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                                                                       Exhibit A


                               SUBLEASE AGREEMENT

                                    BETWEEN

                               LINDEN PROPERTIES

                                      AND

                       MAGNETIC TECHNOLOGIES CORPORATION







700,000 SQ. FT.
770 LINDEN AVENUE
ROCHESTER, NEW YORK 14625                                       NOVEMBER 1, 1996



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                               TABLE OF CONTENTS

                                     SUBJECT                          PAGE
                                     -------                          ----
ALTERATIONS ..........................................................  5

ASSIGNMENT ...........................................................  4

CASUALTY .............................................................  7

COMPLIANCE BY TENANT WITH GOVERNMENTAL REQUIREMENTS...................  3

COMPLIANCE WITH ENVIRONMENTAL LAWS ...................................  3

CONDEMNATION .........................................................  9

CONDITION OF LEASED PROPERTY .........................................  2

CONSENT OF LANDLORD AND TENANT ....................................... 10

CONSTRUCTION ......................................................... 11

DEFAULT ..............................................................  8

EXCULPATION ..........................................................  6

INDEMNITY ............................................................  6

INDUSTRIAL DEVELOPMENT BOND FINANCING ................................ 12

INSPECTION ...........................................................  7

INSURANCE ............................................................  6

LATE CHARGES .........................................................  2

LIMITATION ON PERSONAL LIABILITY ..................................... 11

MAINTENANCE OF ROAD, YARD AND PARKING LOT ............................  3

NO ABATEMENT .........................................................  7

NO WAIVER BY LANDLORD ................................................  9

NOTICES .............................................................. 10

QUIET ENJOYMENT ...................................................... 10

REMEDIES .............................................................  8

RENT .................................................................  1


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Table of Contents
(Continued)

REPAIRS ..............................................................  2

REVIEW OF ASSESSMENTS ................................................  4

RIGHT TO MORTGAGE ....................................................  9

RUBBISH REMOVAL ......................................................  7

SIGNS ................................................................ 10

SNOW REMOVAL AND AREA LIGHTING .......................................  3

TAXES ................................................................  4

TENANTS WAIVER OF RIGHT TO REDEEM .................................... 10

USE ..................................................................  2

UTILITIES ............................................................  4

WAIVER OF SUBROGATION ................................................ 11


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         WHEREAS, COUNTY OF MONROE, INDUSTRIAL DEVELOPMENT AGENCY, a public
benefit corporation duly existing under the laws of the State of New York,
having its office at 183 East Main Street, Rochester, New York, hereinafter
described as OWNER, is the Owner of certain premises located at 770 Linden
Avenue, Rochester, New York 14625, and

         WHEREAS, LINDEN PROPERTIES, with offices at 3 Townline Circle,
Rochester, New York 14623, hereinafter designated as LANDLORD has leased the
building from OWNER, and

         WHEREAS, MAGNETIC TECHNOLOGIES CORPORATION, with offices at 770 Linden
Avenue, Rochester New York 14625, hereinafter designated as TENANT, wishes to
sublet certain premises from Landlord;

         NOW, THEREFORE,

                                  WITNESSETH:

         The Landlord hereby leases to Tenant and Tenant hereby hires from
Landlord approximately 70,000 square feet of space in the building located at
770 Linden Avenue, Rochester New York 14625, as set forth on Schedule "A"
attached hereto and made a part hereof, for a term of ten years to commence
November 1, 1996 and expire October 31, 2006.

1.       RENT

         Tenant covenants and agrees to pay to Landlord, at Landlord's office, 3
Townline Circle, Rochester, New York 14623, or at such other place as Landlord
may from time to time designate in writing, the annual rent as follows:

<TABLE>
<CAPTION>
               Term                 Annual Rent      Monthly Rent
               ----                 -----------      ------------
<S>                                 <C>              <C>       
          11/1/1996-10/31/2000      $395,752.00      $32,979.35
          11/1/2000-10/31/2003       414,033.00       34,502.75
          11/1/2003-10/31/2006       433,227.00       36,102.25
</TABLE>

The rent shall be paid in equal monthly installments, as shown above, in advance
on the first day of each month of the term, together with any additional rent or
other charges which may be due the Landlord.

         The rent shall be paid to the Landlord without notice or demand and
without abatement, deduction or setoff except as otherwise specifically provided
in the Lease. Nothing contained in the Lease shall require the Tenant to pay any
franchise, corporate, estate, inheritance, succession, capital levy or transfer
tax of the Landlord, or any income, profits or revenue tax, or any other tax,
assessment, charge or levy upon the rent payable by the Tenant under this Lease.


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2.       LATE CHARGES

         If any installment of rent or any other amount due from the Tenant is
not received by the Landlord within ten (10) days after the first of the month
in the case of rent, or within fifteen days after receipt of notice and demand,
in the case of other charges the Tenant will pay to the Landlord a late charge
equal to 4% of such overdue amount. The late charge represents a fair and
reasonable estimate of the cost the Landlord will incur by reason of the late
payment. Acceptance of the late charge by the Landlord will not constitute a
waiver of the Tenant's default with respect to such overdue amount nor prevent
Landlord from exercising any other remedies granted hereunder. If a late charge
is payable hereunder, whether or not collected for three consecutive
installments of rent, then rent will automatically become due and payable
quarterly in advance, rather than monthly in advance, notwithstanding any other
provision of this Lease to the contrary. Furthermore, in the event that the late
charge is payable hereunder, whether or not collected for three consecutive
installments of rent, or any other monetary obligation of the Tenant under the
terms of this lease is not paid when due, the Tenant will pay to the Landlord,
if the Landlord shall so request, a monthly advance installment payable at the
same time as the monthly rent as estimated by the Landlord to cover real
property taxes and other charges which are payable by the Tenant under the terms
of this lease. Such funds will be used to insure payment when due before
delinquency of real property taxes and other charges.

3.       USE

         The Leased Property will be used only for the permitted use and such
other use which is reasonably comparable. The use of the Leased Property by the
Tenant will be subject to all governmental codes, regulations, ordinances and
restrictions of record. The Tenant will not use the Leased Property for any
purpose or in any manner which would be reasonably objectionable to the
Landlord, or which would prevent the Landlord from obtaining insurance.

4.       CONDITION OF LEASED PROPERTY

         Unless otherwise specified herein, the Tenant accepts the Leased
Property in its existing condition. No representation, statement or other
warranty, express or implied had been made by or on behalf of the Landlord as to
the condition of the Leased Property or the suitability of the Leased Property
for the conduct of the Tenant's business.

5.       REPAIRS

         The Landlord's obligation to maintain and repair the Leased Property
will be limited to the exterior walls, foundations, roofs, driveways and parking
areas. Except for the foregoing, the Tenant will have complete responsibility to
maintain and repair the Leased Property including, without limitation, all
plumbing, heating, air conditioning, electrical, lighting fixtures, equipment,
ceilings, floors, windows, doors and plate glass located within the Leased
Property. All repairs will be of a quality and class at least equal to the
original work. If the Tenant fails to perform its obligations hereunder, The
Landlord may elect to enter the Leased Property after ten days' prior notice to
the Tenant, except in the case of emergency where 


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no notice will be required, and perform the obligations on the Tenant's behalf.
Upon the last day of the term of the Lease, or upon any sooner termination, the
Tenant will surrender the Leased Property to the Landlord in the same condition
as when received, ordinary wear excepted, clean and free of debris. The Tenant
will repair any damage to the Leased Property occasioned by the installation or
removal of the Tenant's fixtures, furnishings and equipment. Unless the Landlord
has elected that the Tenant remove such items, the Tenant will leave the air
lines, power panels, electrical distribution systems, lighting fixtures, space
heaters, air conditioning and plumbing in the Leased Property in good operating
condition.

6.       MAINTENANCE OF ROAD, YARD AND PARKING LOT; SNOW REMOVAL AND AREA 
         LIGHTING

         The Tenant shall be responsible for maintaining and removing snow from
the parking areas, driveways, and the entrances from the road leading to the
Leased Property and for yard maintenance and area lighting.

7.       COMPLIANCE BY TENANT WITH GOVERNMENTAL REQUIREMENTS

         Tenant shall, at Tenant's own cost and expense, promptly execute and
comply with all statutes, ordinances, rules, orders, regulations and
requirements of the Federal, State and local governments and of any and all of
their Departments and Bureaus as well as any orders and regulations of the
National Board of Fire Underwriters or any other body exercising similar
functions, applicable to Tenant's use of the Leased Property, for the
correction, prevention and abatement of nuisances or other grievances connected
with Tenant's use of the Leased Property during the term, except where a
structural change is required.

8.       COMPLIANCE WITH ENVIRONMENTAL LAWS

         The Tenant acknowledges that the leased premises, the building in which
the leased premises are located and adjacent areas (the "Premises Area"), are
subject to federal and state environmental laws and regulations now in effect
that new environmental laws and regulations may be enacted applicable to the
Premises Area. The Tenant will comply with all applicable current and future
environmental laws and regulations and terms of all environmental permits issued
by any governmental agency to the Tenant. The Tenant will not dispose of any
hazardous substances or waste material other than in accordance with applicable
environmental laws and regulations. The Tenant promptly will furnish the
Landlord with a copy of any notice from any governmental agency with respect to
any environmental matter. The Tenant will be responsible for investigation,
inspection and cleanup of all hazardous substances and waste materials that are
determined to be present at the Premises Area by reason of the Tenant's
activities in accordance with applicable environmental laws and regulations. If
the Landlord, in good faith, believes that a potential environmental problem
exists by reason of the Tenant's activities, the Landlord may require that an
environmental inspection and audit be undertaken at the Tenant's expense. The
Tenant will indemnify and hold the Landlord and its successors and assigns
harmless from any claim, loss, damage and expense, including professional and
counsel fees and expenses, resulting from the use of the leased premises by the
Tenant in violation of applicable environmental


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laws and regulations and the failure to promptly and diligently take such action
with respect to environmental liabilities including investigation, containment,
removal and cleanup and other remedial action required under applicable
environmental laws and regulations. The liability of the Tenant hereunder will
not be affected by the amendment, extension or termination of this lease, the
invalidity or unenforceability of any provision herein, the sale of the building
in which the leased premises are located, any investigation made by the Landlord
or others or any other circumstance which might be a legal or equitable defense
available to the Tenant.

         9.       TAXES

         Tenant shall pay before the same become delinquent any and all real
estate taxes and other taxes, assessments and other levies assessed, levied or
made against the Leased Property, the building and land of which the Leased
Property is a part and Landlord's personal property therein or thereon.

         10.      UTILITIES

         The Tenant will pay for all water, gas, oil, electricity, pollution,
pure water and other environmental control charges and telephone and other
services supplied to the Leased Property together with any taxes thereon. The
Landlord will not be liable for the interruption of any utilities or other
services.

         11.      REVIEW OF ASSESSMENTS

         Tenant shall have the right to contest or review by legal proceedings
or in such other manner as may be legal (which, if instituted, shall be
conducted promptly at Tenant's own expense and free of all expense to Landlord)
any tax, assessments, water rent or charge, or other governmental imposition
aforementioned upon condition that, before instituting any such proceedings,
Tenant shall pay (under protest) such tax, assessment, water charge or other
governmental imposition duties, and charges aforementioned. In such event, the
Landlord will offer no objections and at the request of Tenant, but without
expense to the Landlord, will cooperate with the Tenant.

         Landlord, at Landlord's option, may, but shall not be obligated to,
contest or review by legal proceedings, or in such manner as may be legal, and
at Landlord's own expense, any tax, assessment, water rent or charge, or other
governmental imposition aforementioned, which shall not be contested or
reviewed, as aforesaid, by Tenant and unless Tenant shall promptly join with
Landlord in such contest or review, Landlord shall be entitled to receive and
retain any refund payable by the governmental authority with respect thereto.

         12.      ASSIGNMENT

         The Tenant will not voluntarily or by operation of law assign,
transfer, mortgage, sublet or otherwise encumber all or part of the Tenant's
interest in this Lease or in the Leased Property without Landlord's prior
consent, which the Landlord will not unreasonably withhold.



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The Landlord will respond to Tenant's request for consent hereunder in a timely
manner. Any attempted assignment, transfer, mortgage, subletting or encumbrance
without the consent of the Landlord will be unenforceable and will constitute a
breach of this Lease. Consent to an assignment or subletting will not release
the Tenant of its obligations or alter the primary liability of the Tenant to
pay Rent and to perform all other obligations hereunder. The acceptance of Rent
by the Landlord from another person will not be deemed to be a waiver by
Landlord of any provision hereof. Consent to one assignment or subletting will
not be deemed consent to any subsequent assignment or subletting. In the event
of default by any assignee or successor of the Tenant in the performance of the
terms hereof, the Landlord may proceed directly against the Tenant without the
necessity of exhausting remedies against the assignee. The Landlord may consent
to subsequent assignments or subletting of this Lease or amendments or
modifications of this Lease with assignees of the Tenant without notifying the
Tenant or any successor of the Tenant and without obtaining consent thereto. In
the event that the assets of the Tenant are purchased by another corporation or
the Tenant shall merge with another corporation, such transaction shall not be
deemed to constitute an assignment, transfer or sublease hereunder.

         13.      ALTERATIONS

         The Tenant will not change or alter the exterior of the Leased Property
without first obtaining the Landlord's consent. The Tenant will not make any
alterations, other than interior non-structural alterations not exceeding $5,000
in cumulative cost, without first obtaining the Landlord's consent. Should the
Tenant make any alterations without the required approval of the Landlord, the
Landlord may require that the Tenant remove the alterations immediately at the
Tenant's expense. Detailed plans for any alterations will be furnished to the
Landlord for approval. The Landlord's approval will be conditioned upon the
Tenant securing all governmental approvals required for the alterations. The
Landlord may require that the Tenant procure a completion bond in an amount of
100% of the estimated cost of the alterations. The Tenant will pay all claims
for labor or materials furnished, or claimed to have been furnished, to or for
the Tenant or for use in the Leased Property. Any lien filed against the Leased
Property for work or materials claimed to have been furnished to the Tenant will
be promptly satisfied or bonded against by the Tenant in a manner to the
reasonable satisfaction of the Landlord. The Tenant shall also defend for the
Landlord and at the Tenant's sole cost and expense, any action, suit or
proceeding which may be brought thereon or for the enforcement of the same, and
will pay any damages and satisfy and discharge any judgment entered therein and
save harmless the Landlord from any liability, claim or damage resulting
therefrom. Nothing in this Lease authorizing the Tenant to make repairs,
alterations, improvements and rebuilding shall authorize the Tenant to do any
act or make any contract with any contractor, subcontractor, or materialman
which shall in any way encumber or in any way affect the fee title of the
Landlord. At the expiration of this Lease, the Landlord may require the Tenant
to remove any or all of the alterations, including air lines, power panels,
electrical distribution systems, lighting fixtures, space heaters and similar
items at the expense of the Tenant and require the Tenant to restore the Leased
Property to its condition on the Lease Commencement Date. 


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         14.      INSURANCE

         The Landlord will obtain and keep in force policies of insurance
containing an "agreed amounts" provision covering loss or damage to the Leased
Property covering the amount of the full replacement value thereof, against all
perils, including fire, extended coverage, vandalism, malicious mischief and
special extended perils. The insurance policies will provide for payment of loss
thereunder to the Landlord or to the holders of mortgages on the Leased
Property. The Landlord will not insure the Tenant's fixtures, furniture,
equipment or tenant improvements, unless the tenant improvements have become
part of the Leased Property. The Tenant will obtain and keep in force a policy
of combined single limit bodily injury and property damage insuring the Landlord
and Tenant against liability arising out of the ownership, occupancy and
maintenance of the Leased Property and all areas adjacent thereto with a single
policy limit in an amount not less than $1,000,000 per occurrence. The policy
will ensure performance by the Tenant of the indemnity provisions in this Lease,
but the limits of the insurance will not limit the liability of the Tenant
hereunder. The Tenant shall deliver to Landlord certificates of such insurance
or certified copies of the policy or policies. If Tenant's use of the Leased
Property increases the premiums on insurance required by this Lease, the Tenant
will reimburse the Landlord the amounts of additional insurance premiums.

         15.      INDEMNITY

         The Tenant will indemnify and hold the Landlord harmless against any
claim by or on behalf of any person arising from the Tenant's use of the Leased
Property or the conduct of its business, or from any activity permitted or
suffered in or about the Leased Property. The Tenant will further indemnify and
hold the Landlord harmless from any claim arising from any breach or default on
the Tenant's part and performance of any obligation to be performed under the
terms of this Lease or arising from any negligence of the Tenant or any of its
agents, contractors, employees or invitees and from all costs, reasonable
counsel fees, expenses and liabilities incurred in connection with any suit
brought against the Landlord by reason of any such claim. The Tenant, upon
notice from the Landlord, will defend such suit by counsel reasonably
satisfactory to the Landlord. The Tenant hereby assumes all risk of damage to
property or injury to persons in or about the Leased Property arising from any
cause and the Tenant hereby waives all claims with respect thereto against the
Landlord.

         16.      EXCULPATION

         The Landlord will not be liable for injury to Tenant's business or for
any loss of income or for damage to the inventory or other property of the
Tenant, its agents, employees or invitees, or any person in or about the Leased
Property. The Landlord will not be responsible for injury to the Tenant, its
agents, employees, contractors or invitees, whether such damage is caused by or
results from fire, breakage, leakage, obstruction or any other cause. Any
obligation on the Landlord's part to perform hereunder for the benefit of the
Tenant will not be deemed a breach if the Landlord is unable to perform by
reason of governmental regulation, accidents, strike, labor difficulties or any
other cause beyond the Landlord's control.

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         17.      CASUALTY

         In case of damage by fire or other casualty to the Leased Property, the
Landlord may elect to repair the damage. If the Landlord so elects, the damage
will be repaired with reasonable dispatch. If the damage has rendered the Leased
Property untenantable in whole or in part, there will be an equitable adjustment
in the Rent until the damage has been repaired. In determining what constitutes
reasonable dispatch, consideration will be given to delays caused by
construction problems, adjustments of insurance claims and other causes beyond
the Landlord's control. The Landlord will not be obligated to repair or replace
tenant's fixtures, furniture, equipment or tenant improvements. If the damage is
caused by the Tenant's negligence or willful conduct and is not covered by the
insurance required under this lease, the Tenant will reimburse the Landlord for
the entire cost of the repair of the Leased Property. If the Landlord does not
elect to repair the damage to the Leased Property, the Landlord may elect to
terminate this lease as of the date of the occurrence of the damage by giving
notice to the Tenant of its election to do so within sixty (60) days after the
date of the occurrence of the damage. Landlord or Tenant may cancel this Lease
on thirty (30) days notice, each to the other, in the event that more than 50%
of the Leased Property shall become untenantable.

         18.      RUBBISH REMOVAL

         The Tenant shall keep the Leased Property clean, at its own expense,
and will remove the garbage and other refuse from said premises. The Tenant
shall not burn any materials or rubbish of any description upon said premises.
Tenant agrees to keep all accumulated rubbish in covered containers and to have
same removed regularly. In the event the Tenant fails to keep the Leased
Property in the proper condition, the Landlord may cause the same to be done for
the Tenant, and the Tenant hereby agrees to pay the expense thereof on demand,
as additional rent.

         19.      NO ABATEMENT

         Except as may otherwise be specifically provided in this Lease, no
abatement, diminution, or reduction of the rent, or other charges, payable by
Tenant under this Lease, shall be claimed by or allowed to Tenant for any
inconvenience, interruption, cessation, or loss of business or otherwise caused
directly or indirectly by any event to which business operations may be normally
affected, or by priorities, rationing or curtailment of labor or materials, or
by war or any matter or thing resulting therefrom, or by any other causes beyond
the control of Landlord, nor shall this Lease be affected by any such causes.

         20.      INSPECTION

         Tenant shall permit Landlord or Landlord's agents to enter the Leased
Property at all reasonable hours for the purpose of inspecting the same, or of
making repairs that Tenant may neglect or refuse to make in accordance with the
terms, covenants, and conditions of this Lease, and also for the purpose of
showing the Leased Property to persons wishing to 


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purchase the same, and during the ninety (90) day period prior to the expiration
of this Lease shall permit inspection thereof by, or on behalf of, prospective
tenants.

         21.      DEFAULT

         The occurrence of one or more of the following events will constitute a
material default under this lease by the Tenant:

         a. The vacating or abandonment of the Leased Property by the Tenant.

         b. The failure of the Tenant to make payment of rent, additional rent,
or any other payment required to be made by the Tenant hereunder when due, where
the failure will continue for a period of ten (10) days after written notice
thereof is received by the Tenant.

         c. The failure of the Tenant to observe or perform any of the
provisions of this Lease to be observed or performed by the Tenant other than
described above where the failure will continue for a period of thirty (30) days
after notice thereof is received by the Tenant.

         d. The making by the Tenant of any arrangement or assignment for the
benefit of the creditors, the Tenant becoming a "debtor" as defined by the
bankruptcy laws, the appointment of a trustee or receiver to take possession of
substantially all of the Tenant's assets located in the Leased Property or the
Tenant's interest in this Lease, or the attachment, execution or judicial
seizure of substantially all of Tenant's assets located in the Leased Property
or of the Tenant's interest in this Lease.

         22.      REMEDIES

         In the event of a default by the Tenant, the Landlord may at any time
thereafter, without notice or demand and without limiting the Landlord in the
exercise of any right or remedy which Landlord may have by reason of such of the
default, take the following action:

         a. Terminate the Tenant's right to possession of the Leased Property by
any lawful means, in which case the Lease will terminate and the Tenant shall
immediately surrender possession of the Leased Property to the Landlord. In such
case, the Landlord shall be entitled to recover from the Tenant all damages
incurred by the Landlord by reason of the Tenant's default including, without
limitation, the cost of recovering possession of the Leased Property, the
expenses of re-letting, including any necessary renovation and alteration of the
Leased Property, reasonable attorney's fees and any real estate commission
actually paid and the worth, at the time of award by the court having
jurisdiction thereof, of the amount by which the unpaid rent for the balance of
the term after the time of the award exceeds the amount of the rental loss for
the same period that could be reasonably avoided.

         b. Maintain Tenant's right to possession, in which case this Lease will
continue in effect whether or not Tenant has abandoned the Leased Property. In
such event, the 


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Landlord will be entitled to enforce all of Landlord's rights and remedies under
this Lease, including the right to recover the rent as it becomes due hereunder.

         c. Pursue any other remedy now or hereafter available to the Landlord
under the laws of the State of New York. Unpaid installments of rent and other
unpaid obligations of the Tenant under the terms of the Lease will bear interest
from the date due at the maximum allowable by law.

         d. It is agreed between Landlord and Tenant that the respective parties
hereto shall, and hereby do, waive trial by jury in any action, proceeding or
counterclaim brought by either of the parties against the other on any matters
whatsoever arising out of, or in any way connected with, this Lease, the
Tenant's use or occupancy of said premises, and/or claim or injury or damage.

         23.      RIGHT TO MORTGAGE

         The Landlord reserves the right to subject and subordinate this Lease
at all times to the lien of any mortgage or mortgages now or hereafter placed
upon the Landlord's interest in the said Leased Property and on the land and
buildings of which the said property is a part or upon any buildings hereafter
placed upon the land of which the Leased Property forms a part. The Tenant
covenants and agrees to execute and deliver upon demand such further instrument
or instruments subordinating this Lease to the lien of any such mortgage or
mortgages as shall be desired by the Landlord and any mortgages or proposed
mortgages and provided, however, that under no circumstances shall Tenant's
rights and privileges under this Lease or any renewal thereof be diminished or
interfered with by any mortgagee, and provided, however, that any mortgagee
shall agree not to disturb Tenant in the event of Landlord's default.

         Landlord will cause any such mortgage or mortgages to contain
provisions requiring the mortgagee to mail to Tenant by certified mail a copy of
each notice of breach of covenant, default or foreclosure. Should Landlord fail
to make payment of any sum due on any mortgage which encumbers the Leased
Property, the Tenant shall have the right to pay such sum and to apply the money
so advanced on account of the next maturing rent payment due to the Landlord.

         24.      NO WAIVER BY LANDLORD

         Acceptance of rent or other charges after default in payment by the
Tenant, or any failure of Landlord to enforce the provisions of this Lease upon
any default by Tenant shall not be construed as creating custom or deferring
payment or as modifying in any way the terms of this Lease or as a waiver of
Landlord's right to terminate this Lease as herein provided, or otherwise to
enforce the provision hereof for any subsequent default.

         25.      CONDEMNATION

         If the Leased Property or any part is taken under the power of eminent
domain or sold under the threat of eminent domain, the Landlord may elect to
terminate this Lease as of the 



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date of the occurrence of the condemnation. Any award for the taking of all or
part of the Leased Property or any payment made under the threat of the exercise
of the power of eminent domain will belong to the Landlord. The Tenant will be
entitled to any award for the loss or damage to Tenant's trade fixtures,
removable personal property, moving expenses, business interruption or loss of
profit. In the event that this lease is not terminated by the Landlord by reason
of a condemnation, the Landlord, to the extent of severance damages received by
the Landlord in connection with the condemnation, will repair any damage to the
Leased Property caused by the condemnation. If more than 10% of the floor area
of the Leased Property or more than 25% of the parking areas of the Leased
Property is taken by condemnation, the Tenant may elect to terminate this Lease
as of the date of the occurrence of the condemnation by giving the Landlord
notice of the election to do so within 60 days after the occurrence of the
condemnation.

         26.      TENANT'S WAIVER OF RIGHT TO REDEEM

         The Tenant waives all rights to redeem under any law of the State of
New York.

         27.      NOTICES

         All notices, demands, and communications hereunder shall be served or
given by mail and, if intended for Landlord, shall be addressed to Landlord at 3
Townline Circle, Rochester, New York 14623, or to such other address as may be
requested by Landlord in writing, and if intended for Tenant, shall be addressed
to Tenant at 770 Linden Avenue, Rochester, New York 14625, or at such other
address as may be requested by Tenant in writing. Any notice given hereunder by
mail shall be deemed delivered when deposited in a United States general or
branch post office, enclosed in a prepaid wrapper and addressed as above
provided. All such notices shall be sent by certified or registered mail, return
receipt requested.

         28.      QUIET ENJOYMENT

         Landlord covenants that if, and so long as, Tenant pays the rent and
additional rent and other charges reserved by this Lease, and performs all the
terms, covenants and conditions of this Lease on the part of Tenant to be
performed, Tenant shall quietly enjoy the Leased Property.

         29.      CONSENT OF LANDLORD AND TENANT

         Landlord and Tenant agree that the consent on the part of either of
them required under any provision of this Lease will not be unreasonably
withheld.

         30.      SIGNS

         Tenant may install and maintain signs, indicating its business name
and/or activity in the Leased Property provided that Tenant obtains prior
written approval and consent of the 



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Landlord as to size, design and location of the sign on the premises, and
obtains any governmental approvals which may be required for the installation of
such signs.

         31.      LIMITATION ON PERSONAL LIABILITY

         The Tenant will look solely to the interest of the Landlord in the
Leased Property for the satisfaction of any claim against the Landlord. Should
the interest of the Landlord in the Leased Property be transferred, the Landlord
will be relieved from any liability to the Tenant with respect to any claim
arising after the transfer. In such event, the Landlord shall turn over to its
grantee all monies and security, if any, then held by Landlord on behalf of
Tenant and shall assign to such grantee all right, title and interest of
Landlord thereto, it being understood that the covenants and agreements
contained in this Lease on the part of Landlord to be performed shall, subject
as aforesaid, be binding on Landlord, its successors and assigns.

         32.      WAIVER OF SUBROGATION

         Landlord and Tenant each hereby agree that, to the extent permitted by
law and by their respective policies, neither of them shall be liable to the
other for damage or destruction to the Leased Property or the buildings of which
the Leased Property is a part or to any of the contents thereof, whether owned
by Tenant or Landlord, caused by events insured against or for which insurance
is required hereunder covering such damaged or destroyed property.

         33.      CONSTRUCTION

         This Lease contains all of the agreements of the parties relating to
this Lease or to the Leased Property. This Lease replaces all prior Leases and
Amendment thereto between the parties hereto, including a Lease dated October
18, 1993, and Amendment dated October 7, 1994, which Lease and Amendment are
hereby cancelled. There have been no representations made by the Landlord other
than as set forth herein. This Lease may not be modified except by a written
instrument duly executed by the parties. Receipt of rent with knowledge of a
default by the Tenant will not condone such default. The failure of the Landlord
to enforce any of the provisions herein for any length of time will not be
deemed a waiver of its rights set forth in this Lease, but such waiver may only
be made by an instrument in writing signed by the Landlord. Time is of the
essence with respect to all payments and performance required of the Tenant.
This Lease will bind and insure to the benefit of the parties and their
respective heirs and representatives, successors and assigns. The invalidity of
any provision will in no way affect the validity of any other provision. Either
party upon the request of the other will execute, acknowledge and deliver to the
other a memorandum of this Lease for recording purposes. No remedy or election
herein will be deemed exclusive but will, wherever possible, be cumulative with
all other remedies at law or in equity. This Lease will be governed by the laws
of the State of New York.


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<PAGE>   15



34.      INDUSTRIAL DEVELOPMENT BOND FINANCING

         Tenant acknowledges that Landlord has financed the construction of the
demised premises through Industrial Development Bonds as issued by the County of
Monroe Industrial Development Agency. Said bonds are issued in compliance with
Section 103 et seq. of the Internal Revenue Code of the United States. During
the term of this lease and any renewals thereof, Tenant covenants not to do
anything to affect the status of the bonds as tax exempt under the Internal
Revenue Code. If any action of Tenant shall result in the imposition of an
interest rate higher than the rate at which said bonds were issued then and in
that event the annual rental provided for hereof, shall be increased by the
amount of increase of annual debt service for such bonds.

         IN WITNESS WHEREOF, the parties hereunto set their hands and seals the
day and year first above written.

                                                  LINDEN PROPERTIES
                                                       LANDLORD


                                             By: /s/ Elliot Landsman
                                                --------------------------------


                                             MAGNETIC TECHNOLOGIES CORPORATION
                                                        TENANT


                                             By: /s/ Gordon H. McNeil
                                                -------------------------------


STATE OF NEW YORK          )
                           ) ss
COUNTY OF MONROE           )


         On the 4th day of November, 1996, before me personally came Elliott
Landsman, to me known and known to me to be the individual described in, and who
executed, the foregoing instrument, and he/she acknowledged to me that he/she
executed the same.


                                             /s/ Betty J. Sykes
                                             -----------------------------------
                                                       Notary Public
                                             BETTY J. SYKES
                                             Notary Public, State of New York
                                               Qualified in Ontario County
                                         12 Commission Expires Aug. 14, 1997  




<PAGE>   16


STATE OF NEW YORK          )
                           )ss:
COUNTY OF MONROE           )


         On the 5th day of November, 1996, before me personally came Gordon H.
McNeil to me known, who being by me duly sworn, did depose and say that he/she
resides at No. 44 Oak Meadow Trail, Pittsford, NY, that he/she is the President
and CEO of Magnetic Technologies Corporations, the corporation mentioned in,
and which executed, the foregoing instrument; that he/she knows the seal of said
corporation; that the seal affixed to said instrument is such corporate seal;
that it was so affixed by order of the Board of Directors of said corporation;
and that he/she signed his/her name thereto by like order.


                                                  /s/ Susan M. Weise
                                                  ------------------------------
                                                          Notary Public

                                              SUSAN M. WEISE, # 4804145
                                         NOTARY PUBLIC, State of N.Y. Monroe Co.
                                             My Commission Expires 5/31/98

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