Exhibit 10.7

                          THIS IS AN OPEN-END MORTGAGE
                         SECURING FUTURE ADVANCES UP TO
                          A MAXIMUM PRINCIPAL AMOUNT OF
                EIGHT MILLION FIVE HUNDRED SEVENTY-NINE THOUSAND
                NINE HUNDRED SIXTY-SEVEN DOLLARS AND TWELVE CENTS
                  PLUS ACCRUED INTEREST AND OTHER INDEBTEDNESS
                   AS DESCRIBED IN 42 PA.C.S.A. (section) 8143

              MORTGAGE, ASSIGNMENT OF LEASES AND SECURITY AGREEMENT


         THIS MORTGAGE, ASSIGNMENT OF LEASES AND SECURITY AGREEMENT (this
"Mortgage") dated March 20, 1997 is made by NEOSE TECHNOLOGIES, INC., a Delaware
corporation, with an address of 102 Witmer Road, Horsham, Pennsylvania 19044
(the "Mortgagor"), in favor of JEFFERSON BANK, with an address of 1607 Walnut
Street, Philadelphia, Pennsylvania 19103 (the "Mortgagee").

                              W I T N E S S E T H :

         A. Montgomery County Industrial Development Authority (the "Issuer")
has issued its Federally Taxable Variable Rate Demand Revenue Bonds (Neose
Technologies, Inc. Project), Series B of 1997, in the aggregate principal amount
of $8,400,000 (the "Bonds") under a Trust Indenture, dated as of March 1, 1997
(the "Indenture") between the Issuer and Dauphin Deposit Bank and Trust Company,
as trustee (including any successor trustee, the "Trustee").

         B. Pursuant to a Loan Agreement, dated as of March 1, 1997 between the
Issuer and the Mortgagor (the "Loan Agreement"), the proceeds of the Bonds are
being applied to finance a project more fully described therein. Under the Loan
Agreement, the Mortgagor is obligated to make loan payments to the Trustee in
amounts and at times corresponding to the principal of and interest due in
respect of the Bonds.

         C. In order to facilitate the issuance and sale of the Bonds and to
enhance the marketability of the Bonds, the Issuer and the Borrower have asked
CoreStates Bank, N.A. (the "Letter of Credit Bank") to issue its Irrevocable
Letter of Credit (together with any amendment thereto and any substitute letter
of credit issued by the Letter of Credit Bank therefor, the "Letter of Credit")
to the Trustee authorizing the Trustee to make one or more draws on the Letter
of Credit Bank up to an aggregate of $8,579,967.12 (as reduced and reinstated
from time to time in accordance with the provisions of the Letter of Credit, the
"Letter of Credit Amount"), of which originally: (i) $8,400,000 shall be in
respect of principal of the Bonds; and (ii) $179,967.12 shall be in respect of
accrued interest on the Bonds. The purpose of the Letter of Credit is to provide
funds for the payment of principal of and interest on the Bonds and purchase
price of Bonds which have been tendered for purchase pursuant to the tender
option provisions thereof and of the Indenture to the extent remarketing
proceeds or other funds are not available therefor in accordance with the
provisions of the Indenture.


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         D. The Letter of Credit Bank will only issue the Letter of Credit if it
will be reimbursed pursuant to the terms of an agreement to be entered into with
another banking institution acceptable to the Letter of Credit Bank. To such end
and in order to achieve interest cost savings and other savings for the
Mortgagor, the Mortgagor has asked the Mortgagee to enter into a Participation
and Reimbursement Agreement, dated as of March 1, 1997, with the Letter of
Credit Bank (the "Participating Bank Agreement") under which the Mortgagee will
become primarily and unconditionally obligated to reimburse the Letter of Credit
Bank for all drawings under the Letter of Credit and to make certain other
payments to the Letter of Credit Bank.

         E. The Mortgagee is willing to enter into the Participating Bank
Agreement for the account of the Mortgagee upon the terms and conditions set
forth in the Reimbursement Agreement, dated as of March 1, 1997, (the
"Reimbursement Agreement"), between the Mortgagee and the Mortgagor.


                                    ARTICLE I
                              OBLIGATIONS; SECURITY

         1.1 Obligations; Loan Documents. This Mortgage is executed,
acknowledged and delivered by the Mortgagor to secure and enforce the following
obligations and liabilities (collectively, the "Obligations"):

                  (a) The payment of: (i) the principal sum of Eight Million
Five Hundred Seventy-Nine Thousand Nine Hundred Sixty-Seven Dollars and Twelve
Cents ($8,579,967.12) in the aggregate to be paid with interest thereon, as the
same may fluctuate, pursuant to the provisions of the Reimbursement Agreement,
including all advances now or hereafter made by the Mortgagee pursuant to the
Participating Bank Agreement, together with interest thereon, as more fully
described in the Reimbursement Agreement; (ii) all sums now or in the future
advanced or coming due or required to be paid under the Loan Documents
(hereinafter defined) whether for principal, interest, fees, costs, charges,
expenses, or other amounts owing under reimbursement or indemnification
obligations under the Loan Documents, whether such advances are voluntary or
obligatory, whether such obligations presently exist or come into existence at
some future time, and whether such advances, costs and expenses were made or
incurred at the request of the Mortgagor or any other obligor or guarantor under
the Loan Documents or Mortgagee; (iii) any increases in the Letter of Credit
Amount whether by amendment of the Reimbursement Agreement, the Participating
Bank Agreement, replacement of the Letter of Credit or otherwise; and (iv) all
sums which may hereafter be lent to the Mortgagor by the Mortgagee when
evidenced by a promissory note or other obligation reciting that said note or
obligation is intended to be secured by this Mortgage; and

                  (b) The performance of all of the terms, covenants,
conditions, agreements, obligations and liabilities of the Mortgagor or any
other obligor or guarantor under:


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(i) the Reimbursement Agreement, this Mortgage, all documents referred to as
"Security Documents" in the Reimbursement Agreement and any other document now
or hereafter given to evidence, secure or facilitate the payment and performance
of any of the Obligations; (ii) all extensions, renewals, replacements or
modifications of, or amendments or additions to any of the foregoing; and
(iii) any note, document or instrument now or hereafter evidencing an obligation
of the Mortgagor or to the Mortgagee which recites that it is intended to be
secured by this Mortgage (all of the foregoing being collectively referred to in
this Mortgage as the "Loan Documents"). The Mortgagor shall pay and perform the
Obligations required in accordance with the provisions of the Loan Documents.

         1.2 Grant of Mortgage; Mortgaged Property. For the purpose of securing
payment and performance of all Obligations, the Mortgagor has granted, conveyed,
bargained, sold, alienated, enfeoffed, released, confirmed, assigned to, granted
a security interest in and mortgaged, and by these presents does hereby grant,
convey, bargain, sell, alien, enfeoff, release, confirm, assign to, grant a
security interest in and mortgage unto the Mortgagee all of the Mortgagor's
right, title and interest in and to the following whether presently in existence
or to come into existence at some future time (collectively, the "Mortgaged
Property"):

                  (a) The parcel of land situated generally at 102 Witmer Road,
Horsham, located in the Township of Horsham, Montgomery County, Pennsylvania and
more fully described in Exhibit "A" attached hereto and made a part hereof (the
"Land");

                  (b) All buildings, structures and improvements of every kind
erected on, under or over the Land (the "Improvements") (the Land and the
Improvements being hereinafter referred to as, collectively, the "Real Estate");

                  (c) All building materials, fixtures, building machinery and
building equipment delivered on site to the Real Estate during the course of, or
in connection with, the construction of, or reconstruction of, or remodeling of,
any of the Real Estate from time to time during the term hereof;

                  (d) Subject to subparagraph (h) hereof, all fixtures,
machinery, equipment and other articles of real, personal or mixed property
attached to, situate or installed in or upon, or used in the operation or
maintenance of, the Real Estate or any plant or business situated thereon,
whether or not such real, personal or mixed property is or shall be affixed to
the same, and all replacements, substitutions, accretions and proceeds of the
foregoing (collectively, "Fixtures") including all building service fixtures,
machinery and equipment of any kind whatsoever; all lighting, heating,
ventilating, air conditioning, refrigerating, sprinkling, plumbing, security,
cleaning, incinerating, waste disposal, communications, alarm, fire prevention
and extinguishing systems, fixtures, apparatus, machinery and equipment; all
elevators, escalators, lifts, cranes, hoists and platforms; all pipes, conduits,
pumps, boilers, tanks, motors, engines, furnaces and compressors; all dynamos,
transformers, generators; all parts, fittings, accessories, accessions,
substitutions and replacements thereof; all floor and window coverings; all
storm and screen windows, shutters and doors; and all trees and other plantings;


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                  (e) All leases, licenses, occupancy agreements or agreements
to lease all or any part of the Real Estate and all extensions, renewals,
amendments, and modifications thereof, and any options, rights of first refusal,
or guarantees relating thereto (collectively, "Leases"); all rents, income,
receipts, revenues, security deposits, escrow accounts, reserves, issues,
profits, awards, and payments of any kind payable under the Leases or otherwise
arising from the Real Estate (collectively, the "Income"); all contract rights,
accounts receivable and general intangibles relating to the Real Estate or the
use, occupancy, maintenance, construction or repair thereof; all management
agreements, franchise agreements, utility agreements and deposits, building
service contracts, maintenance contracts, construction contracts, architect's
agreements; all maps, plans, surveys and specifications; all warranties and
guaranties; all permits, licenses and approvals; all insurance policies, books
of account and other documents, of whatever kind or character, relating to the
use, construction upon, occupancy, leasing, sale or operation of the Real
Estate;

                  (f) All estates, rights, tenements, hereditaments, privileges,
easements, and appurtenances of any kind benefitting the Real Estate; all means
of access to and from the Real Estate, whether public or private; all water and
mineral rights; all rights of the Mortgagor as declarant or unit owner under any
declaration of condominium or association applicable to the Real Estate; and all
other claims or demands of the Mortgagor, either at law or in equity, in
possession or expectancy, of, in, or to the Real Estate;

                  (g) All "Proceeds" of any of the above-described property,
which term shall have the meaning given to it in the Uniform Commercial Code of
the state in which the Real Estate is located and shall additionally include
whatever is received upon the use, lease, sale, exchange, collection, or other
utilization or any disposition of any of the above-described property, voluntary
or involuntary, whether cash or non-cash, including proceeds of insurance and
condemnation awards, rental or lease payments, accounts, chattel paper,
instruments, documents, contract rights, general intangibles, equipment and
inventory; and

                  (h) Notwithstanding anything to the contrary in the foregoing,
the lien and security interest of the Mortgagee in and to the Fixtures is
subject and subordinate to those liens and encumbrances in the Fixtures
described in Exhibit "B", which is attached hereto and made a part hereof. The
Mortgagee agrees to release its lien and security interest in the Fixtures
described in Exhibit "B" upon the reasonable request of the Corporation, but
only if such lien and security interest causes the Mortgagor to be in default
under any of its Fixture financing agreements. The Mortgagor shall be permitted
to finance any Fixtures it acquires in the future and in connection therewith to
grant a lien and security interest in and to such Fixtures to a third party. The
Mortgagee agrees that its lien and security interest in and to such Fixtures
shall be subject and subordinate to the lien and security interest granted to
such third party. The Mortgagee agrees to release the lien and security interest
in any such future acquired Fixtures upon the reasonable request of the
Mortgagor, but only if such lien and security interest causes the Mortgagor to
be in default under any of such Fixture financing agreements.

         TO HAVE AND TO HOLD the Mortgaged Property unto the Mortgagee to and
for the use of the Mortgagee forever.


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         PROVIDED, HOWEVER, that at such time as all Obligations have been fully
satisfied, this Mortgage and the estate hereby granted shall terminate.

         1.3 Security Agreement. This Mortgage is also a security agreement
under the Uniform Commercial Code of the state in which the Real Estate is
located. The Mortgagor grants, and the Mortgagee shall have and may enforce, a
security interest in all those property interests included in the Mortgaged
Property which may be "personal property" to secure payment and performance of
all Obligations. This Mortgage is intended to be an industrial plant mortgage
within the broadest interpretation of the "industrial plant mortgage doctrine"
under the laws of the Commonwealth of Pennsylvania. The Mortgagor shall execute,
deliver, file and refile any financing statements, continuation statements, or
other security agreements the Mortgagee may require to confirm the lien of this
Mortgage with respect to such property. The Mortgagor irrevocably appoints the
Mortgagee attorney-in-fact for the Mortgagor to execute, deliver and file such
instruments.

         1.4 Assignment of Leases and Income.

                  (a) This Mortgage is also an absolute and unconditional
assignment to the Mortgagee of all Leases and Income, whether now in existence
or hereafter arising, for the purpose of vesting in the Mortgagee a first
priority, perfected security interest in the Leases and the Income. The
Mortgagor hereby assigns, transfers and sets over to the Mortgagee all Leases,
all Income and all rights of the Mortgagor to enforce the Leases and collect the
Income. This assignment includes any award received or receivable by the
Mortgagor in any legal proceeding involving any tenant under a Lease whether
under the Bankruptcy Code or otherwise.

                  (b) The Mortgagor irrevocably appoints the Mortgagee the
attorney-in-fact of the Mortgagor to enforce the Leases and demand, receive and
collect the Income and the sole and exclusive agent of the Mortgagor to agree to
any modifications of the Leases. This power is coupled with an interest and is
therefore irrevocable. The Mortgagor shall notify any person which the Mortgagee
may from time to time specify that the Income should be paid directly to the
Mortgagee and that any modification of the Leases must be approved by the
Mortgagee.

                  (c) So long as no event of default has occurred and is
continuing under any of the Loan Documents, the Mortgagor shall have a license,
revocable at the will of the Mortgagee, to enforce the Leases and collect the
Income subject to any applicable provisions contained in the Loan Documents.
Upon request of the Mortgagee, the Mortgagor shall execute and deliver to the
Mortgagee: (i) a specific assignment, in recordable form, of any Lease now or
hereafter affecting the Mortgaged Property or any portion thereof to further
evidence the assignment hereby made; and (ii) such other instruments as the
Mortgagee may deem necessary, convenient or appropriate in connection with the
payment and delivery directly to the Mortgagee of all of the Income.

                  (d) All security deposits, prepaid rent permitted to be
collected by the Mortgagor,


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if any (other than prepaid rent for the next succeeding calendar month), and
similar payments under any Lease shall be deposited in a separate escrow account
with an escrowee satisfactory to the Mortgagee which, if the Mortgagee is
permitted to hold such accounts under applicable law, shall, at the Mortgagee's
election, be the Mortgagee. The Mortgagor shall notify the Mortgagee of the
identification of the escrow account. Such sums shall be disbursed only upon the
prior written consent of the Mortgagee except such consent shall not be required
when by law or by the terms of the Lease, the Mortgagor is required to, and
does, return such sums to the party entitled to same under the Lease.

                  (e) The Mortgagor shall not accept or permit the payment of
rent in any medium other than lawful money of the United States of America, or
anticipate, discount, compromise, forgive, encumber or further assign the Leases
or the Income or any part thereof or any interest therein without the prior
written consent of the Mortgagee.

                  (f) The Mortgagor hereby authorizes and directs that upon the
occurrence of an Event of Default under this Mortgage or the other Loan
Documents all other parties now or hereafter owing or paying Income under any
Lease or now or hereafter having in their possession or control any Income from
or allocated to the Mortgaged Property, or any part thereof, or the Proceeds
therefrom, shall, upon the request of the Mortgagee and until the Mortgagee
directs otherwise, pay and deliver such Income directly to the Mortgagee at the
Mortgagee's address set forth in the introduction to this Mortgage, or in such
other manner as the Mortgagee may direct such parties in writing and this
authorization shall continue until this Mortgage is released of record. No payor
making payments to the Mortgagee at its request under the assignment contained
in this Mortgage shall have any responsibility to see to the application of any
of such funds, and any party paying or delivering Income to the Mortgagee under
such assignment shall be released thereby from any and all liability to the
Mortgagor to the full extent and amount of all such Income so delivered. The
Mortgagor agrees to indemnify and hold harmless any and all parties making
payments to the Mortgagee, at the Mortgagee's request under the assignment
contained in this Mortgage, against any and all liabilities, actions, claims,
judgments, costs, charges and attorneys' fees resulting from the delivery of
such payments to the Mortgagee.

                  (g) Notwithstanding any legal presumption to the contrary, the
Mortgagee shall not be obligated by reason of its acceptance of this assignment
to perform any obligation of the Mortgagor as lessor under any Lease. Neither
the acceptance of this assignment nor the collection of Income under the Leases
shall constitute a waiver of any rights of the Mortgagee under the Loan
Documents or constitute a cure of any default by the Mortgagor thereunder.

         1.5 Open-End Mortgage. This is an Open-End Mortgage and shall be
entitled to all benefits as such under 42 Pa.C.S.A. (section) 8143 (the
"Open-End Mortgage Statute").

                  (a) If the Mortgagee receives written notice pursuant to
Section 8143(b) of the Open-End Mortgage Statute from a holder of a lien or
encumbrance on the Mortgaged Property which is subordinate to the lien of the
Mortgage, then and notwithstanding any provision to the 


                                       -6-

<PAGE>


contrary contained in any Loan Document, the Mortgagor agrees that the Mortgagee
shall not be responsible to make any further advances to the Mortgagor (and the
Mortgagee is released from all liability for failure to make such advances) if
the Mortgagee determines in its sole discretion that any such advance requested
by the Mortgagor could be construed to be an unobligated advance under Section
8143(b) of the Open-End Mortgage Statute.

                  (b) If the Mortgagee receives written notice pursuant to
Section 8143(b) of the Open-End Mortgage Statute from a holder of a mechanic's
lien for labor performed or to be performed or materials furnished or to be
furnished for the erection, construction, alteration or repair of any part of
the Mortgaged Property, then and notwithstanding any provision to the contrary
contained in any Loan Document, the Mortgagor agrees that the Mortgagee shall
have the right to suspend (until such time as the lien is fully released) any
further advances to the Mortgagor (and the Mortgagee is released from all
liability for failure to make such advances) except advances which the Mortgagee
determines in its sole discretion are for the purpose of paying toward all or
part of the cost of completing any erection, construction, alteration or repair
of any part of the Mortgaged Property the financing of which, in whole or in
part, the Mortgage was given to secure.

                  (c) If the Mortgagor should at any time elect to limit the
Obligations secured by this Mortgage pursuant to Section 8143(c) of the Open-End
Mortgage Statute, the Mortgagor agrees that notice of such election shall: (i)
not be effective unless and until it is served upon the Mortgagee in accordance
with the requirements of Section 8143(d) of the Open-End Mortgage Statute and
fully complies with the requirements for the giving of notices under any Loan
Document; (ii) release the Mortgagee from all obligation to make any further
advances under the Loan Documents notwithstanding anything to the contrary
contained in such notice or the Loan Documents; (iii) constitute, at the
election of the Mortgagee, an Event of Default under the Loan Documents; and
(iv) not be effective to limit the Mortgagor's liability for payment and
performance of all Obligations for which the Mortgagor is responsible under this
Mortgage or the other Loan Documents (including all reimbursement and
indemnification agreements) whether such Obligations arise prior or subsequent
to the date of such notice.


                                   ARTICLE II
                                  TITLE MATTERS

         2.1 Warranty of Title. Until the Obligations are fully satisfied, the
Mortgagor represents, warrants and covenants that:

                  (a) Mortgagor has good and marketable fee simple absolute
title to the Mortgaged Property subject only to those exceptions to title more
particularly described in marked-up title commitment no. 96-7934-M issued by
Lawyers Title Insurance Corporation in connection with this transaction and that
certain Declaration of Covenants and Restrictions, dated March 20, 1997, between
Pennsylvania Business Campus Delaware, Inc. and the Mortgagor (the "Permitted
Encumbrances") and the Mortgagor shall defend the validity, priority and
enforceability of the lien


                                       -7-

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of this Mortgage against the claims of all persons excepting only those claiming
under Permitted Encumbrances;

                  (b) To the best of its knowledge, the Mortgagor has full power
and lawful authority to subject the Mortgaged Property to the lien of this
Mortgage;

                  (c) To the best of its knowledge, the execution, delivery and
performance of this Mortgage and the other Loan Documents will not contravene
any Legal Requirements (hereinafter defined) presently in effect or any
agreement, document or instrument to which the Mortgagor is a party or by which
the Mortgagor or the Mortgaged Property is bound;

                  (d) The Mortgagor shall make, execute, acknowledge and deliver
all such further or other deeds, documents, instruments or assurances and cause
to be done all such further acts and things as may at any time be reasonably
required by the Mortgagee to confirm and fully protect the lien and priority of
this Mortgage; and

                  (e) The Mortgagor shall make such payments, all before the
same shall become delinquent, and perform all obligations as are required under
any Permitted Encumbrances affecting the Mortgaged Property.

         2.2 No Transfer. Without the prior written consent of the Mortgagee in
each instance, which consent may be given or withheld in the Mortgagee's sole
discretion, the Mortgagor will abstain from, and will not cause or permit, any
transfer of the Mortgaged Property or any portion thereof, whether voluntary,
involuntary, by operation of law, or otherwise, nor shall the Mortgagor enter
into any agreement or transaction to transfer, or accomplish in form or
substance a transfer, of the Mortgaged Property.

                  (a) A "transfer" of the Mortgaged Property includes: (i) the
direct or indirect sale, agreement to sell, transfer or conveyance of the
Mortgaged Property or any portion thereof or interest therein; (ii) the
execution of any installment land sale contract or similar instrument affecting
all or a portion of the Mortgaged Property; and, unless and only to the extent
the Mortgagee has expressly consented to the following transfers in this
Mortgage or the other Loan Documents, (iii) the lease or sublease of all or a
portion of the Mortgaged Property; and (iv) the transfer of any stock,
partnership or other ownership interests in the Mortgagor (if the Mortgagor is a
partnership, joint venture or corporation) other than as may be permitted by the
Reimbursement Agreement.

                  (b) Consent to any such transfer shall not be deemed to be a
waiver of the right to require consent to future or successive transfers. If
consent should be given to a transfer and if this Mortgage is not released to
the extent of the transferred portion of the Mortgaged Property by a writing
executed by the Mortgagee and recorded in the appropriate office of public
record, then any such transfer shall be subject to this Mortgage and any such
transferee shall be deemed, by acceptance of the deed or other instrument of
transfer, to have assumed all Obligations under this Mortgage and to have agreed
to be bound by all provisions contained herein. Any such assumption


                                       -8-

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shall not, however, release the Mortgagor or any other obligor or guarantor of
the Obligations from any liability under the Loan Documents.

         2.3 No Other Financing or Liens. Without the prior written consent of
the Mortgagee in each instance, which consent may be given or withheld in
Mortgagee's sole discretion, the Mortgagor shall not create or cause or permit
to exist any lien on the Mortgaged Property whether superior to or subject to
the lien of this Mortgage except the Permitted Encumbrances and such other liens
or security interests as are expressly and specifically agreed to be permitted
upon the Mortgaged Property by the Mortgagee under the Loan Documents.

         2.4 Leases. The Mortgagor represents and warrants that there are no
Leases affecting the Mortgaged Property. The Mortgagor shall not enter into any
Leases without the prior written consent of the Mortgagee being obtained in each
instance.


                                   ARTICLE III
                    OBLIGATIONS REGARDING MORTGAGED PROPERTY

         3.1 Legal Requirements Generally. The Mortgagor represents and warrants
to the Mortgagee that the Mortgaged Property is in substantial compliance with
the material Legal Requirements (hereinafter defined). The Mortgagor shall
promptly comply with, and cause the Mortgaged Property to be kept in substantial
compliance with, all present and future laws, statutes, codes, ordinances,
orders, judgments, decrees, injunctions, rules, regulations, restrictions and
requirements (collectively the "Legal Requirements") of the United States of
America, the state in which the Real Estate is located and any political
subdivision thereof or any town, city, county or municipality in which the Real
Estate is located or any agency, department, bureau, board, commission or
instrumentality of any of the foregoing now existing or hereafter created
(individually, a "Governmental Authority" and, collectively, the "Governmental
Authorities") having jurisdiction over the Mortgagor or the Mortgaged Property
or the construction, use, occupancy, operation, maintenance, or improvement of
the Mortgaged Property, whether foreseen or unforeseen, ordinary or
extraordinary.

         3.2 Land Use Approvals. The Mortgagor represents and warrants to the
Mortgagee that the Land is and shall remain one or more zoning lots separate and
apart from all other premises. The Mortgagor shall not, by any act or omission,
impair the integrity of the Land as such separate zoning lot or lots. The
Mortgagor shall not, without the prior written consent of the Mortgagee, submit
or cause to be submitted to any Governmental Authority an application for
zoning, subdivision or development approval affecting the Real Estate if any of
the following would result from such proposed zoning change, subdivision or
development:

                  (a) the separate transfer, use and ownership of the Real
Estate is not permitted as a matter of right under applicable Legal
Requirements; (b) the use of the Real Estate as of the date of this Mortgage is
no longer permitted as a matter of right under applicable Legal Requirements; or
(c) any portion of the Real Estate is used to fulfill a Legal Requirement of
other property not subject to the lien of this Mortgage.


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<PAGE>


         3.3 Environmental Matters.

                  (a) The Mortgagor represents and warrants that neither the
Mortgagor nor, to the best of its knowledge, any other person has: (i) used,
installed or disposed of any Hazardous Materials (hereinafter defined) on, from,
or affecting the Mortgaged Property except in material compliance with
Applicable Environmental Laws (hereinafter defined); or (ii) received any notice
from any Governmental Authority with regard to Hazardous Materials on, from or
affecting the Mortgaged Property.

                  (b) The Mortgagor shall not use the Mortgaged Property, nor
allow it to be used, to generate, manufacture, refine, transport, treat, store,
handle, dispose, transfer, produce or process Hazardous Materials except in
material compliance with Applicable Environmental Laws. The Mortgagor shall not
cause or permit, as a result of any intentional or unintentional act or omission
on the part of the Mortgagor or any other person, a release of Hazardous
Materials onto, from or affecting the Mortgaged Property or any other use,
installation, or disposition of Hazardous Materials in violation of Applicable
Environmental Laws. The Mortgagor shall comply, and enforce compliance by all
tenants and subtenants, with all Applicable Environmental Laws and shall keep
the Mortgaged Property free and clear of any liens imposed pursuant to any
Applicable Environmental Laws.

                  (c) If the Mortgagor receives any notice from any Governmental
Authority with regard to Hazardous Materials on, from or affecting the Mortgaged
Property, or any notice of violation of Applicable Environmental Laws, the
Mortgagor shall promptly notify the Mortgagee. The Mortgagor shall conduct and
complete all investigations, studies, sampling, and testing, and all remedial,
removal, and other actions necessary to clean up and remove all Hazardous
Materials on, from or affecting the Mortgaged Property in accordance with all
Applicable Environmental Laws and to the satisfaction of the Mortgagee.

                  (d) The term "Applicable Environmental Laws" shall mean,
without limitation, all of the Legal Requirements of any Governmental Authority
pertaining to the preservation or enhancement of the quality of the environment
or regulating or restricting the use, transfer, storage or remediation of
Hazardous Materials including the Comprehensive Environmental Response,
Compensation, and Liability Act of 1980, as amended (42 U.S.C. Sections 9601, et
seq.), the Hazardous Materials Transportation Act, as amended (49 U.S.C.
Sections 1801, et seq.), the Resource Conservation and Recovery Act, as amended
(42 U.S.C. Sections 6901, et seq.), the Pennsylvania Hazardous Sites Cleanup Act
(35 Pa.C.S.A. Sections 6020.101, et seq.), and the rules, regulations adopted
and publications promulgated pursuant thereto at any time. The term "Hazardous
Materials" shall mean, without limitation, any flammable explosives, radioactive
materials, hazardous materials, hazardous wastes, hazardous or toxic substances,
or related materials, asbestos or any material containing asbestos, or any other
substance or material regulated under any Applicable Environmental Laws.


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<PAGE>


         3.4 General Obligations. Until the Obligations are fully satisfied, the
Mortgagor shall:

                  (a) Perform all maintenance, repair, restoration and
rebuilding required to keep the Mortgaged Property in good repair, order and
condition in full compliance with the requirements of the Loan Documents, any
Leases affecting the Mortgaged Property and all Legal Requirements;

                  (b) Pay all charges for water, sewer, gas, electric and other
utility services provided to the Mortgaged Property promptly as and when due;

                  (c) Complete any improvements to the Mortgaged Property
required under the Loan Documents, any Leases affecting the Mortgaged Property,
or required by any Governmental Authority or insurer insuring the Mortgaged
Property, in a good and workmanlike manner and free of mechanics' liens;

                  (d) Permit, and cause any lessee or occupant of the Mortgaged
Property to permit, the Mortgagee and its agents and representatives, to enter
upon the Mortgaged Property at any reasonable time after reasonable advance
notice to appraise and photograph the Mortgaged Property and to inspect for
compliance with Legal Requirements (including subsurface investigations to
determine compliance with Applicable Environmental Laws), insurance
requirements, and the Obligations of the Mortgagor under this Mortgage and the
other Loan Documents (the Mortgagee agrees to abide by all regulations of the
Corporation when making any such entries upon the Mortgaged Property);

                  (e) Make the books and accounts relating to the Mortgaged
Property available for inspection by the Mortgagee, or its representatives, upon
request at any reasonable time; and

                  (f) If the Mortgaged Property is, as of the date of this
Mortgage or at any time hereafter, subject to Leases, deliver to the Mortgagee
within ninety (90) days after the end of each fiscal year of the Mortgagor, or
on a more frequent basis if requested by the Mortgagee, a schedule of Leases and
Income as of the end of the preceding year, an income and expense statement for
the Mortgaged Property as of the end of the preceding year, and a projected
income and expense statement for the Mortgaged Property for the then-current
fiscal year.

         3.5 General Restrictions. Until the Obligations are fully satisfied,
the Mortgagor shall not, without the prior written consent of the Mortgagee
being obtained in each instance:

                  (a) Abandon the Mortgaged Property or any portion thereof or
allow the same to become vacant;

                  (b) Commit or suffer waste with respect to the Mortgaged
Property;

                  (c) Impair or diminish the value or integrity of the Mortgaged
Property or the priority or security of the lien of this Mortgage;


                                      -11-

<PAGE>


                  (d) Remove, demolish or materially alter any of the Mortgaged
Property without the prior written consent of the Mortgagee in each instance,
except that the Mortgagor shall have the right to remove and dispose of, free of
the lien of this Mortgage, such Fixtures as may, from time to time, become worn
out or obsolete, provided that, simultaneously with or prior to such removal,
any such Fixtures shall be replaced with other Fixtures which shall have a value
and utility at least equal to that of the replaced Fixtures and, by such removal
and replacement, the Mortgagor shall be deemed to have subjected such
replacement Fixtures to the lien and priority of this Mortgage;

                  (e) Make, install or permit to be made or installed, any
additions or improvements to the Mortgaged Property except in a good and
workmanlike manner, free of mechanic's liens, in compliance with Legal
Requirements, and in accordance with plans and specifications approved by
Mortgagee; or

                  (f) Make, suffer or permit any nuisance to exist on the
Mortgaged Property or any portion thereof.

         3.6 Required Notices. The Mortgagor shall notify the Mortgagee promptly
after the Mortgagor becomes aware of the occurrence of any of the following:

                  (a) A fire or other casualty causing damage to the Mortgaged
Property;

                  (b) A pending or threatened condemnation of the Mortgaged
Property;

                  (c) A violation of a Legal Requirement or other notice from or
to a Governmental Authority relating to the Mortgaged Property;

                  (d) Receipt or giving of any notice of default or cancellation
under any Lease of all or a material portion of the Mortgaged Property;

                  (e) Commencement of any litigation affecting the Mortgaged
Property;

                  (f) Discovery, discharge or release of any Hazardous Material
for which the Mortgagor is or may be responsible under any Applicable
Environmental Laws;

                  (g) The existence of any event or condition which presents a
risk of creating material liability in the Mortgagor under ERISA (Public Law
93-406, as amended); or

                  (h) The occurrence of a default under, or the receipt or
giving of any notice under, any Permitted Encumbrance.


                                      -12-

<PAGE>


                                   ARTICLE IV
                               TAXES AND INSURANCE

         4.1 Real Estate Taxes and Assessments.

                  (a) The Mortgagor shall pay when due and before interest or
penalties commence to accrue thereon, all taxes, assessments, water and sewer
rents, levies, encumbrances and all other charges or claims of any nature and
kind, whether public or private, which may be assessed, levied, imposed,
suffered, placed or filed at any time against the Mortgaged Property or any part
thereof or which by any present or future law may have priority (either in lien
or in distribution out of the proceeds of any sale) over the lien of this
Mortgage (individually, an "Imposition" and, collectively, "Impositions").

                  (b) The Mortgagor shall produce to the Mortgagee, not later
than the last date any such Imposition is due and payable without interest or
penalty, official receipts evidencing payment of such Imposition. If the
Mortgagor is not in default under this Mortgage or any Loan Document and in good
faith and by appropriate legal action shall contest the validity or amount of
any Imposition and shall have established a reserve for the payment thereof in
such form and amount as the Mortgagee may require (including any interest and
penalties which may be payable in connection therewith), then the Mortgagor
shall not be required to pay the Imposition or to produce the receipts while the
reserve is maintained and so long as the contest operates to prevent collection,
is maintained and prosecuted with diligence, and shall not have been terminated
or discontinued adversely to the Mortgagor.

         4.2 Taxes on Mortgagee. If any Governmental Authority shall levy,
assess or charge any tax, assessment or imposition upon this Mortgage or any
other Loan Document (including any requirement to have affixed to this Mortgage
any revenue, documentary or similar stamps) or upon the interest of the
Mortgagee in the Mortgaged Property by reason of this Mortgage or any other Loan
Document, the Mortgagor shall pay the same directly to such Governmental
Authority as an Imposition. If the Mortgagor is not legally permitted to pay
such Imposition or to reimburse Mortgagee for amounts advanced on account of
such payment, then the Mortgagee may declare the entire amount of the
Obligations immediately due and payable on demand.

         4.3 Corporate or Partnership Mortgagor. If the Mortgagor (or any
successor or transferee of Mortgagor) is a corporation or partnership, the
Mortgagor shall at all times until the Obligations are satisfied in full:

                  (a) Keep in effect and in good standing its existence and
rights as a corporation or partnership, as the case may be, under the laws of
the state of its incorporation or constitution and its right to own property and
transact business in the state in which the Real Estate is situated; and

                  (b) File returns for all federal, state and local taxes with
the proper Governmental Authorities, and pay, when due and payable and before
interest or penalties are due thereon, all taxes owing by the Mortgagor to any
Governmental Authorities.


                                      -13-

<PAGE>


         4.4 Insurance Coverages. Until the Obligations are fully satisfied, the
Mortgagor shall maintain and keep in force the following policies of insurance
with respect to the Mortgaged Property:

                  (a) Insurance against loss or damage to the Mortgaged Property
by fire and any of the risks covered by insurance of the type commonly known as
"all-risk coverage," in an amount not less than the full replacement value
(evidenced by a "Replacement Cost Endorsement") of the Mortgaged Property;
provided, however, that the amount of such "all-risk coverage" shall never be
less than the amount of the Obligations;

                  (b) During the course of any construction or repair of any
improvements on the Mortgaged Property, builder's completed value risk insurance
against "all risks of physical loss," including collapse and transit coverage,
during construction of such improvements, in non-reporting form;

                  (c) Boiler and machinery insurance (to the extent the
Mortgaged Property includes items covered by such insurance), in such amounts as
are reasonably satisfactory to the Mortgagee;

                  (d) Coverage against sprinkler leakage;

                  (e) Vandalism and malicious mischief insurance;

                  (f) Commercial general liability insurance on an "occurrence
basis" against claims for personal injury including bodily injury, death or
property damage occurring on or about the Mortgaged Property and the adjoining
streets, sidewalks and passageways, with minimum protection to a limit of not
less than $2,000,000 (or such higher amounts as are required under any other
Loan Document) with respect to personal injury or death to any one or more
persons or damage to property;

                  (g) Worker's compensation insurance (including employer's
liability insurance) for all employees of the Mortgagor engaged on or with
respect to the Mortgaged Property in such amount as is reasonably satisfactory
to the Mortgagee, or, if such limits are established by law, in such amounts;

                  (h) Flood insurance, in accordance with the National Flood
Insurance Act of 1968, as amended by the Flood Disaster Protection Act of 1973,
if any portion of the Real Estate lies within a flood hazard area designated by
the Department of Housing and Urban Development, Federal Insurance
Administration as a "Flood Hazard Area";


                                      -14-

<PAGE>


                  (i) Business interruption and/or rental loss coverage for a
period equal to the reasonable period of time required to rebuild and restore
the Mortgaged Property upon the occurrence of a substantial destruction; and

                  (j) Such other insurance, and in such amounts, as may from
time to time be reasonably required by the Mortgagee.

         4.5 Policy Requirements. The insurance coverages required above shall
be insured under policies: (a) in form reasonably satisfactory to the Mortgagee;
(b) issued by companies reasonably satisfactory to the Mortgagee; (c) endorsed
with a standard mortgagee clause in favor of the Mortgagee providing not less
than thirty days' notice to the Mortgagee of any cancellation or change in
coverage; (d) endorsed to name the Mortgagee as additional insured and, subject
only to Permitted Encumbrances (if any), as loss payee; and (e) not subject to
contribution or co-insurance. Certificates of insurance, addressed to the
Mortgagee, evidencing such insurance coverage, may be delivered to the Mortgagee
in lieu of the policies therefor, but only if the Mortgagor provides to the
Mortgagee copies of such policies. Certificates shall be delivered to the
Mortgagee on or before the date of this Mortgage and, thereafter, at least
thirty (30) days before expiration of the existing policies. If any insurance
required under this Mortgage is canceled, expires, becomes void or voidable or
otherwise becomes unsatisfactory to the Mortgagee pursuant to the terms hereof,
the Mortgagor shall place or cause to be placed new insurance on the Mortgaged
Property reasonably satisfactory to the Mortgagee. In the event of any loss,
Mortgagee may make proof of loss if not made promptly by the Mortgagor. Each
insurance company concerned is hereby authorized and directed to make payment
under such insurance including return of unearned premiums, directly to the
Mortgagee instead of to the Mortgagor and the Mortgagee jointly, and the
Mortgagor appoints the Mortgagee, irrevocably, as the Mortgagor's
attorney-in-fact to endorse any draft therefor.

         4.6 Installments for Insurance, Taxes and Other Charges. Without
limiting the effect of the other provisions of this Article, the Mortgagee
reserves the right to require the Mortgagor to pay to the Mortgagee, monthly, an
amount equal to one-twelfth (1/12) of the annual amount of all Impositions and
premiums for insurance policies required under this Article plus any additional
sums necessary to pay, or establish adequate reserves for the payment of, such
premiums and Impositions as and when due. The amounts so paid shall be security
for the premiums and Impositions and shall be used in payment thereof if the
Mortgagor is not otherwise in default under this or any other Loan Document. No
amount so paid shall be deemed to be trust funds but may be commingled with
general funds of the Mortgagee and no interest shall be payable thereon. Upon
the occurrence of an Event of Default under this Mortgage or any Loan Document,
the Mortgagee shall have the right, at its election, to apply any amount so held
against the Obligations. At the Mortgagee's option, the Mortgagee from time to
time may waive, and after any such waiver may reinstate, the provisions of this
section requiring installment payments. During the time periods when the
Mortgagee has not required the Mortgagor to make such payments, the Mortgagor
shall annually furnish evidence to the Mortgagee that all such annual
Impositions have been paid by the Mortgagor.


                                      -15-

<PAGE>


                                    ARTICLE V
                             CASUALTY; CONDEMNATION

         5.1 Casualty. If the Mortgaged Property is damaged by fire or other
casualty, the Mortgagor shall promptly repair and restore the same to its
condition prior to the damage. If, and only for so long as, the following terms
and conditions are fully satisfied by the Mortgagor, the Mortgagee shall release
insurance proceeds for repair and restoration of the Mortgaged Property;
otherwise the Mortgagee shall have the right to apply the proceeds toward
reduction of the Obligations, or if the Letter of Credit remains outstanding,
shall be held as cash collateral for the Obligations under the provisions of
Section 6.11 of this Mortgage; provided that Mortgagor shall be entitled to any
amount in excess of the proceeds that would have been required for the repair
and restoration of the Mortgaged Property:

                  (a) No default under this or any other Loan Document shall
have occurred and be continuing uncured;

                  (b) The Mortgagor shall have delivered evidence satisfactory
to the Mortgagee that: (i) the Mortgaged Property can be fully repaired and
restored within a period of time during which all payments coming due under the
Obligations are fully covered by the proceeds of business interruption or rental
loss insurance applicable to the loss or damage to the Mortgaged Property or
otherwise; and (ii) and that after the Mortgaged Property is fully repaired and
restored, the Mortgagor will have the ongoing ability to meet all payments
coming due on the Obligations;

                  (c) No holder of a Permitted Encumbrance has a right to apply
insurance proceeds to the obligations secured by such Permitted Encumbrance or,
if it does, the holder has waived in writing its right to do so;

                  (d) Intentionally omitted;

                  (e) The work is performed by a reputable general contractor
satisfactory to the Mortgagee under a fixed price or guaranteed maximum price
contract satisfactory to the Mortgagee, in accordance with plans and
specifications satisfactory to the Mortgagee and in compliance with all Legal
Requirements, and no work shall commence until waivers of mechanics' liens have
been filed by the general contractor and all those claiming by, through, or
under the general contractor;

                  (f) The Mortgagor shall have deposited with the Mortgagee for
disbursement in connection with the restoration the greater of: (i) the
applicable deductible under the insurance policies covering the loss; or (ii)
the amount by which the cost of restoration is reasonably estimated by the
Mortgagor and the Mortgagee to exceed the insurance proceeds available for
restoration (the "Excess Amount"). In the event that the Mortgagor and the
Mortgagee cannot agree upon Excess Amount, they shall choose an independent
contractor licensed in the Commonwealth of Pennsylvania (the "Contractor") to
determine the Excess Amount. The determination of the Contractor shall be final.
If the Mortgagor and the Mortgagee cannot agree upon the identity of the


                                      -16-

<PAGE>


Contractor, then each of them shall choose a contractor licensed in the
Commonwealth of Pennsylvania who shall chose a third contractor licensed in the
Commonwealth of Pennsylvania who shall be the Contractor hereunder;

                  (g) The insurance proceeds are held by the Mortgagee (or an
escrowee satisfactory to the Mortgagee) for disbursement periodically as the
work progresses in amounts not exceeding 90% of the value of labor and materials
incorporated into the restoration. The remaining 10% will be released upon
substantial completion of the work in accordance with the aforesaid plans and
specifications, and upon a receipt of a release of liens from all contractors
engaged in the restoration subject to receipt of final payment; and

                  (h) The Mortgagor has paid as and when due all of the
Mortgagee's reasonable costs and expenses incurred in connection with the
collection of insurance proceeds, approval of plans, charges of the Mortgagee's
inspection representative and such reasonable fee as may be charged by the
Mortgagee to monitor the restoration and disburse the insurance proceeds.

         5.2 Condemnation.

                  (a) In the event of any condemnation or taking of any part of
the Mortgaged Property by eminent domain, alteration of the grade of any street,
or other injury to or decrease in the value of the Mortgaged Property by any
public or quasi-public authority or corporation (a "Taking"), which Taking
diminishes the value of the Mortgaged Property to a point below the Threshold
Level (as hereinafter defined), then all Proceeds (including the award or agreed
compensation for the damages sustained) allocable to the Mortgagor, after
deducting therefrom all reasonable costs and expenses (regardless of the
particular nature thereof and whether incurred with or without suit) including
reasonable attorney's fees incurred by the Mortgagee in connection with the
collection of such Proceeds, shall be paid to the Mortgagee and applied, at the
Mortgagee's election: (i) toward restoration of the Mortgaged Property (in which
case the terms and conditions applicable to restoration in the case of casualty
shall apply); or (ii) to the Obligations.

                  In the event a Taking does not diminish the value of the
Mortgaged Property to a point below the Threshold Level, then all Proceeds shall
be applied to the restoration of the Mortgaged Property (in which case the terms
and conditions applicable to restoration in the case of a Casualty shall apply).

                  No settlement for damages sustained because of a Taking shall
be made by the Mortgagor without the Mortgagee's prior written approval. As used
herein, the "Threshold Level" shall mean one hundred and ten percent (110%) of
the then outstanding unsecured Obligations. In the event of a Taking, the
Mortgagor and the Mortgagee shall choose an MAI appraiser (the "Appraiser") to
determine whether the Taking has diminished the value of the Mortgaged Property
to a point below the Threshold Level. The determination of such Appraiser shall
be final. In the event that the Mortgagor and the Mortgagee cannot agree on the
Appraiser, then each shall choose an MAI appraiser and the two appraisers so
chosen shall choose a third MAI appraiser who shall be the Appraiser hereunder.


                                      -17-

<PAGE>


                  (b) If prior to the receipt of the Proceeds by the Mortgagee,
the Mortgaged Property shall have been sold on foreclosure of this Mortgage, the
Mortgagee shall have the right to receive the Proceeds to the extent of:

                            (i) the full amount of all such Proceeds if the
Mortgagee is the successful purchaser at the foreclosure sale, or

                           (ii) if anyone other than the Mortgagee is the
successful purchaser at the foreclosure sale, in addition to the net sale
proceeds to be received by the Mortgagee in connection with the sale, any
deficiency (as hereinafter defined) due to the Mortgagee in connection with the
foreclosure sale, with legal interest thereon, and reasonable counsel fees,
costs and disbursements incurred by the Mortgagee in connection with collection
of such Proceeds of condemnation and the establishment of such deficiency. For
purposes of this section, the word "deficiency" shall be deemed to mean the
difference between: (A) the aggregate amount of all sums which the Mortgagee is
entitled to collect under the Loan Documents; and (B) the net sale proceeds
actually received by the Mortgagee as a result of such foreclosure sale less any
costs and expenses incurred by the Mortgagee in connection with enforcement of
its rights under the Loan Documents.

                  (c) The Mortgagee shall have the right to prosecute to final
determination, or settlement, an appeal or other appropriate proceedings in the
name of the Mortgagee or the Mortgagor, for which the Mortgagee will then be
appointed as attorney-in-fact for the Mortgagor, which appointment, being for
security, is irrevocable. In that event, the expenses of the proceedings,
including reasonable counsel fees, shall be paid first out of the Proceeds, and
only the excess, if any, paid to the Mortgagee shall be applied to the
Obligations, or if the Letter of Credit remains outstanding, shall be held as
cash collateral for the Obligations under the provisions of Section 6.11 of this
Mortgage.

                  (d) Nothing herein shall limit the rights otherwise available
to the Mortgagee, at law or in equity, including the right to intervene as a
party to any condemnation proceeding.


                                   ARTICLE VI
                               DEFAULTS; REMEDIES

                  6.1 Right to Make Advances. If the Mortgagor should fail to
pay or perform any of its Obligations with respect to the Mortgaged Property as
required under Article III and Article IV of this Mortgage, or otherwise fails
to pay or perform any of its other Obligations under this or any other Loan
Document, then the Mortgagee, at its election, shall have the right, but not the
obligation, to make any payment or expenditure and to take any action which the
Mortgagor should have made or taken or which the Mortgagee deems advisable to
protect the security of this Mortgage or the Mortgaged Property. Such action
shall be without prejudice to any of the Mortgagee's rights or


                                      -18-

<PAGE>


remedies available under this Mortgage or the other Loan Documents or otherwise
at law or in equity. All such sums, as well as costs and expenses reasonably
advanced by the Mortgagee shall be due immediately from the Mortgagor to the
Mortgagee, shall become part of the Obligations secured by this Mortgage and the
other Loan Documents, and shall bear interest (including any judgment obtained
on account of any of the Obligations) at the applicable "post default rate of
interest" provided in Section 10.1 of the Reimbursement Agreement in effect
after maturity or default (the "Default Rate") until repayment in full to the
Mortgagee.

         6.2 Events of Default. The occurrence of any one or more of the
following events shall, at the election of the Mortgagee, constitute an Event of
Default under this Mortgage:

                  (a) Any event of default under the Reimbursement Agreement;

                  (b) Failure to pay any sum required to be paid under this
Mortgage as and when due within ten (10) days of the receipt by the Mortgagor of
written notice from the Mortgagee;

                  (c) Any material breach of warranty or other material
violation of any provision contained in Article II of this Mortgage and such is
not cured within fifteen (15) days of the receipt by the Mortgagor of written
notice from the Mortgagee; or

                  (d) Material nonperformance of, or material noncompliance
with, any of the agreements, covenants, conditions, warranties, representations
or other provisions contained in this Mortgage (if and only to the extent not
included in any of the occurrences listed above), which nonperformance or
noncompliance is not cured and remedied within fifteen (15) days after notice
thereof is given to the Mortgagor, or such longer period if such nonperformance
or noncompliance is of such a nature that it cannot reasonably be cured within
such fifteen (15) day period so long as the Mortgagor shall commence curative
actions within such fifteen (15) day period and shall diligently and
continuously proceed to full compliance.

         6.3 Remedies; Execution. Upon the occurrence of an Event of Default,
and at all times thereafter, the Mortgagee shall have the right to accelerate
all Obligations (including interest thereon at the Default Rate) pursuant to the
terms of the Loan Documents and to enforce its rights under this Mortgage and
the other Loan Documents by exercising such remedies as are available to the
Mortgagee under applicable law, either by suit in equity or action at law, or
both, whether for specific performance of any provision contained in this
Mortgage or any of the other Loan Documents or in aid of the exercise of any
power granted in this Mortgage or the other Loan Documents.

                  (a) The Mortgagee shall have the right to obtain judgment for
the Obligations (including all amounts advanced or to be advanced by the
Mortgagee under Section 6.1 above, all costs and expenses of collection and
suit, including any bankruptcy or insolvency proceeding affecting the Mortgagor,
and reasonable attorneys' fees incurred in connection with any of the foregoing)
together with interest on such judgment at the Default Rate until payment in
full is


                                      -19-

<PAGE>


received by the Mortgagee and the Mortgagee shall have the right to obtain
execution upon the Mortgaged Property on account of such judgment.

                  (b) The Mortgagee shall have the right to institute an action
of mortgage foreclosure against the Mortgaged Property or take such other action
for realization on the security intended to be provided under Article I of this
Mortgage as applicable law or the provisions of the Loan Documents may allow.

         6.4 Remedies; Collection of Income. Upon the occurrence of an Event of
Default and at all times thereafter, the Mortgagee may, at any time without
notice, either in person, by agent or by a receiver appointed by a court, and
without regard to the adequacy of any security for the Obligations, enter upon
the Mortgaged Property and, with or without taking possession of the Mortgaged
Property, and with or without legal action, collect all Income (which term shall
also include amounts determined by the Mortgagee as fair rental value for use
and occupation of the Mortgaged Property by any person, including the Mortgagor)
and, after deducting all costs of collection and administration expense
including attorneys' fees and reasonable reserves, apply the net Income to any
of the Obligations in such order and amounts as the Mortgagee in its sole
discretion may determine, or any of the following in such order and amounts as
the Mortgagee in its sole discretion may elect: the payment of any sums due, or
accumulation of necessary reserves for, payment of all costs and expenses
arising from or incurred in connection with (a) the preservation and protection
of the validity and priority of the lien of this Mortgage; (b) the preservation
and protection of the Mortgaged Property; (c) compliance with the Legal
Requirements; and (d) fulfilling any obligations of the Mortgagor or any other
obligor or guarantor under the Permitted Encumbrances, the Leases, this Mortgage
or the Loan Documents. The Mortgagee shall not be accountable for more monies
than it actually receives from the Mortgaged Property nor shall it be liable for
failure to collect the Income. The Mortgagee shall have the right to determine
the method of collection and the extent to which enforcement of collection of
Income shall be prosecuted and the Mortgagee's judgment shall be deemed
conclusive and reasonable.

         6.5 Remedies; Possession. Upon the occurrence of an Event of Default
and at all times thereafter, the Mortgagee may, with or without legal action,
take possession and control of the Mortgaged Property to the exclusion of the
Mortgagor and all others excepting only those claiming under Permitted
Encumbrances. The Mortgagee shall have the authority while so in possession to
insure (at the Mortgagor's expense) against all risks by reason of having taken
such possession and the Mortgagor will transfer and deliver to the Mortgagee all
policies of insurance upon the Mortgaged Property not theretofore transferred
and delivered to the Mortgagee. SUBJECT TO THE PRECONDITIONS SET FORTH IN
SECTION 8.03 OF THE REIMBURSEMENT AGREEMENT, FOR THE PURPOSE OF OBTAINING
POSSESSION OF THE MORTGAGED PROPERTY UPON THE OCCURRENCE OF ANY EVENT OF
DEFAULT, THE MORTGAGOR HEREBY AUTHORIZES AND EMPOWERS ANY ATTORNEY OF ANY COURT
OF RECORD IN THE STATE IN WHICH THE REAL ESTATE IS LOCATED OR ELSEWHERE AS
ATTORNEY FOR THE MORTGAGOR AND ALL PERSONS CLAIMING UNDER OR THROUGH THE
MORTGAGOR, TO CONFESS JUDGMENT IN EJECTMENT AND CONFESS JUDGMENT


                                      -20-

<PAGE>


FOR RECOVERY OF POSSESSION OF THE MORTGAGED PROPERTY AND TO APPEAR FOR AND
CONFESS JUDGMENT AGAINST THE MORTGAGOR, AND ALL PERSONS CLAIMING UNDER OR
THROUGH THE MORTGAGOR IN FAVOR OF THE MORTGAGEE FOR RECOVERY BY THE MORTGAGEE OF
POSSESSION THEREOF, FOR WHICH THIS MORTGAGE, OR A COPY THEREOF VERIFIED BY
AFFIDAVIT, SHALL BE SUFFICIENT WARRANT; AND THEREUPON A WRIT OF POSSESSION MAY
IMMEDIATELY ISSUE FOR POSSESSION OF THE MORTGAGED PROPERTY, WITHOUT ANY PRIOR
WRIT OR PROCEEDING WHATSOEVER AND WITHOUT ANY STAY OF EXECUTION. IF FOR ANY
REASON AFTER SUCH ACTION HAS BEEN COMMENCED IT SHALL BE DISCONTINUED, OR
POSSESSION OF THE MORTGAGED PROPERTY SHALL REMAIN IN OR BE RESTORED TO THE
MORTGAGOR, THE MORTGAGEE SHALL HAVE THE RIGHT FOR THE SAME DEFAULT OR ANY
SUBSEQUENT DEFAULT TO BRING ONE OR MORE FURTHER ACTIONS TO CONFESS JUDGMENT IN
EJECTMENT AND CONFESS JUDGMENT FOR RECOVERY OF POSSESSION OF THE MORTGAGED
PROPERTY. THE MORTGAGEE MAY BRING AN ACTION TO CONFESS JUDGMENT IN EJECTMENT AND
TO CONFESS JUDGMENT FOR RECOVERY OF POSSESSION OF THE MORTGAGED PROPERTY BEFORE
OR AFTER THE INSTITUTION OF PROCEEDINGS TO FORECLOSE THIS MORTGAGE OR TO ENFORCE
ANY LOAN DOCUMENT, OR AFTER ENTRY OF JUDGMENT THEREON OR ON ANY LOAN DOCUMENT,
OR AFTER A SHERIFF'S SALE OF THE MORTGAGED PROPERTY IN WHICH THE MORTGAGEE IS
THE SUCCESSFUL BIDDER, IT BEING THE UNDERSTANDING OF THE PARTIES THAT THE
AUTHORIZATION TO PURSUE SUCH PROCEEDINGS FOR OBTAINING POSSESSION IS AN
ESSENTIAL PART OF THE REMEDIES FOR ENFORCEMENT OF THIS MORTGAGE AND THE OTHER
LOAN DOCUMENTS, AND SHALL SURVIVE ANY EXECUTION SALE TO THE MORTGAGEE.

         BY AGREEING THAT THE MORTGAGEE MAY CONFESS JUDGMENT HEREUNDER THE
MORTGAGOR, FOR ITSELF AND ANY OTHER PERSONS OR ENTITIES NOW OR HEREAFTER IN
POSSESSION OF ALL OR ANY PART OF THE MORTGAGED PROPERTY, WAIVES THE RIGHT TO
NOTICE IN A PRIOR JUDICIAL PROCEEDING TO DETERMINE THEIR RIGHTS AND LIABILITIES
AND THE OPPORTUNITY TO RAISE ANY DEFENSE, SET OFF, COUNTERCLAIM OR OTHER CLAIM
AGAINST SUCH ACTION BY THE MORTGAGEE.

         6.6 Remedies; Repossession. Upon the occurrence of an Event of Default
and at all times thereafter, the Mortgagee shall have the right to take
possession of any portion of the Mortgaged Property constituting fixtures or
other personal property which is security for the Mortgagee's Obligations
subject to the Uniform Commercial Code of the state in which the Real Estate is
located, and any records pertaining thereto. The Mortgagee shall have the right
to use, operate, manage, lease or otherwise control the Mortgaged Property in
any lawful manner and, in its sole discretion but without any obligation to do
so, insure, maintain, repair, renovate, alter or remove such Mortgaged Property;
sell or otherwise dispose of all or any of such Mortgaged Property at any public
or private sale at any time or times without advertisement or demand upon or
notice


                                      -21-

<PAGE>


to the Mortgagor, all of which are expressly waived to the extent permitted by
law, with the right of the Mortgagee or its nominee to become purchaser at any
sale (unless prohibited by statute) free from any equity of redemption and from
all other claims, and after deducting all legal and other expenses for
maintaining or selling such Mortgaged Property, and all attorneys' fees, legal
or other expenses for collection, sale and delivery, apply the remaining
proceeds of any sale to pay (or hold as a reserve against) the Obligations and
exercise all rights and remedies of a secured party under the Uniform Commercial
Code of the state in which the Real Estate is located or any other applicable
law.

         6.7 Remedies; Appointment of Receiver. Upon the occurrence of an Event
of Default and at all times thereafter, the Mortgagee may obtain appointment of
a receiver for the Mortgaged Property without regard to the adequacy of any
security for the Obligations.

         6.8 Remedies; Actions Prior to Acceleration. The Mortgagee shall have
the right, from time to time, to bring an appropriate action or actions to
recover any sums required to be paid by the Mortgagor under the terms of this
Mortgage, as they become due, without regard to whether or not the Obligations
shall be due and payable in full, and without prejudice to the right of the
Mortgagee thereafter to bring an action of mortgage foreclosure, or any other
action, for any default by the Mortgagor existing at the time the earlier action
was commenced.

         6.9 No Marshalling. Any of the Mortgaged Property sold pursuant to any
writ of execution issued on a judgment obtained on the Obligations or pursuant
to any other judicial proceedings relating to the Loan Documents or this
Mortgage, may be sold in one parcel, as an entirety, or in such parcels, and in
such manner or order as the Mortgagee, in its sole discretion, may elect.

         6.10 Rights and Remedies Cumulative.

                  (a) All rights and remedies of the Mortgagee as provided in
this Mortgage and the other Loan Documents shall be cumulative and concurrent,
may be pursued separately, successively or together against the Mortgagor or the
Mortgaged Property, or both, at the sole discretion of the Mortgagee and may be
exercised as often as occasion therefor shall arise. The failure to exercise any
such right or remedy shall in no event be construed as a waiver or release
thereof.

                  (b) Any failure by the Mortgagee to insist upon strict
performance by the Mortgagor of any of the terms and provisions of this Mortgage
or the other Loan Documents shall not be deemed to be a waiver of any of the
terms or provisions of this Mortgage or the other Loan Documents and the
Mortgagee shall have the right thereafter to insist upon strict performance by
Mortgagor of any and all of them.

         6.11 Receipt of Proceeds Prior to Expiration of Letter of Credit. If,
and for so long as, the Letter of Credit remains outstanding and the Bonds (as
that term is defined in the Reimbursement


                                      -22-

<PAGE>


Agreement) have not been paid in full, and: (i) an Event of Default occurs; or
(ii) Proceeds of the Mortgaged Property are received by the Mortgagee pursuant
to other provisions of this Mortgage directing the Mortgagee to hold and
disburse same under this Section, then any cash Proceeds of the Mortgaged
Property received by the Mortgagee upon exercise of its remedies under this
Article VI or otherwise deposited with the Mortgagee pursuant to applicable
provisions of this Mortgage, shall, after deduction of all advances and
disbursements made or to be made by the Mortgagee pursuant to Section 6.1 hereof
and all of the Mortgagee's costs and expenses described in Section 7.1 hereof,
be held by the Mortgagee, pursuant to such documentation as the Mortgagee shall
request, as cash collateral for payment and performance of the Obligations to
the Mortgagee.


                                   ARTICLE VII
                                  MISCELLANEOUS

         7.1 Costs and Expenses. If the Mortgagee becomes a party to any suit or
proceeding affecting the Mortgaged Property, title thereto, the lien created by
this Mortgage or the Mortgagee's interest therein, or in the event of the
commencement of any bankruptcy or insolvency proceedings involving the
Mortgagor, or if the Mortgagee engages counsel to collect or to enforce
performance of the Obligations, or if the Mortgagee incurs any other costs and
expenses in perfecting, protecting or enforcing its rights hereunder or in
responding to any request of the Mortgagor for any consent, waiver, approval,
modification or release in connection with this Mortgage or the Mortgaged
Property, the Mortgagee's reasonable counsel fees, and all other costs and
expenses paid or incurred by the Mortgagee, including reasonable fees of
appraisers, accountants, consultants, and other professionals, title premiums,
title report and work charges, filing fees, and mortgage, mortgage registration,
transfer, stamp and other excise taxes, whether or not an Event of Default shall
have occurred, shall be paid to the Mortgagee by the Mortgagor, on demand, with
interest at the Default Rate and until paid they shall be deemed to be part of
the Obligations secured by this Mortgage.

         7.2 Indemnity. The Mortgagor shall indemnify, defend and hold the
Mortgagee harmless from and against any claims, expenses, demands, losses,
costs, fines or liabilities of any kind (including those involving death,
personal injury or property damage and including reasonable attorneys' fees and
costs) arising from or in any way related to the failure of the Mortgagor to
comply with, or the failure of the Mortgaged Property to be kept in material
compliance with, the Legal Requirements, Applicable Environmental Laws, the
Leases and the Permitted Encumbrances. The indemnification of the Mortgagor
under this section shall survive the release or termination of this Mortgage and
shall remain effective notwithstanding any foreclosure of this Mortgage or other
execution against the Mortgaged Property or acceptance of a deed in lieu of
foreclosure. The indemnification agreement of the Mortgagor under this section
is specifically excepted from any limitation of liability provision contained in
this or any other Loan Document.

         7.3 Intentionally omitted.


                                      -23-

<PAGE>


         7.4 Communications. All notices required under this Mortgage shall be
in writing and shall be delivered in accordance with the applicable provisions
contained in the Reimbursement Agreement. A party may change its address by
giving written notice to the other party as specified therein.

         7.5 Covenant Running with the Land. Any act or agreement specified
herein to be done or performed by the Mortgagor shall be construed as a covenant
running with the land and shall be binding upon the Mortgagor and its successors
and assigns as if each had personally made such agreement.

         7.6 Amendment. Any amendment, modification, consent or waiver which may
be hereafter requested by the Mortgagor or otherwise required must be in writing
and signed by both the Mortgagor and the Mortgagee.

         7.7 Applicable Law. This Mortgage shall be governed by and construed in
accordance with the laws of the Commonwealth of Pennsylvania. Nothing contained
in this Mortgage or in any other Loan Document shall require the Mortgagor to
pay, or the Mortgagee to accept, interest in an amount which would subject the
Mortgagee to penalty under applicable law.

         7.8 Construction. Whenever used in this Mortgage, unless the context
clearly indicates a contrary intent:

                  (a) The word "Mortgagor" shall mean the persons who execute
this Mortgage and any subsequent fee owner of the Mortgaged Property and his
respective heirs, executors, administrators, personal representatives,
successors and assigns;

                  (b) The word "Mortgagee" shall mean, collectively, all of the
entities listed as Mortgagee hereinabove or any subsequent holder of this
Mortgage or participant in the loan secured hereby;

                  (c) The word "person" shall mean individual, corporation,
partnership or unincorporated association;

                  (d) The use of any gender shall include all genders;

                  (e) The singular number shall include the plural and the
plural the singular as the context may require;

                  (f) The word "including" shall mean "including but not limited
to" or "including without limitation" as the context may require.

         7.9 Joint and Several Liability. If the Mortgagor, or any successor or
grantee of the Mortgagor, shall be more than one person, all Obligations of the
Mortgagor under this Mortgage shall be joint and several and shall bind and
affect all persons who are defined as "Mortgagor"


                                      -24-

<PAGE>


as fully as though all of them were specifically named herein wherever the word
"Mortgagor" is used.

         7.10 Headings. The headings of sections have been included in this
Mortgage for convenience of reference only and shall not be considered in
interpreting this Mortgage.

         7.11 Severability. If any provision of this Mortgage shall be held for
any reason to be invalid, illegal or unenforceable, such impairment shall not
affect any other provision of this Mortgage.

         7.12 Receipt of Copy. The Mortgagor acknowledges receipt of conformed
copies of the Loan Documents and this Mortgage.

         7.13 Nonforeign Entity.

                  (a) The Mortgagor hereby certifies, under penalty of perjury,
that: (i) the Mortgagor is not a foreign corporation, foreign partnership,
foreign trust or foreign estate, as those terms are defined in the Internal
Revenue Code of 1986, as amended and regulations promulgated thereunder; (ii)
the Mortgagor's U.S. employer identification number is 13-3549286; and (iii) the
Mortgagor's principal place of business is set forth in the introduction
paragraph of this Mortgage.

                  (b) The Mortgagor warrants that withholding of tax will not be
required in the event of any disposition of the Mortgaged Property, or any
portion thereof, pursuant to the terms of this Mortgage. The Mortgagor covenants
and agrees to execute such further certificates, which shall be signed under
penalty of perjury, as the Mortgagee shall require. The provisions of this
section shall survive the foreclosure or other execution upon the lien of this
Mortgage or acceptance of a deed in lieu of foreclosure.

         IN WITNESS WHEREOF, the Mortgagor, intending to be legally bound
hereby, has duly executed this Mortgage, under seal, as of the day and year
first above written.

                                            NEOSE TECHNOLOGIES, INC.

(Seal)

Attest: /s/ A. Brian Davis                  By: /s/ P. Sherrill Neff
        ---------------------------             -------------------------------
            Secretary                               President


I hereby certify that the address of the Mortgagee is:
Jefferson Bank
1607 Walnut Street
Philadelphia, PA 19103

/s/ Kenneth R. Frappier SVP
----------------------------------
On behalf of the Mortgagee


                                      -25-

<PAGE>


COMMONWEALTH OF PENNSYLVANIA  :
                                  SS.
COUNTY OF PHILADELPHIA        :


         On the 20th day of March, 1997, before me, a Notary Public in and for
the State and County aforesaid, personally appeared P. SHERRILL NEFF, who
acknowledged himself/herself to be the (Vice) President of NEOSE TECHNOLOGIES,
INC., a Delaware corporation, and that he/she as such officer, being authorized
to do so, executed the foregoing instrument for the purposes therein contained
by signing the name of the corporation by himself/herself as such officer.

         IN WITNESS WHEREOF, I have hereunto set my hand and official seal.


                                            Notary Public

My Commission expires:

Notarial Seal
Michael S. Baurer, Notary Public
Philadelphia, Philadelphia County
My Commission Expires January 16, 2000
Member, Pennsylvania Association of Notaries
All exhibits omitted.

Exhibit "A" - Legal Description of Mortgaged Property

Exhibit "B" - Existing Liens and Encumbrances in the Fixtures

         The Registrant hereby agrees to furnish supplementally a copy of any
omitted Exhibit to the Securities and Exchange Commission upon request.


                                      -26-