Exhibit 10.27
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             MORTGAGE MODIFICATION AND EXTENSION AGREEMENT



     AGREEMENT, made the 28th day of August, 1997 between MSB BANK,
a federally chartered savings bank having its principal office at
35 Matthews Street, Goshen, New York 10924, hereinafter designated
as the party of the first part and as Mortgagee, and TOUCHSTONE
APPLIED SCIENCE ASSOCIATES, INC., a Delaware corporation with its
office for doing business at Fields Lane, PO Box 382, Brewster, New
York 10509-0382 hereinafter designated as the party of the second
part and as Mortgagor.

     WITNESSETH, that the party of the first part, the holder of
the following Mortgages and of the Notes executed thereby: 

     (a)  Mortgage dated May 15, 1991 made by Touchstone Applied
Science Associates, Inc. and Town of Southeast Industrial
Development Agency, Mortgagors to Barclay s Bank of New York, N.A.,
Mortgagee in the original principal sum of $400,000.00 and recorded
in the Putnam County Clerk s Office on May 16, 1991 in Liber 1391
MP 57, upon which there remains an outstanding principal balance of
$219,160.97 with interest thereon, payment for which has been
assumed by the party of the second part, which mortgage was
assigned by the Mortgagee, Barclay s Bank of New York N.A. to the
Bank of New York, Assignee by instrument of assignment dated March
31, 1993 and recorded March 1, 1994 in Liber 1886, MP 113 in the
Putnam County Clerk s Office;

     (b)  Gap Mortgage dated August 28, 1997 in the principal
amount of $1,580,839.03 plus interest thereon, intended to be
recorded in the Putnam County Clerk s Office simultaneously
herewith.  

     The Mortgagor herein has assumed the Mortgage recited in
Clause (a) above by agreement of assumption contained in the Deed
from Town of Southeast Industrial Development Agency to Touchstone
Applied Science Associates, Inc. dated August 26, 1997 and intended
to be recorded simultaneously herewith.  The liens of the prior
Mortgage and the Gap Mortgage executed simultaneously herewith are
hereby consolidated and coordinated so that together they shall
hereinafter constitute in law a valid and enforceable first lien
upon the mortgaged property securing the consolidated indebtedness
in the amount of $1,800,000.00, together with interest accrued and
to accrue thereon and all other sums secured thereby and the
Mortgagor hereby assumes and agrees to pay the consolidated
indebtedness and interest thereon at the rate of interest on the
terms provided for in that certain Amended and Restated Mortgage
Note dated the date hereof and made by the Mortgagor to the
Mortgagee (the "Amended and Restated Mortgage Note").

     The payment of this consolidated indebtedness of
$1,800,000.00, together with interest at the rate of EIGHT AND ONE
HUNDRED TWENTY FIVE ONE THOUSANDTHS (8.125%) PER CENT per annum
shall be paid, interest only, on the fifteenth (15th) day of
September, 1997 and thereafter, constant payments of principal and
interest on the 15th day of October, 1997 and on the 15th day of
each month thereafter until September 15, 2007, when the entire
remaining principal balance, plus accrued interest, shall become
fully due and payable, all in accordance with the Amended and
Restated Mortgage Note executed simultaneously herewith and
incorporated by reference herein.

     If the Amended and Restated Mortgage Note or any installment
of principal or interest becomes payable on a Saturday, Sunday or
public holiday under the laws of the State of New York, such
payment shall be extended to the next succeeding business day and
(except for interest payments) interest thereon shall be payable at
the rate herein specified during such extension.

     The whole of the principal sum of any part thereof, and of any
other sums of money secured by the Mortgage given to secure the
Note shall forthwith or thereafter, at the option of the party of
the first part, become due and payable if default be made in any
payment under this Agreement, or upon the happening of any default
which, by the terms of the Mortgage extended by this Agreement,
shall entitle the party of the first part to declare the same or
any part thereof to be due and payable; and all of the covenants,
agreements, terms and conditions of said Mortgage are hereby
incorporated herein with the same force and effect as if herein set
forth at length, excepting as herein modified.

     AND the party of the second part further covenants with the
party of the first part as follows:

     1.   That the party of the second part will pay the
indebtedness in full as hereinbefore provided.

     2.   In order more fully to protect the security of this
Mortgage together with, and in addition to, the monthly
installments of principal and interest payable under the terms of
the Note secured hereby, the Mortgagee, at its option, may demand
on ten (10) days written notice to the Mortgagors that the
Mortgagors will pay to the Mortgagee, as Trustee (under the terms
of this Trust as hereinafter stated), on the 1st day of each month
until the amount is fully paid, the following sums:

          (a)  a sum equal to 1/12th of the taxes and special
assessments next due on the premises covered by this Mortgage, plus
the premiums that will next become due and payable on policies of
fire and other hazard insurance on the premises covered hereby (all
as estimated by the Mortgagee as Trustee) less all sums already
paid therefor divided by the number of months to elapse before one
month prior to the date when such taxes, assessments and premiums
will become first payable, such sums to be held by the Mortgagee in
trust to pay such taxes, special assessments and premiums before
the same become delinquent;

          (b)  all payments mentioned in the preceding subdivision
of this Paragraph and all payments to be made on the Note secured
hereby shall be added together and the aggregate amount thereof
shall be paid by the Mortgagor each month in a single payment to be
applied by the Mortgagee to the following items in order named:

               1.   Taxes, assessments, water rates, fire and other
hazard insurance premiums if the Mortgagee has made a written
demand for monthly payments of taxes and/or insurance;

               2.   Interest on the Note secured hereby; and

               3.   Amortization of the principal of the Note;

          (c)  Any deficiency in the amount of such aggregate
monthly installment shall, unless made good by the Mortgagor prior
to the due date of the next such payment, constitute a default
under this Mortgage.  In the event that any installment shall
become overdue for a period in excess of ten (10)  days, a "late
charge" of five ($.05) cents for each dollar ($1.00) so overdue may
be charged by the holder hereof for the purpose of defraying the
expense incident to handling such delinquent payment.

     3.   If the total of the payments made by the Mortgagor under
Subdivision (b) of the preceding Paragraph shall exceed the amount
of payments actually made by the Mortgagee as Trustee or its
assigns for taxes, assessments, water rates or insurance premiums,
as the case may be, such excess shall be credited by the Mortgagee
as Trustee or its assigns on subsequent payments to be made by the
Mortgagor.  If, however, the estimated monthly payments made by the
Mortgagor under Subdivision (b) of the preceding Paragraph shall
not be sufficient to pay the taxes, assessments, water rates and
insurance premiums when the same shall become due and payable, then
the Mortgagor shall pay to the Mortgagee as Trustee or its assigns
any amount necessary to make up the existing deficiency according
to a revised estimated budget before the due date of the next
monthly payment.  If there shall be default under any provision of
this Mortgage and Mortgagee shall elect to declare the unpaid
principal immediately due and payable, Mortgagee as Trustee may
apply the amount then remaining to the credit of Mortgagor on
account of the unpaid interest and unpaid principal.

     4.   That the party of the second part will pay all taxes,
assessments, water rates and other governmental or municipal
charges, fines or impositions, for which provision has not been
made as hereinbefore stated and in default thereof the party of the
first part may pay the same; and that the party of the second part
will promptly deliver the official receipts therefor to the party
of the first part.

     5.   That no building on the premises shall be removed,
altered or demolished and no fixtures or personal property covered
by this Agreement shall be removed or demolished, without the
written consent of the party of the first part.  The party of the
second part, for himself, his heirs, and all subsequent owners of
said premises, covenants and agrees with the party of the first
part and the successors and assigns of the party of the first part,
that he will keep and maintain the mortgaged premises in a good and
complete state of repair and will promptly comply with all the
requirements of the Federal, State and Municipal governments or of
any departs or bureaus thereof having jurisdiction; and in default
thereof the party of the first part may enter said premises and
make such repairs as may be necessary or for the purpose of
complying with any governmental or departmental regulations or
requirements and the cost thereof shall be a lien on said premises
secured by this Agreement and shall be payable on demand with
interest at the maximum legal rate per annum then prevailing that
neither the value of the mortgaged premises nor the lien of the
Mortgage extended by this Agreement will be diminished or impaired
in any way by any act or omission of the party of the second part,
his heirs, or by any subsequent owner of said premises, and that he
will not do or permit to be done to, in, upon or about said
premises or any part thereof, anything that may in any wise
substantially impair the value thereof, or substantially weaken,
diminish or impair the security of the Mortgage extended by this
Agreement.

     6.   That the party of the second part warrants the title to
the premises.

     7.   That in the event of a foreclosure of this Mortgage said
premises may be sold in one parcel, any provision of law to the
contrary notwithstanding.

     8.   That the party of the second part will keep the buildings
now erected and hereafter  erected on said premises insured as may
be required by the party of the first part from time to time
against loss by fire and other hazards, casualties and
contingencies, in such amounts and in such companies, and for such
periods as the party of the first part shall require, and upon
failure to so insure the party of the first part may have such
insurance written and pay the premium thereon, and the principal
sum, together with the amount paid for such insurance, shall, at
the option of the party of the first part, immediately become due
and payable.  That the party of the second part will give immediate
notice by mail to the party of the first part of any fire, damage
or other casualty to the premises or of any conveyance, transfer or
change of ownership of the premises.  If the premises covered
hereby, or any part thereof, shall be damaged by fire or other
hazard against which insurance is held as hereinbefore provided,
the amounts paid by any insurance company pursuant to the contract
of insurance shall to the extent of the indebtedness then remaining
unpaid, be paid to the party of the first part, and, at its option,
may be applied to the debt or released for the repairing or
rebuilding of the premises.

     9.   That the whole of the said principal sum and of any other
sums of money secured by this Mortgage, extended by this Agreement
shall, forthwith or thereafter, at the option of the party of the
first part, become due and payable upon the happening of either of
the following events, irrespective of whether or not the same be
remedied by the party of the second part:

          (a)  Failure to pay in full any aggregate monthly payment
as required by the Amended and Restated Mortgage Note.

          (b)  Failure of the party of the second part to perform
or comply with any other covenant, agreement, term or condition of
the Mortgage, extended by this Agreement, or of the Note also
secured thereby in accordance with the terms hereof and thereof.

          (c)  Default in any payment of principal or interest of
any obligation for borrowed money other than the Amended and
Restated Mortgage Note, including but not limited to the term loan
of $300,000.00 executed contemporaneously herewith; or in the
performance of any other term, condition or covenant contained in
any agreement under which any such obligation is created, the
effect of which default is to cause or permit the holder of such
obligation to cause such obligation to become due and payable prior
to its stated maturity date.

          (d)  The default of any of the terms and conditions of
any of the Loan Documents executed by the party of the second part
and the expiration of any applicable cure periods contained
therein.

          (e)  Any event of default shall be automatically deemed
to be a demand for payment by the Obligee and the entire remaining
principal balance plus accrued interest shall become fully due and
payable.  Failure of the Bank to exercise said right of
acceleration on the due date of payment on the indebtedness
evidenced by, or indulgence granted by the holder to the Obligor
from time to time shall in no event be considered or otherwise
construed as a waiver of such right of acceleration or in any
manner prohibit holder from exercising such right.

     10.  In the event of the passage after the date of the
Mortgage, extended by this Agreement of any law of the State of New
York, deducting from the value of land for the purpose of taxation
any lien thereon, or changing in any way the laws for the taxation
of mortgages or debts secured by mortgage for State or local
purposes, or the manner of the collection of any such taxes, so as
to affect the Mortgage, extended by this Agreement, and the debt
secured by this Agreement, the party of the first part shall have
the right to give thirty (30) days written notice to the owner of
the mortgaged premises requiring the payment of the mortgage debt. 
If such notice be given the said debt shall become due, payable and
collectible at the expiration of said thirty (30) days.

     11.  That in the event of any default hereunder, the rents and
profits of said premises and all leases existing at the time of
such default are hereby assigned to the party of the first part as
further security for the payment of said indebtedness and the party
of the first part is hereby empowered upon such default to enter
upon and take possession of said premises and to let the said
premises and collect all the rents therefrom which are due or to
become due and to apply the same after payment of all necessary
charges and expenses, on account of said indebtedness.  A notice of
default and of the entry and taking possession of said premises by
the party of the first part, served upon the record owner of said
premises personally, or by mail addressed to such owner at his last
known address, shall be deemed to place the party of the first part
in possession of said premises.  The party of the second part, for
himself, his heirs and all subsequent owners of said premises,
further covenants and agrees that if the party of the second part
or any subsequent owner of said premises occupies the same when an
action or proceeding is commenced to foreclose the Mortgage
extended by this Agreement, such occupant shall be deemed to be the
tenant of the party of the first part and the party of the second
part or such subsequent owner agrees to pay in advance upon demand
to the holder of this Mortgage as a reasonable monthly rental for
the premises an amount equivalent to one-twelfth of the aggregate
of the twelve monthly installments payable in the then current
year, plus the actual amount of the taxes, assessments, water rates
and insurance premiums for such year not covered by the aforesaid
monthly payments and in default of so doing such party of the
second part or subsequent owner agrees to vacate and surrender the
possession of said premises and the party of the first part shall
be empowered upon such default to dispossess the party of the
second part or any subsequent owner of said premises by the usual
summary proceedings.  This covenant shall become effective
immediately after the happening of any such default, solely on the
determination of the then holder of this Mortgage, who shall give
notice of such determination to the party of the second part or
subsequent owner of the mortgaged premises. In case of foreclosure
and the appointment of a receiver of the rents, this covenant shall
inure to the benefit of such receiver.

     12.  That the party of the first part, its successors or
assigns, in any action to foreclose the Mortgage extended by this
Agreement, shall be entitled as a matter of right and without
regard to the value of the premises above described or the solvency
of the Mortgagor or of any owner of said premises, upon application
to any court having jurisdiction, to the appointment of a receiver
of the rents and profits of said premises and of the rental value
of the portions, if any, of said premises occupied by the owner at
the time being, which is to be fixed and which the owner agrees to
pay, without notice to the party of the second part, his heirs,
executors, administrators or assigns; and in such event the said
rents and profits and rental value are hereby assigned to the
holder of the Mortgage extended by this Agreement as further
security for the payment of the said indebtedness.  Upon the
appointment of such receiver and the fixing by the Court of rent
for the said premises and upon subsequent defaults by the Mortgagor
or any owner in possession, said receiver shall have the right to
institute and consummate proceedings to evict the said Mortgagor or
any owner in possession, and upon obtaining a warrant from the
Court of dispossession, he shall have the right to direct the
Sheriff to evict said Mortgagor or any owner in possession.

     13.  If any action or proceeding be commenced (including an
action or proceeding to foreclose the Mortgage extended by this
Agreement or to collect the debt secured thereby), to which action
or proceeding the holder of this Mortgage is made a party, or in
which it becomes necessary to defend or uphold the lien of this
Mortgage, all sums paid by the holder of this Mortgage for the
expense of any litigation to prosecute or defend the rights and
lien created by this Mortgage (including reasonable counsel fees),
shall be paid by the party of the second part, together with
interest at the highest permissible rate (as more particularly set
forth in the Amended and Restated Mortgage Note) and any such sum
and the interest thereon shall be a lien on said premises, prior to
any right, or title to, interest in or claim upon said premises
attaching or accruing subsequent to the lien of this Mortgage and
shall be deemed to be secured by the Mortgage extended by this
Agreement and by the Note which it secures.

     14.  That the party of the second part will not assign the
rents or any part of the rents of the mortgaged premises to any
third party without first obtaining the written consent of the
party of the first part to such assignment.

     15.  That the party of the second part will receive the
advances secured by the Mortgage extended by this Agreement and
will hold the right to receive such advances, as a trust fund to be
applied first for the purpose of paying the cost of improvement and
that he will apply the same first to the payment of the cost of
improvement before using any part of the total of the same for any
other purpose.

     16.  That the party of the second part within five days upon
request in person or within ten days upon request by mail will
furnish a statement of the amount due on this Mortgage.

     17.  That notice and demand or request may be in writing and
may be served in person or by mail, to be effective upon personal
delivery or if by mail, three (3) business days after deposit of
such notice and demand in the United States mail.

     18.  That any and all awards heretofore made and hereafter to
be made to the present and all subsequent owners of said premises,
including any award and awards for change of grade of any street
affecting said premises, which said award or awards are hereby
assigned to the party of the first part who is hereby authorized
and empowered to collect and receive such award and awards and to
give proper receipts and acquittances therefor and to apply the
same toward the payment of the amount owing on the Mortgage
extended by this Agreement, notwithstanding the fact that the
amount owing on the Mortgage extended by this Agreement, may not
then be due and payable; and the party of the second part for
himself, his heirs and all subsequent owners of said premises,
covenants and agrees with the party of the first part, its
successors and assigns, upon request by the holder of this Mortgage
extended by this Agreement, to make, execute and deliver any and
all assignments and other instruments sufficient for the purpose of
assigning said award and awards to the holder of the Mortgage,
extended by this Agreement, free, clear and discharged of any
encumbrances of any kind or nature whatsoever.

     19.  That all fixtures and articles of personal property, now
or hereafter attached to, or used in connection with the premises
shall be deemed to be and form a part of the realty and are covered
by the lien of the Mortgage, extended by this Agreement.

     20.  That the Mortgage extended by this Agreement, is and will
be maintained as a valid first lien on the premises.

     21.  This Agreement may not be changed or modified orally, but
only by an agreement in writing and signed by the party against
whom enforcement of any waiver, change, modification or discharge
is sought.

     22.  If more than one person joins in the execution of this
Mortgage, and if any be of the feminine sex, the relative words
herein shall be read as if written in the plural, or in the
feminine gender, as the case may be, and the words "party of the
second part" shall include their heirs, executors, administrators,
successors and assigns.

     23.  This Agreement shall be binding upon the heirs,
executors, administrators, distributees, successors and assigns of
the respective parties hereto.

     24.  That the party of the second part, in consideration of
the sum of one dollar paid, and in order to obtain this extension,
does hereby covenant and declare to the party of the first part and
to any subsequent holder of said Mortgage that said Mortgage is a
valid first lien on the premises therein described for the amount
of ONE MILLION EIGHT HUNDRED THOUSAND AND 00/100 ($1,800,000.00)
DOLLARS, with interest at the rate of EIGHT AND ONE HUNDRED TWENTY
FIVE ONE THOUSANDTHS (8.125%) PER CENT per annum and that there are
no defenses or offsets to said Mortgage, nor to the Note which it
secures, but all the provisions of said Note and Mortgage are
unmodified and in force except as the same are modified by this
Agreement; and the said party of the second part makes this
covenant and declaration to induce any subsequent holder of said
Bond and Mortgage to purchase the same in reliance thereon and
represents that said TOUCHSTONE APPLIED SCIENCE ASSOCIATES, INC.
now own the premises described in said Mortgage.

     25.  If the Mortgagor shall sell, transfer or otherwise
dispose of the mortgaged premises, or any part thereof, without the
prior consent in writing of the Mortgagee, the Mortgagee may, at
its election, declare the entire indebtedness hereby secured to be
immediately due and payable, without notice to the Mortgagor (which
notice the Mortgagor hereby expressly waives) and upon such
declaration the entire indebtedness hereby secured shall be
immediately due and payable, anything herein or in any Bond, Note
or obligation of the Mortgagor to the contrary notwithstanding.

     26.  Mortgagee shall have the right, from time to time, to
take action to recover any sum or sums which constitute a part of
the Debt as the same become due, without regard to whether or not
the balance of the Debt shall be due, and without prejudice to the
right of Mortgagee thereafter to bring an action of foreclosure, or
any other action, for a default or defaults by Mortgagor existing
at the time such earlier action was commenced.

     27.  Mortgagor hereby waives, to the extent permitted by law,
the benefit of all appraisement, valuation, stay, extension,
reinstatement and redemption laws now or hereafter in force and all
rights of marshaling in the event of any sale hereunder of the
Mortgaged Property or any part thereof or any interest therein.
Further, Mortgagor hereby expressly waives any and all rights of
redemption from sale under any order or decree of foreclosure of
this Mortgage on behalf of Mortgagor, and on behalf of each and
every person acquiring any interest in or title to the Mortgaged
Property subsequent to the date of this Mortgage and on behalf of
all persons to the extent permitted by applicable law.

     28.  Mortgagor hereby represents and warrants to Mortgagee
that, to the best of Mortgagor s knowledge, after due inquiry and
investigation: (a) the Mortgaged Property is not in direct or
indirect violation of any local, state, federal or other
governmental authority, statute, ordinance, code, order, decree,
law, rule or regulation pertaining to or imposing liability or
standards of conduct concerning environmental regulation,
contamination, or clean-up including, without limitation, the
Comprehensive Environmental Response, Compensation and Liability
Act, as amended ("CERCLA"), the Resource Conservation and Recovery
Act, as amended ("RCRA"), the Emergency Planning and Community
Right-to-Know Act of 1986, as amended, the Hazardous Substances
Transportation Act, as amended, the Solid Waste Disposal Act, as
amended, the Clean Water Act, as amended, the Clean Air Act, as
amended, the Toxic Substance Control Act, as amended, the Safe
Drinking Water Act, as amended, the Occupational Safety and Health
Act, as amended, any state super-lien and environmental clean-up
statutes and all regulations adopted in respect to the foregoing
laws (collectively, "Environmental Laws"); (b) the Mortgaged
Property is not subject to any private or governmental lien or
judicial or administrative notice or action or inquiry,
investigation or claim relating to hazardous and/or toxic,
dangerous and/or regulated, substances, wastes, materials, raw
materials, which include hazardous constituents, pollutants or
contaminants, including without limitation, petroleum, tremolite,
anthlophylie, actinolite or polychlorinated piphenyls and any other
substances or materials which are included under or regulated by
Environmental Laws or which are considered by scientific opinion to
be otherwise dangerous in terms of the health, safety and welfare
of humans (collectively "Hazardous Substances"); (c) no Hazardous
Substances are or have been (including the period prior to
Mortgagor s acquisition of the Mortgaged Property), discharged,
generated, treated, disposed of or stored on, incorporated in, or
removed or transported from the Mortgaged Property other than in
compliance with all Environmental Laws; (d) no Hazardous Substances
are present in, on or under any nearby real property which could
migrate to or otherwise affect the Mortgaged Property; and (e) no
underground storage tanks exist on any of the Mortgaged Property. 
So long as Mortgagor owns or is in possession of the Mortgaged
Property, Mortgagor (i) shall keep or cause the Mortgaged Property
to be kept free from Hazardous Substances and in compliance with
all Environmental Laws, (ii) shall promptly notify Mortgagee if
Mortgagor shall become aware of any Hazardous Substances on or near
the Mortgaged Property and/or if Mortgagor shall become aware that
the Mortgaged Property is in direct or indirect violation of any
Environmental Laws and/or if Mortgagor shall become aware of any
condition on or near the Mortgaged Property which shall pose a
threat to the health, safety or welfare of humans, (iii) shall
remove such Hazardous Substances and/or cure such violations and/or
remove such threats, as applicable, as required by law (or as shall
be required by Mortgagee in the case of removal which is not
required by law, but in response to the opinion of a licensed
hydrogeologist, licensed environmental engineer or other qualified
consultant engaged by Mortgagee ("Mortgagee s Consultant)),
promptly after Mortgagor becomes aware of same, at Mortgagor s sole
expense and (iv) shall comply with all of the recommendations
contained in the environmental report which was delivered to
Mortgagee in connection with the origination of the Loan.  Nothing
herein shall prevent Mortgagor from recovering such expenses from
any other party that may be liable for such removal or cure.  The
obligations and liabilities of Mortgagor under this Paragraph 28 shall
survive any termination, satisfaction or assignment of this
Mortgage and the exercise by Mortgagee of any of its rights or
remedies hereunder, including, without limitation, the acquisition
of the Mortgaged Property by foreclosure or a conveyance in lieu of
foreclosure.
     
     29.  Mortgagor represents and warrants that, to the best of
Mortgagor s knowledge, after due inquiry and investigation, no
asbestos or any substance or material containing asbestos
("Asbestos") is located on the Mortgaged Property except as may have
been disclosed in an environmental report delivered to Mortgagee
prior to the date of this Mortgage.  Mortgagor shall not install in
the Mortgaged Property, nor permit to be installed in the Mortgaged
Property, Asbestos and shall remove any Asbestos promptly upon
discovery to the satisfaction of Mortgagee, at Mortgagor s sole
expense.  Mortgagor shall, in all instances, comply with, and
ensure compliance by all occupants of the Mortgaged Property with,
all applicable federal, state, and local laws, ordinance, rules and
regulations with respect to Asbestos, and shall keep the Mortgaged
Property free and clear of any liens imposed pursuant to such laws,
ordinances, rules or regulations.  In the event that Mortgagor
receives any notice or advice from any governmental agency or any
source whatsoever with respect to Asbestos on, affecting or
installed on the Mortgaged Property, Mortgagor shall immediately
notify Mortgagee.  The obligations and liabilities of Mortgagor
under this Paragraph 29 shall survive any termination, satisfaction or
assignment of this Mortgage and the exercise by Mortgagee of any of
its rights or remedies hereunder, including but not limited to, the
acquisition of the Mortgaged Property by foreclosure or a
conveyance in lieu of foreclosure.

     30.  Mortgagor shall give prompt written notices to Mortgagee
of (a) any proceeding or inquiry by any party with respect to the
presence of any Hazardous Substance or Asbestos on, under, from or
about the Mortgaged Property; (b) all claims made or threatened by
any third party against Mortgagor or the Mortgaged Property
relating to any loss or injury resulting from any Hazardous
Substance or Asbestos; and (c) Mortgagor s discovery of any
occurrence or condition on any real property adjoining or in the
vicinity of the Mortgaged Property that could cause the Mortgaged
Property to be subject to any investigation or cleanup pursuant to
any Environmental Law.  Mortgagor shall permit Mortgagee to join
and participate in, as a party if it so elects, any legal
proceedings or actions initiated with respect to the Mortgaged
Property in connection with any Environmental Law or Hazardous
Substance, and Mortgagor shall pay all attorneys  fees and
disbursements incurred by Mortgagee in connection therewith.  Upon
Mortgagee s request, at any time and from time to time while this
Mortgage is in effect, Mortgagor shall provide (i) an inspection or
audit of the Mortgaged Property prepared by a licensed
hydrogeologist or licensed environmental engineer approved by
Mortgagee indicating the presence or absence of Hazardous
Substances on, in or near the Mortgaged Property, and (ii) an
inspection or audit of the Mortgaged Property prepared by a duly
qualified engineering or consulting firm approved by Mortgagee,
indicating the presence or absence of Asbestos on the Mortgaged
Property.  The cost and expense of such audit or inspection shall
be paid by Mortgagor not more frequently than once every five (5)
calendar years after the occurrence of a Secondary Market
Transaction unless Mortgagee, in its good faith judgment,
determines that reasonable cause exists for the performance of an
environmental inspection or audit of the Mortgaged Property, then
such inspections or audits described in the preceding sentence
shall be at Mortgagor s sold expense.  If Mortgagor fails to
provide any inspection or audit required pursuant to this Paragraph 30
within thirty (30) days after such request, Mortgagee may order
same, and Mortgagor hereby grants to Mortgagee and its employees
and agents access to the Mortgaged Property and a license to
undertake such inspection or audit.  The cost of such inspection or
audit may be added to the Debt and shall bear interest thereafter
until paid at the Default Rate.  In the event that any
environmental site assessment report prepared in connection with
such inspection or audit recommends that an operations and
maintenance plan be implemented for Asbestos or any Hazardous
Substance, Mortgagor shall cause such operations and maintenance
plan to be prepared and implemented at Mortgagor s expense upon
request of Mortgagee.  In the event that any investigation, site
monitoring, containment cleanup, removal, restoration or other work
of any kind is reasonably necessary or desirable under an
applicable Environmental Law (the "Remedial Work"), Mortgagor shall
commence and thereafter diligently prosecute to completion all such
Remedial Work within thirty (30) days after written demand by
Mortgagee for performance thereof (or such shorter period of time
as may be required under applicable law).  All Remedial Work shall
be performed by contractors approved in advance by Mortgagee, and
under the supervision of a consulting engineer approved by
Mortgagee.  All costs and expenses of such Remedial Work shall be
paid by Mortgagor including, without limitation, Mortgagee s
reasonable attorneys  fees and disbursements incurred in connection
with monitoring or review of such Remedial Work.  In the event
Mortgagor shall fail to timely commence, or cause to be commenced,
or fail to diligently prosecute to completion, such Remedial Work,
Mortgagee may, but shall not be required to, cause such Remedial
Work to be performed and all costs and expenses thereof, or
incurred in connection therewith, may be added to the Debt and
shall bear interest thereafter until paid at the Default Rate.

     31.  Handicapped Access:

          (a)  Mortgagor agrees that the Mortgaged Property shall
at all times strictly comply to the extent applicable with the
requirements of the Americans with Disabilities Act of 1990, the 
Fair Housing Amendments Act of 1988, if applicable, all State and
local laws and ordinances related to handicapped access and all
rules, regulations, and orders issued pursuant thereto including,
without limitation, the Americans with Disabilities Act
Accessibility Guidelines for Buildings and Facilities (collectively
"Access Laws").

          (b)  Notwithstanding any provisions set forth herein or
in any other document regarding Mortgagee s approval of alterations
of the Mortgaged Property, Mortgagor shall not alter the Mortgaged
Property in any manner which would increase Mortgagor s
responsibilities for compliance with the applicable Access Laws
without the prior written approval of Mortgagee.  The foregoing
shall apply to tenant improvements constructed by Mortgagor or by
any of its tenants.  Mortgagee may condition any such approval upon
receipt of a certificate of Access Law compliance from an
architect, engineer or other person acceptable to Mortgagee.

          (c)  Mortgagor agrees to give prompt notice to Mortgagee
of the receipt by Mortgagor of any complaints related to violation
of any Access Laws and of the commencement of any proceedings or
investigations which relate to compliance with applicable Access
Laws.

     32.  In addition to any other indemnifications provided herein
or in the other Loan Documents, Mortgagor shall protect, defend,
indemnify and save harmless Mortgagee from and against all
liabilities, obligations, claims, demands, damages, penalties,
causes of action, losses, fines, costs and expenses (including,
without limitation, reasonable attorneys  fees and disbursements),
imposed upon or incurred by or asserted against Mortgagee by reason
of (a) ownership of this Mortgage, the Mortgaged Property or any
interest therein or receipt of any Rents; (b) any accident, injury
to or death of persons or loss of or damage to property occurring
in, on or about the Mortgaged Property or any part thereof or on
the adjoining sidewalks, curbs, adjacent property or adjacent
parking areas, streets or ways; (c) any use, non-use or condition
in, on or about the mortgaged property or any part thereof or on
adjoining sidewalks, curbs, adjacent property or adjacent parking
areas, streets or ways; (d) any failure on the part of Mortgagor to
perform or comply with any of the terms of this Mortgage; (e)
performance of any labor or services or the furnishing of any
materials or other property in respect of the Mortgaged Property or
any part thereof; (f) the presence, disposal, escape, seepage,
leakage, spillage, discharge, emission, release, or threatened
release of any Hazardous Substance or Asbestos on, from, or
affecting the Mortgaged Property; (g) any personal injury
(including wrongful death) or property damage (real or personal)
arising out of or related to such Hazardous Substance or Asbestos;
(h) any lawsuit brought or threatened, settlement reached, or
government order relating to such Hazardous Substance or Asbestos;
(i) any violation of the Environmental Laws, which are based upon
or in any way related to such Hazardous Substance or Asbestos
including, without limitation, the costs and expenses of any
Remedial Work, attorney and consultant fees and disbursements,
investigation and laboratory fees, court costs and litigation
expenses; (j) any failure of the Mortgaged Property to comply with
any Access Laws; (k) any representation or warranty made in the
Note, this Mortgage or any of the other Loan Documents being false
or misleading in any material respect as of the date such
representation or warranty was made; (l) any claim by brokers,
finders or similar persons claiming to be entitled to a commission
in connection with any Lease or other transaction involving the
Mortgaged Property or any part thereof under any legal requirement
or any liability asserted against Mortgagee with respect thereto;
and (m) the claims of any lessee of any or any portion of the
Mortgaged Property for any person acting through or under any
lessee or otherwise arising under or as a consequence of any Lease. 
Any amounts payable to Mortgagee by reason of the application of
this paragraph shall be secured by this Mortgage and shall become
immediately due and payable and shall bear interest at the Default
Rate from the date of loss or damage is sustained by Mortgagee
until paid.  The obligations and liabilities of mortgagor under
this Paragraph 32 shall survive the termination, satisfaction, or
assignment of this Mortgage and the exercise by Mortgagee of any of
its rights or remedies hereunder, including, but not limited to,
the acquisition of the Mortgaged Property by foreclosure or a
conveyance in lieu of foreclosure.

     33.  That if the mortgaged premises shall be abandoned or
vacated by the Mortgagors or any successors in title, the Mortgagee
shall be entitled to take possession of the same to protect and
conserve its security.

     34.  The Obligor may prepay the obligation secured by this
Agreement at any time provided that it notifies the Mortgagee
within thirty (30) days of its intent to do so and pays the
following prepayment fees:
     
          (a)  Prepayment for years 1 through 3 of the Mortgage (up
to 36 months from the execution of the Note) the Mortgagor shall be
required to pay a prepayment fee of three (3%) percent of the
principal prepayment made on the mortgage at the time of
prepayment.
     
          (b)  Any prepayment after the third anniversary date of
the Mortgage until the maturity date of the Mortgage shall require
the Obligor to pay a prepayment fee of one (1%) percent of the
principal prepayment made on the Mortgage at the time of payment.

     35.  The Mortgagee by its duly authorized agent or agents
shall have the right to enter into and upon said premises or any
part thereof at all reasonable hours for the purpose of examining
same and if denied or refused the right to enter into such premises
or any part thereof for the purposes herein provided by the
Mortgagors, its agents, servants, employees or licensees or if
interfered with upon making said examination, the whole of said
principal sum shall become due at the option of the Mortgagee.

     36.  It is agreed that all additions or replacements of any
chattel, fixture or article of personal property presently
installed or to be installed in the future on the mortgaged
premises in connection with the operation of the business as
presently operated on the premises are intended to be and shall be
deemed to be permanently installed and integrated onto the premises
as real property now covered by the lien of this Mortgage.  The
Mortgagors hereby authorize the Mortgagee to file any financing
statements necessary under the Uniform Commercial Code in order to
protect its security interest without requiring the signature of
the Mortgagors herein.

     37.  Upon payment in full of the indebtedness secured by this
Mortgage, the Mortgagors shall be entitled to a Satisfaction of
Mortgage which shall be prepared by the attorneys for the
Mortgagee, at the sole cost and expense of the Mortgagors.

     38.  The Mortgagor agrees that it shall not further mortgage,
pledge, transfer, assign or otherwise encumber the property covered
by the lien of this mortgage without the prior written approval of
the Mortgagee.

     39.  The Mortgagor shall submit to the Mortgagee its quarterly
10K report, which it is required to file pursuant to the Rules of
the Securities and Exchange Commission as a public company. 
Mortgagor shall also submit, annually, its annual required 10K
report and all reports shall be delivered within ninety (90) days
from the close of the Mortgagor s fiscal quarter or fiscal year. 
In the event the Mortgagor is no longer required to file these 10K
reports, Mortgagor shall be obligated to provide such quarterly and
annual reports as required by the Mortgagee.

     40.  Mortgagor agrees that it shall maintain a bank account
with the Mortgagee and maintain sufficient funds in said account so
that all payments due under this Consolidated and Extended Mortgage
and the Amended and Restated Mortgage Note shall be automatically
debited from the account on its due date.  A failure by the
Mortgagor to maintain an account with sufficient funds to pay the
amount due under this obligation on its due date shall be deemed an
Event of Default.

     41.  This Mortgage agreement and all Loan Documents pertaining
hereto shall be construed in accordance with the Laws of the State
of New York.

     42.  The Mortgagor hereby mortgages unto the Mortgagee all
that certain plot, piece or parcel of land situate, lying and being
in the Town of Southeast, County of Putnam and State of New York as
more accurately bound and described on Schedule "A" annexed hereto
and made a part hereof.

     IN WITNESS WHEREOF, this Agreement has been duly executed by
the parties hereto.



IN PRESENCE OF:               TOUCHSTONE APPLIED SCIENCE 
                              ASSOCIATES, INC.    



                              BY:  /s/ ANDREW L. SIMON
                                   ---------------------------
                                   ANDREW L. SIMON, PRESIDENT



                              MSB BANK



                              BY:  /s/ SALVATORE BELFIGLIO
                                   ---------------------------
                                   SALVATORE BELFIGLIO
                                   ASSISTANT VICE PRESIDENT

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

     On the 28 day of August, 1997 before me personally came ANDREW
L. SIMON, to me known, who, being by me duly sworn, did depose and
say that he resides at No. Hunterbrook Rd, Yorktown Hts, NY 10598
that he is the President of TOUCHSTONE APPLIED SCIENCE ASSOCIATES,
INC., the corporation described in and which executed the foregoing
instrument; and that he signed his name thereto by order of the
Board of Directors.




                                   /s/ MAUREEN CRUSH
                                   ---------------------------
                                   Notary Public

                                   MAUREEN CRUSH
                                   Notary Public, State of New York
                                   No. 4892935
                                   Qualified in Greene County
                                   Commission Expires 4/13/99
STATE OF NEW YORK   )
                    ) ss.:
COUNTY OF ORANGE    )

     On the 28 day of August, 1997 before me personally came
SALVATORE BELFIGLIO to me known, who, being by me duly sworn, did
depose and say that he has offices at No. 35 Matthews Street,
Goshen, New York that he is the Assistant Vice President of MSB
BANK, the corporation described in and which executed the foregoing
instrument; and that he signed his name thereto by order of the
Board of Directors.




                                   /s/ LINDA J. BERTHIAUME
                                   --------------------------
                                   Notary Public

                                   LINDA J. BERTHIAUME
                                   Notary Public, State of New York
                                   No. 01DI5024690
                                   Qualified in Orange County
                                   Commission Expires 3-14-98

P - 15960
E - 190627
                            SCHEDULE A



ALL that certain plot, piece or parcel of land, situate, lying and
being in the Town of Southeast, County of Putnam and State of New
York, known and designated as Lot NO. 4 as shown on a certain map
entitled, 'SUBDIVISION PLAT OF HARDSCRABBLE HEIGHTS SITUATE IN THE
TOWN OF SOUTHEAST, COUNTY OF PUTNAM, STATE OF NEW YORK', dated July
9, 1985, revised August 6, 1985 and revised October 3, 1985, filed
October 22, 1985 in the Putnam County Clerk's Office, as Map No.
2088, being bounded and described as follows:

BEGINNING at a point in the southerly line of Field's Lane being
the northwesterly corner of Lot No. 4 herein described and the
northeasterly corner of Lot No. 5 as shown on the above referenced
map;

Thence following the southerly line of Field's Lane, North 84o
48' 00" East a distance of 44.76 feet to a point of curvature, said
point being the intersection of the line of Lot No. 4 and the
southwesterly line of Hardscrabble Heights Drive;

Thence following the southwesterly line of Hardscrabble Heights
Drive on a curve to the right having a radius of 52.58 feet, a
distance of 74.20 feet to a point of reverse curvature;

Thence along a curve to the left having a radius of 225.00 feet a
distance of 186.50 feet to a point of tangency;

Thence South 61o  50' 00" East a distance of 157.20 feet to a point
being the northeasterly corner of Lot No. 4 and the northwesterly
corner of Lot No. 6;

Thence along the line of Lot No. 6 and leaving the southwesterly
line of Lot No. 6 and leaving the southwesterly line of
Hardscrabble Heights Drive, South 04o  40' 00" West a distance of
241.88 feet to a point in the line of Lot No. 9;

Thence along Lot No. 9, North 85o  20' 00" West a distance of 370.00
feet to a point in the line of Lot No. 5;

Thence along Lot No. 5 North 04o  40' 00" East a distance of 464.63
to the point and place of BEGINNING.