MORTGAGE AND SECURITY AGREEMENT

                                    $675,000

     THIS  MORTGAGE AND  SECURITY  AGREEMENT,  dated  January 16, 1998 from Disc
Graphics,  Inc., 10 Gilpin Avenue,  Hauppauge,  New York 11788  ("Mortgagor") to
KeyBank  National  Association,  a  national  banking  association,  1377  Motor
Parkway, Islandia, New York 11788 ("Mortgagee").

     WITNESSETH,  that to secure the  payment of an  indebtedness  evidenced  by
Mortgagor's Promissory Note for $675,000 bearing even date herewith, as the same
may be modified,  renewed or extended  (the  "Note"),  which sum,  with interest
thereon, is to be paid by Mortgagor to Mortgagee in accordance with the terms of
the Note,  and also to secure the payment by  Mortgagor to Mortgagee of all sums
expended or advanced by Mortgagee pursuant to any covenant, term or provision of
this  Mortgage or any other Loan Document (as that term is defined in the Note),
and to secure the performance of each covenant,  term and provision by Mortgagor
to be performed pursuant to this Mortgage or any other Loan Document,  Mortgagor
hereby  mortgages and warrants to Mortgagee,  its  successors  and assigns,  the
following  property  (the  "Mortgaged  Property")  whether  now owned or held or
hereafter acquired:

     ALL THAT TRACT OR PARCEL OF LAND  situate in the State of Indiana,  City of
Indianapolis,  County  of  Marion,  and  being the same  premises  described  in
Schedule "A" hereto annexed and made a part hereof (the "Premises").

     ALL RIGHT, TITLE AND INTEREST of Mortgagor in and to any and all buildings,
structures and improvements,  including without limitation,  the foundations and
footings thereof, now or at any time hereafter erected,  constructed or situated
upon the Premises or any part thereof (the "Improvements").

     TOGETHER with all fixtures,  chattels and articles of personal property now
or hereafter attached to and used in connection with the Premises, together with
any and all replacements  thereof and additions thereto (the  "Chattels").  This
Mortgage shall be considered a financing statement pursuant to the provisions of
the  Uniform  Commercial  Code,  covering  fixtures  which  are  affixed  to the
Premises.  The  types  of  collateral  covered  hereby  are  described  in  this
paragraph.  The  debtor is Disc  Graphics,  Inc.  The  secured  party is KeyBank
National Association. Their addresses are set forth above.

     TOGETHER with all right,  title and  interest,  if any, of Mortgagor of, in
and to the bed of any street, road or avenue,  opened or proposed,  in front of,
adjoining or abutting upon the Premises to the center line thereof.

     TOGETHER with any and all awards heretofore and hereafter made with respect
to the Premises by any  governmental or other lawful  authorities for the taking
by  eminent  domain of the whole or any part of the  Premises,  or any  easement
therein,  including  any awards for any changes of grade of streets,  which said
awards are hereby assigned to Mortgagee, who is hereby authorized to collect and
receive the proceeds of any such awards from such authorities and to give proper
receipts and acquittances  therefor, and to apply the same toward the payment of
the amount owing on account of this Mortgage and the Note,  notwithstanding  the
fact that the amount owing thereon may not then be due and payable.
<PAGE>
          TO  HAVE  AND TO HOLD  the  Mortgaged  Property  unto  Mortgagee,  its
successors and assigns,  PROVIDED ALWAYS that if Mortgagor shall pay or cause to
be paid to Mortgagee,  its successors  and assigns,  said principal sum of money
and other  charges  mentioned  and set forth in this  Mortgage  and in the Note,
together  with  interest  thereon,  then and from thence  forth,  the  Mortgaged
Property and the estate hereby granted shall cease, determine and be void.

          AND Mortgagor covenants with Mortgagee as follows:

     1.  Representations.  Mortgagor hereby represents and warrants to Mortgagee
as follows:

          (a) The Loan Documents are in all respects  valid and legally  binding
obligations, enforceable in accordance with their respective terms.

          (b) The execution and delivery of the Loan  Documents by Mortgagor and
any guarantor do not, and the  performance  and  observance by Mortgagor and any
guarantor of their  obligations  thereunder will not,  contravene or result in a
breach of (i) any  provision of  Mortgagor's  certificate  of  incorporation  or
by-laws, or (ii) any governmental requirements,  or (iii) any decree or judgment
binding  on  Mortgagor  or any  guarantor,  or (iv) any  material  agreement  or
instrument  binding on  Mortgagor or any  guarantor  or any of their  respective
properties,  nor will the same  result in the  creation  of any lien or security
interest under any such agreement or instrument.

          (c) There are no actions, suits, investigations or proceedings pending
at law,  in equity or by any  governmental  authority,  or to the  knowledge  of
Mortgagor,  threatened against or affecting Mortgagor (or any officer,  director
or  shareholder  of  Mortgagor),  any  guarantor or the Mortgaged  Property,  or
involving  the validity or  enforceability  of any of the Loan  Documents or the
priority of the lien thereof,  or which will affect Mortgagor's ability to repay
the Note.

          (d) Mortgagor  represents and warrants that it is the fee simple owner
of the  Mortgaged  Property  free of defects,  liens,  and  encumbrances  of any
nature, other than those exceptions to title that are set forth in the policy of
title  insurance  insuring this Mortgage  issued to Mortgagee on the date hereof
("Permitted Exceptions").  Mortgagor warrants that this Mortgage is and shall be
maintained  as a valid first lien priority  mortgage on the Mortgaged  Property,
subject only to the Permitted Exceptions,  and shall defend the same against the
claims of all persons.  Mortgagor has no knowledge of any  violations or notices
of violations of any requirements.

          (e) Mortgagor is a Delaware corporation (i) is duly formed and validly
existing under the laws of the state in which it is formed,  (ii) if required by
the laws of the state in which the Premises is located, is fully qualified to do
business in Indiana,  (iii) has the power,  authority and legal right to own and
operate  its  properties  and assets,  to carry on the  business  conducted  and
proposed to be conducted by it, and to engage in the  transactions  contemplated
by the Loan Documents, and (iv) the execution and delivery of the Loan Documents
to which it is a party and the  performance  and  observance  of the  provisions
thereof have all been duly authorized by all necessary corporate actions.
<PAGE>
          (f)  All  utility   services   necessary   and   sufficient   for  the
construction,  development  and  operation  of the  Mortgaged  Property  for its
intended  purposes are  presently  available to the Premises  through  dedicated
public rights of way or through perpetual private easements.

          (g)  Neither the  Mortgaged  Property  nor any portion  thereof is now
damaged as result of any fire, explosion,  accident,  flood or other casualty or
has been the subject of any taking, and to Mortgagor's  knowledge,  no taking is
pending or contemplated.

          (h) Any brokerage  commissions due in connection with the transactions
contemplated  hereby have been paid in full and that any such commissions coming
due in the future will be promptly paid by Mortgagor.  Mortgagor shall indemnify
Mortgagee  from any  liability,  claims or losses  arising by reason of any such
brokerage  commissions.  This provision  shall survive the repayment of the Note
and shall  continue in full force and effect so long as the  possibility of such
liability, claims or losses exists.

          (i) The financial statements of Mortgagor and any guarantor previously
delivered to Mortgagee are true and correct in all respects,  have been prepared
in  accordance  with  generally  accepted  accounting  principles   consistently
applied, and fairly present the respective financial conditions of Mortgagor and
any  guarantor  as of the  respective  dates  thereof  and the  results of their
operations  for the periods  covered  thereby.  No material  adverse  change has
occurred in the assets,  liabilities,  or financial conditions reflected therein
since the respective dates thereof.

          (j) All  federal,  state and other tax  returns of  Mortgagor  and any
guarantor  required by law to be filed have been filed, that all federal,  state
and other taxes,  assessments and other governmental  charges upon Mortgagor and
any guarantor or their respective properties which are due and payable have been
paid or are being contested in good faith,  and Mortgagor and any guarantor have
set aside on their books provisions  reasonably  adequate for the payment of all
taxes for periods  subsequent  to the periods for which such  returns  have been
filed.

          (k) Mortgagor has made no contract or arrangement of any kind (whether
oral or written,  formal or  informal),  the  performance  of which by the other
party thereto is expected to give rise to a lien or encumbrance on the Mortgaged
Property,  except for contracts  (all of which have been disclosed in writing to
Mortgagee)  made by Mortgagor  with parties who have executed and delivered lien
waivers to  Mortgagor,  and which will not create  rights in  existing or future
lien claimants which may be superior to the lien of the Mortgage.
<PAGE>
          (l) The rights of way for all roads necessary for the full utilization
of the  Improvements  for their  intended  purposes have either been acquired by
Mortgagor,  the  appropriate  governmental  authority or have been  dedicated to
public use and accepted by such governmental authority, and all such roads shall
have been  completed,  or all necessary steps shall have been taken by Mortgagor
and  such  governmental  authority  to  assure  the  complete  construction  and
installation  thereof  prior to the date  upon  which  access  to the  Mortgaged
Property via such roads will be necessary.  All curb cuts,  driveway permits and
traffic signals  necessary for access to the Mortgaged  Property are existing or
have been fully approved by the appropriate governmental authority.

          (m) No Event of  Default  (hereinbelow  defined)  exists  and no event
which but for the passage of time, the giving of notice or both would constitute
an Event of Default has occurred.

          2. The  Indebtedness.  Mortgagor will pay the indebtedness as provided
in the Note or in any modification, renewal or extension of the Note.

          3. Insurance.  Mortgagor shall maintain  insurance with respect to the
Premises,  the  Improvements  and the  Chattels  against such risks and for such
amounts as are customarily  insured against by businesses of like size and type,
and shall pay,  as the same  become due and  payable,  all  premiums  in respect
thereto, including but not limited to:

          (a) Insurance  protecting  the interests of Mortgagor and Mortgagee as
their  interests may appear against loss or damage to the  Improvements by fire,
lightning,  flood and other casualties normally insured against,  with a uniform
standard extended coverage endorsement,  such insurance at all times to be in an
amount of the Note or the total cash replacement value of the  Improvements,  as
determined at least once every three years by a recognized  appraiser or insurer
selected by Mortgagor and approved by Mortgagee.

          (b) Boiler and machinery  insurance  covering  physical  damage to the
Improvements  and  to  the  major   components  of  any  central  heating,   air
conditioning or ventilation  systems and such other equipment as Mortgagee shall
designate.

          (c) Business  interruption  insurance in an amount sufficient to allow
Mortgagor to recover 80% of the net income  derived from its  operations  at the
Mortgaged Property.

          (d) Workers'  compensation  insurance,  disability benefits insurance,
and such other form of insurance  which Mortgagor is required by law to provide,
covering loss resulting from injury, sickness,  disability or death of employees
of Mortgagor who are located at or assigned to the Premises.

          (e)  Insurance  protecting  Mortgagor  and  Mortgagee  against loss or
losses from  liabilities  imposed by law or assumed in any written  contract and
arising  from  personal  injury  and death or damage to the  property  of others
caused by accident or occurrence, in such amounts as may be designated from time
to  time  by  Mortgagee,  excluding  liability  imposed  upon  Mortgagor  by any
applicable  workers'  compensation law, or such other amounts as may be required
in writing by  Mortgagee;  and a blanket  excess  liability  policy in an amount
reasonably  satisfactory to Mortgagee protecting Mortgagor and Mortgagee against
any loss or liability or damage for personal injury or property damage.
<PAGE>
     4.  Other  Insurance  Provisions.  (a) All  insurance  required  under this
Mortgage  shall be procured and  maintained in  financially  sound and generally
recognized  responsible insurance companies selected by Mortgagor and authorized
to write such  insurance in the State of Indiana and  acceptable  to  Mortgagee.
Such  insurance may be written with  deductible  amounts  comparable to those on
similar  policies  carried by other  entities  engaged in businesses  similar in
size,  character and other respects to those in which Mortgagor is engaged.  All
policies  evidencing  such insurance shall provide for (i) payment of the losses
to Mortgagor and Mortgagee as their respective interests may appear, and (ii) at
least 30 days written notice to Mortgagor and Mortgagee  prior to  cancellation,
reduction in policy limits or material change in coverage thereof. The insurance
required by Section 3(a) shall contain a standard mortgagee endorsement in favor
of Mortgagee.  All insurance  required  hereunder shall be in form,  content and
coverage  reasonably  satisfactory  to  Mortgagee.  The  original  policy,  or a
certified  duplicate copy thereof,  for all insurance  required  hereby shall be
delivered  to  Mortgagee.  The  proceeds  of any  insurance  which  are  paid to
Mortgagee may be applied by Mortgagee  toward the payment of any monies  secured
by this Mortgage,  or, may be paid over, wholly or in part, to Mortgagor for the
repair of the  Improvements  or for any other purpose or object  satisfactory to
Mortgagee.  Mortgagor  shall  deliver to Mortgagee at least 30 days prior to the
expiration date of any insurance  coverages  required  hereunder,  a certificate
reciting  that there is in full force and effect,  with a term covering at least
the next  succeeding  year,  insurance in the amounts and of the types  required
hereunder.

          (b)  Notwithstanding  the foregoing,  Mortgagee shall allow the use of
such  proceeds  for  the  restoration  of  the  Improvements  if  (i)  Mortgagee
determines such proceeds are sufficient to complete the restoration,  or if such
proceeds are insufficient for completion of such restoration, Mortgagor deposits
with Mortgagee an amount equal to the difference between  Mortgagee's  estimated
cost of  restoration  and the  insurance  proceeds,  or  adequate  security  (in
Mortgagee's  reasonable  judgment)  therefor  (ii)  there  has  been no Event of
Default under this Mortgage which continues at the time of such loss,  (iii) the
date of the casualty  loss is not less than 12 months prior to maturity  date of
the Note and (iv)  Mortgagor has in effect the business  interruption  insurance
described in Section 3(c). If the foregoing  conditions  are met,  Mortgagee may
restore  the  damage,  but the use and  advancing  of the  proceeds  shall be as
provided in subsection (d) of this Section.

     (c) Mortgagor  shall give  Mortgagee  prompt written notice of damage to or
destruction  of any  Mortgaged  Property.  If  Mortgagee  does not require  full
payment of the Note  within 30 days of the  damage or  destruction  and  permits
Mortgagor to use  insurance  proceeds for the repair  thereof,  Mortgagor  shall
promptly commence and diligently  continue to perform the repairs and rebuilding
<PAGE>
of the Mortgaged  Property so damaged or destroyed (the "Work").  The Work shall
be conducted and completed in full compliance with the provisions hereof and all
legal requirements and so that the Mortgaged Property shall be at least equal in
value and general utility as they were prior to such damage or  destruction.  If
the cost of the Work in the  reasonable  judgment of Mortgagee  exceeds  $75,000
("Major  Work"),  Mortgagor  shall prior to the  commencement  of the Major Work
furnish to Mortgagee for its approval (i) complete plans and  specifications for
the Major  Work,  with  satisfactory  evidence  of the  approval  thereof by all
governmental  authorities  whose  approval  is  required  and  by  an  architect
satisfactory  to Mortgagee  (the  "Architect")  accompanied  by the  Architect's
signed  estimate of the entire cost of completing the Major Work, (ii) certified
copies of all  permits and  approvals  required  by law in  connection  with the
commencement  and conduct of the Major Work,  and (iii) either (A) a surety bond
or  guaranty  of the  payment  for  and  completion  of the  Major  Work in form
satisfactory to Mortgagee in an amount not less than the Architect's estimate of
the entire  cost of  completing  the Major  Work,  less the amount of  insurance
proceeds  then held by Mortgagee  for  application  toward the cost of the Major
Work or (B) a deposit equal to the difference between Mortgagee's estimated cost
of restoration  and such insurance  proceeds.  After  commencing the Major Work,
Mortgagor  shall  perform  the  Major  Work  diligently  and in  good  faith  in
accordance with the plans and specifications submitted.

          (d) If Mortgagor  is  permitted  under the terms hereof to use the net
insurance  proceeds,  after any cost to  Mortgagee of recovery and of paying out
such  proceeds  (including  reasonable  attorneys'  fees and costs  allocable to
inspecting  the  Work  and  the  plans  and  specifications  therefor),  towards
restoration  of the damaged  Mortgaged  Property,  Mortgagee  or its agent shall
apply such insurance proceeds as follows:

               (i) At  Mortgagee's  option  exercised  from  time  to  time,  to
Mortgagor or directly to the contractors, subcontractors, materialmen, laborers,
engineers,  architects and other persons rendering services or materials for the
Work, as said Work  progresses  except as otherwise  hereinafter  provided,  but
subject to the following conditions, any of which Mortgagee may freely waive:

                    (A) The  Architect  shall be in  charge of the Work if it is
Major Work;

                    (B) Each  request  for  payment  shall be made on seven days
notice to Mortgagee and shall be  accompanied  by a certificate of the Architect
(if one is required) or an officer of Mortgagor stating that (i) all of the Work
completed   has  been  done  in   compliance   with  the   approved   plans  and
specifications,  if required, and in accordance with all provisions of law, (ii)
the sum requested is to pay or reimburse  Mortgagor for payments by Mortgagor to
the contractor,  subcontractor,  materialmen, laborers, engineers, architects or
other  persons  rendering  services or  materials  for the Work  (giving a brief
description  of such  services and  materials),  and that when added to any sums
previously  paid out by Mortgagee,  does not exceed the  estimated  value of the
Work done to date of such  certificate and (iii) the amount of such proceeds and
other deposits remaining in the hands of Mortgagee is estimated to be sufficient
on completion of the Work to pay for the same in full (giving in such reasonable
detail as Mortgagee may require an estimate of the cost of such completion);
<PAGE>
     (C) Each request shall be accompanied by waivers of liens  satisfactory  to
Mortgagee  covering any Work  previously  paid for and with respect to the final
payment  request,  by a search  prepared by the title  company which insured the
lien hereof or other  evidence  satisfactory  to  Mortgagee  that there is not a
mechanic's or other lien or  encumbrance  in respect of any part of the Work and
that there exist no liens or encumbrances on or affecting any Mortgaged Property
other than Permitted Exceptions;

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

              (ii) Upon completion of the Work and payment in full therefor,  or
if  Mortgagor  fails to commence  promptly  after  collection  of the  insurance
proceeds or  diligently  to continue  the Work,  or at any time upon  request by
Mortgagor,  Mortgagee  may apply the amount of any such proceeds it holds to the
payment of the Note. Nothing herein shall prevent Mortgagee from applying at any
time any such proceeds to the curing of any Event of Default under this Mortgage
or the Note.

     5. Alterations.  No Improvements shall be structurally altered,  removed or
demolished without the prior written consent of Mortgagee.

     6.  Appointment  of Receiver.  Mortgagee  in any action to  foreclose  this
Mortgage shall be entitled,  without notice and as a matter of right and without
regard to the  adequacy of any security of the  indebtedness  or the solvency of
Mortgagor, upon application to any court having jurisdiction, to the appointment
of a receiver of the rents, income and profits of the Mortgaged Property.  If an
Event of Default (hereinbelow  defined) occurs under this Mortgage,  as a matter
of right  and  without  regard to the  adequacy  of any  security  for the Note,
Mortgagor,  upon demand of Mortgagee,  shall surrender the possession of, and it
shall be lawful for  Mortgagee,  by such officer or agent as it may appoint,  to
take possession,  of all or any part of the Mortgaged Property together with the
books,  papers,  and  accounts of  Mortgagor  pertaining  thereto,  and to hold,
operate  and manage the same,  and from time to time to make all needed  repairs
and  improvements  as  Mortgagee  shall deem wise;  and, if  Mortgagee  deems it
necessary  or  desirable,   to  complete   construction  and  equipping  of  any
Improvements  and in the course of such  construction  or equipping to make such
changes  to the  same as it may  deem  desirable;  and  Mortgagee  may  sell the
Mortgaged  Property  or any  part  thereof,  or  institute  proceedings  for the
complete or partial  foreclosure  of the lien of this  Mortgage on the Mortgaged
Property,  or lease the  Premises  or any part  thereof  in the name and for the
account of Mortgagor or Mortgagee and collect,  receive and sequester the rents,
revenues,  earnings, income, products and profits therefrom, and out of the same
and any other monies  received  hereunder pay or provide for the payment of, all
proper costs and expenses of taking, holding,  leasing, selling and managing the
same,  including reasonable  compensation to Mortgagee,  its agents and counsel,
and any charges of Mortgagee hereunder, and any taxes and other charges prior to
the lien of this Mortgage which Mortgagee may deem it wise to pay.
<PAGE>
          7. Payment of Taxes.  (a) Mortgagor  will pay all taxes,  assessments,
sewer  rents  or  water  rates  or sums due  under  any  payment  in lieu of tax
agreement  ("Pilot  Agreement")  and in default  thereof,  Mortgagee may pay the
same. If Mortgagee shall pay any such tax, assessment, sewer rent or water rate,
Mortgagee  shall have the right,  among other  rights,  to declare the amount so
paid with  interest  thereon  immediately  due and payable,  and upon default of
Mortgagor in paying any such amount with interest thereon,  Mortgagee shall have
the right to foreclose for such amount  subject to the  continuing  lien of this
Mortgage for the balance of the mortgage indebtedness not then due.

          (b) If  Mortgagor  fails to pay any sum  Mortgagor  has  agreed to pay
pursuant  to this  covenant  for a period in excess of 60 days after the same is
due and  payable,  in  addition to any other  remedies  available  to  Mortgagee
hereunder,  Mortgagee may, at its option,  require that  Mortgagor  deposit with
Mortgagee,  monthly,  one-twelfth  of the annual charges for taxes and any other
sums Mortgagor is obligated to pay pursuant to this covenant and Mortgagor shall
make such deposits with  Mortgagee.  Mortgagor  shall  simultaneously  therewith
deposit  with  Mortgagee  a  sum  of  money  which  together  with  the  monthly
installments  aforementioned  will be  sufficient  to make  payment  of all sums
required  to be paid  hereunder  at least 30 days  prior to the due date of such
payments,  it being understood that Mortgagee shall calculate the amount of such
deposits and notify  Mortgagor of the sum due. Should an Event of Default occur,
the funds deposited with Mortgagee  pursuant to this provision may be applied in
payment of the charges for which said funds shall have been  deposited or to the
payment of any other sums secured by this Mortgage as Mortgagee sees fit.

          8.   [intentionally omitted]

          9. Statement of Amount Due.  Mortgagor,  within five days upon request
in  person  or within 15 days  upon  request  by mail,  shall  furnish a written
statement duly  acknowledged  of the amount due on this Mortgage and whether any
offsets or defenses exist against the said indebtedness.

          10. Notices. All notices, consents, approvals and other communications
required or  permitted to be given to a party under this  Agreement  shall be in
writing and shall be  delivered  personally  to the party,  sent by any national
overnight   courier  or  mailed  first  class  certified  mail,  return  receipt
requested,  to the party at the address  indicated on page one, to the attention
of Joseph Burns for  Mortgagee,  and to the attention of Donald Sinkin and Frank
A. Bress, Esq., general counsel for Mortgagor.  Any item delivered in accordance
with the  provisions of this Section shall be deemed to have been  delivered (i)
on the date of personal  delivery,  (ii) on the business day  following the date
sent by overnight  courier or (iii) on the fifth day following the date on which
it was so mailed, as the case may be.

          11. Warranty of Title.  Mortgagor  warrants the title to the Premises,
Improvements and Chattels.
<PAGE>
          12. Sale in One Parcel. In case of a sale, the Premises may be sold in
one parcel  together with the  Improvements  and  Chattels.  Should the Premises
consist of more than one parcel,  in the event of a foreclosure of this Mortgage
or any mortgage at any time  consolidated  with this Mortgage,  Mortgagor agrees
that Mortgagee shall be entitled to a judgment  directing the referee  appointed
in the  foreclosure  proceeding  to sell  all of the  parcels  constituting  the
Premises  at one  foreclosure  sale,  either as a group or  separately  and that
Mortgagor  expressly waives any right that it may now have or hereafter  acquire
to (i) request or require that the parcels be sold  separately  or (ii) request,
if  Mortgagee  has  elected  to  sell  parcels  separately,   that  there  be  a
determination of any deficiency amount after any such separate sale or otherwise
require a  calculation  of whether said parcel or parcels  separately  sold were
conveyed for their "fair market value".

          13.  [intentionally omitted]

          14. Negative  Covenants.  Mortgagor will not (i) execute an assignment
of the rents, income or profits, or any part thereof from the Mortgaged Property
except to Mortgagee,  or (ii) except where the tenant is in default  thereunder,
terminate  or  consent  to the  cancellation  or  surrender  of any lease of the
Premises or Improvements or of any part thereof, now existing or hereafter to be
made,  having an unexpired term of two years or more,  except that any lease may
be canceled provided that promptly after the cancellation or surrender thereof a
new lease is entered  into with a new tenant  having a credit  standing,  in the
judgment of Mortgagee, at least equivalent to that of the tenant whose lease was
canceled,  on substantially  the same terms as the terminated or canceled lease,
or modify any such lease so as to shorten the unexpired term thereof or so as to
decrease the amount of the rents payable thereunder, or (iii) accept prepayments
of any sums to become due under such leases, except prepayments of rent for more
than one month in  advance or  prepayments  in the  nature of  security  for the
performance of the tenants thereunder, (iv) in any other manner impair the value
of the Mortgaged  Property or the security of this Mortgage,  (v) enter into any
lease for all or a substantial part of the Mortgaged  Property (other than to an
affiliate of Mortgagor) or (vi) further encumber, alienate, hypothecate, grant a
security  interest in or grant any other  interest  whatsoever  in the Mortgaged
Property.  No rent reserved under any lease of the Premises or Improvements  has
been assigned or anticipated,  and no rent for any period subsequent to the date
hereof has been collected in advance of the due date. Mortgagor will not execute
any lease of all or a substantial portion of the Premises or Improvements except
for actual  occupancy by the tenant  thereunder,  and will at all times promptly
and  faithfully  perform,  or  cause  to be  performed,  all of  the  covenants,
conditions  and  agreements  contained  in all  current or future  leases of the
Premises or  Improvements  required  on the part of the  landlord to be kept and
performed,  and will at all times do all things necessary to compel  performance
by the tenant under each lease of all  obligations,  covenants and agreements by
such tenant to be performed.  If any lease  provides for tenant's  giving status
certificates,  Mortgagor  shall exercise its right to request such  certificates
within five days of any demand therefor by Mortgagee. Mortgagor shall furnish to
Mortgagee,  upon request of Mortgagee to do so, a written  statement  containing
the names of all  tenants of the  Premises or  Improvements,  the terms of their
respective leases, the space occupied and the rentals payable thereunder.
<PAGE>
     15. [intentionally omitted]

     16. Books and Records. (a) In addition to any requirements elsewhere in the
Loan  Documents,  Mortgagor  shall keep and maintain at all times at Mortgagors'
addresses  stated in this Mortgage,  complete and accurate books of accounts and
records  adequate  to reflect  correctly  the  results of the  operation  of the
Mortgaged  Property  and  copies  of all  written  contracts,  leases  and other
instruments  which affect the  Mortgaged  Property.  Mortgagor may relocate such
books  and  records  to the  extent  permitted  under  the  terms of the  Credit
Agreement  and  Security  Agreement,  both  dated  February  26,  1997,  between
Mortgagor  and  Mortgagee.  Such  books,  records,  contracts,  leases and other
instruments  shall be subject to  examination  and  inspection at any reasonable
time by Mortgagee.

     (b) Upon request of Mortgagee in writing,  Mortgagor shall promptly provide
Mortgagee with all documents  reasonably  requested by Mortgagee prepared in the
form and manner called for in such request and as may  reasonably  relate to the
operation or condition thereof,  or the financial  condition of Mortgagor or any
party  obligated  on  the  Note  or  under  any  guaranty,   including,  without
limitation,  all leases or leasehold interests granted to or by Mortgagor,  rent
rolls and tenant lists, rent and damage deposit ledgers,  operating  statements,
profit and loss statements and balance sheets,  personal financial statements of
Mortgagor or income tax returns  (including  quarterly  returns),  any or all of
which  documents  shall  be  audited  or  certified  as true and  accurate  by a
certified  public  accountant,  if requested by Mortgagee,  and shall cover such
period or periods as may be specified by Mortgagee.

     (c) In addition,  Mortgagor shall promptly furnish or cause to be furnished
to  Mortgagee,  to the  extent  any  tenant  prepares  the  same or the same are
required by any tenant's lease, annual financial statements of any tenant of the
Mortgaged  Property  where such  tenant  leases 15% percent or more of the gross
leasable area of the  Improvements,  each such statement to be delivered as soon
as practicable  following the end of each fiscal year of such tenant, but in any
event within 120 days  thereafter,  and each such  statement to include  balance
sheets, statements of operations and statements of changes in financial position
as of the end of such year.

     (d) So long as the Note is outstanding,  Mortgagor shall furnish  Mortgagee
with the financial  statements and  information  required under the terms of the
Credit Agreement dated February 26, 1997 between them, and shall comply with all
affirmative and negative covenants set forth in such Credit Agreement.

     (e)  Mortgagee  or its agents  will have the right of access and to inspect
and copy all records at Mortgagor's premises at all times during normal business
hours and upon reasonable notice.

     (f) All  other  loans  or debt of  Mortgagor,  including  specifically  but
without  limitation,  any loans  from any  guarantor,  shall be  subordinate  in
payment  and  priority  to the  Note  and any  other  loans  from  Mortgagee  to
Mortgagor.
<PAGE>
     17. Future Laws.  If after the date of this Mortgage of any federal,  state
or municipal law is enacted,  deducting  from the value of land for the purposes
of taxation any lien thereon,  or changing in any way, the laws for the taxation
of mortgages or debts secured by  mortgages,  or the manner of collection of any
such  taxes so as to affect  Mortgagee,  this  Mortgage,  or said  indebtedness,
Mortgagee shall have the right to accelerate  payment of said  indebtedness upon
30 days notice to Mortgagor, whereupon payment of said indebtedness shall become
due, payable and collectible.

     18. [intentionally omitted]

     19.  Provisions  regarding  use of  Mortgaged  Property.  Mortgagor  is not
responsible  for any  action  or  omission,  and does not know of any  action or
omission  by any prior  owner,  that would  cause the  Mortgaged  Property to be
subject to forfeiture  pursuant to any law, rule or regulation (a "Forfeiture").
The  Mortgaged  Property  has  not  been  acquired  with  any  proceeds  from  a
transaction or an activity that would cause the Mortgaged Property to be subject
to Forfeiture,  and Mortgagor shall not use, and will not permit any third party
to use, the Mortgaged  Property or any portion  thereof or interest  therein for
any purpose or activity that would cause a Forfeiture.

     20.  Actions and  Proceedings.  If any action or proceeding is commenced to
which Mortgagee is made a party and in which it becomes necessary in the opinion
of  Mortgagee  to defend or uphold the lien of this  Mortgage,  all sums paid by
Mortgagee  for the expense of any  litigation to prosecute and defend the rights
and lien created by this Mortgage,  including reasonable counsel fees, costs and
allowances,  shall,  together with  interest  thereon be a lien on the Mortgaged
Property  and  secured  by this  Mortgage  and  shall be  collectible  like said
indebtedness and paid on demand.

     21.  Security  Interest  under the Uniform  Commercial  Code.  Mortgagee is
authorized  to sign as the agent of  Mortgagor  such  additional  agreements  as
Mortgagee  at any time may deem  necessary  or  proper  or  require  to grant to
Mortgagee a perfected  security interest in the Chattels.  If Mortgagor declines
to do so, then  Mortgagee is authorized to file  financing  statements  (as such
term is defined in said Uniform  Commercial  Code) with respect to the Chattels,
at any time, without the signature of Mortgagor. Mortgagor will, however, at any
time upon request of Mortgagee,  sign such financing statements.  Mortgagor will
pay all filing  fees for the  filing of such  financing  statements  and for the
refiling  thereof at the times  required,  in the opinion of Mortgagee,  by said
Uniform Commercial Code. If the lien of this Mortgage is subject to any security
agreement  covering the  Chattels,  then in the event of any default  under this
Mortgage,  all the right,  title and interest of Mortgagor in and to any and all
of the Chattels is hereby  assigned to  Mortgagee,  together with the benefit of
any  deposits or payments  now or  hereafter  made  thereof by  Mortgagor or the
predecessors or successors in title of Mortgagor in the Mortgaged Property.

     22.  Condemnation.  (a) Any and all awards heretofore and hereafter made to
Mortgagor  and  all  subsequent   owners  of  the  Mortgaged   Property  by  any
governmental or other lawful authorities for the taking by eminent domain of the

<PAGE>

whole or any part of the Mortgaged  Property or any easement therein,  including
any  awards  for any  changes  of grade  of  streets,  are  hereby  assigned  to
Mortgagee,  who is hereby  authorized to collect and receive the proceeds of any
such awards from such  authorities,  to give proper  receipts  and  acquittances
therefor and to apply the same toward the payment of the amount owing on account
of this Mortgage and said indebtedness, notwithstanding the fact that the amount
owing thereon may not then be due and payable;  and Mortgagor  hereby  covenants
and agrees,  upon request,  to make, execute and deliver any and all assignments
and other  instruments  sufficient  for the purpose of assigning  the  aforesaid
awards to Mortgagee  free,  clear and discharged of any and all  encumbrances of
any kind or nature  whatsoever.  Mortgagor  shall  continue to make all payments
required by the Note until any such award shall have been  actually  received by
Mortgagee and any reduction in said indebtedness  resulting from the application
by  Mortgagee  of such award  shall be deemed to take effect only on the date of
such receipt.

          (b) Notwithstanding the foregoing,  if any one or more of the portions
of the  Mortgaged  Property  described  below shall be damaged or taken  through
condemnation,  either  temporarily or  permanently,  then the entire balance due
under the Note and any other Loan Documents  shall,  at the option of Mortgagee,
become immediately due and payable:

     (i)  Any  portion  or  portions  of  the  Improvements  or the  support  or
foundation of any portion or portions of the Improvements; or

     (ii) Ten percent or more of any parking area; or

     (iii) Any  portion or portions of the  Premises  which,  when so damaged or
taken,  would result either in (A) an  impairment of access to the  Improvements
from the publicly dedicated rights of way now adjoining the Premises, or (B) the
failure of the  Improvements  to comply with any building code,  zoning or other
governmental  laws or  regulations,  lease  or  other  agreement  to  which  the
Mortgaged Property is subject.

          (c) Mortgagor authorizes Mortgagee, at Mortgagee's option, as attorney
in fact for  Mortgagor,  to commence,  appear in and prosecute in Mortgagor's or
Mortgagee's name, any action or proceeding relating to any condemnation or other
taking  of the  Mortgaged  Property  and to settle  or  compromise  any claim in
connection with such condemnation or other taking, but Mortgagor also shall have
the right to have its own  co-counsel in any such  proceeding and to approve any
settlement.

          23. No Defenses. This Mortgage is a valid first priority lien securing
the debt  represented  by the Note and there are no  defenses or offsets to this
Mortgage or to the said indebtedness.

          24. Leases of the Mortgaged Property.  Mortgagor will not lease all or
any portion of the Mortgaged  Property (other than to an affiliate of Mortgagor)
without Mortgagee's  consent. If such consent is given, all leases covering more
than 15% of the gross  leasable area of the Mortgaged  Property must require the
<PAGE>
tenant to provide  Mortgagee  with  annual  financial  statements  of the tenant
certified  to by an  independent  certified  public  accountant.  Mortgagor,  at
Mortgagee's request,  shall furnish Mortgagee with executed copies of all leases
hereafter made of all or any part of the Mortgaged Property,  and all leases now
or hereafter  entered into will be in form and substance subject to the approval
of Mortgagee.

     25.  Transfer of  Mortgaged  Property.  The full amount of the  outstanding
indebtedness secured hereby, with all accrued interest, shall be immediately due
and  payable  at  Mortgagee's  option in the event of the  sale,  conveyance  or
transfer,  by deed, lease (other than as permitted herein),  any other voluntary
or involuntary act or by operation of law or otherwise (including the entry into
any land sale contract,  sale-leaseback  arrangement or other similar agreement)
of any interest in any of the  Mortgaged  Property,  or if any other  mortgages,
liens or encumbrances are placed on the Mortgaged  Property other than Permitted
Exceptions.

     26. Access.  Mortgagee, by its employees or agents, shall at all times have
the right to enter upon the Mortgaged Property during reasonable  business hours
for the purpose of examining and inspecting the same.

     27. [intentionally omitted]

     28. Performance of Mortgagor's Covenants by Mortgagee.  In the event of any
default in the  performance  of any of the  covenants,  terms,  or provisions of
Mortgagor  under this  Mortgage,  Mortgagee  may,  at the  option of  Mortgagee,
perform the same and the cost thereof,  with interest,  shall immediately be due
from Mortgagor to Mortgagee and secured by this Mortgage.

     29.  Remedies not  Exclusive.  Mortgagee  shall have the right from time to
time, to take action to recover any amounts of past due  principal  indebtedness
and interest  thereon,  or any installment of either, or any other sums required
to be paid under the  covenants,  terms and  provisions  of this Mortgage or the
Note, as the same become due, whether or not the principal indebtedness secured,
or any other sums secured by the Note or this Mortgage shall be due, and without
prejudice  to  the  right  of  Mortgagee   thereafter  to  bring  an  action  of
foreclosure,  or any other action, for default or defaults by Mortgagor existing
at the time such earlier action was commenced.

     30.  Additional  Acts and Documents.  Mortgagor  covenants that it will do,
execute, acknowledge, deliver, file or record, or cause to be recorded every and
all such further acts, deeds, conveyances,  advances,  mortgages,  transfers and
assurances,  in  law  as  Mortgagee  shall  require  for  the  better  assuring,
conveying, transferring, mortgaging, assigning and confirming unto Mortgagee all
and singular the Mortgaged Property.

     31.  Remedies  Cumulative.  The  rights and  remedies  herein  afforded  to
Mortgagee  shall be  cumulative  and  supplementary  to and not exclusive of any
other rights and remedies afforded the holder of this Mortgage and the Note.
<PAGE>
     32.  Successors.  All of the provisions of this Mortgage shall inure to the
benefit of Mortgagee and of any subsequent  holder of this Mortgage and shall be
binding upon Mortgagor and each subsequent owner of the Mortgaged Property.

     33. Effect of Releases.  Mortgagee, without notice, may release any part of
the  security  described  herein,  or  any  person  or  entity  liable  for  any
indebtedness  secured hereby without  affecting the lien hereof upon any part of
the security not expressly  released,  and may agree with any party obligated on
said  indebtedness  or having any interest in the security  described  herein to
extend  the time for  payment  of any  part or all of the  indebtedness  secured
hereby.  Such agreement  shall not release or impair the lien hereof,  but shall
extend the lien hereof as against the title of all parties  having any  interest
in said security, which interest is subject to said lien, and no such release or
agreement shall release any person or entity  obligated to pay any  indebtedness
secured hereby.

     34.  Waivers.  Any failure by Mortgagee to insist upon  Mortgagor's  strict
performance of any of the covenants, terms and provisions of this Mortgage shall
not  be  deemed  to be a  waiver  thereof.  Notwithstanding  any  such  failure,
Mortgagee shall have the right thereafter to insist upon the strict  performance
by  Mortgagor  of any and all of the  covenants,  terms and  provisions  of this
Mortgage.  Neither  Mortgagor  nor any other  person or entity now or  hereafter
obligated for the payment of the whole or any part of said indebtedness shall be
relieved of such  obligation by reason of (i) the failure of Mortgagee to comply
with any request of  Mortgagor,  or of any other person or entity so  obligated,
(ii) the failure of  Mortgagee  to take  action to  foreclose  this  Mortgage or
otherwise enforce any of the covenants, terms and provisions of this Mortgage or
the Note, (iii) the release,  regardless of  consideration,  of the whole or any
part of the security held for payment of said indebtedness or (iv) any agreement
or stipulation  between any subsequent owner or owners of the Mortgaged Property
and Mortgagee modifying the covenants,  terms and provisions of this Mortgage or
the Note without  first  having  obtained the consent of Mortgagor or such other
person or entity.  In the last  mentioned  event,  Mortgagor  and all such other
persons or entities shall continue liable to make such payments according to the
terms and provisions of any such agreement or extension or  modification  unless
expressly  released  and  discharged  in writing  by  Mortgagee.  Mortgagee  may
release, regardless of consideration,  any part of the security held for payment
of said indebtedness  without,  as to the remainder of the security,  in any way
impairing  or affecting  the lien of this  Mortgage or the priority of such lien
over  any  subordinate  lien.  Mortgagee  may  resort  for the  payment  of said
indebtedness to any other security  therefor held by Mortgagee in such order and
manner as Mortgagee may elect.

     35. Interest on Advances.  Wherever under this Mortgage or by law Mortgagee
is  entitled to interest  on  advances  made or expenses  incurred,  it shall be
computed at the interest rate payable under the Note.

     36. Mortgagee not Obligated. Nothing herein contained shall be construed as
making the payment of any insurance  premiums,  taxes or assessments  obligatory
upon Mortgagee,  although  Mortgagee may pay same, or as making Mortgagee liable
in any way for loss,  damage or injury,  resulting  from the  non-payment of any
such insurance premiums, taxes or assessments.
<PAGE>
     37. [intentionally omitted]

     38. Environmental  Warranties and Covenants. (a) Except as may otherwise be
set forth on a Schedule  hereto,  Mortgagor makes the following  representations
and warranties: (i) Mortgagor is in compliance in all material 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"),  and to the  extent  Mortgagor  is not in
compliance  (whether  material or not),  Mortgagor  shall  remedy  promptly  any
non-compliance,  (ii)  Mortgagor  does  not use  any  portion  of the  Mortgaged
Property  in a manner  that is not in  material  compliance  with  Laws,  and to
Mortgagor's best knowledge,  the Mortgaged Property was not at any previous time
used for the disposal, storage,  treatment,  processing or other handling of any
hazardous  or toxic  substances  in a manner  that did not comply with the Laws,
(iii) the soil and any  surface  water and ground  water which are a part of the
Mortgaged Property do not contain any solid wastes, toxic or hazardous substance
or contaminant which exceeds  applicable action levels under applicable Laws and
(iv)  neither  the federal  government  nor the State of Indiana  Department  of
Environmental  Conservation  or any  other  governmental  or quasi  governmental
entity  has  filed  a  lien  on  the  Mortgaged  Property,  nor  are  there  any
governmental,  judicial or administrative  actions with respect to environmental
matters  pending,  or to the best of Mortgagor's  knowledge,  threatened,  which
involve the Mortgaged Property.

          (b) Mortgagor  agrees that Mortgagee or its agents or  representatives
may  in  its  judgment  reasonably  exercised,  at any  reasonable  time  and at
Mortgagor's  expense  inspect  Mortgagor's  books and  records  and  inspect and
conduct  any  sampling  or other tests on the  Mortgaged  Property to  determine
whether  Mortgagor is in  continuing  compliance  with the Laws,  subject to the
provisions of paragraph 3(b) of the Hazardous  Substances Indemnity Agreement of
even date to which Mortgagor is a party.

          (c) If any  environmental  contamination  is  found  on the  Mortgaged
Property for which any removal or remedial  action is required  pursuant to Law,
ordinance, order, rule, regulation or governmental action, Mortgagor agrees that
it will at its sole cost and  expense,  take such  removal  or  remedial  action
promptly and in accordance with Laws.

          (d) Mortgagor agrees to defend, indemnify and hold harmless Mortgagee,
its  employees,  agents,  officers  and  directors  from and against any claims,
actions, demands, penalties, fines, liabilities,  settlements, damages, costs or
expenses  (including,  without  limitation,  reasonable  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  Mortgaged
Property; (ii) any personal injury (including wrongful death or property damage)
arising  out of or  related to such  hazardous  or toxic  substances;  (iii) any
lawsuit brought,  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 Mortgagee, which are based upon or in any way related to such
hazardous or toxic substances.
<PAGE>
     (e) To Mortgagor's  best  knowledge,  Mortgagor has not used any on-site or
off-site locations where hazardous or toxic substances from the operation of any
Improvement  or otherwise  have been stored,  treated,  recycled or disposed of,
other than in accordance with Laws.

     (f) With respect to any lease or other occupancy of the Mortgaged  Property
(if  consented  to by  Mortgagee),  Mortgagor  shall not  knowingly  permit  the
occupant, tenant or subtenant to conduct operations at the Mortgaged Property in
a manner  which  involves use of  hazardous  or toxic  substances  other than in
compliance with Laws.

     (g)  Mortgagor  acknowledges  that any action  Mortgagee  takes  under this
Mortgage shall be taken to protect Mortgagee's security interest only; Mortgagee
does not hereby intend to be involved in the operations of Mortgagor.

     (h) Mortgagor  acknowledges that any  determinations  Mortgagee makes under
this Section  regarding  compliance  with  environmental  laws shall be made for
Mortgagee's  benefit  only and are not  intended  to be relied upon by any other
party.

     (i) The  provisions  of this  Section  shall be in  addition  to any  other
obligations and  liabilities  Mortgagor may have to Mortgagee at common law, and
shall survive the transactions contemplated herein.

     (j) 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 to time),  and the Resource  Conservation And Recovery Act (as each
may be amended from time to time) and in any regulations  adopted or promulgated
pursuant to any of the foregoing.

          39.  Events  of  Default.  The  whole  of  the  principal  sum  of the
indebtedness  secured  hereby and interest  thereon,  and all other sums due and
payable  hereunder shall become due, at the option of Mortgagee,  if one or more
of the following events (an "Event of Default") shall happen:

     (a) The  occurrence of an "Event of Default" under the Note, any other Loan
Document,  under any other loan or debt of Mortgagor to Mortgagee,  or under any
other loan or debt from any guarantor to Mortgagee; or

     (b) If  Mortgagor  defaults in the payment of any tax,  water rate or sewer
rent or payment under any Pilot Agreement against the Mortgaged  Property for 30
days  after the same  become due and  payable or fails to exhibit to  Mortgagee,
within 30 days after demand,  receipts showing payment of all taxes, water rates
or sewer rents; or

     (c) The actual or threatened removal,  demolition or structural alteration,
in whole or in material  part,  of any  Improvement,  without the prior  written
consent of Mortgagee;  or the removal,  demolition or destruction in whole or in
material part, of any Chattels without replacing the same with Chattels at least
equal in  quality  and  condition  to those  replaced,  free  from any  security
interest or other  encumbrance  thereon and free from any  reservation  of title
thereto;  or the  commission  of any material  waste in respect to the Mortgaged
Property; or
<PAGE>
          (d) Failure of Mortgagor to pay within 15 days after notice and demand
any   installment  of  any  assessment  made  against  the  Premises  for  local
improvements,  heretofore or hereafter made, which assessment is, or may become,
a lien on the Premises prior to the lien of this Mortgage; or

          (e) Failure of Mortgagor to pay the said indebtedness  secured by this
Mortgage  within 30 days after  notice and  demand,  in the event of the passage
after the date of this Mortgage of any federal, state or municipal law deducting
from the value of land for the purpose of taxation any lien thereon, or changing
in any way the laws now in force  for the  taxation  of  mortgages,  or of debts
secured by mortgages,  or the manner of  collection of any such taxes,  so as to
affect  Mortgagee,   this  Mortgage  or  the  indebtedness   which  is  secured,
notwithstanding that Mortgagor, before or after such notice, may have the option
to pay or contest the payment of such tax; or

          (f) Failure of Mortgagor to maintain the  Improvements on the Premises
in a rentable or tenantable  state of repair to the reasonable  satisfaction  of
Mortgagee, for 30 days after notice of such failure has been given to Mortgagor,
or to comply with any order or requirement of any municipal,  state,  federal or
other governmental  authority having jurisdiction of the Premises within 30 days
after such order or requirement shall have been issued by any such authority; or
failure of Mortgagor or of any tenant  holding under  Mortgagor,  to comply with
any and all and singular the  statutes,  requirements,  orders or decrees of any
federal,  state or  municipal  authority  relating  to the use of the  Mortgaged
Property,  or of any part thereof; or failure of Mortgagor to observe and timely
perform all of the covenants, terms and provisions contained in any lease now or
hereafter  affecting the Premises or the Improvements or any portion thereof, on
the part of the landlord to be observed and performed; or

          (g) Failure of Mortgagor, if a final judgment for the payment of money
is entered  against  Mortgagor,  to discharge such judgment or to have it stayed
pending appeal within 30 days from the entry thereof,  or if such judgment shall
be affirmed on appeal,  the failure to discharge  such  judgment  within 30 days
from the entry of such affirmance; or

          (h) Failure of Mortgagor to pay within 15 days after notice and demand
any filing or refiling fees required hereunder; or

          (i) Failure of Mortgagor or any occupant of the Mortgaged Property, to
allow or  permit  Mortgagee,  or its duly  authorized  agent,  to  inspect  said
Mortgaged Property on reasonable notice from time to time during business hours;
or

          (j) Default for 15 days after notice and demand in the  observance  or
performance of any other covenant or agreement under this Mortgage; or
<PAGE>
          (k) If any warranty or representation of Mortgagee contained herein or
any other Loan Document is false or misleading  in any material  respect,  or if
any such  statement  omits to state any material  fact which,  by reason of such
omission, is false or misleading; or

          (l)  Occurrence  of an "Event of Default"  under the  Promissory  Note
executed and delivered by Mortgagor to Mortgagee on even date herewith.

          40. Interest to Accrue. If the whole of the principal sum evidenced by
the Note and  interest,  shall become due by exercise of the option of Mortgagee
after default by Mortgagor  under any of the terms,  covenants and conditions of
this  Mortgage or the Note,  or if the whole of said  principal sum and interest
shall mature and become due under the terms,  covenants  and  conditions of this
Mortgage and the Note  regardless of default,  if any, on the part of Mortgagor,
then  interest  on said  principal  sum  shall  continue  to  accrue at the rate
provided for in the Note,  and in this  Mortgage,  until said  principal  sum is
fully paid.

          41. Flood  Insurance.  In addition to the terms and provisions of this
Mortgage  with regard to  insurance,  if the Premises are  determined to be in a
special flood hazard area as determined by any  governmental  agency,  Mortgagor
shall insure the Premises and Improvements against loss or damage by flood, with
coverage as is therein  provided for by fire and other  specified  perils to the
same extent and effect as if such flood insurance was therein  specifically  set
forth.

          42. Costs,  Expenses and Attorney's Fees. If after an Event of Default
an action is commenced for the foreclosure of this Mortgage,  Mortgagee shall be
entitled to recover all sums due hereunder,  statutory costs, and any additional
allowances,  including reasonable  attorneys' fees in such proceeding and in all
proceedings  related to the  foreclosing  proceeding,  and such amount  shall be
added to the principal  balance and interest then due and shall be a lien on the
Mortgaged Property prior to any right or title to, interest in or claim upon the
Mortgaged  Property  attaching  and  accruing  subsequent  to the  lien  of this
Mortgage,  and  shall  be  deemed  to  be  secured  by  this  Mortgage  and  the
indebtedness which it secures.

          43. Intervening Liens.  Should any agreement be hereafter entered into
modifying or changing the terms of this  Mortgage or the Note secured  hereby in
any manner, the rights of the parties to such agreement shall be superior to the
rights of the holder of any intervening lien.

          44. Terms. It is understood and agreed that the words, "Mortgagor" and
"Mortgagee"  herein shall include the successors and assigns of Mortgagee and to
the extent  permitted  hereby,  the heirs,  successors and assigns of Mortgagor.
Where  used  herein,  the  word,  "Mortgagor"  may be  read  "Mortgagors"  where
applicable.

          45.  Entire  Agreement.  This  Mortgage  and the other Loan  Documents
constitute the entire  understanding  between  Mortgagor,  any  guarantors,  and
Mortgagee  and to the extent that any  writings  not signed by Mortgagee or oral
statements or conversations  at any time made or had shall be inconsistent  with
the provisions of this Mortgage and the other Loan Documents,  the same shall be
null and void.
<PAGE>
          46.  Governing Law;  Severability.  This Mortgage shall be governed by
the law of the jurisdiction in which the Mortgaged  Property is located.  In the
event that any provision or clause of this Mortgage or the Note  conflicts  with
applicable law, such conflict shall not affect other provisions of this Mortgage
or the Note which can be given effect without the conflicting provision,  and to
this end,  the  provisions  of this  Mortgage  and the Note are  declared  to be
severable.

          47. Time of the  Essence.  Time is of the essence with respect to each
and every  covenant,  agreement and obligation of Mortgagor under this Mortgage,
the Note and any and all other Loan Documents.

          48.  Indemnification;  Subrogation;  Waiver of Offset.  (a)  Mortgagor
shall indemnify,  defend and hold Mortgagee  harmless  against:  (i) any and all
claims  for  brokerage,  leasing,  finders  or  similar  fees  which may be made
relating to the Mortgaged Property or the loan which is the subject of the Note,
and (ii) against any and all liability, obligations, losses, damages, penalties,
claims, actions, suits, costs, and expenses (including its reasonable attorneys'
fees, together with reasonable  appellate counsel fees, if any) of whatever kind
or nature which may be imposed on or incurred by Mortgagee at any time  pursuant
either  to a  judgment  or  decree  or other  order  entered  into by a court or
administrative agency or to a settlement reasonably approved by Mortgagor, which
judgment, decree, order or settlement relates in any way to or arises out of the
offer, sale or lease of the Mortgaged Property or the ownership, use, occupation
or operation of any portion of the Mortgaged Property.

          (b)  If  Mortgagee  is  made  a  party  defendant  to  any  litigation
concerning  the loan  which is the  subject  of the  Note,  this  Mortgage,  the
Mortgaged  Property,  or any  part  thereof,  or any  interest  therein,  or the
occupancy  thereof,  then Mortgagor shall  indemnify,  defend and hold Mortgagee
harmless from all liability by reason of said litigation,  including  reasonable
attorneys'  fees (together with reasonable  appellate  counsel fees, if any) and
expenses  incurred by Mortgagee in any such litigation,  whether or not any such
litigation is prosecuted to judgment.  If Mortgagee  commences an action against
Mortgagor  to  enforce  any of the terms  hereof or to  prosecute  any breach by
Mortgagor  of any of the terms  hereof or to  recover  any sum  secured  hereby,
Mortgagor shall pay to Mortgagee such reasonable  attorneys' fees (together with
reasonable  appellate  counsel  fees,  if any) and  expenses.  The right to such
attorneys  fees (together with  reasonable  appellate  counsel fees, if any) and
expenses shall be deemed to have accrued on the commencement of such action, and
shall be  enforceable  whether or not such action is prosecuted to judgment.  If
Mortgagor  breaches any term of this Mortgage,  Mortgagee may employ an attorney
or  attorneys  to  protect  its  rights  hereunder,  and in the  event  of  such
employment  following  any breach by  Mortgagor,  Mortgagor  shall pay Mortgagee
reasonable  attorneys' fees (together with reasonable appellate counsel fees, if
any) and expenses  incurred by  Mortgagee,  whether or not an action is actually
commenced against Mortgagor by reason of such breach.
<PAGE>
     (c) A  waiver  of  subrogation  shall be  obtained  by  Mortgagor  from its
insurance carrier and, consequently, Mortgagor waives any and all right to claim
or   recover   against   Mortgagee,   its   officers,   employees,   agents  and
representatives,  for loss of or damage to Mortgagor,  the  Mortgaged  Property,
Mortgagor's  property or the property of others under  Mortgagor's  control from
any cause insured against or required to be insured against by the provisions of
this Mortgage.

     (d) All sums payable by Mortgagor  hereunder  shall be paid without  notice
(except as may otherwise be provided  herein),  demand,  counterclaim,  set-off,
deduction or defense and without  abatement,  suspension or  reduction,  and the
obligations and liabilities of Mortgagor  hereunder shall in no way be released,
discharged or otherwise  affected by reason of: (i) any damage to or destruction
of or any  condemnation or similar taking of the Mortgaged  Property or any part
thereof;  (ii) any restriction or prevention of or interference  with any use of
the  Mortgaged  Property  or  any  part  thereof;  (iii)  any  title  defect  or
encumbrance  or any eviction from the Premises or the  Improvements  or any part
thereof  by  title  superior  or  otherwise;  (iv) any  bankruptcy,  insolvency,
reorganization, composition, adjustment, dissolution, liquidation, or other like
proceeding  relating  to  Mortgagee,  or any action  taken with  respect to this
Mortgage  by any  trustee or receiver  of  Mortgagee,  or by any court,  in such
proceeding; (v) any claim which Mortgagor has, or might have, against Mortgagee;
(vi) any  default or failure of  Mortgagee  to perform or comply with any of the
terms  hereof  or of any  other  agreement  with  Mortgagor;  or (vii) any other
occurrence whatsoever,  whether similar or dissimilar to the foregoing,  whether
or not  Mortgagor  shall  have  notice  or  knowledge  of any of the  foregoing.
Mortgagor  waives all rights now or hereafter  conferred by statute or otherwise
to any abatement,  suspension or reduction of any sum secured hereby and payable
by Mortgagor.

          49. Waiver of Jury Trial.  Mortgagor and Mortgagee  hereby waive trial
by jury in any  litigation in any court with respect to, in connection  with, or
arising out of this Mortgage or any other Loan  Document,  or any  instrument or
document delivered in connection with the loan
which is the subject of the Note, or the validity,  protection,  interpretation,
collection or enforcement  thereof,  or the relationship  between  Mortgagor and
Mortgagee  as  borrower  and  lender,  or any other  claim or dispute  howsoever
arising between Mortgagor and Mortgagee.

          IN WITNESS WHEREOF, this Mortgage has been duly executed by Mortgagor.

                                   Disc Graphics, Inc.


                                   By:_____________________________
                                       Name:  Margaret Krumholz
                                       Title:   Chief Financial Officer

<PAGE>


                                   SCHEDULE A
                                   DESCRIPTION


Lots 61, 62, 63,  64,  65, 66, 67 and 30 feet by  parallel  lines off the entire
south side of lot  numbered  68 in Kothe and  Lieber's  Addition  to the City of
Indianapolis,  as per plat  thereof,  recorded in Plat Book 10, page 108, in the
Office of the Recorder of Marion County, Indiana.



<PAGE>


STATE OF NEW YORK        )
                         ) ss.:
COUNTY OF SUFFOLK        )


     On January 16, 1998,  before me, the  undersigned,  a Notary  Public in New
York State,  personally  appeared  Margaret  Krumholz  personally known to me or
proved to me on the basis of  satisfactory  evidence to be the individual  whose
name is  subscribed to the within  instrument  and  acknowledged  to me that she
executed the same in her capacity,  and that by her signature on the instrument,
the  individual,  or the  person  upon  behalf  of which the  individual  acted,
executed the instrument.



                                   ------------------------------
                                   Notary Public

















              This instrument was prepared by William Cornachio, an
                                attorney at law.





                       After recording, please return to:

                             William Cornachio, Esq.
                    McMillan, Rather, Bennett & Rigano, P.C.
                              48 South Service Road
                            Melville, New York 11747