Exhibit 10.35


CLOSING ITEM NO.:  A-8




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                               COUNTY OF SARATOGA
                          INDUSTRIAL DEVELOPMENT AGENCY

                                       AND

                            SPURLOCK ADHESIVES, INC.

                                       TO

                          KEYBANK NATIONAL ASSOCIATION


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

                         MORTGAGE AND SECURITY AGREEMENT

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


                           DATED AS OF OCTOBER 1, 1997

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


         THIS MORTGAGE (A) AFFECTS TANGIBLE AND INTANGIBLE  PERSONAL PROPERTY AS
WELL AS REAL PROPERTY, (B) CONTAINS AFTER-ACQUIRED PROPERTY PROVISIONS,  AND (C)
IS INTENDED TO CONSTITUTE A SECURITY AGREEMENT UNDER THE UNIFORM COMMERCIAL CODE
OF THE STATE OF NEW YORK.

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<PAGE>

                                TABLE OF CONTENTS

                     (This Table of Contents is not part of
             this Mortgage and is for convenience of reference only)

<TABLE>
<CAPTION>
<S>                                                                                                      <C>
ARTICLE I
     DEFINITIONS
          SECTION 1.01.  DEFINITIONS OF TERMS.............................................................3
          SECTION 1.02.  INTERPRETATION...................................................................9


ARTICLE II
     REAL ESTATE MORTGAGE; GRANTING CLAUSES; SECURITY AGREEMENT; GENERAL COVENANTS
          SECTION 2.01.  GRANTING CLAUSES................................................................11
          SECTION 2.02.  SECURITY AGREEMENT..............................................................12
          SECTION 2.03.  INFORMATION UNDER UNIFORM COMMERCIAL CODE.......................................13
          SECTION 2.04.  PERFORMANCE OF COVENANTS........................................................13
          SECTION 2.05.  PRIORITY OF LIEN OF MORTGAGE; DISCHARGE OF LIENS AND ENCUMBRANCES...............13


ARTICLE III
     REPRESENTATIONS AND WARRANTIES
          SECTION 3.01.  REPRESENTATIONS AND WARRANTIES OF THE ISSUER....................................15
          SECTION 3.02.  REPRESENTATIONS AND WARRANTIES OF THE COMPANY...................................15
          SECTION 3.03.  PERFORMANCE OF COVENANTS........................................................16
          SECTION 3.04.  COVENANTS REGARDING REIMBURSEMENT AGREEMENT.....................................16


ARTICLE IV
     MAINTENANCE, MODIFICATION, TAXES AND INSURANCE
          SECTION 4.01.  MAINTENANCE OF AND MODIFICATIONS TO PROJECT FACILITY BY COMPANY.................17
          SECTION 4.02.  INSURANCE REQUIRED..............................................................17
          SECTION 4.03.  TAXES, ASSESSMENTS AND UTILITY CHARGES..........................................17
          SECTION 4.04.  PAYMENTS IN LIEU OF TAXES.......................................................17

ARTICLE V
     SPECIAL COVENANTS
          SECTION 5.01.  RIGHT OF ACCESS TO THE PROJECT FACILITY.........................................18
          SECTION 5.02.  INSPECTION OF PROJECT FACILITY BOOKS............................................18
          SECTION 5.03.  AGREEMENT TO PROVIDE INFORMATION................................................18
          SECTION 5.04.  BOOKS OF RECORD AND ACCOUNT; FINANCIAL STATEMENTS; COMPLIANCE
                   CERTIFICATES..........................................................................18
          SECTION 5.05.  COMPLIANCE WITH ORDERS, ORDINANCES, ETC.........................................18


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<PAGE>

          SECTION 5.06.  RECORDATION OF MORTGAGE, ASSIGNMENT AND INSTALLMENT SALE AGREEMENT AND
                   FILING OF SECURITY INSTRUMENTS........................................................19
          SECTION 5.07.  [INTENTIONALLY OMITTED].........................................................19
          SECTION 5.08.  ENVIRONMENTAL WARRANTIES AND COVENANTS..........................................19
          SECTION 5.09.  MORTGAGE TAX....................................................................21
          SECTION 5.10.  FEES AND EXPENSES OF THE BANK...................................................21

ARTICLE VI
     EVENTS OF DEFAULT AND REMEDIES
          SECTION 6.01.  EVENTS OF DEFAULT DEFINED.......................................................22
          SECTION 6.02.  ACCELERATION, ANNULMENT OF ACCELERATION.........................................24
          SECTION 6.03.  ENFORCEMENT OF REMEDIES.........................................................24
          SECTION 6.04.  APPOINTMENT OF RECEIVERS........................................................25
          SECTION 6.05.  APPLICATION OF MONEYS...........................................................25
          SECTION 6.06.  REMEDIES CUMULATIVE.............................................................25
          SECTION 6.07.  TERMINATION OF PROCEEDINGS......................................................26
          SECTION 6.08.  WAIVER AND NON-WAIVER OF EVENT OF DEFAULT.......................................26
          SECTION 6.09.  REPAYMENT AND SECURING OF EXPENSES PAID BY THE BANK.............................26
          SECTION 6.10.  OTHER ACTIONS BY THE BANK.......................................................27
          SECTION 6.11.  REPAYMENT AND SECURING OF COLLECTION COSTS INCURRED BY BANK.....................27


ARTICLE VII
     MISCELLANEOUS
          SECTION 7.01.  LIMITATION OF RIGHTS............................................................28
          SECTION 7.02.  LAWS............................................................................28
          SECTION 7.03.  REVENUE STAMPS..................................................................28
          SECTION 7.04.  FURTHER ASSURANCE...............................................................28
          SECTION 7.05.  SATISFACTION OF MORTGAGE........................................................28
          SECTION 7.06.  SEVERABILITY....................................................................28
          SECTION 7.07.  COVENANTS RUN WITH THE LAND.....................................................29
          SECTION 7.08.  NOTICES.........................................................................29
          SECTION 7.09.  COUNTERPARTS....................................................................30
          SECTION 7.10.  APPLICABLE LAW..................................................................30
          SECTION 7.11.  TABLE OF CONTENTS AND SECTION HEADINGS NOT CONTROLLING..........................30
          SECTION 7.12.  AMENDMENT, ETC..................................................................30
          SECTION 7.13.  USURY...........................................................................30
          SECTION 7.14.  NO RECOURSE; SPECIAL OBLIGATION.................................................31
          SECTION 7.15.  WAIVER OF NOTICE................................................................31
          SECTION 7.16.  LIEN LAW........................................................................31
          SECTION 7.17.  PROVISIONS  REGARDING MAXIMUM  INDEBTEDNESS,  REDUCTION OF SECURED AMOUNT
                   AND TREATMENT AND APPLICATION OF PAYMENTS.........................................32


                                       ii
<PAGE>


EXHIBIT "A"
     DESCRIPTION OF LAND................................................................................A-1


EXHIBIT "B"
     DESCRIPTION OF EQUIPMENT...........................................................................B-1

</TABLE>

                                      iii
<PAGE>

                         MORTGAGE AND SECURITY AGREEMENT


         THIS MORTGAGE AND SECURITY  AGREEMENT dated as of OCTOBER 1, 1997, (the
"Mortgage")  from  COUNTY  OF  SARATOGA   INDUSTRIAL   DEVELOPMENT  AGENCY  (the
"Issuer"),  a public benefit  corporation of the State of New York (the "State")
having a principal  office at 40 McMaster  Street,  Ballston Spa, New York 12020
and SPURLOCK  ADHESIVES,  INC.  (the  "Company"),  a  corporation  organized and
existing under the laws of the  Commonwealth  of Virginia,  having an address of
5090  General  Mahone  Highway,  Waverly,  Virginia  23890 to  KEYBANK  NATIONAL
ASSOCIATION,  (the "Bank") a national banking association organized and existing
under the laws of the  United  States  and  having  an  office at 66 South  Peal
Street,  Albany,  New York  12207-1501,  as Issuer of the  Letter of Credit  (as
hereinafter defined).

                              W I T N E S S E T H :

         WHEREAS,  the Issuer by  resolution  adopted  on  September  16,  1997,
resolved to undertake the Project (as hereinafter defined); and

         WHEREAS,   said  project  (the  "Project")  consists  of  (A)  (1)  the
acquisition of a certain  parcel of land  comprising  approximately  16.37 acres
constituting Lot #3 located in the Moreau Industrial Park in the Town of Moreau,
Saratoga County, New York (the "Land"),  (2) the construction on the Land of two
(2)  buildings  approximately  10,000  square  feet  each  in  size  and one (1)
approximately 800 square foot building for use in the manufacturing of synthetic
organic  chemicals and related  functions  (collectively the "Facility") and (3)
the acquisition and installation therein of certain machinery and equipment (the
"Equipment"  and  together  with  the  Land  and  the  Facility,   the  "Project
Facility"),  and (B) the financing of a portion of the costs of the foregoing by
the issuance of the Issuer's  $6,000,000  aggregate  principal amount Multi-Mode
Variable Rate Industrial  Development  Revenue Bonds (Spurlock  Adhesives,  Inc.
Project), Series 1997 A (the "Bonds"); and

         WHEREAS,  the Bonds are to be issued  pursuant  to the terms of a trust
indenture  dated as of October 1, 1997,  (the  "Indenture")  by and  between the
Issuer and Star Bank, N.A., as trustee (the "Trustee"); and

         WHEREAS,  contemporaneously  with the execution of the  Indenture,  the
Issuer and the Company have entered into an installment  sale agreement dated as
of  October  1, 1997 (the  "Installment  Sale  Agreement")  with  respect to the
Project Facility; and

         WHERAS, to secure the Bonds,  pursuant to a pledge and assignment dated
as of October 1, 1997 (the "Assignment"), the Issuer has assigned to the Trustee
certain  of  the  Issuer's  rights  and  remedies  under  the  Installment  Sale
Agreement,  including  the right to receive  installment  purchase  payments and
other amounts payable  thereunder,  but not including the Unassigned  Rights (as
hereinafter defined); and

         WHERAS,  as security  for the Bonds,  the  Company  has entered  into a
letter  of  credit  reimbursement  agreement  dated as of  October  1, 1997 (the
"Reimbursement  Agreement") with the Bank, pursuant to which the Bank has issued
in favor of the Trustee an irrevocable  transferable direct-pay letter of credit
(the "Letter of Credit") in an amount equal to the principal amount of the Bonds
Outstanding  and one hundred and ten (110) days' interest  thereon,  under which
the Bank is obligated to pay to the


<PAGE>

Trustee,   upon  presentation  of  a  sight  draft  and  required   accompanying
documentation,  the amount  necessary to pay the principal of an interest on the
Bonds then due and payable;

         WHEREAS,  to provide the Company  with  additional  funds with which to
complete  the  Project,  the Bank will  extend to the Company a term loan in the
amount of  $1,500,000  to be  evidenced  by a note  dated the  Closing  Date (as
hereinafter  defined)  from the  Company  in favor of the Bank (the  "Term  Loan
Note"); and

         WHEREAS,  the Company and the Issuer as security for the obligations of
the  Company  under  the  Reimbursement  Agreement  and under the Term Loan Note
intend  to  grant  the Bank a  mortgage  Lien (as  hereinafter  defined)  on and
security interest in the Project Facility; and

         WHEREAS,  all things  necessary to constitute the Mortgage a valid Lien
on  and  pledge  of the  Mortgaged  Property  (as  hereinafter  defined)  herein
described in accordance with the terms hereof have been done and performed,  and
the  creation,  execution  and  delivery of the  Mortgage,  as security  for the
obligations of the Company under the  Reimbursement  Agreement and the Term Loan
Note, have in all respects been duly authorized;

         NOW, THEREFORE, THIS MORTGAGE FURTHER WITNESSETH:

         KNOW ALL MEN BY THESE  PRESENTS,  that the Company  and the Issuer,  in
order to secure the obligations of the Company under the Reimbursement Agreement
and the Term Loan Note in the  principal  amount of SEVEN  MILLION  SIX  HUNDRED
EIGHTY  THOUSAND  EIGHT  HUNDRED  TWENTY-TWO  AND 00/100  DOLLARS  ($7,680,822),
according to their tenor and effect,  the payment of all other sums  required to
be paid  hereunder  and under the  Reimbursement  Agreement  and the other  Bank
Documents and the  performance  and  observance by the Issuer and the Company of
all of the covenants,  agreements,  representations and warranties herein and in
the Reimbursement  Agreement,  and the other Bank Documents,  do hereby covenant
and agree as follows:



                                       2
<PAGE>


                                    ARTICLE I

                                   DEFINITIONS


SECTION 1.01. DEFINITIONS OF TERMS. The following words and terms shall have the
following  meanings,  unless the context or use  indicates  another or different
meaning or intent:

         "Act" means Title 1 of Article 18-A of the General Municipal Law of the
State,  as amended from time to time,  together  with Chapter 855 of the Laws of
1971 of the State, as amended from time to time.

         "Act of  Bankruptcy"  means the filing of a petition in bankruptcy  (or
the other commencement of a bankruptcy or similar  proceeding) by or against the
Company   or  the   Issuer   under  any   applicable   bankruptcy,   insolvency,
reorganization or similar law, now or hereafter in effect.

         "Assignment"  means the  pledge and  assignment  dated as of October 1,
1997 from the Issuer to the Trustee pursuant to which the Issuer has assigned to
the  Trustee  its  rights  under the  Installment  Sale  Agreement  (other  than
Unassigned Rights), as said pledge and assignment may be supplemented or amended
from time to time.

         "Alternate  Credit  Facility"  shall have the meaning  assigned to such
term in the Indenture.

         "Authorized  Representative"  means the  Person or  Persons at the time
designated to act in behalf of the Issuer or the Company, as the case may be, by
written  certificate  furnished to the Trustee containing the specimen signature
of each such  Person and signed on behalf of (A) the Issuer by its  Chairman  or
Vice  Chairman,  or such other person as may be  authorized by resolution of the
Issuer,  and (B) the Company by Irvine  Spurlock,  Phillip Sumpter or such other
person as may be authorized by the Company.

         "Available  Moneys" shall have the meaning assigned to such term in the
Indenture.

         "Bank"  means  initially,   KeyBank  National   Association,   and  its
successors  and assigns in its capacity as issuer of the Letter of Credit and in
the  event an  Alternate  Credit  Facility  is  outstanding,  the  issuer of the
Alternate Credit Facility.

         "Bank  Documents"  means  the  Letter  of  Credit,   the  Reimbursement
Agreement,  the  Mortgage,  the Pledge and Security  Agreement,  the  Collateral
Mortgage, the Security Agreement, the Guaranty, the Term Loan Note, the Building
Loan Agreement and any other document now or hereafter executed by the Issuer or
the Company or the  Guarantor  in favor of the Bank which  affects the rights of
the  Bank in or to the  Project,  in  whole or in  part,  or  which  secures  or
guarantees any sum due under any Bank Document.

         "Bill of Sale to Issuer" means the bill of sale from the Company to the
Issuer conveying the Company's interest in the Equipment to the Issuer.

         "Bond Counsel"  means Lemery and Reid,  P.C. of Saratoga  Springs,  New
York or such other  attorney  or firm of  attorneys  located in the State  whose
experience  in matters  relating to the  issuance of



                                       3
<PAGE>

obligations by states and their political  subdivisions is nationally recognized
and who are  acceptable  to the  Issuer  and the  Trustee  in  their  reasonable
discretion.

         "Bond Fund" means the fund so designated  and  established  pursuant to
Section 402 of the Indenture.

         "Bond Payment  Date" means each Interest  Payment Date and each date on
which  principal  or premium  shall be payable on the Bonds  according  to their
terms and the Indenture, so long as any Bonds shall be Outstanding.

         "Bond Registrar" means the Trustee.

         "Bond Year" means each one (1) year period ending on the anniversary of
the Closing Date.

         "Bondholder"  or "Holder" or "Owner" means the registered  owner of any
Bond as indicated on the bond register maintained by the Bond Registrar.

         "Bonds"  means  the  Issuer's   Multi-Mode   Variable  Rate  Industrial
Development  Revenue Bonds (Spurlock  Adhesives,  Inc.  Project),  Series 1997 A
issued  in  the  aggregate  principal  amount  of  $6,000,000  pursuant  to  the
Resolution and Article II of the Indenture.

         "Building Loan Agreement" means the building loan agreement dated as of
October 1, 1997 by and between the Issuer,  the Company and the Bank, as amended
or supplemented from time to time.

         "Business  Day"  means  any day of the year on which  the  Trustee  and
banking institutions located in the State are open for the purpose of conducting
business.

         "Closing  Date"  means  the  date  on  which  authenticated  Bonds  are
delivered to the purchaser of the Bonds and payment is received  therefor by the
Trustee on behalf of the Issuer.

         "Code" means the Internal  Revenue  Code of 1986,  as amended,  and the
applicable  regulations  of the United States  Treasury  Department  promulgated
thereunder and under the Internal Revenue Code of 1954, as amended.

         "Collateral Mortgage" means the collateral mortgage dated as of October
1, 1997 from the Company in favor of the Bank, as said  collateral  mortgage may
be amended or supplemented from time to time.

         "Company" means Spurlock Adhesives,  Inc., a corporation  organized and
existing under the laws of the State of Virginia,  having an address of 209 West
Main Street, Waverly, Virginia 23890, and its successors and permitted assigns.

         "Completion   Date"  means  the  date   identified  on  the  completion
certificate  delivered  by the  Company in  accordance  with  Section 4.4 of the
Installment Sale Agreement.

         "Condemnation"  means the  taking of title to, or the use of,  Property
under the exercise of the power of eminent domain by any Governmental Authority.


                                       4
<PAGE>

         "Construction  Contract" means the contract for the construction of the
Facility by and between the Company and the Contractor.

         "Construction  Period"  means the period (A)  beginning  on the Closing
Date and (B) ending on the Completion Date.

         "Contractor" means D.B. Western, Inc.

         "Cost of the  Project"  means  all those  costs  and  items of  expense
enumerated in Section 4.3 of the Installment Sale Agreement.

         "Debt Service Payment" means, with respect to any Interest Payment Date
and/or Purchase Date, (A) the interest payable on the Bonds on such Bond Payment
Date, plus (B) the principal,  if any, payable on the Bonds on such Bond Payment
Date,  plus (C) the premium,  if any,  payable on the Bonds on such Bond Payment
Date.

         "Deed to Issuer"  means the deed from the  Company  to the Issuer  with
respect to the Project Facility.

         "Equipment"  means all  materials,  machinery,  equipment,  fixtures or
furnishings  intended  to be  acquired  with the  proceeds  of the  Bonds or any
payment  made by the Company  pursuant to Section  4.5 of the  Installment  Sale
Agreement,  and such substitutions and replacements therefor as may be made from
time to time pursuant to the  Installment  Sale  Agreement,  including,  without
limitation,   all  the  Property  described  in  Exhibit  "B"  attached  to  the
Installment Sale Agreement and the Mortgage.

         "Event of  Default"  means  any of those  events  defined  as Events of
Default by the terms of Article X of the Indenture, Article X of the Installment
Sale Agreement or Article VI of the Mortgage.

         "Facility"  means all those  buildings,  improvements,  structures  and
other related facilities (A) affixed to or attached to the Land and (B) financed
with the  proceeds of the sale of the Bonds or any  payment  made by the Company
pursuant to Section 4.5 of the Installment Sale Agreement.

         "Financing  Documents" means the Bonds, the Indenture,  the Installment
Sale Agreement, the Assignment, the Bank Documents, the Tax Regulatory Agreement
and any other document now or hereafter executed by the Issuer or the Company in
favor of the  Bondholders or the Trustee or the Bank which affects the rights of
the  Bondholders  or the Trustee or the Bank in or to the Project  Facility,  in
whole or in part, or which secures or guarantees  any sum due under the Bonds or
any  other  Financing  Document,  each as  amended  from  time to time,  and all
documents related thereto and executed in connection therewith.

         "Governmental  Authority" means the United States, the State, any other
state and any political subdivision of any of them, and any agency,  department,
commission, board, bureau or instrumentality of any of them.

         "Gross  Proceeds"  means one hundred  percent (100%) of the proceeds of
the  transaction in question,  including,  but not limited to, the settlement of
any insurance or Condemnation award.

         "Guarantor" means Spurlock Industries, Inc.


                                       5
<PAGE>

         "Guaranty"  means the  payment  and  performance  guaranty  dated as of
October 1, 1997 from the  Guarantor  in favor of the Bank,  as said  payment and
performance guaranty may be amended or supplemented from time to time.

         "Indebtedness"  shall have the meaning assigned to such term in Section
2.01 of the Mortgage.

         "Indenture"  means the trust indenture dated as of September 1, 1997 by
and  between  the  Issuer  and the  Trustee,  as  said  trust  indenture  may be
supplemented or amended from time to time.

         "Independent  Counsel" shall mean an attorney or firm of attorneys duly
admitted to practice  law before the highest  court of any state and approved by
the Bank and not a full-time employee of the Company or the Issuer.

         "Installment Sale Agreement" means the installment sale agreement dated
as of  October  1, 1997 by and  between  the  Issuer  and the  Company,  as said
installment sale agreement may be supplemented or amended from time to time.

         "Insurance  and  Condemnation  Fund" means the fund so  designated  and
established pursuant to Section 4.03 of the Indenture.

         "Interest  Payment  Date"  means  the date on which an  installment  of
interest on the Bonds is paid as set forth in the Indenture.

         "Issuer" means (A) County of Saratoga Industrial Development Agency and
its successors and assigns,  and (B) any public benefit corporation or political
subdivision  resulting  from or surviving any  consolidation  or merger to which
County of Saratoga  Industrial  Development  Agency or its successors or assigns
may be a party.

         "Land" means the  approximately  16.37 acre parcel of land constituting
Lot #3 in the Moreau Industrial Park in the Town of Moreau, Saratoga County, New
York, as more particularly  described in Exhibit "A" attached to the Installment
Sale Agreement and Exhibit "A" attached to the Mortgage.

         "Letter  of Credit"  means (A) the  irrevocable,  direct-pay  Letter of
Credit  issued by the Bank and delivered to the Trustee upon the issuance of the
Bonds and (B) any Alternate Credit Facility.

         "Lien" means any interest in Property  securing an obligation owed to a
Person,  whether such interest is based on the common law,  statute or contract,
and  including but not limited to a security  interest  arising from a mortgage,
encumbrance,  pledge,  conditional sale or trust receipt or a lease, consignment
or  bailment  for  security  purposes.  The term "Lien"  includes  reservations,
exceptions,  encroachments,  projections,  easements,  rights of way, covenants,
conditions,   restrictions,  leases  and  other  similar  title  exceptions  and
encumbrances,   including   but  not  limited  to   mechanics',   materialmen's,
warehousemen's and carriers' liens and other similar encumbrances affecting real
property.  For purposes  hereof, a Person shall be deemed to be the owner of any
Property which it has acquired or holds subject to a conditional  sale agreement
or other  arrangement  pursuant to which title to the Property has been retained
by or vested in some other Person for security purposes.


                                       6
<PAGE>

         "Local  Authority"  means any  Governmental  Authority  which exercises
jurisdiction over the Land or the  reconstruction,  construction or installation
of the Project Facility.

         "Maturity Date" means with respect to any Bonds, the Stated Maturity.

         "Mortgage"  means  the  mortgage  and  security  agreement  dated as of
October 1, 1997 from the Issuer and the  Company to the Bank,  as said  mortgage
may be supplemented or amended from time to time.

         "Mortgaged  Property"  shall have the meaning  assigned to such term in
Section 2.01 of the Mortgage.

         "Net  Proceeds"  means so much of the Gross  Proceeds  with  respect to
which  that  term is used as  remain  after  payment  of all fees for  services,
expenses, costs and taxes (including attorneys' fees) incurred in obtaining such
Gross Proceeds.

         "Outstanding"  shall  have the  meaning  assigned  to such  term in the
Indenture.

         "Permit" shall mean any permit,  license,  certificate or authorization
of any kind required by any  Governmental  Authority in connection with the use,
ownership,  occupancy or operation of the Project  Facility,  including all such
environmental permits required for the transfer,  sale or conveyance of any part
of  the  Project  Facility  or the  storage,  treatment,  generation,  handling,
transportation, processing or disposal of Hazardous Substances.

         "Permitted Encumbrances" means (A) utility, access and other easements,
rights of way, restrictions, encroachments and exceptions that benefit or do not
materially  impair the utility or the value of the Property affected thereby for
the  purposes  for  which  it  is  intended,   (B)  mechanics',   materialmen's,
warehousemen's,  carriers' and other  similar  Liens to the extent  permitted by
Section  8.8(B)  of  the  Installment  Sale  Agreement,  (C)  Liens  for  taxes,
assessments and utility charges (1) to the extent permitted by Section 6.2(B) of
the Installment Sale Agreement, or (2) at the time not delinquent,  (D) any Lien
on the  Project  Facility  obtained  through  any  Financing  Document,  (E) any
exception  appearing  in the  mortgagee  title  insurance  policy  issued on the
Closing Date and accepted by the Bank and (F) any Permitted  Lien (as defined in
the Reimbursement Agreement).

         "Person"  means  an  individual,   partnership,   corporation,   trust,
unincorporated organization or Governmental Authority.

         "Plans and  Specifications"  means the plans and specifications for the
construction  and  reconstruction  of the Facility,  prepared and stamped by the
Architect,  and all material amendments and modifications thereof made by change
orders;  and, if an item for the construction and reconstruction of the Facility
is not specifically detailed in the aforementioned plans and specifications, but
rather is described by way of  manufacturer's or supplier's or contractor's shop
drawings,  catalog  references or similar  descriptions,  the term also includes
such shop drawings, catalog references and descriptions.

         "Pledge  and  Security  Agreement"  means (A) the pledge  and  security
agreement  dated as of October 1, 1997 by and  between the Company and the Bank,
as the same may be supplemented or amended from time to time, and (B) the pledge
and security  agreement by and between the Company and any  substitute  Bank, as
the same may be supplemented or amended form time to time.


                                       7
<PAGE>

         "Project" means (A) the  acquisition of the Land, (B) the  construction
of the Facility, (C) the installation of the Equipment; and (D) the financing of
a portion of the costs of the foregoing by the issuance of the Bonds.

         "Project Facility" means, collectively,  the Land, the Facility and the
Equipment.

         "Project Fund" means the fund so designated and established pursuant to
Section 402 of the Indenture.

         "Property" means any interest in any kind of property or asset, whether
real, personal or mixed, or tangible or intangible.

         "Rebate Amount" shall have the meaning assigned to such term in the Tax
Regulatory Agreement.

         "Rebate Fund" means the fund so designated and established  pursuant to
Section 402 of the Indenture.

         "Request for Disbursement"  means a request from the Company,  as agent
of the Issuer,  stating the amount of disbursement  sought in substantially  the
form of Schedule "D" attached to the Building Loan Agreement.

         "Reimbursement  Agreement"  means the  letter  of credit  reimbursement
agreement  dated as of October 1, 1997 between the Company and the Bank,  as the
same may be amended  from time to time and any  agreement  of the Company with a
Credit  Facility  Issuer  setting forth the  obligations  of the Company to such
Credit Facility Issuer arising out of any payments under a Credit Facility.

         "Requirement" or "Local Requirement" means any law,  ordinance,  order,
rule  or  regulation  of  a  Governmental   Authority  or  a  Local   Authority,
respectively.

         "Resolution"  means the  resolution of the Issuer  adopted on September
16, 1997, authorizing the Issuer to undertake the Project, to issue and sell the
Bonds and to execute and deliver the Financing  Documents to which the Issuer is
a party.

         "Security  Agreement" means the security  agreement dated as of October
1,  1997  from the  Company  to the  Bank,  as said  security  agreement  may be
supplemented or amended from time to time.

         "SEQR" means Article 8 of the  Environmental  Conservation Law, Chapter
43-B of the  Consolidated  Laws of New  York,  as  amended  and the  regulations
adopted pursuant thereto.

         "State" means the State of New York.

         "Stated  Amount"  shall have the  meaning  assigned to such term in the
Letter of Credit.

         "Stated  Maturity"  means,  when used with  respect  to any Bond or any
installment  of interest  thereon,  the date specified in such Bond as the fixed
date on which the principal of such Bond or such installment of interest on such
Bond is due and payable.


                                       8
<PAGE>

         "Tax Regulatory Agreement" means the tax regulatory agreement dated the
Closing Date executed by the Company in favor of the Issuer, the Trustee and the
Bank regarding,  among other things, the restrictions  prescribed by the Code in
order for interest on the Bonds to remain excluded from gross income for federal
income tax purposes.

         "Term Loan Note" means the term loan note dated the Closing Date in the
principal amount of $1,500,000 from the Company in favor of the Bank.

         "Trust  Estate"  shall have the  meaning  assigned  to such term in the
Indenture.

         "Trustee"  means  Star  Bank,  N.A.,  a  national  banking  association
organized and existing under the laws of the United States, having its office at
425 Walnut Street,  Cincinnati,  Ohio  45201-1118,  or any successor  trustee or
co-trustee, acting as trustee under the Indenture.

         "Unassigned Rights" means (A) the rights of the Issuer granted pursuant
to Sections 2.2(E),  2.2(F),  2.2(J), 3.2, 4.1(B),  4.1(D),  4.1(E)(2),  4.1(F),
4.1(G), 4.4, 5.2, 5.3(B)(2), 6.1(B)(1), 6.3, 6.4 (as it relates to the insurance
required by Section 6.3),  6.5, 6.6, 7.1, 7.2, 8.1, 8.2, 8.3, 8.4, 8.5,  8.6(C),
8.7, 8.8, 8.9, 8.11,  8.14, 9.1, 9.3, 9.4, 11.1, 11.2, 11.10 and 11.11(B) of the
Installment  Sale Agreement,  (B) the moneys due and to become due to the Issuer
for its own account or the members,  officers,  agents  (other than the Company)
and employees of the Issuer for their own account  pursuant to Sections  2.2(F),
4.1(F),  5.3(B)(2),  5.3(C),  6.4(B), 8.2, 8.14 and 10.4 of the Installment Sale
Agreement,  (C) the rights of the Issuer  under  Section 6.6 of the  Installment
Sale Agreement and the moneys due as payments in lieu of taxes under Section 6.6
of the Installment  Sale  Agreement,  and (D) the right to enforce the foregoing
pursuant to Article X of the  Installment  Sale Agreement.  Notwithstanding  the
preceding  sentence,  to the extent the  obligations  of the  Company  under the
Sections of the  Installment  Sale  Agreement  listed in (A) or (C) above do not
relate to the  payment  of moneys to the  Issuer  for its own  account or to the
members,  officers,  agents (other than the Company) and employees of the Issuer
for their own account, such obligations, upon assignment of the Installment Sale
Agreement  by the Issuer to the Trustee  pursuant to the  Assignment  and to the
Bank  pursuant  to  the  Mortgage,  shall  be  deemed  to and  shall  constitute
obligations  of the Company to the Issuer and the Trustee and the Bank,  jointly
and severally,  and either the Issuer or the Trustee or the Bank may commence an
action  to  enforce  the  Company's   obligations  under  the  Installment  Sale
Agreement.

SECTION 1.02. INTERPRETATION.  (A) In the Mortgage, unless the context otherwise
requires:

                  (1)     the terms "hereby", "hereof",  "herein",  "hereunder",
         and any similar terms as used in the  Mortgage,  refer to the Mortgage,
         and the term "heretofore"  shall mean before,  and the term "hereafter"
         shall mean after, the date of the Mortgage;

                  (2)     words of  masculine  gender  shall  mean  and  include
         correlative  words of feminine and neuter genders,  and words importing
         the singular number shall mean and include the plural number,  and vice
         versa; and

                  (3)     words   importing   persons   shall   include   firms,
         associations,  partnerships  (including limited partnerships),  trusts,
         corporations and other legal entities, including public bodies, as well
         as natural persons;


                                       9
<PAGE>

                  (4)     any  headings  preceding  the  texts  of  the  several
         Articles  and  Sections of the  Mortgage,  and any table of contents or
         marginal  notes  appended  to  copies  hereof,   shall  be  solely  for
         convenience  of reference  and shall  neither  constitute a part of the
         Mortgage nor affect its meaning, construction or effect;

                  (5)     any  certificates,  letters or opinions required to be
         given pursuant to the Mortgage shall mean a signed  document  attesting
         to or acknowledging the circumstances, representations, opinions of law
         or other matters  therein  stated or set forth or setting forth matters
         to be determined pursuant to the Mortgage.

         (B)     If any one or  more of the  covenants  or  agreements  provided
herein on the part of the Issuer or the Company to be performed  shall,  for any
reason, be held or shall, in fact, be inoperative,  unenforceable or contrary to
law, in any particular case, such circumstance shall not render the provision in
question  inoperative  or  unenforceable  in any  other  case  or  circumstance.
Further, if any one or more of the phrases,  sentences,  clauses,  paragraphs or
sections  herein  should be contrary to law,  then such covenant or covenants or
agreement or agreements shall be deemed  separable from the remaining  covenants
and  agreements  hereof  and shall in no way affect  the  validity  of the other
provisions of the Mortgage.

         (C)     The  Mortgage  shall  be  construed  in  accordance   with  the
applicable laws of the State.



                                       10
<PAGE>

                                   ARTICLE II

                     REAL ESTATE MORTGAGE; GRANTING CLAUSES;
                      SECURITY AGREEMENT; GENERAL COVENANTS


SECTION 2.01. GRANTING CLAUSES.  The Issuer and the Company, in consideration of
the  execution  and delivery by the Bank of the Letter of Credit,  the making of
the  loan  evidenced  by the Term  Loan  Note and for  other  good and  valuable
consideration,  receipt of which is hereby acknowledged,  and in order to secure
(1) the  obligations  of the Company  under the  Reimbursement  Agreement in the
original  principal  amount of Six  Million One Hundred  Eighty  Thousand  Eight
Hundred Twenty-Two and 00/100 Dollars ($6,180,822), (2) the repayment of amounts
due under the Term Loan Note in the  original  principal  amount of One  Million
Five Hundred  Thousand Dollars  ($1,500,000),  (3) the payment of all other sums
required to be paid hereunder,  under the  Reimbursement  Agreement and the Term
Loan  Note  and the  other  Financing  Documents  and (4)  the  performance  and
observance  by the Issuer and the Company of all of the  covenants,  agreements,
representations  and warranties herein and in the Reimbursement  Agreement,  the
Term  Loan  Note  and  the  other   Financing   Documents   (collectively,   the
"Indebtedness");  and in order  to  secure  the  Indebtedness;  hereby  warrant,
assign, mortgage, hypothecate, pledge, grant a Lien on and security interest in,
set over and confirm unto the Bank and its successors and assigns  forever,  all
of the estate,  right,  title and  interest of the Issuer and the Company in, to
and  under  any and all of the  following  described  property  (the  "Mortgaged
Property") whether now owned or held or hereafter acquired:

         (A)     All right,  title and interest of the Issuer and the Company in
and to the Land (as more particularly described in Exhibit A attached hereto);

         (B)     All right,  title and interest of the Issuer and the Company in
and to all buildings,  structures,  improvements and appurtenances now standing,
or at any  time  hereafter  constructed  or  placed,  upon  the Land or any part
thereof,  including all right,  title and interest of the Issuer and the Company
in  and to all  building  materials  and  fixtures  of  every  kind  and  nature
whatsoever on the Land or in any building now or hereafter  standing on the Land
or any part thereof, including, without limitation, the Facility;

         (C)     All right,  title and interest of the Issuer and the Company in
and to the Equipment;

         (D)     All  right,  title  and  interest  in  and  to  all  easements,
royalties,  mineral,  oil and gas rights and  profits,  water,  water rights and
water stock relating to the Land necessary for the ownership, operation, use and
maintenance of the Facility;

         (E)     Any and all moneys and securities from time to time held by the
Bank under the terms of the  Mortgage  and any and all other  Property  of every
name and nature,  from time to time hereinafter by delivery or by writing of any
kind conveyed, mortgaged, pledged, assigned or transferred as and for additional
security  hereunder  by the Issuer or the  Company or by anyone on its behalf or
with its written consent in favor of the Bank;

         (F)     All leases,  contract  rights,  general  intangibles  and other
agreements  affecting  the use,  operation or occupancy of all or any portion of
the Project Facility or the other real property described


                                       11
<PAGE>

above now or  hereafter  entered  into,  and the right to receive  and apply the
rents, issues and profits of the Land or the Facility or the other real property
described above to the payment of the Indebtedness;

         (G)     All rights and interest of the Issuer under, in and pursuant to
the  Installment  Sale  Agreement  (except the  Unassigned  Rights),  including,
without  limiting the  generality of the  foregoing,  the present and continuing
right (1) to make claim for, collect or cause to be collected,  receive or cause
to be received all installment purchase payments and other sums of money payable
or  receivable  by the  Issuer  under the  Installment  Sale  Agreement  (except
payments  with  respect to the  Unassigned  Rights),  (2) to bring  actions  and
proceedings   thereunder  for  the  enforcement   thereof  (except  actions  and
proceedings  with respect to the Unassigned  Rights),  and (3) to do any and all
things  which the Issuer is or may become  entitled to do under the  Installment
Sale  Agreement;  provided  that the  assignment  made by this clause  shall not
impair or diminish  any  obligation  of the Issuer  under the  Installment  Sale
Agreement nor impose any obligation,  liability or duty upon the Bank; provided,
further,  that the assignment made by this clause shall not give to the Bank the
right to amend the Installment Sale Agreement  without the prior written consent
of the Issuer;

         (H)     All  proceeds of and any  unearned  premiums  on any  insurance
policies  covering  the Land,  the  Facility or the  Equipment or the other real
property described above,  including,  without limitation,  the right to receive
and apply the proceeds of any insurance or  judgments,  or  settlements  made in
lieu thereof, for damage to any of the foregoing;

         (I)     All other  proceeds of the  conversion,  whether  voluntary  or
involuntary,  of the Project Facility or any other Property or rights encumbered
or  conveyed  hereby  into  cash  or  liquidated  claims,   including,   without
limitation,  all  title  insurance,  hazard  insurance,  Condemnation  and other
awards; and

         (J)     All extensions,  additions,  substitutions  and accessions with
respect to any of the foregoing.

         TO HAVE AND TO HOLD the foregoing  Mortgaged Property unto the Bank and
its successors and assigns forever;

         SUBJECT, HOWEVER, to the Permitted Encumbrances;

         EXCEPTING, THEREFROM, the Unassigned Rights;

         PROVIDED,  HOWEVER,  that,  if (A) there  shall be no Event of  Default
under the Reimbursement  Agreement or the Term Loan Note and, (B) the Issuer for
itself and the  Company  shall  perform  and  observe  all the  covenants  to be
performed  and  observed   hereunder  and  perform  all  obligations  under  the
Reimbursement Agreement, the Term Loan Note and the other Financing Documents to
which they are parties,  then upon such final payments and such  performance and
observance,  this Mortgage and the rights hereby granted shall cease,  terminate
and be void; otherwise, this Mortgage to be and remain in full force and effect.

SECTION 2.02. SECURITY AGREEMENT.  The Mortgaged Property includes both real and
personal  Property  and all other  rights  and  interest,  whether  tangible  or
intangible in nature,  of the Issuer and the Company in the Mortgaged  Property.
This  Mortgage  shall also  constitute  a security  agreement  under the Uniform
Commercial  Code of the  State so that the Bank  shall  have and may  enforce  a
security interest in any or all of the Mortgaged  Property,  in addition to (but
not in  limitation  of) the Lien upon that  portion



                                       12
<PAGE>

of the  Mortgaged  Property  constituting  part  of the  realty  imposed  by the
foregoing  provisions  hereof,  such security interest to attach at the earliest
moment  permitted  by law and also to include  and attach to all  additions  and
accessions thereto,  all substitutions and replacements  therefor,  all proceeds
thereof, including insurance and Condemnation proceeds, and all contract rights,
rental or lease  payments and general  intangibles of the Issuer and the Company
obtained in connection with or relating to the Mortgaged Property as well as any
and all items of Property in the foregoing  classifications  which are hereafter
acquired.  The Issuer and the Company shall, at the request of the Bank, deliver
to the Bank,  any and all further  instruments  which the Bank shall  require in
order to further  secure and perfect the Lien of the  Mortgage.  Pursuant to the
Uniform  Commercial  Code  of the  State,  the  Issuer  and the  Company  hereby
authorize the Bank to execute and file UCC Financing Statements and continuation
statements without the necessity of the Issuer's or the Company's  signatures as
debtors if the Bank shall  determine  that such are  necessary  or  advisable in
order to perfect its security interest in any of the Mortgaged  Property covered
by this Mortgage, and shall pay to the Bank, on demand, any expenses incurred by
the Bank in  connection  with the  preparation,  execution  and  filing  of such
statements and any continuation statements that may be filed by the Bank without
the necessity of the Issuer's and Company's signatures as debtors.

SECTION  2.03.   INFORMATION  UNDER  UNIFORM   COMMERCIAL  CODE.  The  following
information  is  stated  in  order  to  facilitate  filings  under  the  Uniform
Commercial Code of the State: The Secured Party is KeyBank National Association,
having an address of 66 South Pearl Street,  Albany,  New York  12207-1501.  The
Debtors are Spurlock  Adhesives,  Inc., having an address of 5090 General Mahone
Highway,   Waverly,  Virginia  23890  and  the  County  of  Saratoga  Industrial
Development  Agency,  having an office at Saratoga County Municipal  Center,  40
McMaster Street, Ballston Spa, New York 12020.

SECTION  2.04.  PERFORMANCE  OF  COVENANTS.  The Issuer and the  Company  hereby
covenant that they will faithfully observe and perform,  or cause to be observed
and performed,  at all times any and all covenants,  undertakings,  stipulations
and provisions on their respective  parts to be observed or performed  contained
in the Mortgage and the other Financing Documents to be executed by them.

SECTION 2.05. PRIORITY OF LIEN OF MORTGAGE; DISCHARGE OF LIENS AND ENCUMBRANCES.
(A) The Company hereby covenants that,  except for Permitted  Encumbrances,  the
Company and the Issuer are  lawfully  seized of the estate  conveyed  hereby and
have the right to grant and convey the  Mortgaged  Property,  and  Company  will
warrant  and  defend  title to the  Mortgaged  Property  against  all claims and
demands, subject to the Permitted Encumbrances.

         (B)     The Issuer shall not and the Company shall not permit or create
or  suffer  to  be  permitted  or  created  any  Lien,   except  for   Permitted
Encumbrances, upon the Mortgaged Property or any part thereof.

         (C)     Notwithstanding  the  provisions  of  subsection  (B)  of  this
Section 2.05, the Company may in good faith contest any such Lien, provided that
the  Company  (1) first  shall  have  notified  the  Issuer and the Bank of such
contest,  (2) is not in default under any of the Financing  Documents,  (3) such
lien shall be removed within sixty (60) days from the date of such notice by the
Company  or  secured  by the  Company's  posting  a bond in form  and  substance
satisfactory to the Issuer and the Bank, and (4)  demonstrates to the reasonable
satisfaction  of the Bank that the failure to  discharge  any such Lien will not
subject  the  Project  Facility  or any part  thereof or any funds of the Issuer
applicable to the construction of the Project Facility to loss or forfeiture.



                                       13
<PAGE>

                                   ARTICLE III

                         REPRESENTATIONS AND WARRANTIES


SECTION 3.01.  REPRESENTATIONS  AND WARRANTIES OF THE ISSUER.  The Issuer hereby
represents and warrants that it is duly authorized  under the  Constitution  and
laws of the State,  including  particularly and without limitation,  the Act, to
issue the Bonds,  to execute and deliver  those of the  Financing  Documents  to
which it is a party and to pledge and  encumber  the  Mortgaged  Property in the
manner and to the extent  herein set forth;  and that all action on its part for
the  issuance  of the Bonds and the  execution  and  delivery  of the  Financing
Documents to which it is a party has been duly and effectively taken.

SECTION  3.02.  REPRESENTATIONS  AND  WARRANTIES  OF THE  COMPANY.  The  Company
represents and warrants as follows:

         (A)     (1)     The Company and/or the Issuer have good, marketable and
insurable  title to the Land,  subject only to Permitted  Encumbrances,  (2) the
Company and the Issuer will own all fixtures  and articles of personal  Property
now or  hereafter  constituting  part of the  Project  Facility,  including  any
substitutions  or replacements  thereof,  free and clear of all Liens and claims
except for  Permitted  Encumbrances,  and (3) this Mortgage is and will remain a
valid and enforceable Lien on the Project Facility.

         (B)     The Company is a corporation  duly organized,  validly existing
and in  good  standing  under  the  laws of the  Commonwealth  of  Virginia,  is
authorized  to conduct  business  in the State of New York and has the power and
authority to enter into the Mortgage and the other Financing  Documents executed
by the Company and to mortgage and pledge the  Mortgaged  Property in the manner
and to the extent  herein set forth,  and the Mortgage  and the other  Financing
Documents executed by the Company  constitute valid and enforceable  obligations
according to their respective terms.

         (C)     Neither the execution and delivery of the Mortgage or the other
Financing   Documents   executed  by  the  Company,   the  consummation  of  the
transactions contemplated hereby or thereby nor the fulfillment of or compliance
with the  provisions  hereof or thereof will conflict with or result in a breach
of any of the terms,  conditions  or  provisions  of the  Company's  Articles of
Incorporation or By-Laws or of any order, judgment, law, restriction,  agreement
or instrument to which the Company is a party of by which it is bound, or result
in the creation or  imposition  of any Lien of any nature  (except for Permitted
Encumbrances)  upon any of the  Property of the  Company  under the terms or any
such instrument or agreement.

         (D)     The  Project  Facility  and  the  operation  thereof  currently
complies  and  will  continue  to  comply  in all  material  respects  with  all
applicable  building,  zoning and environmental,  planning and subdivision laws,
ordinances, permits, licenses, rules and regulations of Governmental Authorities
having jurisdiction over the Project Facility.

         (E)     The Land is not located in an area  identified by the Secretary
of  Housing  and Urban  Development  as an area  having  special  flood  hazards
pursuant to the terms of the National  Flood  Insurance Act of 1968 or the Flood
Disaster Protection Act of 1973, as same may have been amended to date.


                                       14
<PAGE>

         (F)     The  Company  has or will  obtain at the  appropriate  time all
necessary certificates,  licenses,  authorizations,  registrations,  permits and
approvals  necessary  for  the  commencement  of the  construction  on  and  the
operation of the Project Facility,  including,  but not limited to, all required
environmental  permits, all of which are or will be in full force and effect and
not, to the  knowledge of the  Company,  subject to any  revocation,  amendment,
release,  suspension,  forfeiture or the like; the present and  contemplated use
and  occupancy  of  the  Land  does  not  conflict  with  or  violate  any  such
certificate,  license, authorization,  registration, permit or approval; and the
Company  has  delivered  to the Bank,  prior to the  execution  hereof,  or will
deliver  promptly upon  receipt,  duplicate  originals or  officially  certified
copies  of  all  such  certificates,  licenses,  authorizations,  registrations,
permits and approvals.

SECTION  3.03.  PERFORMANCE  OF  COVENANTS.  The Issuer and the  Company  hereby
covenant that they will faithfully  observe and perform at all times any and all
covenants,  undertakings,  stipulations,  warranties  and  provisions  on  their
respective  parts  to be  observed  or  performed  contained  in  the  Financing
Documents.

SECTION 3.04. COVENANTS REGARDING REIMBURSEMENT AGREEMENT. The Company covenants
that it will  promptly  pay,  or cause to be paid,  any  amounts  due  under the
Reimbursement Agreement.


                                       15
<PAGE>

                                   ARTICLE IV

                 MAINTENANCE, MODIFICATION, TAXES AND INSURANCE


SECTION 4.01.  MAINTENANCE OF AND  MODIFICATIONS TO PROJECT FACILITY BY COMPANY.
The Company  shall,  (A) keep the Project  Facility in good condition and repair
and preserve the same against waste,  loss,  damage and  depreciation,  ordinary
wear and tear excepted,  (B) make all necessary  repairs and replacements to the
Project  Facility  or any  part  thereof  (whether  ordinary  or  extraordinary,
structural  or  nonstructural,  foreseen  or  unforeseen),  and (C)  operate the
Project Facility in a sound and economic manner.

SECTION  4.02.  INSURANCE  REQUIRED.  At all  times  throughout  the term of the
Mortgage,  including,  without limitation,  during any period of construction of
the Facility,  the Company shall maintain the insurance  described in Article VI
of the Installment  Sale Agreement  regardless of whether the  Installment  Sale
Agreement  shall be  terminated or shall be for any reason not in full force and
effect and shall  within ten (10) days of request  therefor by the Bank  deliver
proof to the Bank that such insurance has been and is being maintained.

SECTION 4.03. TAXES,  ASSESSMENTS AND UTILITY CHARGES. (A) The Company shall pay
or cause to be paid,  as the same  respectively  become  due,  (1) all taxes and
governmental  charges of any kind  whatsoever  which may at any time be lawfully
assessed  or levied  against or with  respect to the Project  Facility,  (2) all
utility and other charges, including "service charges",  incurred or imposed for
the  operation,  maintenance,  use,  occupancy,  upkeep and  improvement  of the
Project  Facility,  and (3) all  assessments,  charges  and  rents  of any  kind
whatsoever lawfully made by any Governmental  Authority for public improvements,
provided that, with respect to special assessments or other governmental charges
that may lawfully be paid in  installments  over a period of years,  the Company
shall be  obligated  under  the  Mortgage  to pay or cause to be paid  only such
installments  as are  required  to be paid during the term of the  Mortgage  and
shall,  promptly after the payment of any of the foregoing,  forward to the Bank
evidence of such payment.

         (B)     Notwithstanding  the  provisions  of  subsection  (A)  of  this
Section 4.03 but subject, however, to the provisions of Section 2.02(B)(3)(b) of
the PILOT  Agreement,  the Company may in good faith  actively  contest any such
taxes, assessments and other charges,  provided that the Company shall have paid
such taxes.

SECTION 4.04.  PAYMENTS IN LIEU OF TAXES.  The Company shall pay all payments in
lieu of taxes due pursuant to Section 6.6 of the Installment Sale Agreement.


                                       16
<PAGE>

                                    ARTICLE V

                                SPECIAL COVENANTS


SECTION  5.01.  RIGHT OF ACCESS TO THE  PROJECT  FACILITY.  The  Issuer  and the
Company agree that the Bank or the officers or agents of the Bank shall have the
right at all reasonable times and upon reasonable prior notice to enter upon and
to examine and inspect the Project Facility.

SECTION 5.02.  INSPECTION OF PROJECT  FACILITY BOOKS. The Issuer and the Company
hereby  covenant  that all books and  documents in their  respective  possession
relating to the  Project  Facility  and the  revenues  derived  from the Project
Facility shall at all reasonable times be open to inspection by such accountants
or other agents as the Bank may from time to time designate.

SECTION 5.03.  AGREEMENT TO PROVIDE  INFORMATION.  The Company agrees,  whenever
requested  by the Bank,  to provide  and certify or cause to be  certified  such
information  concerning the Company,  its finances and other topics  relating to
the Project Facility as the Bank from time to time reasonably consider necessary
or appropriate, including, but not limited to, such information as to enable the
Bank to make any reports required by law or governmental regulation.

SECTION  5.04.  BOOKS OF RECORD AND ACCOUNT;  FINANCIAL  STATEMENTS;  COMPLIANCE
CERTIFICATES.  (A) The Company agrees to maintain proper  accounts,  records and
books in which  full  and  correct  entries  shall be made of all  business  and
affairs of the Company.

         (B)     The  Company  agrees  to  provide  to the  Bank  the  financial
statements  described  in and  at  the  times  specified  in  the  Reimbursement
Agreement.

SECTION 5.05.  COMPLIANCE WITH ORDERS,  ORDINANCES,  ETC. (A) The Company agrees
that it will, at all times prior to the  termination  of the Mortgage,  promptly
comply with all statutes,  codes,  laws, acts,  ordinances,  orders,  judgments,
decrees,  injunctions,  rules, regulations,  permits, licenses,  authorizations,
directions and requirements of all Governmental  Authorities having jurisdiction
over the Company or the  Project  Facility  and all  companies  or  associations
insuring  the  Mortgaged   Property,   foreseen  or   unforeseen,   ordinary  or
extraordinary,  which  now or at any time  hereafter  may be  applicable  to the
Project Facility or any part thereof,  or to any use, manner of use or condition
of the Project Facility or any part thereof.

         (B)     The Company may in good faith actively  contest the validity or
the applicability of any such  requirement,  provided that the Company (1) first
shall  have  notified  the Issuer  and the Bank of such  contest,  (2) is not in
default under any of the Financing Documents,  (3) shall have set aside adequate
reserves  for any  such  requirement,  and (4)  demonstrates  to the  reasonable
satisfaction of the Issuer the Bank that  noncompliance with such requirement or
requirements  will not  subject  the Lien of the  Mortgage as to any part of the
Project Facility,  or the value of the Project Facility or any part thereof,  to
material loss or  forfeiture.  Otherwise,  the Company shall  promptly take such
action with respect thereto as shall be satisfactory to the Issuer and the Bank.
This  Section  5.05(B)  shall not be deemed to apply to the  payment of taxes or
assessments.

SECTION 5.06. RECORDATION OF MORTGAGE, ASSIGNMENT AND INSTALLMENT SALE AGREEMENT
AND FILING OF SECURITY  INSTRUMENTS.  The Issuer hereby  covenants  that it



                                       17
<PAGE>

will cause the Mortgage, the Assignment, and the Installment Sale Agreement, and
all supplements hereto and thereto, together with all other security instruments
and financing statements,  to be recorded and filed, as the case may be, in such
manner and in such  places as may be  required  by law in order to  perfect  the
Liens of the Assignment,  the Mortgage and the Installment  Sale Agreement.  The
Company  covenants that it will, upon request of the Bank, cause to be filed all
documents  requested by the Bank  including,  without  limitation,  continuation
statements under the Uniform Commercial Code of the State, in such manner and in
such places as may be required by law in order to protect and  maintain in force
the Liens of the Mortgage, the Installment Sale Agreement and the Assignment.

         Without  limiting  the  foregoing,  the Issuer and the  Company  hereby
irrevocably appoint the Bank  attorney-in-fact for the Issuer and the Company to
execute,  deliver and file such Uniform Commercial Code financing statements and
continuation  statements for and on behalf of the Issuer and the Company without
the necessity of the signature of the Issuer and the Company or anyone  claiming
under or through the Issuer and the Company,  including, but not limited to, the
Company.

SECTION 5.07.  [INTENTIONALLY OMITTED].

SECTION 5.08.  ENVIRONMENTAL  WARRANTIES  AND  COVENANTS.  (A)  Warranties.  The
Company makes the following  representations  and  warranties to the best of its
knowledge:  (i) the Company (or the present  owner of the Project  Facility,  if
different) is in compliance in all respects with all applicable  federal,  state
and local laws and regulations, including, without limitation, those relating to
toxic and hazardous  substances  and other  environmental  matters (the "Laws"),
(ii) no portion of the  Project  Facility  is being used or has been used at any
previous  time,  for the  disposal,  storage,  treatment,  processing  or  other
handling of any  hazardous or toxic  substances,  in a manner not in  compliance
with the Laws, (iii) the soil and any surface water and ground water which are a
part of the Project Facility are free from any solid wastes,  toxic or hazardous
substance or  contaminant  and any  discharge  of sewage or  affluent;  and (iv)
neither  the  federal  government  nor the  State  Department  of  Environmental
Conservation or any other governmental or quasi governmental  entity has filed a
lien on the  Project  Facility,  nor are there  any  governmental,  judicial  or
administrative  actions with respect to environmental  matters  pending,  or the
best of the Company's knowledge, threatened, which involve the Project Facility.

         (B)     Agreement  to Comply.  If any  environmental  contamination  is
found at the  Project  Facility  for which any  removal  or  remedial  action is
required pursuant to Law,  ordinance,  order,  rule,  regulation or governmental
action,  the Company  agrees that it will at its sole cost and expense take such
removal or remedial action promptly and to the Bank's satisfaction.

         (C)     Indemnification.  The Company  agrees to defend,  indemnify and
hold harmless the Issuer and its employees, agents, officers and directors, from
and  against  any  claims,  actions,  demand,  penalties,   fines,  liabilities,
settlements, damages, costs or expenses (including, without limitation, attorney
and  consultant  fees,  investigations  and  laboratory  fees,  court  costs and
litigation expenses) of whatever kind or nature, known or unknown, contingent or
otherwise  arising  out of or in any way  related  to:  (i) the past or  present
disposal,  release or threatened release of any hazardous or toxic substances on
the Project  Facility;  (ii) any personal  injury  (including  wrongful death or
property damage,  real or personal)  arising out of or related to such hazardous
or toxic substances; (iii) any lawsuit brought or threatened, settlement reached
or government order given relating to such hazardous or toxic substances; and/or
(iv) any violation of any Law, order, regulation,  requirement, or demand of any
government  authority,  or any policies or requirements of the Issuer, which are
based upon or in any way related to such hazardous or toxic substances.


                                       18
<PAGE>

         (D)     Other  Sites.  The  Company  knows of no  on-site  or  off-site
locations where hazardous or toxic substances from the operation of the Facility
on the Land have been,  except in  compliance  with the Laws,  stored,  treated,
recycled or disposed of.

         (E)     Leases.  The Company agrees not to lease or permit the lease of
the Project  Facility to a tenant or subtenant  whose  operations will knowingly
result  in  contamination  of the  Project  Facility  with  hazardous  or  toxic
substances.

         (F)     Non-Operation  by the Bank. The Company  acknowledges  that any
action  taken by the Bank under  this  Mortgage  shall be taken to  protect  the
Bank's  security  interest  only; the Bank does not intend to be involved in the
operations of the Company.

         (G)     Compliance  Determinations.  The Company  acknowledges that any
determinations made by the Bank under this Section regarding the compliance with
environmental  laws  shall  be made  for the  Bank's  benefit  only  and are not
intended to be relied upon by any other party.

         (H)     Survival of Conditions. The provisions of this Section shall be
in addition to any other obligations and liabilities the Company may have to the
Bank at common law, and shall survive the transactions contemplated herein.

         (I)     Definitions.  The term  "hazardous  substance"  shall  include,
without limit, any substance or material  defined in 42 U.S.C.  Section 9601 (as
the  same  may  be  amended  from  time  to  time),   the  Hazardous   Materials
Transportation   Act  (as  amended  from  time  to  time),   and  the  New  York
Environmental Conservation Law or the Resource Conservation and Recovery Act (as
each  may be  amended  from  time to time)  and in any  regulations  adopted  or
publications promulgated pursuant to any of the foregoing.

         (J)     Further   Indemnification.   The  Company   further  agrees  to
indemnify  and hold the Issuer  harmless  from and against any loss,  liability,
damage, cost or expense (including  reasonable  attorneys' fees) incurred by the
Issuer  resulting  from (i) the  Company's  failure  to comply  with any  order,
decree,  settlement,  judgment  or verdict  (whether  arising as a result of the
manufacture, holding, handling, transportation,  spilling, leaking or dumping of
toxic or hazardous  wastes or waste products prior to, or during,  the Company's
ownership  of the Land),  (ii) the  Company's  failure  to comply  with any such
statute,  rule or  regulation,  or (iii) the  Company's  failure  to  conduct an
appropriate inquiry into previous uses and ownership of any portion of the Land,
as described in the Superfund Amendment and Reauthorization Act of 1986.

         (K)     Sums Secured by  Mortgage.  If the Bank incurs any of the costs
or the sums that the Company has agreed to indemnify  and hold the Bank harmless
against in accordance  with this Section 5.08, then those costs or sums shall be
paid  immediately  by the Company  with  interest at the highest  interest  rate
permitted by law, and will be deemed secured by this Mortgage.

SECTION 5.09.  MORTGAGE TAX. The Company  agrees that in the event that mortgage
recording tax is required for any reason  whatsoever,  the Company will pay said
tax on demand to the Bank; and if the Company fails to pay said tax the Bank may
pay same;  the amounts  paid by the Bank,  plus  interest  at the  maximum  rate
allowable by law from the date of payment, shall be deemed to be secured by this
Mortgage and shall be collected in like manner as the principal monies.


                                       19
<PAGE>

SECTION  5.10.  FEES AND EXPENSES OF THE BANK.  All sums paid or incurred by the
Bank or the  expenses  (including  reasonable  attorneys'  fees)  of  enforcing,
defending  or upholding  the lien of this  Mortgage,  regardless  of whether any
action or proceeding has been  commenced,  but including any action to foreclose
the  Mortgage  or to  collect  the debt  secured  thereby,  shall be paid by the
Company   together  with  interest   thereon  at  the  rate   specified  in  the
Reimbursement  Agreement or the maximum rate the law allows,  whichever is less,
such sums and the interest thereon to be a lien on the Mortgaged Property, prior
to any right, or title to, interest in or claim upon said premises  attaching or
accruing  subsequent  to the lien of the  Mortgage  and shall be  secured by the
Mortgage.  In addition to and not in limitation of the foregoing,  in any action
or  proceeding  to  foreclose  the  Mortgage,  or to recover or collect the debt
secured  thereby,  the  provisions  of law  respecting  the  recovery  of costs,
disbursements  and  allowances  shall also  apply.  The  expenses  of  pursuing,
searching  for,  retaking,  receiving,  holding,  storing,  safe-guarding,   and
environmental  testing  and  cleanup,  insuring,  accounting  for,  advertising,
preparing  for sale or lease,  selling,  leasing and the like,  plus  attorneys'
fees, fees for certified  public  accountants,  fees for  auctioneers,  fees for
brokers and/or  appraisers,  fees for security  guards,  fees for  environmental
auditors and engineers,  fees for hazard insurance premiums,  or any other costs
or  disbursements  whatsoever  incurred  by or  contracted  for by the  Bank  in
connection with the disposition of the Mortgaged Property  (including any of the
foregoing  incurred  or  contracted  for by the  Bank  in  connection  with  any
bankruptcy  or  insolvency  proceedings  involving  the  Company)  shall  all be
chargeable to the Company and shall be secured by the Mortgage, and said Company
will also be responsible for any deficiency.


                                       20
<PAGE>

                                   ARTICLE VI

                         EVENTS OF DEFAULT AND REMEDIES


SECTION  6.01.  EVENTS OF DEFAULT  DEFINED.  The  following  shall be "Events of
Default" under the Mortgage and the terms "Event of Default" or "default"  shall
mean,  whenever they are used in the Mortgage,  any one or more of the following
events:

         (A)     default  by the  Issuer  in the due  and  punctual  payment  of
principal of, premium, if any, and interest on the Bonds;

         (B)     a default by the Company in the due and punctual payment of any
sum  due  for  borrowed  money  under  the  Installment   Sale  Agreement,   the
Reimbursement Agreement or the Term Loan Note;

         (C)     a default in the  performance or observance of any other of the
covenants,  agreements or conditions on the part of the Issuer or the Company in
any Financing  Document to be performed or observed and the continuance  thereof
for a period of thirty  (30) days after  written  notice is given by the Trustee
and/or the Bank to the Issuer and the Company,  or, if such covenant,  condition
or  agreement is capable of cure but cannot be cured within such thirty (30) day
period,  the  failure of the Company to commence to cure within such thirty (30)
day  period and  thereafter  diligently  proceed  with all  action  required  to
complete  said cure within  ninety (90) days of such written  notice unless such
time to cure is otherwise extended by the Trustee and/or the Bank in writing;

         (D)     the  occurrence  of an  "Event  of  Default"  under  any of the
Financing Documents;

         (E)     any  representation  or  warranty  made  by the  Issuer  or the
Company  herein  or in any  Financing  Document  shall  have  been  false in any
material manner at the time it was made;

         (F)     the  Company  shall  generally  not pay its debts as such debts
become due or admits its inability to pay its debts as they become due;

         (G)     the Company shall conceal,  remove or permit to be concealed or
removed any part of its  Property,  with intent to hinder,  delay or defraud its
creditors,  or any one of them, or shall make or suffer a transfer of any of its
Property  which is fraudulent  under any  bankruptcy,  fraudulent  conveyance or
similar  law; or make any  transfer  of its  Property to or for the benefit of a
creditor at a time when other creditors  similarly  situated have not been paid;
or shall suffer or permit,  while insolvent,  any creditor to obtain a Lien upon
any of its Property through legal  proceedings or distraint which is not vacated
within sixty (60) days from the date thereof;

         (H)     the Mortgaged Property,  or any substantial part thereof, is in
any manner, whether voluntarily or involuntarily,  encumbered, assigned, leased,
subleased,  sold, transferred or conveyed, or the Issuer or Company threatens to
encumber,  assign,  lease,  sublease,  sell,  transfer or convey,  the Mortgaged
Property,  or any part thereof,  to any person without the prior written consent
of the Bank;

         (I)     (1)     the filing by the Company of a voluntary petition under
Title 11 of the United  States  Code or any other  federal  or state  bankruptcy
statute;  (2) the  failure  by the  Company  within  sixty (60) days to lift any
execution,  garnishment  or  attachment of such  consequence  as will impair the


                                       21
<PAGE>

Company's ability to carry out its obligations  hereunder;  (3) the commencement
of a case under Title 11 of the United  States  Code  against the Company as the
debtor or commencement  under any other federal or state bankruptcy statute of a
case,  action or proceeding  against the Company and  continuation of such case,
action or proceeding  without dismissal for a period of sixty (60) days; (4) the
entry of an order for relief by a court of competent jurisdiction under Title 11
of the United States Code or any other federal or state bankruptcy  statute with
respect to the debts of the Company; or (5) in connection with any insolvency or
bankruptcy case, action or proceeding,  appointment by final order,  judgment or
decree of a court of  competent  jurisdiction  of a  receiver  or trustee of the
whole or a substantial portion of the Property of the Company unless such order,
judgment or decree is vacated,  dismissed or dissolved within sixty (60) days of
such appointment;

         (J)     final  judgment  for the payment of money in excess of $100,000
shall be rendered  against the Company and the Company  shall not  discharge the
same or cause it to be  bonded or  discharged  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; and

         (L)     the  imposition of a Lien on the Project  Facility other than a
Lien being  contested  as provided  in Section  8.8(B) of the  Installment  Sale
Agreement or a Permitted Encumbrance.

         Notwithstanding the above provisions of this Section 6.01, if by reason
of force  majeure (as  hereinafter  defined) the Issuer or the Company  shall be
unable in whole or in part to carry out its  obligations  hereunder  and if such
party shall give notice and full particulars of such force majeure in writing to
the Bank within a  reasonable  time after the  occurrence  of the event or cause
relied  upon,  the  obligations  of such  party  hereunder,  so far as they  are
affected by such force majeure, shall be suspended during the continuance of the
inability,  which shall include a reasonable  time for the removal of the effect
thereof.  The suspension of such  obligations  for such period  pursuant to this
paragraphs  shall not be deemed an Event of  Default  under this  Section  6.01.
Notwithstanding  anything to the contrary in this  paragraph,  an event of force
majeure shall not excuse,  delay or in any way diminish the  obligations  of the
Company to make the payments  required by the  Reimbursement  Agreement  and the
Term Loan Note and by Sections 4.5,  5.3,  6.6, 8.4 and 8.14 of the  Installment
Sale Agreement to comply with the provisions of Sections 2.2(E),  4.5, 6.6, 8.2,
8.4, 8.5,  8.7(C) and 8.14 of the  Installment  Sale  Agreement,  to comply with
Sections 4.03, 5.03, 5.04 and 5.08 hereof, to provide the indemnity  required by
Sections 8.2, 8.4, 8.12, 8.13 and 8.14 of the Installment  Sale Agreement and to
obtain and continue in full force and effect the insurance  required by Sections
6.3 and 6.4 of the Installment Sale Agreement and Section 4.02 hereof.  The term
"force majeure" as used herein shall include,  without limitation,  acts of God,
strikes,  lockouts or other  industrial  disturbances,  acts of public  enemies,
orders  of any kind of any  Governmental  Authority  or any  civil  or  military
authority,  insurrections,  riots,  epidemics,  landslides,  earthquakes,  fire,
hurricanes,  storms,  floods,  washouts,  droughts,  restraint of government and
people,  civil  disturbances,  explosions,  breakage or  accident to  machinery,
transmission pipes or canals,  entire failure of utilities or any other cause or
event not reasonably within the control of the party claiming such inability. It
is  agreed  that the  settlement  of  strikes,  lockouts  and  other  industrial
disturbances  shall be  entirely  within  the  discretion  of the  party  having
difficulty,  and the party having difficulty shall not be required to settle any
strike,  lockout or other industrial  disturbances by acceding to the demands of
the opposing party or parties.

SECTION 6.02. ACCELERATION; ANNULMENT OF ACCELERATION. Upon the occurrence of an
Event of Default hereunder,  the Bank may, by notice in writing delivered to the
Company and the Issuer,


                                       22
<PAGE>

declare the whole of the Indebtedness immediately due and payable, whereupon the
same shall become and be immediately  due and payable,  anything in the Mortgage
or any other Financing Documents to the contrary notwithstanding. In such event,
there shall be due and payable the total amount of Indebtedness plus all accrued
but unpaid  interest  thereon and all interest  which will accrue thereon to the
date of payment.

SECTION 6.03.  ENFORCEMENT OF REMEDIES.  (A) Upon the occurrence and continuance
of any Event of Default,  the Bank may proceed  forthwith to protect and enforce
its rights under the Mortgage,  and the other Financing Documents by such suits,
actions  or  proceedings  as  it  shall  deem  appropriate,  including,  without
limitation,  an action to foreclose the Lien of the Mortgage,  in which case the
Mortgaged Property or any interest therein may be sold for cash or credit in one
or more interests and in any order or manner;

         (B)     The  Bank may sue  for,  enforce  payment  of and  receive  any
amounts due or becoming  due from the Company for  principal,  premium,  if any,
interest or otherwise  under any of the  provisions of the Mortgage or the other
Financing Documents, without prejudice to any other right or remedy of the Bank.

         (C)     Regardless  of the  happening of an Event of Default,  the Bank
may institute and maintain such suits and proceedings as it may be advised shall
be necessary or expedient to prevent any  impairment  of the security  under the
Mortgage by any acts which may be unlawful or in violation of the  Mortgage,  or
to preserve or protect the interests of the Bank.

         (D)     The Bank  shall  have the  right to appear  in and  defend  any
action or proceeding brought with respect to the Mortgaged Property and to bring
any  action  or  proceeding,  in the name and on  behalf  of the  Issuer  or the
Company,  which the Bank,  in its  discretion,  determines  should be brought to
protect their interests in the Mortgaged Property.

         (E)     Upon the  occurrence  and  continuance  of any Event of Default
hereunder,  the Company,  upon demand of the Bank, shall forthwith surrender the
possession  of, and it shall be lawful for the Bank, to take  possession of, all
or any part of the  Mortgaged  Property,  together  with the  books,  papers and
accounts of the Company pertaining thereto,  and to hold, operate and manage the
same, and from time to time to make all needed repairs and  improvements as Bank
shall  deem  wise;  and the Bank may sell  the  Mortgaged  Property  or any part
thereof, or lease the Mortgaged Property or any part thereof in the name and for
the account of the Issuer or the Company,  collect,  receive and  sequester  the
rents, revenues,  earnings,  income, products and profits therefrom, and pay out
of the same all proper costs and expenses of taking, holding,  leasing,  selling
and managing the Mortgaged Property,  including  reasonable  compensation to the
Bank and its agents and counsel, and any charges of the Bank hereunder,  and any
taxes and other  charges  prior to the Lien of the  Mortgage  which the Bank may
deem it wise to pay,  and all  expenses of such  repairs and  improvements,  and
apply the remainder of the moneys so received in accordance  with the provisions
of Section 6.05 hereof.

         Whenever all that is due under the  Reimbursement  Agreement,  the Term
Loan  Note and the  other  Financing  Documents  shall  have  been  paid and all
defaults made good,  the Bank shall  surrender  possession to the Issuer and the
Company; the same right of entry, however, to exist upon any subsequent Event of
Default.



                                       23
<PAGE>

         (F)     Notwithstanding  anything herein contained to the contrary, the
Issuer or the  Company or anyone  claiming  through or under  either of them (1)
will not (a) 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 the Mortgage,  (b) 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 hereof,
or  pursuant  to the  decree,  judgment  or  order  of any  court  of  competent
jurisdiction,  or (c) after any such sale or sales,  claim or exercise any right
under any statute heretofore or hereafter enacted to redeem the Property so sold
or any part thereof,  (2) hereby expressly waive all benefit or advantage of any
such law or laws, and (3) covenant not to hinder,  delay or impede the execution
of any power herein  granted or delegated to the Bank,  but to suffer and permit
the  execution  of every  power as  though  no such law or laws had been made or
enacted.  The Company and the Issuer, for themselves and all who may claim under
them,  waive,  to the  extent  that  they  lawfully  may,  all right to have the
Mortgaged Property marshalled upon any foreclosure hereof.

SECTION  6.04.  APPOINTMENT  OF  RECEIVERS.  Upon the  occurrence of an Event of
Default  hereunder  and  upon  the  filing  of a suit or  commencement  of other
judicial  proceedings to enforce the rights of the Bank under the Mortgage,  the
Bank shall be entitled,  as a matter of right, without notice and without regard
to the adequacy of any security for the debt secured hereby,  to the appointment
of a receiver or  receivers  of the  Mortgaged  Property and of the revenues and
receipts  thereof,  pending the  conclusion of such  proceedings  and any appeal
therefrom,  with such powers as the court making such appointment  shall confer.
The receiver shall be entitled to occupational rent from an  owner/occupant  and
may upon non-payment of said rent evict the owner/occupant.

SECTION 6.05.  APPLICATION OF MONEYS.  The Net Proceeds  received by the Bank or
pursuant to any right given or action taken under the provisions of this Article
VI shall,  during the continuance of an event of default  hereunder,  be applied
(A) first, to the payment of the fees, costs and expenses of the Bank, including
reasonable  attorney's  fees; (B) second,  to the payment of all installments of
interest  then due and payable  under the  Reimbursement  Agreement and the Term
Loan Note; (C) third, to the payment of unpaid principal of and premium, if any,
under the  Reimbursement  Agreement and the Term Loan Note,  whether or not then
due and  payable;  (D) fourth,  to the payment of any sum or charge  (other than
principal  or  interest)  evidenced  or secured by the Mortgage and all interest
payable thereon; (E) fifth, to the payment of interest on principal amounts then
due and payable under any other Financing  Document;  and (F) sixth, the balance
thereof to be applied in  reduction  of  principal  amounts then due and payable
under or any other Financing Document.

SECTION 6.06. REMEDIES  CUMULATIVE.  No remedy herein conferred upon or reserved
to the Trustee and the Bank is intended to be exclusive  of any other  available
remedy,  but each and every such remedy shall be  cumulative  and in addition to
every  other  remedy  given  under the  Mortgage  or under  any other  Financing
Document now or hereafter  existing at law or in equity. No delay or omission to
exercise  any right or power  accruing  upon any default  shall  impair any such
right or power or shall be construed to be a waiver thereof,  but any such right
and  power  may be  exercised  from  time to time and as often as may be  deemed
expedient.  In order to entitle  the Bank to  exercise  any remedy  reserved  to
either of them in this Article VI, it shall not be necessary to give any notice,
other than such notice as may be expressly required in the Mortgage.



                                       24
<PAGE>

SECTION 6.07.  TERMINATION OF PROCEEDINGS.  In case any proceeding  taken by the
Bank on  account  of any  Event of  Default  shall  have  been  discontinued  or
abandoned for any reason or shall have been determined adversely to the Trustee,
then the  Issuer,  the Bank and the Company  shall be  restored to their  former
positions and rights hereunder,  and all rights, remedies and powers of the Bank
shall continue as if no such proceeding had been taken.

SECTION 6.08.  WAIVER AND  NON-WAIVER OF EVENT OF DEFAULT.  (A) The Bank may, in
its discretion,  agree to waive, in writing,  any Event of Default hereunder and
its  consequences  and annul any  acceleration  in accordance  with Section 6.02
hereof.  No such  waiver  shall  extend to or affect any other  existing  or any
subsequent Event of Default.

         (B)     The failure of the Bank to insist upon  strict  performance  of
any term hereof shall not be deemed to be a waiver of any term of the  Mortgage.
The Company  shall not be relieved of the  Company's  obligations  hereunder  by
reason of (1)  failure of the Bank to comply  with any request of the Company to
take any action to  foreclose  the  Mortgage  or  otherwise  enforce  any of the
provisions hereof, (2) the release, regardless of consideration, of the whole or
any part of the Mortgaged  Property,  or (3) any agreement or stipulation by the
Bank extending the time of payment or otherwise  modifying or supplementing  the
terms of the Mortgage, the Reimbursement Agreement or any of the other Financing
Documents.  The Bank may resort for the payment of the Indebtedness to any other
security held by the Bank pursuant to the Financing  Documents in such order and
manner as the Bank, in its  discretion,  may elect.  The Bank may take action to
recover the  Indebtedness,  or any portion  thereof,  or to enforce any covenant
hereof without prejudice to the right of the Trustee thereafter to foreclose the
Mortgage. The rights of the Bank under the Mortgage shall be separate,  distinct
and cumulative and none shall be given effect to the exclusion of the others. No
act of the Bank shall be  construed  as an  election  to  proceed  under any one
provision herein to the exclusion of any other provision. No waiver of any right
of the Bank shall be effective unless it is in a writing signed by an officer of
the Bank.

SECTION 6.09.  REPAYMENT AND SECURING OF EXPENSES PAID BY THE BANK. In the event
the Bank shall pay any  premiums  on any  policies of  insurance  required to be
maintained  or procured by Section 4.02  hereof,  or in the event the Bank shall
expend any funds for the  payment of any unpaid  taxes or  assessments  upon the
Mortgaged  Property,  or expend any funds in payment of any unpaid  installments
under any  applicable  agreement  for  payments in lieu of taxes with any Taxing
Entity or pay or  perform  any other  obligation  of  either  the  Issuer or the
Company  under  any of the  Financing  Documents,  then in any such  event  such
payment  shall be deemed to be secured by the  Mortgage  and shall be payable to
the Bank in the manner provided and with interest as provided herein,  or if not
so provided therein,  shall be payable on demand as an additional  payment under
the  other  Financing  Documents  with  interest  at the rate  specified  in the
Reimbursement  Agreement or the maximum  amount  permitted by law,  whichever is
less.

SECTION 6.10. OTHER ACTIONS BY THE BANK. Regardless of the happening of an Event
of Default,  the Bank may institute and maintain such suits and  proceedings  as
such shall deem necessary or expedient to prevent any impairment of the security
under the  Mortgage  by any acts which may be unlawful  or in  violation  of the
Mortgage, or to preserve or protect the interests of the Bank.

SECTION 6.11.  REPAYMENT AND SECURING OF COLLECTION  COSTS  INCURRED BY BANK. In
the event this Mortgage,  any other  Financing  Documents,  or any or all of the
foregoing  are placed in the hands of an attorney (A) for  collection of any sum
payable hereunder or thereunder, (B) for the foreclosure of this Mortgage or (C)
for the  enforcement  of any of the terms,  conditions  and  obligations of



                                       25
<PAGE>

this Mortgage or the Reimbursement  Agreement or the Term Loan Note, the Company
agrees to pay all costs of  collection  (including  reasonable  counsel fees and
expenses)  incurred  by the Bank,  together  with  interest  thereon at the rate
specified  in the  Reimbursement  Agreement  or the  maximum  permitted  by law,
whichever is less.  All such costs as incurred  shall be deemed to be secured by
this Mortgage and collectable out of the proceeds of this Mortgage in any manner
permitted by law or by this  Mortgage,  and the Company  shall be liable for any
deficiency.



                                       26
<PAGE>

                                   ARTICLE VII

                                  MISCELLANEOUS


SECTION  7.01.  LIMITATION  OF  RIGHTS.  With the  exception  of  rights  herein
expressly conferred, nothing expressed or mentioned in or to be implied from the
Mortgage or the other  Financing  Documents is intended or shall be construed to
give to any  Person,  other  than the  parties  hereto  or  thereto,  and  their
successors and assigns,  any right, remedy or claim under or with respect to the
Mortgage or any  covenants,  conditions  and provisions  herein  contained.  The
Mortgage and all of the covenants, conditions and provisions hereof are intended
to be for the sole  and  exclusive  benefit  of the  parties  hereto  and  their
successors and assigns as herein provided.

SECTION 7.02.  LAWS. If any law or ordinance is enacted or adopted which imposes
a tax, either directly or indirectly,  on the Mortgage, the Company will pay, or
cause to be paid, such tax, with interest and penalties thereon, if any.

SECTION 7.03.  REVENUE STAMPS.  If at any time any Governmental  Authority shall
require revenue or other stamps to be affixed to the Mortgage,  the Company will
pay, or cause to be paid, the same, with interest and penalties thereon, if any.

SECTION  7.04.  FURTHER  ASSURANCE.  The Issuer and the Company will execute and
procure for the Bank and cause to be done any further  conveyances,  instruments
or acts of further assurance as the Bank shall reasonably require to perfect the
security of the Bank in the Mortgaged  Property  intended now or hereafter to be
covered  by the  Mortgage  or  otherwise  for  carrying  out  the  intention  of
facilitating the performance of the terms of the Mortgage.

SECTION 7.05.  SATISFACTION OF MORTGAGE.  Upon the payment in full of all of the
amounts due under the  Reimbursement  Agreement  and the Term Loan Note,  if (A)
there is no Event of Default  under the  Reimbursement  Agreement  and,  (B) the
Issuer and the Company  have  performed  and  observed  all the  covenants to be
performed and observed  hereunder and have performed all  obligations  under the
Installment Sale Agreement,  the Reimbursement Agreement and the other Financing
Documents to which they are parties,  the Bank by  acceptance  of the  Mortgage,
agrees to execute and deliver,  (after the expiration of the  preference  period
under federal  bankruptcy law and any similar  period under any similar  statute
affecting   creditors'   rights)  any  and  all  instruments   necessary  and/or
appropriate to discharge the Lien of the Mortgage of record and to terminate UCC
Financing Statements.

SECTION 7.06. SEVERABILITY.  (A) If any provision of the Mortgage shall, for any
reason,  be held or shall,  in fact,  be  inoperative  or  unenforceable  in any
particular  case, such  circumstance  shall not render the provision in question
inoperative or  unenforceable  in any other case or  circumstance  or render any
other provision herein contained inoperative or unenforceable.

         (B)     The invalidity of any one or more phrases, sentences,  clauses,
paragraphs or sections in the Mortgage  shall not affect the remaining  portions
of the Mortgage or any part thereof.

SECTION 7.07. COVENANTS RUN WITH THE LAND. All of the grants, covenants,  terms,
provisions  and  conditions  herein  shall run with the land and shall apply to,
bind and  inure to the  benefit  of the  parties  hereto  and  their  respective
successors and assigns.


                                       27
<PAGE>

SECTION  7.08.  NOTICES.  All  notices,  certificates  and other  communications
hereunder  shall be in  writing  and  shall be  sufficiently  given and shall be
deemed given when (A) sent to the applicable  address stated below by registered
or certified mail, return receipt requested,  postage prepaid,  or by such other
means (including, without limitation,  personal and overnight delivery) as shall
provide the sender with documentary  evidence of such delivery,  or (B) delivery
is refused by the  addressee,  as evidenced  by the  affidavit of the Person who
attempted to effect such delivery. The addresses to which notices,  certificates
and other communications hereunder shall be delivered are as follows:

            IF TO THE COMPANY:

            Spurlock Adhesives, Inc.
            5090 General Mahone Highway
            Waverly, Virginia  23890
            Attention:  Phillip S. Sumpter, Executive Vice President

            WITH A COPY TO:

            Williams Mullen Christian & Dobbins, P.C.
            1021 East Cary Street
            Richmond, Virginia  23219
            Attention:  David L. Dallas, Jr., Esq.


            IF TO THE ISSUER:

            County of Saratoga Industrial Development Agency
            Saratoga County Municipal Center
            40 McMaster Street
            Ballston Spa, New York  12020
            Attention:  Administrator

            WITH A COPY TO:

            Michael J. Toohey, Esq.
            Snyder, Kiley, Toohey & Corbett, LLP
            160 West Avenue
            P.O. Box 4367
            Saratoga Springs, New York  12866


            IF TO THE BANK:

            KeyBank National Association
            66 South Pearl Street
            Albany, New York  12207-1501
            Attention:  Corporate Banking Division


                                       28
<PAGE>

            WITH A COPY TO:

            KeyBank National Association
            66 South Pearl Street
            Albany, New York  12207
            Attention:  International Division, Letter of Credit Department

            and

            Crane Kelley Greene & Parente
            90 State Street
            Albany, New York  12207
            Attention:  Kevin J. Kelley, Esq.


The Issuer,  the Company and the Bank may, by notice given hereunder,  designate
any further or different addresses to which subsequent notices, certificates and
other communications shall be sent.

SECTION   7.09.   COUNTERPARTS.   The   Mortgage  may  be  executed  in  several
counterparts,  each  of  which  shall  be an  original  and all of  which  shall
constitute but one and the same instrument.

SECTION 7.10.  APPLICABLE LAW. The Mortgage shall be governed exclusively by the
applicable laws of the State.

SECTION 7.11. TABLE OF CONTENTS AND SECTION HEADINGS NOT CONTROLLING.  The table
of  contents  and the  headings  of the  several  articles  and  sections of the
Mortgage  have been  prepared for  convenience  of reference  only and shall not
control, affect the meaning of or be taken as an interpretation of any provision
of the Mortgage.

SECTION 7.12. AMENDMENT, ETC. Neither the Mortgage nor any provisions hereof may
be changed,  waived,  discharged or terminated orally, but only by an instrument
in writing signed by the party against whom  enforcement of the change,  waiver,
discharge or termination is sought.

SECTION 7.13. USURY.  Notwithstanding anything to the contrary contained herein,
in no event  shall  the  total of all  charges  payable  hereunder  or under the
Reimbursement  Agreement  or under  the Term Loan Note or under any of the other
Financing  Documents  which are or could be held to be in the nature of interest
exceed the maximum rate permitted to be charged under applicable law. Should the
Bank receive any payment which is or would be in excess of that  permitted to be
charged under any  applicable  law,  such payment shall have been,  and shall be
deemed to have been, made in error and shall  automatically be applied to reduce
the Indebtedness.

SECTION  7.14.  NO  RECOURSE;   SPECIAL  OBLIGATION.  (A)  The  obligations  and
agreements of the Issuer contained  herein and in the other Financing  Documents
and in any other  instrument  or  document  executed in  connection  herewith or
therewith,  and any other instrument or document supplemental hereto or thereto,
shall be deemed the  obligations  and  agreements of the Issuer,  and not of any
member, officer, agent (other than the Company) or employee of the Issuer in his
individual capacity, and the members,  officers, agents (other than the Company)
and employees of the Issuer shall not be liable  personally hereon or thereon or
be subject to any personal liability or accountability  based


                                       29
<PAGE>

upon or in respect hereof or thereof or of any transaction  contemplated  hereby
or thereby.  The obligations and agreements of the Issuer  contained  herein and
therein  shall not  constitute  or give rise to an obligation of the State or of
Saratoga County,  New York, and neither the State nor Saratoga County,  New York
shall be liable hereon or thereon, and further,  such obligations and agreements
shall not  constitute or give rise to a general  obligation  of the Issuer,  but
rather shall  constitute  limited,  special  obligations  of the Issuer  payable
solely from the  revenues of the Issuer  derived and to be derived from the sale
or other disposition of the Project Facility (except for revenues derived by the
Issuer with respect to the Unassigned  Rights) and the other security pledged to
the  payment of the Bonds.  The  limitations  on the  obligations  of the Issuer
contained in this  Section  7.14 by virtue of any lack of assurance  required by
Paragraph  (B) hereof  shall not be deemed to prevent  the  occurrence  and full
force and effect of any Event of Default pursuant to Section 6.01 hereof.

         (B)     No order or decree of specific  performance with respect to any
of the obligations of the Issuer  hereunder shall be sought or enforced  against
the Issuer  unless (1) the party  seeking  such order or decree shall first have
requested  the  Issuer in  writing  to take the  action  sought in such order or
decree of specific  performance,  and ten (10) days shall have  elapsed from the
date of receipt of such  request,  and the Issuer  shall have  refused to comply
with such request (or if compliance  therewith  would  reasonably be expected to
take  longer than ten (10) days shall have failed to  institute  and  diligently
pursue action to cause compliance with such request) or failed to respond within
such notice  period,  (2) if the Issuer  refuses to comply with such request and
the Issuer's  refusal to comply is based on its reasonable  expectation  that it
will incur fees and expenses,  the party seeking such order or decree shall have
placed in an account  with the  Issuer an amount or  undertaking  sufficient  to
cover such reasonable fees and expenses, and (3) if the Issuer refuses to comply
with such request and the Issuer's  refusal to comply is based on its reasonable
expectation  that it or any of its  members,  officers,  agents  (other than the
Company) or employees shall be subject to potential liability, the party seeking
such order or decree shall (a) agree to indemnify  and hold  harmless the Issuer
and its members, officers, agents (other than the Company) and employees against
any liability  incurred as a result of its compliance with such demand,  and (b)
if requested by the Issuer shall furnish to the Issuer satisfactory  security to
protect the Issuer and its members,  officers,  agents  (other than the Company)
and  employees  against  all  liability  expected  to be incurred as a result of
compliance with such request.

SECTION 7.15. WAIVER OF NOTICE. Whenever in the Mortgage the giving of notice by
mail or  otherwise  is  required,  the  giving of such  notice  may be waived in
writing by the Person or Persons entitled to receive such notice.

SECTION  7.16.  LIEN LAW.  To the extent  permitted  by law,  the Issuer and the
Company  will  receive the  advances to be made  hereunder  subject to the trust
provisions  of Section 13 of the Lien Law of the State , 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 constructing  the improvements to the Land and will apply the
same  first to such  payment  before  using  any part of the same for any  other
purpose,  but  nothing  herein  shall be  construed  to impose upon the Bank any
obligation to see to the proper allocation of such advances by the Issuer or the
Company.

SECTION 7.17.  PROVISIONS REGARDING MAXIMUM  INDEBTEDNESS,  REDUCTION OF SECURED
AMOUNT AND TREATMENT AND APPLICATION OF PAYMENTS.

         (A)     Maximum Amount of Indebtedness. Notwithstanding anything to the
contrary  in  this  Mortgage,   the  maximum   aggregate   principal  amount  of
indebtedness  that is, or under any contingency


                                       30
<PAGE>

may be, secured by this Mortgage  either at execution or at any time  thereafter
(the "Secured Amount"),  is $2,000,000,  plus amounts that the Bank expends upon
an Event of Default  under this  Mortgage  to the extent  that any such  amounts
shall  constitute  payment of (i) taxes;  (ii)  premiums on  insurance  policies
covering the Mortgaged  Property or any part thereof;  (iii)  expenses  incurred
defending or in upholding the lien of this  Mortgage,  including the expenses of
any  litigation  to  prosecute  or defend the  rights  and lien  created by this
Mortgage;  or (iv)  any  amount,  cost or  charge  to  which  the  Bank  becomes
subrogated,  upon payment, whether under recognized principles of law or equity,
or under express statutory authority; then, and in each such event, such amounts
or costs,  together with interest  thereon,  shall be added to the  indebtedness
secured hereby and shall be secured by this Mortgage.

         (B)     Reduction  of  Secured  Amount.  The  Secured  Amount  shall be
reduced only by the last and final sums that the Company  repays with respect to
the Indebtedness.

         (C)     Application  of  Payments.  So  long  as  the  balance  of  the
Indebtedness exceeds the Secured Amount, any payments of the Indebtedness by the
Company shall not be deemed to be applied against,  or to reduce, the portion of
the Indebtedness secured by this Mortgage.



                                       31
<PAGE>

         IN WITNESS WHEREOF,  the Mortgage has been duly executed as of the date
first above written.

                                           COUNTY OF SARATOGA INDUSTRIAL
                                           DEVELOPMENT AGENCY


                                           By: /s/ Floyd H. Rourke
                                               ---------------------------------
                                               Floyd H. Rourke, Chairman


                                           SPURLOCK ADHESIVES, INC.


                                           By: /s/ Phillip S. Sumpter
                                               ---------------------------------
                                           Name: Phillip S. Sumpter
                                                 -------------------------------
                                           Title: Executive Vice President
                                                  ------------------------------


STATE OF NEW YORK        )
                         ) SS.:
COUNTY OF SARATOGA       )

         On the 7th day of October,  1997,  before me  personally  came FLOYD H.
ROURKE,  to me known,  who being by me duly  sworn,  did  depose and say that he
resides in  Northumberland,  New York,  that he is the CHAIRMAN of the COUNTY OF
SARATOGA  INDUSTRIAL  DEVELOPMENT  AGENCY, the public benefit corporation of the
State of New York described in and which executed the foregoing instrument,  and
that he signed his name thereto by authority of said public benefit corporation.


                                           /s/ Theresa C. Priest
                                           -------------------------------------
                                           Notary Public

                                                   THERESA C. PRIEST
                                           Notary Public, State of New York
                                            Washington County #01PR4921971
                                           Commission Expires Feb. 28, 1998

STATE OF NEW YORK        )
                         ) SS.:
COUNTY OF SARATOGA       )

         On this 9th day of October,  1997, before me personally came Phillip S.
Sumpter,  to me known,  who being by me duly  sworn,  did depose and sat that he
resides in Waverly VA, that he is the Exec V.P. of SPURLOCK ADHESIVES, INC., the
corporation described in and which executed the foregoing  instrument,  and that
he  signed  his  name  thereto  by  order  of the  Board  of  Directors  of said
corporation.

                                           /s/ Theresa C. Priest
                                           -------------------------------------
                                           Notary Public

                                                   THERESA C. PRIEST
                                           Notary Public, State of New York
                                            Washington County #01PR4921971
                                           Commission Expires Feb. 28, 1998

<PAGE>

                                   EXHIBIT "A"

                               DESCRIPTION OF LAND




         THAT TRACT OR PARCEL OF LAND, situate in the Town of Moreau,  County of
Saratoga and State of New York more fully  described as Lot Number 3 as shown on
subdivision maps of Moreau  Industrial Park prepared by The Saratoga  Associates
and filed in the  Saratoga  County  Clerk's  Office on March 18,  1992 in drawer
#M-348 A-Z and AA-DD;  and as  modified  by revised  subdivision  maps of Moreau
Industrial  Park prepared by The Saratoga  Associates  and filed in the Saratoga
County  Clerk's  Office on  February  16, 1994 in drawer  #M-398,  A-S and being
further bounded and described as follows:

         BEGINNING  at a point  marked with a capped iron rod found at the point
of  intersection  of the easterly  line of Farnan Road with the common  division
line of Lot No. 4 to the  north and Lot No. 3 to the south as shown on said map;
thence  from  said  point of  beginning  along  said  common  division  line the
following five (5) courses and distances:
     1)  North 90 deg. 00 min. 00 sec. East,  347.86 feet to a point marked with
         a capped iron rod found;
     2)  South 00 deg. 00 min. 00 sec. West, 32.63 feet to a point marked with a
         capped iron rod found;
     3)  North 90 deg. 00 min. 00 sec. East,  191.52 feet to a point marked with
         a capped iron rod found;
     4)  North 00 deg. 00 min. 00 sec. East, 32.63 feet to a point marked with a
         capped iron rod found;
     5)  North  90 deg.  00 min.  00 sec.  East,  680.17  feet to the  point  of
intersection  of the westerly line of Lot No. 5 with the common division line of
Lot No. 4 to the north  and Lot No. 3 to the south as shown on said map;  thence
along said westerly line,  South 16 deg. 10 min. 56 sec. West,  102.04 feet to a
point in the  northwesterly  line of lands of The  State of New York as shown on
said map,  said point also being at the 145 foot  elevation;  thence  along said
northwesterly  and the  westerly  line of lands  of The  State of New York as it
winds and turns along the 145 foot  elevation in a southerly  direction  712 +/-
feet to the point of intersection of said westerly line of lands of The State of
New York with the common  division  line of Lot No. 3 to the north and Lot No. 2
to the south as shown on said map, the last course having a tie-line of South 33
deg. 02 min. 30 sec. West,  699.47 feet; thence along said common division line,
South 90 deg. 00 min. 00 sec. West,  865.65 feet to a point marked with a capped
iron rod found at the point of  intersection of the easterly line of Farnan Road
with the  common  division  line of Lot No. 3 to the  north and Lot No. 2 to the
south as shown on said map;  thence  along  said  easterly  line in a  northerly
direction the following four (4) courses and distances:
     1)  North  00  deg.  00 min.  00  sec.  West,  116.35  feet  to a point  of
         curvature;
     2)  Along a curve to the right an arc  length of 464.05  feet to a point of
         tangency, said curve having a radius of 2,773.32 feet and a delta angle
         of 09 deg. 35 min. 13 sec.;
     3)  North 09 deg. 35 min. 13 sec. East, 50.00 feet to a point of curvature;
     4)  Along a curve to the left an arc  length of 57.49  feet to the point or
place of  beginning,  said curve  having a radius of  2,294.42  feet and a delta
angle of 01 deg. 26 min. 08 sec., said parcel containing 16.37 +/- acres of land
and being Lot No. 3 as shown on said map.



<PAGE>

                                   EXHIBIT "B"

                            DESCRIPTION OF EQUIPMENT


         All  articles  of personal  property  and all  appurtenances,  wherever
located, now or hereafter acquired with the proceeds of the Bonds or any payment
made by the Company  pursuant to Section 4.5 of the  Installment  Sale Agreement
and all articles of personal  property and all  appurtenances now or hereinafter
owned by the Issuer or the Company and now or hereafter  attached to,  contained
in or used in  connection  with  the  Project  Facility  or  placed  on any part
thereof,  though  not  attached  thereto,  including,  but not  limited  to, all
equipment, materials, furnishings, machinery, pipes, screens, fixtures, heating,
lighting,  plumbing,  ventilation,  air  conditioning,  compacting  and elevator
plants,  drapes,  blinds  and  accessories,  sprinkler  systems  and other  fire
prevention and extinguishing apparatus and materials;  and together with any and
all products of any of the above, all substitutions,  replacements, additions or
accessions therefor, and any and all cash proceeds or non-cash proceeds realized
from the sale,  transfer or  conversion of any of the above.  The  references to
"proceeds"  shall not be deemed to be an  authorization  by the  Trustee  of the
disposition of any of the foregoing.




                                      B-1