests in  Mortgagor,  including,  without  limitation,
liabilities under any applicable  securities or blue sky laws. All sums expended
by  Mortgagee  shall be payable on demand and,  until  reimbursed  by  Mortgagor
pursuant hereto,  shall be deemed  additional  principal of the Indebtedness and
shall bear interest at the penalty interest rate set forth in the Note.

     SECTION 3.21. Mortgagor acknowledge that Mortgagor's  obligation to pay the
debt in  accordance  with the  provisions  of the Note and this  Mortgage is and
shall at all times  continue to be absolute and  unconditional  in all respects,
and  shall at all  times be valid  and  enforceable  irrespective  of any  other
agreements  or  circumstances  of any nature  whatsoever  which might  otherwise


                                       28
<PAGE>

constitute a defense to the Note or this Mortgage or the obligation of Mortgagor
thereunder to pay the debt or the  obligations  of any other person  relating to
the Note or this Mortgage or the obligations of Mortgagor under the Note or this
Mortgage or otherwise  with respect to the loan secured  hereby in any action or
proceeding brought by Mortgagee to collect the debt, or any portion thereof,  or
to enforce, foreclose and realize upon the lien and security interest created by
this  Mortgage or any other  document or  instrument  securing  repayment of the
debt, in whole or in part.

     SECTION  3.22. If any action or proceeding be commenced to collect the Note
or enforce any of its provisions or the  provisions of this Mortgage,  Mortgagor
expressly  waive any and every right to interpose any  counterclaim  in any such
action or proceeding except for mandatory  counterclaims which will be waived if
not asserted, and also irrevocably and unconditionally waives any and all rights
to trial by jury in any action, suit or counterclaim arising in connection with,
out of or otherwise  relating to the Note,  this Mortgage and any other document
or instrument now or hereafter executed and delivered in connection therewith or
the loan secured by this Mortgage.

     SECTION  3.23.  This  Mortgage  and the Note  are  subject  to the  express
condition  that at no time shall  Mortgagor  be  obligated  or  required  to pay
interest  on the  principal  balance  due under the Note at a rate  which  could
subject  the holder of the Note to  liability  as a result of being in excess of
the maximum  interest  rate which  Mortgagor are permitted by law to contract or
agree to pay. If by the terms of this Mortgage or the Note, Mortgagor are at any
time  required or obligated to pay interest on the  principal  balance due under
the Note at a rate in excess of such maximum  rate,  the rate of interest  under
the Note shall be deemed to be immediately  reduced to such maximum rate and the
interest  payable shall be computed at such maximum rate and all prior  interest
payments in excess of such  maximum rate shall be applied and shall be deemed to
have been payments in reduction of the principal balance of the Note.

     SECTION 3.24.  Mortgagee shall,  upon request of Mortgagor and upon payment
of the  obligation  secured by the Mortgage  and all  customary  and  reasonable
assignment  and legal fees  related  thereto,  assign  this  Mortgage to a party
designated by Mortgagor.

     SECTION 3.25. Cross Default and Cross  Collateralization.  This Mortgage is
cross-defaulted and  cross-collateralized  with each and every obligation of the
Mortgagor due to the  Mortgagee.  Specifically,  any event of default or default
under any loan made by Mortgagee to the  Mortgagor,  or any other  obligation of
the  Mortgagor or any  guarantor in favor of the  Mortgagee,  shall be deemed an
Event of Default  hereunder.  The loan and Note  secured  hereby,  and any other
obligation of the Borrower due to the Mortgagee,  are hereby collateralized with
the same  security and  collateral  securing the said Note and any other loan or
obligation due from Mortgagor to the Mortgagee.



                                       29
<PAGE>


     IN WITNESS  WHEREOF,  this  Agreement has been duly executed by the parties
the date first above written.


                                         CVD EQUIPMENT CORPORATION,
                                         a New York corporation
                                         Mortgagor


 /s/ Martin J. Teitelbaum                By:  /s/ Glen Charles
- -----------------------------------         -----------------------------------
witness                                     GLEN CHARLES,
                                            Secretary and CFO



                                         CAPITAL ONE, N.A.,
                                         Mortgagee


                                         By:  /s/ Gerard Waters
                                            -----------------------------------
                                            GERARD WATERS,
                                            Vice-President



                                       30
<PAGE>


State of New York         )
                          )        : ss.:
County of Suffolk         )


     On the 30th day of June,  2008,  before  me,  the  undersigned,  personally
appeared  GLEN CHARLES,  personally  known to me or proved to me on the basis of
satisfactory  evidence  to be the  individual  whose name is  subscribed  to the
within instrument and acknowledged to me that she executed same in her capacity,
and that by her signature in the instrument,  the individual, or the person upon
behalf of which the individual acted, executed the instrument.

                                      /s/ Jolanta Schmidt
                                   -----------------------------
                                   Notary Public





State of New York )
                           ) : ss.:
County of Suffolk )


     On the 30th day of June,  2008,  before  me,  the  undersigned,  personally
appeared  GERARD WATERS  personally  known to me or proved to me on the basis of
satisfactory  evidence  to be the  individual  whose name is  subscribed  to the
within instrument and acknowledged to me that she executed same in her capacity,
and that by her signature in the instrument,  the individual, or the person upon
behalf of which the individual acted, executed the instrument.

                                       /s/ Jolanta Schmidt
                                    -----------------------------
                                    Notary Public





                                       31
<PAGE>



              CONSOLIDATION, EXTENSION AND MODIFICATION AGREEMENT


                              Dated: June 30, 2008

                                     between

                           CVD EQUIPMENT CORPORATION,
                             a New York corporation,
                               with an address at
                              1860 Smithtown Avenue
                           Ronkonkoma, New York 11779
                                (the "Mortgagor")

                                       and

                               CAPITAL ONE, N.A.,
                               having an office at
                              275 Broadhollow Road
                            Melville, New York 11747
                                (the "Mortgagee")


                              LOCATION OF PREMISES:


Street Address:                1117 Old Kings Highway
Town of:                       Saugerties
County of:                     Ulster
State of:                      New York
Section:                       17.4
Block:                         2
Lot:                           31


                       After recording, please return to:

                             ADELINA M. SKLYAR, ESQ.
               Ferro, Kuba, Mangano, Sklyar, Gacovino & Lake, P.C.
                                  21 Penn Plaza
                        360 West 31st Street, Suite 1100
                            New York, New York 10001

            This instrument was prepared by the above-named attorney.


</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10
<SEQUENCE>3
<FILENAME>exhibit102.txt
<DESCRIPTION>EXHIBIT 10.2 CONSOLIDATED MORTGAGE NOTE
<TEXT>
Exhibit 10.2
                                           For Bank use only:

                                           Received by:     _________________
                                           Approved by:     _________________
                                           Other:           _________________


                                CAPITAL ONE, N.A.
                     CONSOLIDATED AND RESTATED MORTGAGE NOTE

BORROWER:         CVD EQUIPMENT CORPORATION,
                  a New York corporation
PRINCIPAL:        $805,000.00
DATE:             June 30, 2008

PROMISE TO PAY: The undersigned (the "Borrower"),  jointly and severally if more
than one signer,  does hereby  promise to pay to the order of CAPITAL ONE,  N.A.
(the "Bank") at its offices at 275 Broadhollow Road,  Melville,  New York 11747,
or at any of its  branches,  the sum of EIGHT  HUNDRED FIVE  THOUSAND AND 00/100
($805,000.00)  DOLLARS plus interest thereon, from the date hereof in the manner
set forth below.

RATE AND PAYMENT:  The unpaid principal  balance hereof shall bear interest at a
fixed annual rate of interest of Six and 20/100 percent  (6.20%) (at times,  the
"Rate"), payable monthly in arrears, and repayment shall be from the date hereof
up to July 1, 2018 (the "Maturity Date") as follows:

     (1) in one  payment  due and  payable  at  closing in the amount of $138.64
representing  interest on the principal  amount  outstanding  hereunder from the
date hereof to July 1, 2008; and, then

     (2) in  one  hundred  nineteen  (119)  consecutive  monthly  payments  each
consisting of principal and interest in the amount of $5,903.27,  commencing and
due and payable on the first  (1st) day of August,  2008 and  continuing  on the
first (1st) day of each and every month thereafter; and, then

     (3) in one final payment due and owing on the Maturity  Date  consisting of
the entire  unpaid  principal  balance  hereof and all accrued  interest  and/or
related charges due to the Bank hereunder.

THIS NOTE  SHALL  MATURE ON JULY 1,  2018  WITH ALL SUMS OF  PRINCIPAL,  ACCRUED
INTEREST AND RELATED CHARGES DUE AND OWING ON SUCH DATE.

Payments shall be applied first to interest on unpaid  principal  balance hereof
to the date payment is received by the Bank and then to reduction of  principal.
Interest  shall  be  calculated  on a 360 day  year and  actual  number  of days
elapsed.

All payments  due  hereunder  shall be made by  automatic  debit from an account
maintained  by the  Borrower  for such purpose at the Bank in which the Borrower
shall maintain balances  sufficient to pay each monthly payment due to the Bank.



                                       1
<PAGE>

Each monthly payment of principal and interest shall be  automatically  deducted
from Capital One, N.A. Account No. [OMITTED] in connection with this Note on the
due date  thereof (at times,  the "due  date"),  and the  undersigned  agrees to
maintain  sufficient  funds  in  said  account  to  cover  these  payments.  The
undersigned  further  agrees that should there be  insufficient  funds in any of
Borrower's  accounts  with  the  Bank  to be  charged  for any  monthly  payment
hereunder on the monthly payment due date, an overdraft  charge will be incurred
and the account will not be charged for the monthly  payment.  However,  if this
occurs,  the undersigned will remain  responsible for the principal and interest
payment,  plus any late charges,  and the  undersigned  will be in default under
this  Note.  In  the  event  that  the  money  maintained  in  such  account  is
insufficient  for any  payment  due under  this  Note,  the Bank may  charge any
account of the Borrower or any Guarantor  hereof for any payment due to the Bank
under this Note.

PREPAYMENT:  This Note may be prepaid, upon no less than thirty (30) days' prior
written  notice from the  Borrower to the Bank,  provided the Borrower is not in
default,  all accrued interest and any and all applicable  charges due hereunder
have been paid to the date of such  prepayment,  and  further  provided  that in
connection with any prepayment in whole or in part the undersigned  shall to the
Bank a prepayment fee equal to two (2%) percent of the principal sum so prepaid.

If this Note is  prepaid  in part,  then any such  prepayment  shall be  applied
against the payments due hereunder in inverse order of maturity.

DEFAULT  INTEREST RATE: The unpaid  principal sum due under this Note shall bear
interest at a rate equal to five (5%) percent above the  applicable  Rate herein
on and after the  occurrence  of any Event of  Default as herein  described  and
until the entire principal sum hereof has been fully paid, both before and after
the entry of any judgment with respect to such event,  but in no event shall the
Rate either before or after the  occurrence  of any Event of Default  exceed the
highest rate of interest,  if any,  permitted  under the  applicable New York or
Federal Law.

RIGHT OF OFFSET:  If any payment is not made on time,  or if the entire  balance
becomes due and  payable  and is not paid,  all or part of the amount due may be
offset out of any account or other property which the Borrower or the Guarantors
hereof has at the Bank or at any  affiliate of the Bank without  prior notice or
demand.

LATE CHARGES:  The Borrower will pay a charge of four (4%) percent of the amount
of any  payment  which is not made  within ten (10) days of its  respective  due
date.

SECURITY: This Note is secured by:

     (1) a  security  interest  in and  assignment  and  pledge  of all  monies,
deposits,  or  other  sums now or  hereafter  held by the  Bank on  deposit,  in
safekeeping,  transit or otherwise,  at any time credited by or due from Bank to
the  Borrower  or to the  Guarantor  hereof,  or in which  the  Borrower  or the
Guarantor shall have an interest;

     (2) a first  position  mortgage  lien  evidenced by a Mortgage and Security
Agreement  of even  date  herewith  made by  Borrower  in favor of the Bank (the
"Mortgage")  encumbering  certain real property  owned by the Borrower known as,
and located at, 1117 Old Kings Highway,  Town of  Saugerties,  County of Ulster,
and State of New York and formally  described on the Tax Maps of the said County
of Ulster as Section 17.4,  Block 2, Lot 31 (hereinafter  referred to, at times,
as the "Premises");


                                       2
<PAGE>

     (3) a  Consolidation,  Extension  and  Modification  Agreement of even date
herewith (the "CEMA") encumbering the Premises; and

     (4) an  Assignment  of all Leases and Rents from the  Premises  that is the
subject of the Mortgage and CEMA;

     (5) a security interest in all personal property of the Borrower  evidenced
by a Security  Agreement of even date  herewith made by the Borrower in favor of
the  Bank and  appertaining  UCC-1  financing  statement,  excluding  any of the
Borrower's equipment financed under chattel liens held by the Bank;

     (6) a  collateral  Assignment  by  Borrower to the Bank of a portion of the
proceeds of a life insurance  policy issued on the life of Leonard A. Rosenbaum,
President  and CEO of the Borrower,  in the amount of Five Hundred  Thousand and
00/100  ($500,000.00)  Dollars  which  such  policy  was  issued  by Pruco  Life
Insurance  Company of New Jersey (a Stock  Company of the  Prudential  Insurance
Company of America), under policy no. [OMITTED] (contract date October 14, 2006)
and has a face value of Two Million and 00/100 ($2,000,000.00) Dollars.

FINANCIAL COVENANTS: The Borrower expressly covenants and represents that at all
times  during the term  hereof,  it shall  comply with the  following  financial
covenants, to wit:

     (a)  Borrower  shall  maintain a Maximum  Leverage of 1.20:1.  For purposes
hereof, the term "Maximum Leverage" shall mean the ratio of total liabilities of
the Borrower divided by its tangible net worth at all times; and

     (b)  Borrower  shall  maintain a minimum  Debt  Service  Coverage  Ratio of
1.25:1.  For  purposes  hereof,  the term  "Debt  Service  Coverage"  shall mean
earnings of the Borrower before interest,  taxes,  depreciation and amortization
for the previous  twelve month period,  divided by the interest  expense for the
prior twelve (12) month  period and  aggregate  principal  payments of loans and
capitalized  leases  scheduled  to be paid over the  ensuing  twelve  (12) month
period,  exclusive  of any balloon or maturity  balance of (i) any loans made by
the Bank to the Borrower including,  without  limitation,  the loan evidenced by
the  Note;  and (ii) the GE  Capital  mortgage  loan made to the  Borrower,  and
exclusive of the principal balance due at the maturity of the Note.

DEFAULT:  The Bank may  declare the entire  unpaid  balance of this Note due and
payable on the  happening of any of the  following  events  (each,  an "Event of
Default" or, collectively, "Events of Default"):

     (a) failure to pay any amount required by this Note within ten (10) days of
its respective due date, or any other  obligation  owed to the Bank by Borrower,
or,  failure of the  Borrower to have  sufficient  funds in its  account(s)  for
payments  due  hereunder  to be  debited  on the due date or  within  three  (3)
business days thereafter;

     (b) failure to perform or keep or abide by any term,  covenant or condition
contained  in this Note or the  Mortgage  or the CEMA or any other  document  or
instrument given to the Bank in connection with this or any other loan;


                                       3
<PAGE>

     (c) the filing of a bankruptcy  proceeding,  assignment  for the benefit of
creditors,  issuance of any  execution,  garnishment,  or levy  against,  or the
commencement  of any proceeding for relief from  indebtedness  by or against the
Borrower;

     (d)  the  happening  of any  event  which,  in  the  judgment  of the  Bank
substantially  affects:  (i) the Borrower's  ability to repay this Note; or (ii)
the value of the Premises; or (iii) the value of any collateral for this Note or
the Mortgage or the CEMA;

     (e) if any  written  representation  or  statement  made to the Bank by the
Borrower is untrue;

     (f) if any written representation, covenant or warranty made to the Bank by
the Borrower is breached;

     (g) the occurrence of an Event of Default under the Mortgage, the CEMA, any
Guaranty,  or any other  document or instrument  given to the Bank in connection
with this Note, the Mortgage, the CEMA or any other loan;

     (h)  Inability of the Borrower to manage its affairs,  or the  voluntary or
involuntary dissolution of the Borrower;

     (i) failure of the Borrower to utilize the Bank as  its/their  primary bank
and to maintain relevant accounts at the Bank during the term hereof;

     (j) default by Borrower  under any other guaranty or loan document or other
agreement made in favor of, or with, the Bank.

     (k) the Bank shall have determined,  in its reasonable  business  judgment,
that one or more conditions  exist or events have occurred which has resulted in
a material adverse change in the business,  properties or financial condition of
Borrower;

     (l) Failure of the Borrower to provide the Bank with the  following  during
the term of this Note:

     (i) SEC  10-K  reports  including  audited  consolidated  fiscal  financial
statements of the Borrower  prepared by a firm or certified  public  accountants
acceptable  to the Bank with an  unqualified  opinion,  within one hundred  five
(105) days of its fiscal year end; and

     (ii) SEC 10-Q quarterly  financial  statements of the Borrower within sixty
(60) days of each quarter end; and

     (iii) compliance and covenant  calculations for the Borrower on a quarterly
basis to be submitted with each of the afore-mentioned financial statements;

     (m) Failure of the Borrower,  during the term hereof, to maintain a Maximum
Leverage of 1.20:1.  For purposes hereof, the term "Maximum Leverage" shall mean
the ratio of total liabilities of the Borrower divided by its tangible net worth
at all times;

     (n) Failure of the Borrower,  during the term hereof, to maintain a minimum


                                       4
<PAGE>

Debt  Service  Coverage  Ratio of 1.25:1.  For purposes  hereof,  the term "Debt
Service  Coverage" shall mean earnings of the Borrower before  interest,  taxes,
depreciation and  amortization for the previous twelve month period,  divided by
the  interest  expense  for the prior  twelve  (12) month  period and  aggregate
principal payments of loans and capitalized leases scheduled to be paid over the
ensuing twelve (12) month period,  exclusive of any balloon or maturity  balance
of (i) any loans made by the Bank to the Borrower including, without limitation,
the loan  evidenced  hereby;  and (ii) the GE Capital  mortgage loan made to the
Borrower,  and  exclusive of the  principal  balance due at the maturity of this
Note;

     (o) Borrower shall fail to pay its debts,  liabilities  and  obligations to
the Bank as and when due and  payable,  or Borrower  fails to perform or observe
any term,  covenant,  or condition on its part to be performed or observed under
any  agreement  or  instrument  relating  to any  such  debts,  liabilities  and
obligations  when  required to be performed  or observed,  if the effect of such
failure to perform or observe is to  accelerate,  or to permit the  acceleration
after the giving of notice or passage of time,  or both, of the maturity of such
debts,  liabilities and  obligations,  whether or not such failure to perform or
observe  shall  be  waived  by  the  holder  of  such  debts,   liabilities  and
obligations, or any such debts, liabilities and obligations shall be declared to
be due and  payable,  or be  required  to be prepaid  (other than by a regularly
scheduled  required  prepayment)  prior to the stated  maturity  of such  debts,
liabilities and obligations;

     (p) payment by the  Borrower of cash  dividends  on its common stock during
the term of this Note.

Notwithstanding the foregoing, the balance of this Note shall become immediately
due and payable upon the occurrence of any of the events set forth in (c) above.

ATTORNEY'S  FEES:  In the  event  the  Bank  retains  counsel  with  respect  to
enforcement of this Note or any other document or instrument  given to the Bank,
the Borrower agrees to pay the Bank's reasonable  attorney's fees and associated
costs and  disbursements  (whether or not an action is commenced  and whether or
not in the court of original jurisdiction, appellate court, bankruptcy court, or
otherwise).

SUBSEQUENT  AGREEMENTS:  The Borrower shall be bound by any agreement  extending
the  time or  modifying  the  above  terms of  payment  made by the Bank and any
owner(s) of the property covered by the Mortgage or the CEMA referred to herein,
without notice to the Borrower or the Guarantor, and the Borrower and Guarantors
shall continue to be liable to pay all amounts due hereunder, but at an interest
rate not exceeding the rate set forth herein, according to the terms of any such
agreement of extension or modification.

MISCELLANEOUS:  Delay or failure of the Bank to exercise any of its rights under
this Note shall not be deemed a waiver  thereof.  No waiver of any  condition or
requirement  shall operate as a waiver of any other or  subsequent  condition or
requirement.  The Bank or any other holder of this Note does not have to present
it before  requiring  payment.  The  Borrower  and the  Guarantors,  jointly and
severally,  waive trial by jury,  offset,  and counterclaim  with respect to any
action arising out of or relating to this Note. This Note may not be modified or
terminated  orally.  This Note shall be governed by the laws of the State of New
York  without  regard  to its  conflict  of laws  rules.  The  Borrower  and the
Guarantors  irrevocably  consent to the  jurisdiction  and venue of the New York
State Supreme Court, Suffolk County or Ulster County, said venue being chosen in


                                       5
<PAGE>

the sole and absolute  discretion  of the Bank,  in any action  concerning  this
Note. This Note is binding upon the Borrower and the Guarantors and all of their
respective heirs, successors and assigns.

All  signatories to this Note,  jointly and  severally,  waive  presentment  for
payment,  notice of dishonor,  protest,  notice of protest of this Note or other
notice of any kind and all demands  whatsoever;  and in any litigation  with the
Bank,  whether or not arising out of or relating to this Note or any  collateral
security therefore, said parties expressly waive trial by jury, and in addition,
expressly  waive the right to  interpose  any  defense  based on any  statute of
limitations or any claim of laches and any set-off, counterclaim, or cross-claim
of any nature or description.

No  failure to  accelerate  the debt  evidenced  hereby by reason of an Event of
Default hereunder,  acceptance of a past due installment,  or indulgence granted
from  time-to-time  shall  be  construed  (a) as a  novation  of this  Note or a
reinstatement of the indebtedness  evidenced hereby or as a waiver of such right
or  acceleration  or the  right of the Bank  thereafter  to insist  upon  strict
compliance  with the terms of this Note,  or (b) to prevent the exercise of such
right of acceleration or any other right granted hereunder or by applicable law;
and  Borrower  and the  Guarantors  hereby  expressly  waive the  benefit of any
statute or rule of law or equity now provided,  which may hereafter be provided,
which would produce a result  contrary to or in conflict with the foregoing.  No
extension  of the time  for the  payment  of this  Note or any  installment  due
hereunder,  made by agreement  with any person now or  hereafter  liable for the
payment of this Note,  shall operate to release,  discharge,  modify,  change or
affect the original liability of Borrower under this Note, either in whole or in
part, unless the Bank agrees otherwise in writing. No provision of this Note may
be changed, waived, discharged, or terminated except by an instrument in writing
signed by the party against whom enforcement of the waiver, change, modification
or discharge is sought.  The Bank may, without the consent of Borrower,  release
or discharge the Borrower, accommodation party, or surety or release, surrender,
waive,  substitute,  compromise,  or  discharge  any  security  herefor  without
affecting the liability of the Borrower hereunder.

This  Note is  cross-defaulted  and  cross-collateralized  with  each and  every
obligation  of the  Borrower due to the Bank,  any  successor  and/or  assign or
parent or  subsidiary  thereof.  Any Event of  Default  under any other  loan or
obligation made by Bank to the Borrower, or any other obligation of the Borrower
in favor of the Bank,  shall be deemed an Event of Default  hereunder.  The loan
evidenced  by this Note,  and any other  obligation  of the  Borrower due to the
Bank, are hereby  collateralized  with the same security and collateral securing
this Note and any other said loan or obligation.

The Borrower  shall not,  without the prior written  consent of the Bank hereof,
enter into any transaction of merger,  sale or consolidation or transfer,  sell,
assign,  lease or otherwise dispose of any parcel or parcels of real property as
described  herein or in the Mortgage or the CEMA or any or all or a  substantial
part  of  their  assets,  individually  or  jointly  subject  to the  terms  and
conditions set forth in the Mortgage or the CEMA of even date herewith.

The  terms of the said  Mortgage  and CEMA are  incorporated  into  this Note by
reference with the same force and effect as if fully set forth at length herein.

The Borrower expressly warrants and represents that no statements, agreements or
representations,  whether oral or written, have been made by the Bank, or by any
employee,  agent or broker of the Bank with  respect to the  obligation  or debt
evidenced by this Note. The Borrower further  expressly  warrants and represents
that (a) no oral  commitment has been made by the Bank to extend or continue any


                                       6
<PAGE>

credit to the Borrower or any party other than as expressly  stated herein or in
those certain documents executed in connection  herewith,  (b) no representation
or agreement has been made by or with the Bank, or any employee, agent or broker
of the Bank,  to  forebear  or refrain in any way from  exercising  any right or
remedy in its favor  hereunder or otherwise  unless  expressly set forth herein,
and (c) the  Borrower has not and will not rely on any  commitment  to extend or
continue any credit, nor on any agreement to forebear or refrain from exercising
rights or remedies  unless such  commitment or agreement shall be in writing and
duly executed by an authorized officer of the Bank.

In accordance with Article 9 of the Uniform  Commercial Code and Revised Article
9 thereof,  the Borrower  hereby  authorizes the Bank to sign and file financing
statements at any time with respect to any security  herefor or for the Mortgage
and CEMA without the signature or any further authorization of the Borrower. The
Borrower agrees to pay all filing fees and all other costs and expenses incident
to the filing of such statements.

This Note is a  consolidated  note meant to  consolidate  and  restate the debts
under the  following  notes,  to wit:  (a) Note dated  November 14, 1988 made by
Kidco Realty Corp. in favor of Dutchess Bank & Trust  Company,  in the principal
sum of Five  Hundred  Thousand  and 00/100  ($500,000.00)  Dollars and  interest
thereon; and (b) Note dated April 29, 1999 made by CVD Equipment  Corporation in
favor of Kidco  Realty,  Ltd.,  in the principal sum of Six Hundred Two Thousand
Five Hundred Three and 13/100 ($602,503.13) Dollars and interest thereon;  which
such  Notes  "a" and "b" were  consolidated  and  superseded  by (c) an  Amended
Restated and Consolidated  Promissory Note made by CVD Equipment  Corporation in
favor of Kidco Realty,  Ltd., in the principal sum of Nine Hundred  Thousand and
00/100  ($900,000.00)  Dollars and interest thereon; and (d) Note dated June 30,
2008 made by CVD  Equipment  Corporation  in favor of Capital One,  N.A., in the
principal  sum  of  Sixteen   Thousand  Nine  Hundred   Thirty  Six  and  50/100
($16,936.50)   Dollars  and  interest  thereon,   which  such  notes  heretofore
designated  (a), (b), (c) and (d) and the  obligations  thereunder are currently
owned and held by the Bank.


     IN WITNESS WHEREOF, the Borrower has signed this Note the 30th day of June,
2008.


                                    CVD EQUIPMENT CORPORATION,
                                    a New York corporation,
                                    Borrower



                                    By:   /s Glen Charles
                                       ---------------------------------------
                                       GLEN CHARLES,
                                       Secretary and CFO

Borrower's Address:

1860 Smithtown Avenue
Ronkonkoma, New York 11779



                                       7
<PAGE>





State of New York )
                           ) ss.:
County of Suffolk )

     On June 30, 2008,  before me, the  undersigned,  personally  appeared  Glen
Charles,  personally  known to me or proved  to me on the basis of  satisfactory
evidence to be the individual whose name is subscribed to the within  instrument
and  acknowledged  to me that he executed same in his capacity,  and that by his
signature in the instrument,  the individual, or the person upon behalf of which
the individual acted, executed the instrument.

                                               /s/ Jolanta Schmidt
                                            -------------------------------
                                            Notary Public










                                       8
</TEXT>
</DOCUMENT>
</SEC-DOCUMENT>
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