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                                   EXHIBIT D-3

                      FORM OF AMENDED AND RESTATED MORTGAGE


                                               State:         Site No(s).:      
                                                     ---------            ------

               AMENDED AND RESTATED MORTGAGE, LEASEHOLD MORTGAGE,
               SECURITY AGREEMENT, ASSIGNMENT OF LEASES AND RENTS
                               AND FIXTURE FILING


Mortgagor:   PAYLESS CASHWAYS, INC.
             2300 Main Street
             Kansas City, Missouri  64108


Mortgagee:   CANADIAN IMPERIAL BANK OF COMMERCE,
               as Coordinating and Collateral Agent
             425 Lexington Avenue
             New York, New York  10017


Mortgage
  Amount:    $500,000,000



Date:        December 2, 1997



Premises:




Record and   SHOOK, HARDY & BACON L.L.P.
Return to:   1200 Main St., Suite 3000
             Kansas City, MO 64105
             Attn.: Richard D. Woods, Esq.


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     AMENDED AND RESTATED  MORTGAGE,  LEASEHOLD  MORTGAGE,  SECURITY  AGREEMENT,
ASSIGNMENT OF LEASES AND RENTS AND FIXTURE FILING, dated as of December 2, 1997,
by and between PAYLESS CASHWAYS, INC., a Delaware corporation,  having an office
at 2300 Main Street,  Kansas City,  Missouri 64108  ("Mortgagor"),  and CANADIAN
IMPERIAL  BANK OF  COMMERCE,  as  Coordinating  and  Collateral  Agent under the
Agreement (as hereinafter  defined),  having an office at 425 Lexington  Avenue,
New York, New York 10017 ("Mortgagee").

                                   DEFINITIONS

     Mortgagor  and  Mortgagee  agree  that all  capitalized  terms used but not
defined  herein are defined in or by reference to the  Agreement  and shall have
the same meanings herein as therein. Mortgagor and Mortgagee further agree that,
unless the context  otherwise  specifies or requires,  the following terms shall
have the meanings herein specified, such definitions to be applicable equally to
the singular and the plural forms of such terms.

     "Agreement"  means that certain Amended and Restated Credit Agreement dated
as of December 2, 1997, by and among Mortgagor,  the signatory  Lenders thereto,
the  Underwriters,  U.S.  Bank National  Association,  as a Fronting  Bank,  and
Canadian  Imperial Bank of Commerce,  as a Fronting Bank and as Coordinating and
Collateral  Agent for the Lenders,  the Fronting Banks, the Underwriters and the
other Secured  Parties,  together  with any future  amendments,  amendments  and
restatements, extensions, modifications or supplements thereto or thereof.

     "Bankruptcy Case" means In re Payless Cashways,  Inc., Case No. 97-50543 in
the Bankruptcy Court.

     "Bankruptcy Code" means 11 U.S.C. ss.101 et seq.

     "Bankruptcy Court" means the United States Bankruptcy Court for the Western
District of Missouri.

     "Bankruptcy  Reorganization  Plan" means Payless' plan of reorganization in
the Bankruptcy Case, as confirmed by the Bankruptcy Court.

     "Default" means Default, as that term is defined in the Agreement.

     "Default  Rate" means the rate of interest  specified in Section  2.8(a) of
the Agreement.


    "DIP Agent" means the DIP Agent, as that term is defined in the Agreement.



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     "DIP Credit  Agreement" means the Revolving Credit  Agreement,  dated as of
July 21, 1997,  among  Payless,  as a  Debtor-in-Possession,  the  Lenders,  the
Underwriters and the Fronting Banks party thereto and Canadian  Imperial Bank of
Commerce,  as Coordinating and Collateral  Agent,  together with any amendments,
amendments and restatements, extensions, modifications or supplements thereto or
thereof prior to the date of the Agreement.

     "DIP Obligations" means the DIP Obligations, as that term is defined in the
Agreement.

     "Event of Default" means the events and circumstances  described as such in
Article II hereof.

     "Fixtures"  means  all of  Mortgagor's  right,  title and  interest  in all
furniture,  furnishings,  partitions,  screens, awnings, venetian blinds, window
shades, draperies,  carpeting, pipes, ducts, conduits, dynamos, motors, engines,
compressors,  generators,  boilers, stokers,  furnaces, pumps, tanks, elevators,
escalators,  vacuum  cleaning  systems,  call systems,  switchboards,  sprinkler
systems,  fire  prevention  and  extinguishing  apparatus,   refrigerating,  air
conditioning,   heating,   dishwashing,   plumbing,   ventilating,  gas,  steam,
electrical and lighting  fittings and fixtures,  licenses or permits of any kind
and all building  materials,  equipment and goods now or hereafter  delivered to
the Premises (hereinafter defined) and intended to be installed therein, and all
other machinery, fixtures, tools, implements,  apparatus, appliances, equipment,
goods,  facilities  and other  personal  property of similar  character in which
Mortgagor now has, or at any time hereafter acquires,  an interest and which are
now or  hereafter  affixed  or  attached  to,  or used in  connection  with  the
enjoyment,  occupancy  and/or  operation of, all or any portion of the Premises,
together with all renewals, replacements and substitutions thereof and additions
and accessions thereto and the proceeds of all of the foregoing items.

     "Fronting  Banks" means the Fronting  Banks, as that term is defined in the
Agreement.

     "Improvements"  means all  buildings,  structures  and  other  improvements
presently  existing or hereafter  constructed on the land described in Exhibit A
attached hereto.

     "Lease" has the meaning ascribed to such term in Section 3.01 hereof.

     "Leasehold" has the meaning ascribed to such term in paragraph "F" of the
Granting Clause, below.

     "Leasehold Interest" has the meaning ascribed to such term in paragraph "F"
of the Granting Clause, below.

     "Lenders" means the Lenders, as that term is defined in the Agreement.

     "Lessee" has the meaning ascribed to such term in Section 3.01 hereof.


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     "Loan Documents"  means the Loan Documents,  as that term is defined in the
Agreement.

     "Loans" means the Loans, as that term is defined in the Agreement.

     "Mortgage" means this Amended and Restated  Mortgage,  Leasehold  Mortgage,
Security  Agreement,  Assignment of Leases and Rents and Fixture Filing together
with  any  future   amendments,   amendments   and   restatements,   extensions,
modifications or supplements hereto or hereof.

     "Mortgage  Amount" means an aggregate  principal amount  outstanding at any
time not to exceed $500,000,000.

     "Mortgaged  Property" has the meaning ascribed to such term in the Granting
Clause, below.

     "Notes" means the Notes, as that term is defined in the Agreement.

     "Payless" means Payless Cashways, Inc., an Iowa corporation.

     "Post-Petition Mortgage Liens" has the meaning ascribed to such term in the
fifth WHEREAS clause, below.

     "Pre-Petition  Agent" means the Pre-Petition Agent, as that term is defined
in the Agreement.

     "Pre-Petition  Credit  Agreement"  means the  Amended and  Restated  Credit
Agreement  dated as of  October  3,  1996,  by and among  Payless,  the  lenders
signatory thereto,  Canadian Imperial Bank of Commerce, as letter of credit bank
and as  administrative  and  collateral  agent,  and The  Bank  of Nova  Scotia,
NationsBank of Texas,  N.A. and Bank of America  National Trust and Savings,  as
co-agents,   together  with  any   amendments,   amendments  and   restatements,
extensions, modifications or supplements thereto or thereof prior to the date of
the Agreement.


     "Pre-Petition  Mortgage" has the meaning ascribed to such term in the third
WHEREAS clause, below.

     "Pre-Petition Obligations" means the Pre-Petition Obligations, as that term
is defined in the Agreement.

     "Premises"  means the land described in Exhibit A annexed hereto,  together
with the Improvements  thereon or to be constructed thereon or therein,  and all
of the easements, rights, privileges and appurtenances thereunto belonging or in
anywise appertaining  thereto including,  but not limited to, all of the estate,
right, title,  interest,  claim or demand whatsoever of Mortgagor therein


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and in and to the strips and gores,  streets and ways adjacent thereto,  whether
in law or in equity, in possession or expectancy,  now or hereafter acquired and
also any other realty,  Leaseholds (hereinafter defined) or Fixtures encompassed
by the term "Mortgaged Property", elsewhere herein defined.

     "Rents" has the meaning ascribed to such term in Section 3.01 hereof.

     "Secured  Obligations"  has  the  meaning  ascribed  to  such  term  in the
paragraph entitled "Secured Obligations" below.

     "Secured  Parties"  means Secured  Parties,  as that term is defined in the
Agreement.

     "Underwriters"  means  Underwriters,   as  that  term  is  defined  in  the
Agreement.

                              W I T N E S S E T H :

     WHEREAS, on July 21, 1997, Payless filed a voluntary petition of bankruptcy
under Chapter 11 of the Bankruptcy Code in the Bankruptcy Court; and

     WHEREAS,  prior to the  commencement  of the Bankruptcy  Case,  Payless was
obligated  to certain of the  Lenders  pursuant  to,  among  other  things,  the
Pre-Petition Credit Agreement; and

     WHEREAS,  Payless'  obligations under the Pre-Petition Credit Agreement and
the other Credit  Documents (as defined in the  Pre-Petition  Credit  Agreement)
were  secured by, among other  things,  the  following  real  property  security
instruments (individually and collectively, the "Pre-Petition Mortgage"):

          (a)  the  Mortgage,   Leasehold   Mortgage,   Security  Agreement  and
     Assignment of Leases and Rents,  dated as of October 3, 1996, from Payless,
     as  mortgagor,   in  favor  of  Canadian  Imperial  Bank  of  Commerce,  as
     administrative   and  collateral  agent  under  the   Pre-Petition   Credit
     Agreement, as mortgagee, and recorded ________ ___, 1996, at Book ___, Page
     ____ of the real property records of _________ County, ___________; and

         (b) the Mortgage, Leasehold Mortgage, Security Agreement and Assignment
    of  Leases  and  Rents,  dated as of  October  3,  1996,  from  Payless,  as
    mortgagor, in favor of Canadian Imperial Bank of Commerce, as administrative
    and collateral agent under the Pre-Petition Credit Agreement,  as mortgagee,
    and recorded ________ ___, 1996, at Book ___, Page ____ of the real property
    records of _________ County, ___________; and



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         (c) the Mortgage, Leasehold Mortgage, Security Agreement and Assignment
    of  Leases  and  Rents,  dated as of  October  3,  1996,  from  Payless,  as
    mortgagor, in favor of Canadian Imperial Bank of Commerce, as administrative
    and collateral agent under the Pre-Petition Credit Agreement,  as mortgagee,
    and recorded ________ ___, 1996, at Book ___, Page ____ of the real property
    records of _________ County, ___________; and

         (d) the Mortgage, Leasehold Mortgage, Security Agreement and Assignment
    of  Leases  and  Rents,  dated as of  October  3,  1996,  from  Payless,  as
    mortgagor, in favor of Canadian Imperial Bank of Commerce, as administrative
    and collateral agent under the Pre-Petition Credit Agreement,  as mortgagee,
    and recorded ________ ___, 1996, at Book ___, Page ____ of the real property
    records of _________ County, ___________; and

     WHEREAS, during the Bankruptcy Case, Payless became obligated to certain of
the Lenders pursuant to the DIP Credit Agreement; and

     WHEREAS, pursuant to the orders of the Bankruptcy Court entered on July 21,
1997  and  August  20,  1997  in the  Bankruptcy  Case,  the DIP  Agent  and the
Pre-Petition  Agent were granted liens (the  "Post-Petition  Mortgage Liens") on
the  Mortgaged  Property  to secure  the  Pre-Petition  Obligations  and the DIP
Obligations; and

     WHEREAS,  as  contemplated  by  Payless'  Bankruptcy  Reorganization  Plan,
Payless  has  merged  with and into  Mortgagor,  with  Mortgagor  being the sole
surviving entity; and

     WHEREAS,   Canadian  Imperial  Bank  of  Commerce,   the  Coordinating  and
Collateral Agent under the Agreement and this Mortgage, is the same legal entity
as Canadian Imperial Bank of Commerce,  New York Agency,  the administrative and
collateral  agent under the  Pre-Petition  Credit Agreement and the Pre-Petition
Mortgage; and

     WHEREAS,  pursuant to the terms of the Bankruptcy  Reorganization  Plan and
the  Agreement,  the parties  have agreed to amend and restate the  Pre-Petition
Mortgage pursuant to this Mortgage in order,  among other things, (i) to reflect
the merger of Payless into  Mortgagor,  (ii) to secure  various  obligations  of
Mortgagor (as Payless' successor) in respect of the Pre-Petition Obligations and
the DIP Obligations,  and (iii) without duplication,  to secure all obligations,
whether now existing or hereafter  incurred or arising,  of Mortgagor  under the
Agreement,  the  Notes  and/or  the other  Loan  Documents,  including,  without
limitation, the Secured Obligations; in each case as more particularly set forth
in the Agreement and this Mortgage; and

     WHEREAS,  Mortgagor  is the  actual,  record  and  beneficial  owner of the
Premises or owns an actual beneficial interest therein; and


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     WHEREAS,  Mortgagor has agreed pursuant to the terms of the Agreement,  the
Notes, and/or the other Loan Documents  evidencing the Secured Obligations to be
liable for the Secured Obligations; and

     WHEREAS,  the parties intend that the Secured  Obligations shall be secured
by this Mortgage;

                                 GRANTING CLAUSE

     NOW, THEREFORE,  Mortgagor,  in consideration of the premises, and in order
to secure the payment in full of the Mortgage Amount,  the Secured  Obligations,
all interest due thereon and all other costs and expenses and other  amounts due
hereunder and in respect of the Secured  Obligations,  and the  performance  and
discharge of all the provisions hereof, of the Secured Obligations and all other
Loan Documents, hereby gives, grants, bargains,  mortgages, pledges and grants a
security  interest to Mortgagee,  all of Mortgagor's  estate,  right,  title and
interest  in,  to and  under  any and all of the  following  described  property
whether now owned or hereafter  acquired (all such properties being collectively
referred to as the "Mortgaged Property"):

     A. All Mortgagor's right, title and interest in and to the Premises and all
right,  title  and  interest  of  Mortgagor  in and to the  Improvements  on the
Premises or to be constructed thereon and all Fixtures now or hereafter situated
in, on or about,  or affixed or attached to the  Improvements or the Premises or
any  building,  structure  or  other  improvement  now  or  hereafter  standing,
constructed  or placed upon or within the  Premises,  and all and  singular  the
tenements,  hereditaments,  easements,  rights-of-way or use, rights, privileges
and  appurtenances  to the  Premises,  now or hereafter  belonging or in anywise
appertaining  thereto,  including,  without  limitation,  any such right, title,
interest, claim and demand in, to and under any agreement granting, conveying or
creating, for the benefit of the Premises, any easement, right or license in any
way affecting  other  property and in, to and under any streets,  ways,  alleys,
vaults,  gores or strips of land adjoining the Premises,  or any parcel thereof,
and  all  claims  or  demands  either  in law or in  equity,  in  possession  or
expectancy, of, in and to the Premises.

     B.  All  right,  title  and  interest  of  Mortgagor  in and to all  awards
heretofore  made or hereafter to be made for the taking by eminent domain of the
whole or any part of the above  described  premises,  or any estate or  easement
therein,  including  any  awards for  change of grade of  streets,  all of which
awards are hereby assigned to Mortgagee, which Mortgagee is hereby authorized to
collect (unless provided  otherwise in the Agreement),  and receive the proceeds
of such  awards  and to give  proper  receipts  and  acquittances  therefor  and
Mortgagee  shall  have the right and  option to apply such  excess  towards  the
payment of any sum owing on account of this Mortgage and the Secured Obligations
secured thereby,  notwithstanding the fact that such sum may not then be due and
payable.

     C. The Fixtures and the products and proceeds thereof.



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     D. All present and future leases, subleases and licenses and any guarantees
thereof,  rents,  issues and  profits  and  additional  rents now or at any time
hereafter covering or affecting all or any portion of the Mortgaged Property and
all proceeds of, and all  privileges and  appurtenances  belonging or in any way
appertaining  to, the Mortgaged  Property,  or any part  thereof,  and all other
property  subjected  or required  to be  subjected  to the lien and/or  security
interest of this Mortgage,  including,  without  limitation,  all of the income,
revenues,   earnings,   rents,  maintenance  payments,   tolls,  issues,  awards
(including,  without limitation,  condemnation  awards and insurance  proceeds),
products  and  profits  thereof,  which  income,  revenues,   earnings,   rents,
maintenance  payments,  tolls, issues,  awards,  products and profits are hereby
expressly  assigned  with the right to take and  collect the same upon the terms
hereinafter  set forth;  and all the estate,  right,  title,  interest and claim
whatsoever,  at law and in  equity,  which  Mortgagor  now has or may  hereafter
acquire in and to the aforementioned property and every part thereof;  provided,
that so long as no Event of Default (as hereinafter defined) shall have occurred
and be  continuing,  all such income,  revenues,  earnings,  rents,  maintenance
payments,  tolls,  issues,  awards,  products and profits  shall remain with and
under the control of Mortgagor except as otherwise  expressly provided herein or
in any other written agreement between Mortgagor and Mortgagee.

     E. All right, title and interest of Mortgagor in and to all agreements,  or
contracts,  now or  hereafter  entered  into for the sale,  leasing,  brokerage,
development,  construction, renovation, management, maintenance and/or operation
of the Premises (or any part  thereof),  including  all moneys due and to become
due thereunder,  and all permits, licenses, bonds, insurance policies, plans and
specifications relative to the construction and/or operation of the Improvements
upon the Mortgaged Property.

     F. All  right,  title and  interest  (including,  without  limitation,  all
present  and future  rights to  possession  and use,  and all present and future
options and other rights to renew and to purchase)  of  Mortgagor,  as lessee or
sublessee,  under any  leases,  subleases,  licenses,  occupancy  agreements  or
concessions  now in effect or to be entered into  hereafter  (collectively,  the
"Leasehold  Instruments") whereby Mortgagor has any right to the use, possession
or  occupancy  of  the   Premises  or  any  part  thereof   (collectively,   the
"Leaseholds").

     G. All of Mortgagor's  claims and rights to the payment of damages  arising
from any rejection of a Leasehold or a Lease under or pursuant to the Bankruptcy
Code.

     H.  All  Mortgagor's  rights  and  remedies  at any time  arising  under or
pursuant to  Subsection  365(h) of the  Bankruptcy  Code,  11 U.S.C.  ss.365(h),
including, without limitation, all of Mortgagor's rights to remain in possession
of the Premises.

     I. Any other  property  and rights  which  are,  by the  provisions  of the
Agreement or any other Loan Document, required to be subject to the lien hereof,
and any  additional  property and rights that


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may from time to time hereafter by installation in or on the Mortgaged Property,
or by writing of any kind,  or  otherwise,  be  subjected  to the lien hereof by
Mortgagor or by anyone on its behalf.

     J. All proceeds of the conversion,  voluntary or involuntary, of any of the
foregoing  into  cash  or  liquidated  claims,  including,  without  limitation,
proceeds of insurance and condemnation awards, and all right, title and interest
of  Mortgagor in and to all unearned  premiums  accrued,  accruing and to accrue
under any or all insurance policies obtained by Mortgagor.

     TO  HAVE  AND TO  HOLD  the  Mortgaged  Property,  unto  Mortgagee  and its
successors and assigns,  upon the terms,  provisions  and conditions  herein set
forth, forever, and Mortgagor does hereby bind itself and its successors,  legal
representatives,  and assigns to warrant and forever defend all and singular the
Mortgaged Property unto Mortgagee and its successors and assigns,  against every
person whomsoever lawfully claiming or to claim the same or any part thereof.

                               SECURED OBLIGATIONS

     This  Mortgage,  and  all  rights,  titles,   interests,   liens,  security
interests,  powers,  privileges and remedies created hereby or arising hereunder
or by virtue  hereof,  are given to secure the  payment and  performance  of all
indebtedness,   obligations  and  liabilities   arising  under  the  Notes,  the
Agreement,  this  Mortgage  and any  other  Loan  Document,  and  any  renewals,
extensions,   amendments,   amendments   and   restatements,    supplements   or
modifications  thereof or  thereto,  howsoever  created,  arising or  evidenced,
whether direct or indirect, absolute or contingent, now or hereafter existing or
due or to  become  due,  and any and all fees,  costs or  expenses  incurred  by
Mortgagee or the other Secured Parties,  including, but not limited to, interest
accruing  at the then  applicable  rate  provided  in the  Agreement  after  the
maturity of the Loans and interest accruing at the then applicable rate provided
in the Agreement or other applicable  agreement after the filing of any petition
in bankruptcy,  or the  commencement of any insolvency,  reorganization  or like
proceeding,  relating to the Mortgagor on the Loans and on all other obligations
of  the  Mortgagor  to  the  Secured  Parties,  taxes,  recording  expenses  and
attorneys'  fees in  connection  with the  execution  and delivery of any of the
aforesaid,  and the consummation of the transactions  contemplated  thereby, the
administration  thereof,  and, after Default,  the administration and collection
thereof,  all costs incurred of whatever  nature by Mortgagee in the exercise of
any rights hereunder or under any Loan Document and all other amounts payable by
Mortgagor  under this Mortgage (all of the foregoing  indebtedness,  obligations
and liabilities being referred to herein as the "Secured Obligations").



<PAGE>9


                                    ARTICLE I

                     PARTICULAR WARRANTIES, REPRESENTATIONS
                           AND COVENANTS OF MORTGAGOR

     Section 1.01 Warranties and Representations.  Mortgagor hereby warrants and
represents as follows:

          (a)  Mortgagor  is the  actual,  record  and  beneficial  owner of the
Premises and holder of a good and marketable title to an indefeasible  leasehold
estate in the Leaseholds or owns an actual  beneficial  interest therein and fee
estate in the rest of the Mortgaged Property, subject only to such exceptions to
title as are listed in the title policy  insuring the lien of this  Mortgage and
approved by Mortgagee as permitted exceptions.  Mortgagor is the owner of all of
the remaining Mortgaged Property; Mortgagor will own the Fixtures free and clear
of liens and claims except those in favor of Mortgagee; and this Mortgage is and
will remain a valid and enforceable first lien on the Mortgaged Property subject
only to the permitted exceptions referred to above.

          (b)  Mortgagor  has full power and lawful  authority  to mortgage  the
Mortgaged  Property in the manner and form herein done or intended  hereafter to
be done. Mortgagor will preserve such title, and will forever warrant and defend
the validity and priority of the lien hereof,  against the claims of all persons
and parties whomsoever.

          (c) Except as  otherwise  specified in the Title Policy (as defined in
the Agreement) or in the Survey (as defined in the  Agreement),  the Premises is
not  located  in an area  identified  by the  Secretary  of  Housing  and  Urban
Development  as an area  having  special  flood  hazards or if it is so located,
flood insurance acceptable to Mortgagee has been obtained.

     Section 1.02 Further Assurances.  Mortgagor will, at its sole expense,  do,
execute, acknowledge and deliver every further act, deed, conveyance,  mortgage,
assignment, notice of assignment,  transfer or assurance as Mortgagee shall from
time to time reasonably require, for the better assuring, conveying,  assigning,
transferring  and  confirming  unto  Mortgagee  the property  and rights  hereby
conveyed,  mortgaged or assigned or intended now or hereafter so to be, or which
Mortgagor may be or may hereafter become bound to convey,  mortgage or assign to
Mortgagee or for carrying out the intention or  facilitating  the performance of
the terms of this  Mortgage,  and for  filing,  registering  or  recording  this
Mortgage  and,  on demand,  will  execute  and  deliver,  and hereby  authorizes
Mortgagee  to execute in the name of  Mortgagor to the extent it may lawfully do
so, one or more financing  statements,  chattel mortgages or comparable security
instruments,  and renewals thereof, to evidence more effectively the lien hereof
upon the Fixtures.

     Section 1.03 Filings, Recordings and Payments. (a) Mortgagor forthwith upon
the execution of this Mortgage,  and thereafter from time to time,  will, at its
expense, cause this


<PAGE>10


Mortgage  and any security  instrument  creating a lien or  evidencing  the lien
hereof upon the Fixtures and each  instrument of further  assurance to be filed,
registered  or  recorded in such manner and in such places as may be required by
any present or future law in order to publish notice of and fully to protect the
lien hereof upon, and the interest of Mortgagee in, the Mortgaged Property.

          (b) Mortgagor will pay all taxes,  filing,  registration and recording
fees,  and all expenses  incident to the  execution and  acknowledgment  of this
Mortgage,  any supplemental  mortgage, any other Loan Document, and any security
instrument  with  respect  to  the  Fixtures,  and  any  instrument  of  further
assurance,  and all federal,  state,  county and municipal stamp taxes and other
taxes, duties, imposts,  assessments and charges arising out of or in connection
with  the  execution  and  delivery  of  the  Agreement,   this  Mortgage,   any
supplemental  mortgage,  any other Loan Document,  any security  instrument with
respect to the  Fixtures  or any  instrument  or further  assurance,  other than
income,  franchise  or other  similar  taxes  imposed on Mortgagee in respect of
income derived by Mortgagee under the Secured Obligations.

     Section  1.04  Payment  of Sums  Due.  Mortgagor  will  punctually  pay the
principal  and  interest  and all other  sums to become  due in  respect  of the
Agreement  and any other Loan  Document  at the time and place and in the manner
specified in the  Agreement and any other Loan  Document,  according to the true
intent and meaning thereof and without offset, counterclaim, defense or cause of
action of any kind  whatsoever , and without  deduction or credit for any amount
payable for taxes, all in immediately available funds in Dollars.

     Section  1.05 After  Acquired  Property.  All right,  title and interest of
Mortgagor  in  and  to  all  extensions,  improvements,  betterments,  renewals,
substitutes and  replacements  of, and all additions and  appurtenances  to, the
Mortgaged   Property,   hereafter  acquired  by  or  released  to  Mortgagor  or
constructed,  assembled  or  placed  by  Mortgagor  on  the  Premises,  and  all
conversions  of  the  security  constituted   thereby,   immediately  upon  such
acquisition, release, construction,  assembling, placement or conversion, as the
case may be, and in each such case,  without any further  mortgage,  conveyance,
assignment or other act by Mortgagor,  shall become  subject to the lien of this
Mortgage as fully and completely,  and with the same effect, as though now owned
by Mortgagor and specifically  described in the granting clauses hereof,  but at
any and all times  Mortgagor  will execute and deliver to Mortgagee  any and all
such  further  assurances,  mortgages,  conveyances  or  assignments  thereof as
Mortgagee may reasonably  require for the purpose of expressing and specifically
subjecting the same to the lien of this Mortgage.

     Section 1.06 Taxes,  Fees and Other Charges.  (a)  Mortgagor,  from time to
time when the same shall  become  due,  and prior to the date of  imposition  of
interest or penalty (except as otherwise  permitted in the Agreement),  will pay
and discharge,  or cause to be paid and discharged,  all taxes of every kind and
nature  (including  real and  personal  property  taxes and  income,  franchise,
withholding,  transfer or recordation  taxes,  profits and gross receipt taxes),
all general and special  assessments,  levies,  permits,  inspection and license
fees,  all water and sewer  rents and  charges,  and all other


<PAGE>11


public charges,  whether of a like or different nature, imposed upon or assessed
against it or the  Mortgaged  Property or any part thereof or upon the revenues,
rents,  issues,  income and profits of the Premises or arising in respect of the
occupancy,  use or possession thereof.  Mortgagor will, at any time upon request
by Mortgagee,  promptly deliver to Mortgagee receipts  evidencing the payment of
same.

     Upon the occurrence of an Event of Default under the  Agreement,  Mortgagee
may,  at any time and from  time to time,  at its  option,  to be  exercised  by
written  notice to  Mortgagor,  require the deposit by  Mortgagor at the time of
each payment of an installment  of interest or principal  under the Agreement of
an  additional  amount  sufficient  to  discharge  the  obligations  under  this
subsection (a) when they become due. The  determination of the amount so payable
and of the fractional part thereof to be deposited with  Mortgagee,  so that the
aggregate of such deposit shall be sufficient for this purpose, shall be made by
Mortgagee  in its sole  discretion.  Such  amounts  shall  be held by  Mortgagee
without  interest  in an account  acceptable  to  Mortgagee  and  applied to the
payment of the  obligations  in respect to which such amounts were deposited or,
at the option of Mortgagee and subject to applicable  law, to the payment of the
Secured  Obligations  in such order or priority  as  Mortgagee  shall  determine
consistent  with the Agreement,  on or before the respective  dates on which the
same or any of them would become delinquent.  If one month prior to the due date
of any of the obligations  under this subsection (a) the amounts then on deposit
therefor  shall be  insufficient  for the payment of such  obligations  in full,
Mortgagor  within ten (10) days after  demand  shall  deposit  the amount of the
deficiency  with Mortgagee.  Nothing herein  contained shall be deemed to affect
any right or remedy of Mortgagee under the provisions of this Mortgage or of any
statute  or rule of law to pay any such  amount  and to add the  amount  so paid
together with interest at the Default Rate to the indebtedness hereby secured.

          (b) Except as otherwise  permitted in the  Agreement,  Mortgagor  will
pay,  from time to time when the same shall  become due,  all lawful  claims and
demands of mechanics, materialmen,  laborers, and others which, if unpaid, might
result in, or permit the  creation of, a lien on the  Mortgaged  Property or any
part thereof,  or on the revenues,  rents,  issues,  income and profits  arising
therefrom  and in general  will do or cause to be done  everything  necessary so
that the lien hereof shall be fully preserved, at the cost of Mortgagor, without
expense to Mortgagee.

     Section 1.07 Intentionally Deleted.

     Section  1.08  Insurance.  (a)  Mortgagor  agrees to at all times  provide,
maintain and keep in force the policies of insurance  required to the maintained
pursuant to the terms of the Agreement.

          (b) In the event Mortgagor fails to provide,  maintain,  keep in force
or deliver and furnish to Mortgagee  the  policies of insurance  required by the
Agreement  or  this   Mortgage,   Mortgagee   may  procure  such   insurance  or
single-interest  insurance for such risks  covering  Mortgagee's  interest,  and
Mortgagor will pay all premiums thereon  promptly upon demand by Mortgagee,  and
until such


<PAGE>12


payment is made by  Mortgagor  the amount of all such  premiums,  together  with
interest thereon at the Default Rate shall be secured by this Mortgage.

          (c) After the happening of any casualty to the  Mortgaged  Property or
any part  thereof,  Mortgagor  shall  give  prompt  written  notice  thereof  to
Mortgagee,  and  Mortgagee  may  make  proof  of loss if not  made  promptly  by
Mortgagor.  In the event of such loss or damage, all proceeds of insurance shall
be  payable  in the  manner  provided  for in the  Agreement.  Unless  otherwise
provided in the Agreement,  nothing herein  contained  shall be deemed to excuse
Mortgagor from repairing or maintaining the Premises as provided in Section 1.12
hereof  or  restoring  all  damage or  destruction  to the  Mortgaged  Property,
regardless of whether or not there are insurance  proceeds  available or whether
any such proceeds are  sufficient in amount,  and the  application or release by
Mortgagee  of any  insurance  proceeds  shall not cure or waive any  Default  or
notice of Default  under this  Mortgage or  invalidate  any act done pursuant to
such notice.  Any monies  received as payment for loss under any insurance shall
be applied pursuant to the terms of the Agreement.

          (d) In the event of  foreclosure of this Mortgage or other transfer of
title or assignment of the Premises in  extinguishment,  in whole or in part, of
the debt secured  hereby,  all right,  title and interest of Mortgagor in and to
all  policies  of  insurance  required by this  Section  1.08 shall inure to the
benefit of and pass to the  successor in interest to Mortgagor or the  purchaser
or grantee of the Premises.

          (e) Mortgagor shall not take out separate insurance concurrent in form
or contributing  in the event of loss with that required to be maintained  under
this Section 1.08,  unless Mortgagee has approved the insurance  company and the
form and content of the insurance policy,  including,  without  limitation,  the
naming  thereon of Mortgagee  as a named  insured with loss payable to Mortgagee
under a standard mortgagee  endorsement of the character above described and the
inclusion of a provision  therein  obligating said insurance  company to provide
Mortgagee with notice thirty (30) days prior to cancellation, lapse or amendment
of any policy.  Mortgagor shall immediately  notify Mortgagee  whenever any such
separate  insurance is taken out and shall  promptly  deliver to  Mortgagee  the
policy or policies of such insurance.

          (f) Mortgagee may at any time  following the occurrence of an Event of
Default under the Agreement, at its option, to be exercised by written notice to
Mortgagor,  require the deposit by Mortgagor,  at the time of each payment of an
installment  of interest or  principal  under the  Agreement,  of an  additional
amount sufficient to discharge the obligations under this Section 1.08 when they
become due.  The  determination  of the amount so payable and of the  fractional
part thereof to be deposited with Mortgagee with each  installment,  so that the
aggregate of such deposit shall be sufficient for this purpose, shall be made by
Mortgagee  in its sole  discretion.  Such  amounts  shall  be held by  Mortgagee
without  interest  in an account  acceptable  to  Mortgagee  and  applied to the
payment of the obligations in respect of which such amounts were deposited on or
before  the  respective  dates on which  the  same or any of them  would  become
delinquent  or, at the  option  of


<PAGE>13


Mortgagee,  to the payment of the Secured  Obligations in such order or priority
as Mortgagee shall determine  consistent with the Agreement.  If one month prior
to the due date of any of the  aforementioned  obligations  the amounts  then on
deposit  therefor shall be insufficient  for the payment of such  obligations in
full,  Mortgagor  within five (5) days after demand shall  deposit the amount of
the  deficiency  with  Mortgagee.  Nothing herein  contained  shall be deemed to
affect any right or remedy of Mortgagee under the provisions of this Mortgage or
of any  statute  or rule of law to pay any such  amount and to add the amount so
paid  together  with  interest at the Default  Rate to the  indebtedness  hereby
secured.

     Section 1.09  Condemnation.  (a) In the event the Mortgaged Property or any
part thereof or interest  therein,  shall be taken or damaged by eminent domain,
alteration of the grade of any street,  or there shall occur any other injury to
or decrease in the value of the Mortgaged  Property,  by reason of any public or
quasi-public  improvement or  condemnation  proceeding,  or in any other similar
manner  ("Condemnation"),  or  should  Mortgagor  receive  any  notice  or other
information  regarding such Condemnation or a proposed  Condemnation,  Mortgagor
shall give prompt written notice thereof to Mortgagee.

          (b) All compensation, awards and other payments or relief payable as a
result of any such Condemnation,  shall be payable in the manner provided for in
the Agreement.  All such  compensation,  awards,  damages,  rights of action and
proceeds  awarded to Mortgagor (the "Proceeds") are hereby assigned to Mortgagee
and  Mortgagor  agrees to execute  such further  assignments  of the Proceeds as
Mortgagee  may require.  Mortgagee  shall be under no obligation to question the
amount of any such award or  compensation  and may accept the same in the amount
paid.  All Proceeds may be applied either  against the Secured  Obligations  (in
such  order and  priority  as  Mortgagee  shall  determine  consistent  with the
Agreement) or to restore the Premises, at the discretion of Mortgagee, except as
may be otherwise provided in the Agreement.

          (c)  Unless  otherwise  provided  in  the  Agreement,  nothing  herein
contained shall be deemed to excuse  Mortgagor from repairing or maintaining the
Premises  as  provided  in  Section  1.12  hereof  or  restoring  all  damage or
destruction  to the Mortgaged  Property,  regardless of whether or not there are
proceeds  available or whether any such Proceeds are  sufficient in amount,  and
the  application or release by Mortgagee of any Proceeds shall not cure or waive
any Default or notice of Default under this Mortgage or invalidate  any act done
pursuant to such notice.

          (d) Receipt by Mortgagee and  application in reduction of indebtedness
of any  Proceeds  less  than the full  amount  of the then  outstanding  Secured
Obligations shall not defer, alter or modify Mortgagor's  obligation to continue
to pay the  regular  installments  of  principal,  interest  on the  outstanding
principal  balance and other charges owed in respect of the Secured  Obligations
and herein.



<PAGE>14


          (e) If prior to the receipt of the Proceeds by Mortgagee the condemned
Premises shall have been sold on foreclosure of this Mortgage,  Mortgagee shall,
nevertheless,  have the right to receive the Proceeds and to retain, for its own
account,  (i) an amount  equal to the  counsel  fees,  costs  and  disbursements
incurred by  Mortgagee in  connection  with  collection  of the Proceeds and not
repaid by Mortgagor and (ii) the full amount of all such Proceeds,  if Mortgagee
is the successful  purchaser at the  foreclosure  sale, to the extent of amounts
owed in respect of the Secured Obligations.

     Section  1.10  Mortgagee's  Performance  of  Mortgagor's  Obligations.   If
Mortgagor  shall fail to perform any of the  covenants  contained  herein or any
covenant  contained in the Agreement or any other Loan Document,  Mortgagee may,
but shall not be obligated to, make advances and/or disbursements to perform the
same.  Mortgagor will repay on demand all sums so advanced and/or disbursed with
interest  at the  Default  Rate  from the date of  making  such  advance  and/or
disbursement  until such sums have been repaid and all sums so  advanced  and/or
disbursed,  together with interest  thereon at the Default Rate, shall be a lien
upon the Mortgaged  Property and shall be secured hereby. The provisions of this
Section  1.10 shall not prevent any default in the  observance  of any  covenant
contained herein or with respect to the Secured Obligations or in any other Loan
Document from constituting an Event of Default.

     Section  1.11  Financial  Records.  Mortgagor  will  provide the  financial
statements to Mortgagee required pursuant to the terms of the Agreement.

     Section 1.12 Waste and  Maintenance.  Mortgagor will not threaten,  commit,
permit or suffer any waste to occur on or to the Mortgaged  Property or any part
thereof or alter or demolish the  Mortgaged  Property or any part thereof in any
manner or make any change in its use (except as provided  in the  Agreement)  or
any change which will in any way increase any fire or other hazards  arising out
of construction or operation of the Mortgaged  Property.  Mortgagor will, at all
times,  maintain the Mortgaged Property as required pursuant to the terms of the
Agreement.

     Section 1.13 Enforcement Expenses.  Except where inconsistent with the laws
of the state in which the Mortgaged  Property is located,  Mortgagor agrees that
if any action or proceeding be commenced,  including an action to foreclose this
Mortgage or to collect  the  indebtedness  hereby  secured,  to which  action or
proceeding Mortgagee is made a party by reason of the execution of this Mortgage
or the other  Loan  Documents,  or in which it  becomes  necessary  to defend or
uphold the lien of this Mortgage,  all sums paid by Mortgagee for the expense of
any litigation to prosecute or defend or participate in the  transaction and the
rights and liens created hereby (including  reasonable attorneys' fees) shall be
paid by  Mortgagor  together  with  interest  thereon  from date of  payment  by
Mortgagee at the Default Rate. All such sums paid and the interest thereon shall
be immediately due and payable, shall be a lien upon the Mortgaged Property, and
shall be secured  hereby as shall be all such sums incurred in  connection  with
enforcement  by  Mortgagee  of its  rights  hereunder  or under any  other  Loan
Document.


<PAGE>15


     Section 1.14 Defense of Mortgagee's Interests. If the interest of Mortgagee
in the Mortgaged  Property or any part thereof or the lien or security  interest
of this Mortgage thereon shall be attacked,  directly or indirectly, or if legal
proceedings  shall be  instituted  against  Mortgagor or Mortgagee  with respect
thereto  or  against  Mortgagor,  Mortgagor,  upon its  learning  thereof,  will
promptly  give  written  notice  thereof to Mortgagee  and  Mortgagor  will,  at
Mortgagor's cost and expense,  exert itself diligently to cure, or will cause to
be cured,  any defect that may have  developed or be claimed to exist,  and will
take all necessary and proper steps for the protection  and defense  thereof and
will  take,  or will cause to be taken,  such  action as is  appropriate  to the
defense  of any such  legal  proceedings,  including,  but not  limited  to, the
employment of counsel and the prosecution and defense of litigation.

     Section 1.15 No Impairment of Security.  In no event shall  Mortgagor do or
permit to be done,  or omit to do or permit the  omission  of, any act or thing,
the doing, or omission,  of which would  materially  impair the security of this
Mortgage or materially  impair the value of the  Mortgaged  Property or any part
thereof.

     Section 1.16  Restrictions  on Transfers and  Mortgages.  Unless  otherwise
permitted pursuant to the terms of the Agreement, Mortgagor will not directly or
indirectly,  by  transfer,  mortgage,  conveyance,  or  sale of an  interest  in
Mortgagor permit, do or suffer the assignment, lease, transfer, sale, conveyance
or  encumbrance of the Mortgaged  Property,  or any part thereof or any interest
therein, without the express prior written consent of Mortgagee unless otherwise
permitted pursuant to the terms of the Agreement.  While the Secured Obligations
are  outstanding,  neither the  structure  nor the ownership of Mortgagor may be
changed without the express prior written consent of Mortgagee  unless otherwise
permitted pursuant to the terms of the Agreement.

     Section 1.17  Mortgagee's  Defense.  Mortgagee may appear in and defend any
action or proceeding  at law or in equity or in bankruptcy  purporting to affect
the Premises or the security  hereof or the rights and powers of Mortgagee,  and
any  appellate  proceedings,  and in  such  event  Mortgagor  shall  pay  all of
Mortgagee's costs, charges and expenses, including cost of evidence of title and
attorneys'  fees incurred in such action or proceeding.  All costs,  charges and
expenses so incurred,  together with  interest  thereon at the Default Rate from
the date of payment of same by Mortgagee as  aforesaid,  shall be secured by the
lien of this Mortgage and shall be due and payable upon demand.

     Section 1.18  Environmental  Compliance.  Mortgagor will perform and comply
promptly  with,  and cause the Premises to be  maintained,  used and operated in
accordance with, all applicable federal,  state and local laws pertaining to air
and water quality,  hazardous  waste,  waste  disposal,  air emissions and other
environmental matters as set forth in the Agreement.

     Section 1.19 Zoning Changes. Mortgagor will not consent to, join in, permit
or allow any change in the zoning laws or  ordinances  relating to or  affecting
the Premises which could  reasonably


<PAGE>16


be expected to materially adversely affect the Premises and will promptly notify
Mortgagee of any changes to the zoning laws.

     Section 1.20 Grant of Security Interest. Mortgagor, as further security for
the payment of said  indebtedness and in addition to all the rights and remedies
otherwise  available  to  Mortgagee  under  this  Mortgage  and the  other  Loan
Documents, grants to Mortgagee a security interest, under the Uniform Commercial
Code as now in effect in the state where all or any of the Fixtures are located,
in and to the  Fixtures,  and all  proceeds  thereof.  Upon an Event of Default,
Mortgagee  shall have, in addition to all the other rights and remedies  allowed
by law, the rights and remedies of a secured party under the Uniform  Commercial
Code as in effect at that  time.  Mortgagor  further  agrees  that the  security
interest  created  hereby also  secures all  expenses  of  Mortgagee  (including
reasonable expenses for legal services of every kind, and cost of any insurance,
and  payment  of taxes or other  charges)  incurred  in or  incidental  to,  the
custody,  care, sale or collection of, or realization  upon, any of the property
secured  hereby or in any way relating to the  enforcement  or protection of the
rights of Mortgagee  hereunder,  together with  interest  thereon at the Default
Rate until paid.

     Section 1.21 Compliance with Laws and ADA Compliance.

          (a) Mortgagor  warrants and  covenants  that the Premises are and will
continue to be  substantially in compliance with all applicable  local,  county,
state and federal laws and regulations and all building, housing and fire codes,
rules and regulations.

          (b) Without  limiting the provisions of subsection (a) of this Section
1.21:  (i)  Mortgagor  represents  and warrants to Mortgagee  that  Mortgagor is
substantially in compliance with the Americans with Disabilities Act of 1990 (42
U.S.C.A. sec. 12101 et. seq.), as the same may be amended from time to time (the
"ADA")  and  all  other  federal,   state  and  local  laws  pertaining  to  the
accessibility  of the  Premises by persons with  disabilities  (the ADA and such
other  laws  are,  collectively,   the  "Accessibility  Laws");  (ii)  Mortgagor
covenants to ensure that the  Premises  will at all times  substantially  comply
with all  applicable  Accessibility  Laws and,  upon the  request of  Mortgagee,
Mortgagor  will conduct such surveys of the Premises as Mortgagee  shall require
to ascertain such compliance;  (iii) Mortgagor will maintain accurate records of
all  expenditures  made in connection  with any  alterations to the Premises and
will deliver  copies  thereof to Mortgagee upon  Mortgagee's  request;  and (iv)
Mortgagor shall defend,  indemnify and hold harmless  Mortgagee,  its employees,
agents,  officers  and  directors,  attorneys,  and any parent or  affiliate  of
Mortgagee, from and against any claims, demands,  penalties, fines, liabilities,
settlements,  damages,  cost or expenses of  whatever  kind or nature,  known or
unknown,  contingent  or  otherwise,  arising  out or in any way  related to any
violations of the Accessibility Laws (including,  without limitation,  any costs
incurred by Mortgagee in complying with any Accessibility Laws). Neither payment
of the indebtedness  secured hereby nor foreclosure shall operate as a discharge
of Mortgagor's  obligations  under this  subsection  (b). In the event Mortgagor
tenders a deed in lieu of  foreclosure,  Mortgagor shall deliver the Premises to
Mortgagee  (or  its  designee)  substantially  free  of  any  violations  of the
Accessibility


<PAGE>17


Laws.  In the  event  Mortgagor  does  not  timely  perform  any  of  the  above
obligations,  Mortgagee  after 30 days  notice to  Mortgagor  may  perform  said
obligations at the expense of Mortgagor and Mortgagor shall, upon written demand
from Mortgagee, reimburse Mortgagee for all costs, including attorneys' fees and
out-of-pocket  expenses,  and all liabilities incurred by Mortgagee by reason of
the foregoing,  with interest  thereon at the Default Rate from the date of such
payment  by  Mortgagee  to the date of  repayment.  Until  paid,  said costs and
expenses shall be secured by this Mortgage.

     Section 1.22 Other Multistate  Mortgages.  The indebtedness secured in part
by this Mortgage is secured by mortgages  and/or deeds of trust  encumbering and
conveying lands and other property and/or leasehold  interests  therein in other
states as more particularly  described in the Agreement,  all of which mortgages
and/or deeds of trust, including this instrument, being hereafter referred to as
"the mortgage instruments."

     It is  understood  and  agreed  that  all of the  properties  of all  kinds
conveyed or encumbered by the mortgage  instruments are security for the Secured
Obligations  without  allocation  of any one or more of the  parcels or portions
thereof to any portion of the  Secured  Obligations  less than the whole  amount
thereof unless so stated in said mortgage instruments.

     It is specifically covenanted and agreed that Mortgagee may proceed, at the
same or at different  times, to foreclose said mortgage  instruments,  or any of
them, by any  proceedings  appropriate  in the state where any of the land lies,
and that no event of enforcement  taking place in any state  including,  without
limiting the generality of the foregoing,  any pending foreclosure,  judgment or
decree of the foreclosure,  foreclosure sale, rents received,  possession taken,
deficiency  judgment or decree,  or judgment  taken on the Secured  Obligations,
shall in any way stay,  preclude or bar enforcement of the mortgage  instruments
or any of them in any other state,  and that Mortgagee may pursue any or all its
remedies to the maximum  extent  permitted by state law until all of the Secured
Obligations now or hereafter  secured by any or all of the mortgage  instruments
has been paid and discharged in full.

     Neither Mortgagor,  nor any person claiming under Mortgagor,  shall have or
enjoy any right to marshaling of assets,  all such right being hereby  expressly
waived as to  Mortgagor  and all persons  claiming  under it,  including  junior
lienors.  No release of personal liability of any person whatever and no release
of any portion of the property  now or  hereafter  subject to the lien of any of
the mortgage  instruments shall have any effect whatever by way of impairment or
disturbance  of the lien or priority of any of said  mortgage  instruments.  Any
foreclosure or other  appropriate  remedy brought in any of the states aforesaid
may be brought and prosecuted as to any part of the mortgaged security, wherever
located,  without  regard  to the fact  that  foreclosure  proceedings  or other
appropriate  remedies  have or have not been  instituted  elsewhere on any other
land subject to the lien of said mortgage instruments or any of them.

     Section 1.23 Leasehold and Leasehold Instruments.


<PAGE>18


          (a)  Mortgagor  covenants  and agrees to  faithfully  comply  with and
perform all of its obligations under the Leasehold Instruments,  and to promptly
cure any default by it under the Leasehold Instruments.

          (b) Mortgagor may modify,  amend or terminate any Leasehold Instrument
without the prior written  consent  provided such action is consistent  with the
terms of the Agreement.

          (c)  Mortgagor  will  promptly  give  Mortgagee  a copy of any default
notice given to Mortgagor with respect to any Leasehold Instrument.

                                   ARTICLE II

                         EVENTS OF DEFAULT AND REMEDIES

     Section 2.01 Events of Default.  The following  shall  constitute  defaults
hereunder  and,  after the giving of notice and the passage of time,  if any, as
provided herein, shall constitute "Events of Default" hereunder:

          (a) If  Mortgagor  shall fail to pay when due any  Secured  Obligation
after the passage of any applicable notice or grace period, if any; or

          (b) If an Event of Default,  as defined in the Agreement,  shall occur
under the Agreement.

     Section 2.02 Mortgagee's Remedies.  (a) During the continuance of any Event
of Default, Mortgagee,  without notice or presentment,  each of which are hereby
waived by Mortgagor,  may,  subject to the provisions of the Agreement,  declare
the entire principal of the Secured Obligations then outstanding and all accrued
and unpaid  interest  thereon and all other amounts owing in respect thereof (if
not then due and payable,  whether by acceleration or otherwise),  to be due and
payable immediately,  and upon any such declaration the principal of the Secured
Obligations and said accrued and unpaid interest shall become and be immediately
due and payable,  anything in the instruments evidencing the Secured Obligations
or in this Mortgage to the contrary notwithstanding;

          (b) During the  continuance  of any Event of  Default,  Mortgagee  may
enter into and upon all or any part of the Premises, and, having and holding the
same, may use,  operate,  manage and control the Mortgaged  Property or any part
thereof  and  conduct  the  business  thereof,   either  personally  or  by  its
superintendents,   managers,  agents,  servants,  attorneys  or  receivers;  and
likewise, from time to time, at the expense of Mortgagor, Mortgagee may make all
necessary  or  proper  repairs,   renewals  and  replacements  and  such  useful
alterations,  additions,  betterments and improvements thereto and thereon as to
it may deem  advisable in its sole  judgment;  and in every such case  Mortgagee
shall have the right to manage and operate the  Mortgaged  Property and to carry
on the business  thereof and  exercise  all rights and powers of Mortgagor  with
respect  thereto either in the


<PAGE>19


name of Mortgagor or otherwise as Mortgagee shall deem best; and Mortgagee shall
be entitled,  with or without entering into or upon the Premises, to collect and
receive all gross receipts,  earnings,  revenues,  rents,  maintenance payments,
issues, profits and income of the Mortgaged Property and every part thereof, all
of which shall for all purposes  constitute  property of Mortgagee;  and,  after
deducting  the  expenses  of  conducting   the  business   thereof  and  of  all
maintenance, repairs, renewals, replacement, alterations, additions, betterments
and improvements and amounts necessary to pay taxes, assessments,  insurance and
prior or other proper  charges upon the Mortgaged  Property or any part thereof,
as well as just and  reasonable  compensation  for the services of Mortgagee and
for all attorneys,  counsel,  agents, clerks, servants and other employees by it
properly  engaged  and  employed,  Mortgagee  may apply the  moneys  arising  as
aforesaid in such manner and at such times as Mortgagee  shall  determine in its
discretion  consistent  with  the  Agreement  to  the  payment  of  the  Secured
Obligations and the interest thereon,  when and as the same shall become payable
and/or to the payment of any other sums  required to be paid by Mortgagor  under
this Mortgage;

          (c) During the  continuance  of any such Event of  Default,  Mortgagor
covenants and agrees as follows:

          (1) Mortgagee may, with or without entry,  personally or by its agents
or attorneys,  insofar as  applicable,  sell the Mortgaged  Property or any part
thereof and pursuant to the procedures  provided by law, and all estate,  right,
title,  interest,  claim and demand therein, and right of redemption thereof, at
one or more  sales as an entity or in  parcels,  and at such time and place upon
such terms and after such notice thereof as may be required or permitted by law;
or

          (2)  Mortgagee  may  institute  an action of mortgage  foreclosure  or
institute other proceedings according to law for the foreclosure hereof, and may
prosecute  the same to judgment,  execution  and sale for the  collection of the
Secured  Obligations  secured  hereby,  and all interest  with respect  thereto,
together with all taxes and insurance  premiums  advanced by Mortgagee and other
sums payable by Mortgagor  hereunder,  and all fees,  costs and expenses of such
proceedings, including attorneys' fees and expenses; or

          (3)  Mortgagee  may,  if default be made in the payment of any part of
the Secured Obligations,  proceed with foreclosure of the liens evidenced hereby
in satisfaction of such item either through the courts or by conducting the sale
as herein  provided,  and proceed  with  foreclosure  of the  security  interest
created hereby, all without declaring the whole of the Secured  Obligations due,
and provided that if sale of the Mortgaged Property,  or any portion thereof, is
made  because of default in payment of a part of the Secured  Obligations,  such
sale may be made subject to the unmatured part of the Secured  Obligations,  but
as to such unmatured part of the Secured Obligations (and it is agreed that such
sale,  if so made,  shall not in any  manner  affect the  unmatured  part of the
Secured Obligations) this Mortgage shall remain in full force and effect just as
though no sale had been made under the provisions of this  paragraph.  And it is
further agreed that several sales may be made hereunder  without  exhausting the
right of sale for any unmatured  part of the Secured


<PAGE>20


Obligations, it being the purpose to provide for a foreclosure and sale of the
Mortgaged Property,  or any part  thereof,  for any  matured  portion  of the
Secured Obligations  without  exhausting  the power to foreclose  and to sell
the Mortgaged  Property,  or any part thereof,  for any other part of the
Secured  Obligations whether matured at the time or subsequently maturing; or

          (4)  Mortgagee  may take such steps to protect  and enforce its rights
whether  by  action,  suit or  proceeding  in equity or at law for the  specific
performance of any covenant,  condition or agreement in the Loan Documents or in
aid of the  execution  of any  power  herein  granted,  or for  any  foreclosure
hereunder,  or for the enforcement of any other  appropriate  legal or equitable
remedy or otherwise as Mortgagee shall elect; or

          (5)  Mortgagee  may  exercise  in  respect of the  Mortgaged  Property
consisting  of Fixtures,  all of the rights and remedies  available to a secured
party upon default under the  applicable  provisions  of the Uniform  Commercial
Code as then in effect in the state where the Mortgaged Property is located; or

          (6)  Mortgagee  may  apply  any  proceeds  or  amounts  held in escrow
pursuant  to the terms of this  Mortgage  to payment of any part of the  Secured
Obligations in such order of priority as Mortgagee may determine consistent with
the Agreement; or

          (7) Any sale as aforesaid may be subject to such existing tenancies as
Mortgagee, in its sole discretion, may elect.

     Section 2.03 Sale, Foreclosure, etc. (a) Mortgagee may adjourn from time to
time  any  sale  by it to be  made  under  or by  virtue  of  this  Mortgage  by
announcement at the time and place appointed for such sale or for such adjourned
sale or sales; and, except as otherwise provided by any applicable  provision of
law, Mortgagee, without further notice or publication, may make such sale at the
time and place to which the same shall be so adjourned.

          (b) Upon the  completion of any sale or sales made by Mortgagee  under
or by  virtue  of this  Article  II,  Mortgagee,  or any  officer  of any  court
empowered  to do so,  shall  execute and deliver to the  accepted  purchaser  or
purchasers a good and sufficient instrument, or good and sufficient instruments,
conveying,  assigning and transferring all estate,  right, title and interest in
and  to  the  properties,   interests  and  rights  sold.  Mortgagee  is  hereby
irrevocably appointed the true and lawful attorney of Mortgagor, in its name and
stead,  to make  all  the  necessary  conveyances,  assignments,  transfers  and
deliveries  of any part of the  Mortgaged  Property and rights so sold,  and for
that purpose  Mortgagee may execute all  necessary  instruments  of  conveyance,
assignment  and transfer and may substitute one or more persons with like power,
Mortgagor  hereby  ratifying and  confirming  all that its said attorney or such
substitute or  substitutes  shall  lawfully do by virtue  hereof.  Nevertheless,
Mortgagor, if so requested by Mortgagee,  shall ratify and confirm any such sale
or sales by  executing  and  delivering  to  Mortgagee  or to such  purchaser or
purchasers all such


<PAGE>21


instruments as may be advisable,  in the reasonable  judgment of Mortgagee,  for
the purpose and as may be designated in such request.

          (c) Upon any sale,  whether under the power of sale hereby given or by
virtue of judicial proceedings,  it shall not be necessary for Mortgagee, or any
public  officer  acting under  execution  or order of court,  to have present or
constructive possession of any of the Mortgaged Property.

          (d) The recitals contained in any conveyance made by Mortgagee to
any purchaser at any sale made pursuant hereto or under  applicable law shall be
full evidence of the matters therein stated,  and all prerequisites to such sale
shall be presumed to have been satisfied and performed.

          (e) Any such sale or sales made  under or by virtue of this  Mortgage,
whether  under the power of sale hereby  granted and  conferred,  or under or by
virtue of any judicial  proceedings,  shall operate to divest all right,  title,
interest, claim and demand whatsoever,  either by law or in equity, of Mortgagor
in and to the premises and property  sold, and shall be a perpetual bar, both at
law and in equity,  against Mortgagor,  its successors and assigns,  and against
any and all persons or entities  claiming the premises and property sold, or any
part thereof, from through or under Mortgagor and its successors or assigns.

          (f) The receipt given by Mortgagee for the purchase  money paid at any
such sale,  or the receipt  given by any other person  authorized to receive the
same, shall be sufficient  discharge  therefor to any purchaser of the property,
or  any  part  thereof,  sold  as  aforesaid,  and  no  such  purchaser,  or his
representatives,  grantees or assigns,  after  paying  such  purchase  money and
receiving  such receipt,  shall be bound (i) to see to the  application  of such
purchase  money or any part  thereof  upon or for any trust or  purpose  of this
Mortgage,  (ii) by the  misapplication  or  nonapplication  of any such purchase
money,  or any  part  thereof,  or  (iii) to  inquire  as to the  authorization,
necessity, expediency or regularity of any such sale.

          (g) In case the liens or security interests hereunder, or by the
exercise of any other right or power, shall be foreclosed by Mortgagee's sale or
by other judicial or non-judicial  action,  the purchaser at any such sale shall
receive, as an incident to its ownership,  immediate  possession of the property
purchased,  and if Mortgagor or Mortgagor's  successors shall hold possession of
said  property,  or any part thereof,  subsequent to  foreclosure,  Mortgagor or
Mortgagor's  successors  shall be  considered  as tenants at  sufferance  of the
purchaser at foreclosure  sale,  and anyone  occupying the property after demand
made for  possession  thereof shall be guilty of forcible  detainer and shall be
subject to eviction and removal,  forcible or otherwise, with or without process
of law, and all damages by reason thereof are hereby expressly waived.

          (h) In the  event  a  foreclosure  hereunder  shall  be  commenced  by
Mortgagee,  Mortgagee may at any time before the sale abandon the suit,  and may
then institute suit for the


<PAGE>22


collection of the Secured  Obligations  and for the foreclosure of the liens and
security  interest  hereof.  If  Mortgagee  should  institute  a  suit  for  the
collection of the Secured  Obligations  and for a  foreclosure  of the liens and
security  interest  hereof,  it may at any  time  before  the  entry  of a final
judgment  in said  suit  dismiss  the same  and  proceed  to sell the  Mortgaged
Property, or any part thereof, in accordance with provisions of this Mortgage.

          (i) Any  reasonable  expenses  incurred by Mortgagee  in  prosecuting,
resetting or settling the claim of Mortgagee shall become an additional  Secured
Obligation of Mortgagor hereunder.

          (j) In the event of any sale made  under or by virtue of this  Article
II (whether made under the power of sale herein granted or under or by virtue of
judicial  proceedings or of a judgment or decree of foreclosure  and sale),  the
entire principal of, and interest on, the Secured Obligations, if not previously
due and payable, and all other sums required to be paid by Mortgagor pursuant to
this Mortgage,  immediately thereupon shall, anything in the Secured Obligations
or in this Mortgage to the contrary notwithstanding, become due and payable.

          (k) The purchase money proceeds or avails of any sale made under or by
virtue of this Article II,  together  with any other sums which then may be held
by Mortgagee  under this Mortgage,  whether under the provisions of this Article
II or otherwise, shall be applied in accordance with the laws of the state where
the Mortgaged Property is located, and to the extent not inconsistent,  first to
the  payment  of the costs  and  expenses  of such  sale,  including  reasonable
compensation  to Mortgagee and its agents and counsel,  second to the payment of
the amounts due and owing  under or in respect of the  Secured  Obligations  for
principal and interest and any other amounts including (without  limitation) any
other sums  required to be paid by Mortgagor  pursuant to any  provision of this
Mortgage or any other Loan Document,  with interest at the Default Rate from and
after the  happening  of any Event of  Default in the order set forth in Section
7.2 of the  Agreement,  all with interest at the Default Rate from the date such
sums were or are  required  to be paid  under  this  Mortgage,  and third to the
payment of the  surplus,  if any,  to  whomsoever  may be  lawfully  entitled to
receive the same.

          (l) Upon any sale made under or by virtue of this Article II,  whether
made under the power of sale  herein  granted or under or by virtue of  judicial
proceedings  or of a judgment or decree of foreclosure  and sale,  Mortgagee and
any other Secured  Party may bid for and acquire the  Mortgaged  Property or any
part thereof and  Mortgagee  and any other  Secured Party in lieu of paying cash
therefor may make  settlement for the purchase price by crediting some or all of
the  indebtedness  of Mortgagor  secured by this Mortgage  owing to such Secured
Party (or, in the case of Mortgagee, owing to all Secured Parties) the net sales
price after  deducting  therefrom  the expenses of the sale and the costs of the
action and any other sums which  Mortgagee  is  authorized  to deduct under this
Mortgage.



<PAGE>23


     Section 2.04 Payments, Judgment, etc. (a) In case an Event of Default under
the Agreement and the  acceleration  of the  obligations  thereunder  shall have
occurred, then, Mortgagor will in accordance with the Agreement pay to Mortgagee
the whole  amount  which then shall have  become due and  payable on the Secured
Obligations,  whether for principal  and interest or both or  otherwise,  as the
case may be,  which  interest  shall then accrue at the Default Rate on the then
unpaid principal of or other amounts constituting the Secured  Obligations,  and
the sums  required to be paid by  Mortgagor  pursuant to any  provision  of this
Mortgage,  and in addition thereto such further amount as shall be sufficient to
cover the costs and expenses of collection,  including compensation to Mortgagee
its agents and counsel and any expenses incurred by Mortgagee hereunder.  In the
event Mortgagor shall fail forthwith to pay such amounts upon demand,  Mortgagee
shall be entitled and empowered to institute  such action or  proceedings at law
or in equity as may be advised by its counsel for the  collection of the sums so
due and unpaid,  and may prosecute any such action or proceedings to judgment or
final decree.

          (b)  Mortgagee  shall be  entitled to recover  judgment  as  aforesaid
either  before  or after or  during  the  pendency  of any  proceedings  for the
enforcement  of the  provisions  of this  Mortgage and the right of Mortgagee to
recover such judgment shall not be affected by any entry or sale  hereunder,  or
by the exercise of any other right,  power or remedy for the  enforcement of the
provisions of this Mortgage or the  foreclosure  of the lien hereof;  and in the
event  of a sale  of the  Mortgaged  Property  or any  part  thereof  and of the
application  of the  proceeds  of sale,  as provided  in this  Mortgage,  to the
payment of the  indebtedness  hereby  secured,  Mortgagee  shall be  entitled to
enforce  payment of, and to receive all amounts  then  remaining  due and unpaid
upon,  the Secured  Obligations,  and to enforce  payment of all other  charges,
payments  and costs due under this  Mortgage  and shall be  entitled  to recover
judgment for any portion of the debt remaining unpaid,  with interest thereon at
the Default  Rate.  In case of  proceedings  against  Mortgagor in insolvency or
bankruptcy  or  any  proceedings  for  its   reorganization   or  involving  the
liquidation of its assets,  then Mortgagee  shall be entitled to prove the whole
amount of principal  and interest due upon the Secured  Obligations  to the full
amount  thereof,  and all other  payments,  charges  and  costs  due under  this
Mortgage without deducting  therefrom any proceeds obtained from the sale of the
whole or any part of the Mortgaged Property.

          (c) No  recovery  of any  judgment  by  Mortgagee  and no  levy  of an
execution  under any  judgment  upon the  Mortgaged  Property  or upon any other
property of Mortgagor shall affect, in any manner or to any extent,  the lien of
this  Mortgage upon the  Mortgaged  Property or any part thereof,  or any liens,
rights,  powers or  remedies of  Mortgagee  hereunder,  but such liens,  rights,
powers and remedies of Mortgagee shall continue unimpaired as before.

          (d) Any moneys thus  collected  by  Mortgagee  under this Section 2.04
shall be applied by Mortgagee in accordance with the provisions of paragraph (k)
of Section 2.03.



<PAGE>24


     Section 2.05 Receiver,  Waiver. After the happening of any Event of Default
and  immediately  upon the  commencement  of any  action,  suit or  other  legal
proceedings  by Mortgagee to obtain  judgment for the  principal of, or interest
on,  and any other  amounts  constituting  the  Secured  Obligations,  including
(without  limitation) all sums required to be paid by Mortgagor  pursuant to any
provision  of this  Mortgage or of any nature in aid of the  enforcement  of the
Secured  Obligations or of this Mortgage,  Mortgagor will (a) waive the issuance
and service of process and submit to a voluntary appearance in such action, suit
or proceeding and (b) if required by Mortgagee,  consent to the appointment of a
receiver or receivers of the  Mortgaged  Property or any part thereof and of all
the earnings,  revenues, rents, maintenance payments, issues, profits and income
thereof in accordance with Section 2.11 hereof. After the happening of any Event
of  Default  and  during  its  continuance,  or  upon  the  commencement  of any
proceedings  to foreclose  this Mortgage or to enforce the specific  performance
hereof  or in aid  thereof  or  upon  the  commencement  of any  other  judicial
proceeding to enforce any right of Mortgagee,  Mortgagee shall be entitled, as a
matter of right, if it shall so elect, without the giving of notice to any other
party and without  regard to the adequacy or  inadequacy of any security for the
Mortgage  indebtedness,  forthwith  either before or after  declaring the unpaid
principal of the Secured  Obligations to be due and payable,  to the appointment
of such a receiver or receivers.

     Section 2.06 Mortgagee's Possession. Notwithstanding the appointment of any
receiver,  liquidator or trustee of Mortgagor or of any of its  property,  or of
the  Mortgaged  Property  or any part  thereof,  Mortgagee  shall be entitled to
retain possession and control of the Mortgaged Property.

     Section  2.07  Remedies  Cumulative.  No remedy  herein  conferred  upon or
reserved  to  Mortgagee  is  intended  to be  exclusive  of any other  remedy or
remedies which Mortgagee may be entitled to exercise against  Mortgagor and each
and every such  remedy  shall be  cumulative,  and shall be in addition to every
other remedy given  hereunder or in the  Agreement or in any other Loan Document
now or  hereafter  existing  at law or in equity or by  statute.  No delay by or
omission of  Mortgagee to exercise any right or power shall be construed to be a
waiver of any Event of Default or any acquiescence  therein; and every power and
remedy given in this  Mortgage or in the Agreement or in any other Loan Document
to  Mortgagee  may be  exercised  from  time to time as often  as may be  deemed
expedient by Mortgagee.  The resort to any remedy  provided  hereunder or in the
Agreement  or in any other Loan  Document or provided by law or at equity  shall
not prevent the  concurrent  or subsequent  employment of any other  appropriate
remedy or remedies against Mortgagor.  By the acceptance of payment of principal
of or  interest  on or any other  amount due in  respect  of any of the  Secured
Obligations  after its due date,  Mortgagee  does not waive the right  either to
require prompt payment when due of all other amounts secured hereby or to regard
as an Event of Default  the  failure to pay any other such  amounts.  Nothing in
this Mortgage or in the Agreement or in any  instrument  evidencing  the Secured
Obligations  shall affect the  obligation  of Mortgagor to pay (i) the principal
of, and interest on, the Secured  Obligations  in the manner and at the time and
place  therein  or  in  the  Agreement  expressed  or  (ii)  the  other  Secured
Obligations in the manner and at the time herein expressed.


<PAGE>25


     Section 2.08 Agreement by Mortgagor.  Mortgagor will not at any time insist
upon, or plead, or in any manner whatever claim or take any benefit or advantage
of any stay or extension or moratorium law, any exemption from execution or sale
of the Mortgaged Property or any part thereof,  wherever enacted,  now or at any
time hereafter in force, which may affect the covenants and terms of performance
of this Mortgage or any other Loan Document,  or claim,  take or insist upon any
benefit or  advantage of any law now or  hereafter  in force  providing  for the
valuation or appraisal of the Mortgaged Property, or any part thereof,  prior to
any sale or sales thereof which may be made pursuant to any provision herein, or
pursuant  to  the  decree,   judgment  or  order  of  any  court  of   competent
jurisdiction,  or,  after any such sale or sales,  claim or  exercise  any right
under any statute heretofore or hereafter enacted to redeem the property so sold
or any part  thereof;  and  Mortgagor  hereby  expressly  waives all  benefit or
advantage of any such law or laws and covenants  not to hinder,  delay or impede
the  execution of any power herein  granted or  delegated to  Mortgagee,  but to
suffer and permit the execution of every power as though no such law or laws had
been made or enacted. Mortgagor, waives, to the extent that it lawfully may, all
right to have the  Mortgaged  Property or any part  thereof  marshaled  upon any
foreclosure hereof.

     Section 2.09 Use and  Occupancy  Payments.  During the  continuance  of any
Event of Default and pending the  exercise by  Mortgagee of its right to exclude
Mortgagor  from all or any part of the  Premises,  unless  Mortgagor  is legally
entitled to continue  possession  of the  Premises,  Mortgagor  agrees to pay to
Mortgagee the fair and reasonable rental value, which amount shall be determined
by the Mortgagee in its reasonable  judgement,  for the use and occupancy of the
Premises or any portion thereof which are in its possession for such period and,
upon default of any such payment,  will vacate and  surrender  possession of the
Premises to  Mortgagee or to a receiver,  if any, and in default  thereof may be
evicted by any summary  action or  proceeding  for the recovery of possession of
the Premises for non-payment of rent, however designated.  Any payments received
under this Section 2.09 by Mortgagee shall be applied in accordance with Section
2.03(k) of this Mortgage.

     Section 2.10 Mortgagee's  Right to Purchase.  In case of any sale under the
foregoing  provisions  of this Article II,  whether made under the power of sale
hereby  given or  pursuant to judicial  proceedings,  Mortgagee  may bid for and
purchase any property, and may make payment therefor as hereinafter set forth or
as set forth in Section 2.03 (l) above,  and, upon  compliance with the terms of
said  sale,  may hold,  retain  and  dispose of such  property  without  further
accountability therefor. For the purpose of making settlement or payment for the
property or properties  purchased,  Mortgagee shall be entitled to use and apply
such  of the  Secured  Obligations  held  by it or the  other  Secured  Parties,
including  (without  limitation) any accrued and unpaid interest thereon,  as it
may elect, or as may be otherwise provided for in Section 2.03(l) above.

     Section 2.11 Appointment of Receiver.  Upon application of Mortgagee to any
court of competent jurisdiction, if any Event of Default shall have occurred and
so long as it shall be  continuing,  to the extent  permitted by law, a receiver
may be appointed to take  possession  of and to operate,  maintain,  develop and
manage the Mortgaged Property or any part thereof. In every case


<PAGE>26


when a  receiver  of the whole or any part of the  Mortgaged  Property  shall be
appointed  under this Section 2.11 or  otherwise,  the net income and profits of
the  Mortgaged  Property  shall,  subject to the order of any court of competent
jurisdiction, be paid over to, and shall be received by, Mortgagee to be applied
as provided in Section 2.03(k) hereof.

     Section 2.12 No Waiver.  Mortgagee may resort to any security given by this
Mortgage or to any other security now existing or hereafter  given to secure the
payment of any of the Secured  Obligations  secured hereby, in whole or in part,
and in such  portions  and in such  order as may seem best to  Mortgagee  in its
reasonable discretion, and any such action shall not in any way be considered as
a waiver of any of the rights,  benefits,  liens or security interest created by
this Mortgage.

                                   ARTICLE III

                         ASSIGNMENT OF LEASES AND RENTS

     Section  3.01 Lease  Related  Definitions.  As used in this  Mortgage:  (a)
"Lease" means any lease, sublease, or other similar agreement,  now or hereafter
existing,  under the terms of which  any  person  other  than  Mortgagor  has or
acquires any right to occupancy or use of the  Mortgaged  Property,  or any part
thereof,  or  interest  therein;  (b)  "Lessee"  means  the  lessee,  sublessee,
licensee,  tenant or other  person  having the right to occupy or use all or any
part of the Mortgaged  Property  under a Lease;  and (c) "Rent" means the rents,
additional  rents and other  consideration  payable to  Mortgagor  by the Lessee
under the terms of a Lease.  Whenever  reference  is made in this  Mortgage to a
lease,  license,  lessee,  licensee,  tenancy or tenant, such reference shall be
deemed to  include a  sublease,  sublessee,  license,  licensee,  subtenancy  or
subtenant, as the case may be.

     Section 3.02  Assignment of Leases and Rents.  Mortgagor  hereby assigns to
Mortgagee all Leases,  together with all Rents payable under the Leases,  now or
at any time hereafter existing,  such assignment being upon the following terms:
(a) until  receipt  from  Mortgagee of notice of the  occurrence  of an Event of
Default,  each Lessee may pay rent directly to Mortgagor,  (b) upon receipt from
Mortgagee of notice that an Event of Default exists,  each Lessee shall,  and is
hereby authorized and directed to, pay directly to Mortgagee all Rent thereafter
accruing,  and the receipt of such Rent by Mortgagee  shall be a release of such
Lessee to the extent of all amounts so paid,  (c) Rent so received by  Mortgagee
shall be applied by Mortgagee  first to the expenses,  if any, of collection and
then in  accordance  with Article II hereof,  (d) without  impairing  its rights
hereunder,  Mortgagee  may,  at its  option,  at any time and from time to time,
release to Mortgagor  Rent so received by Mortgagee,  or any part  thereof,  (e)
Mortgagee  shall not be liable for its  failure to  collect,  or its  failure to
exercise diligence in the collection of, Rent, but shall be accountable only for
Rent that it shall  actually  receive.  As among  Mortgagee,  Mortgagor  and any
person claiming  through or under  Mortgagor,  the assignment  contained in this
Section 3.02 is intended to be absolute,  unconditional and presently effective,
and the  provisions of  subsection  3.02(a) are intended for the benefit of each
Lessee and


<PAGE>27


shall never inure to the benefit of Mortgagor or any person claiming  through or
under  Mortgagor.  It shall never be necessary for Mortgagee to institute  legal
proceedings  of any kind  whatsoever  to enforce the  provisions of this Section
3.02.  Notwithstanding  anything  herein to the contrary,  Mortgagor may collect
such Rent until such time as an Event of Default shall occur hereunder.

     Section 3.03 Mortgagee's Consent. Nothing in this Article III shall ever be
construed as (a) allowing any Lease without  Mortgagee's  prior written  consent
unless  otherwise  permitted  under the  Agreement,  or (b)  subordinating  this
Mortgage to any Lease.

     Section 3.04 Lease  Related  Covenants.  Mortgagor  covenants  to: (a) upon
demand by  Mortgagee,  assign to Mortgagee,  by separate  instrument in form and
substance  satisfactory  to  Mortgagee,  any and all  Leases,  and/or  all Rents
payable  thereunder,  including,  but not  limited to, any Lease which is now in
existence or which may be executed  after the date  hereof;  (b) not accept from
any  Lessee,  nor  permit  any  Lessee  to pay,  Rent for more than one month in
advance except for payment in the nature of security for performance of Lessee's
obligations  unless  otherwise  provided  for in the Lease;  (c) comply with the
terms and provisions of each Lease including, without limitation, the payment of
all sums  required to be paid by  Mortgagor or which any Lessor has an option to
pay under any Lease in order to prevent any  reduction in or offset  against any
Rent payable under any Lease or any default thereunder;  (d) not amend,  extend,
cancel,  abridge,  or otherwise  modify,  or accept  surrender of, or renew, any
Lease without the written consent of Mortgagee other than in the ordinary course
of business, (e) not assign,  transfer or mortgage any Lease without the written
consent of Mortgagee; (f) not assign, transfer, pledge or mortgage any Rent; (g)
not waive, excuse,  release or condone any nonperformance of any covenant of any
Lease by any Lessee other than in the ordinary  course of business;  (h) give to
Mortgagee  duplicate notice of each material default by each Lessee;  (i) on all
Leases  executed  after the date  hereof,  cause each  Lessee to agree (and each
Lessee under each Lease executed after the date hereof does so agree) to give to
Mortgagee  written notice of each and every material  default by Mortgagor under
its Lease and not exercise any remedies under such Lease unless  Mortgagee fails
to cure such material  default  within a reasonable  period after  Mortgagee has
received such notice;  provided,  that Mortgagee shall never have any obligation
or duty to cure any such material default; (j) enforce its rights with regard to
all Leases in the ordinary course of business; and (k) not enter into any Lease,
affecting the Mortgaged Property or any part thereof unless otherwise  permitted
under the Agreement without the prior approval of Mortgagee.

     Section  3.05  Mortgagee  Not Liable.  Mortgagee  shall not be obligated to
perform or discharge,  nor does it hereby undertake to perform or discharge, any
obligation,  duty or  liability  under any Lease,  or under or by reason of this
assignment,  and Mortgagor  shall and does hereby agree to indemnify and to hold
Mortgagee harmless from and against any and all liability,  loss or damage which
Mortgagee  may or might  incur  under  any  Lease or under or by  reason of this
assignment and from and against any and all claims and demands  whatsoever which
may be  asserted  against  Mortgagee  by reason of any  alleged  obligations  or
undertakings on its part to perform or discharge


<PAGE>28


any of the  terms,  covenants  or  agreements  contained  in any  Lease.  Should
Mortgagee incur any such  liability,  loss or damage under any Lease or under or
by reason of this  assignment,  or in the defense of any such claims or demands,
the amount thereof,  including all costs, expenses and attorneys' fees, shall be
secured hereby and  constitute  part of the Secured  Obligations,  and Mortgagor
shall  reimburse  Mortgagee  therefore  immediately  upon  demand,  and upon the
failure of  Mortgagor to do so,  Mortgagee  may declare all sums secured by this
Mortgage immediately due and payable.

     Section 3.06 Estoppel  Certificates.  On all Leases executed after the date
hereof,  all Leases shall  provide for the giving by the Lessee of  certificates
with  respect to the status of such Leases,  and  Mortgagor  shall  exercise its
right to request such  certificates  within ten (10) days of any demand therefor
by Mortgagee. Mortgagor shall furnish to Mortgagee, within ten (10) days after a
request by Mortgagee to do so, an executed counterpart of all Leases.

     Section 3.07 Lease Approval Requirements.  On all Leases executed after the
date hereof, all Leases and Lessees of the Premises,  or any part thereof,  must
be acceptable to and approved by Mortgagee unless  otherwise  provided under the
Agreement;   and  all  Lessees  shall   execute  such   estoppel   certificates,
subordinations, attornments and other agreements as Mortgagee may require. Under
no circumstances shall Mortgagee be liable for any obligation to pay any leasing
commission,  brokerage fee or similar fee or charge in connection with any Lease
nor shall Mortgagee be obligated to complete any Improvements for the benefit of
any Lessee.

                                   ARTICLE IV

                                  MISCELLANEOUS

     Section 4.01 Benefit of  Mortgagee.  All of the grants,  covenants,  terms,
provisions  and  conditions of this  Mortgage  shall run with the land and shall
apply to,  bind and inure to the  benefit of the  successors  and assigns of the
respective  parties  hereto;   provided,  that  Mortgagor  may  not  assign  its
obligations hereunder without the prior written consent of Mortgagee.

     Section 4.02 Savings Clause. In the event any one or more of the provisions
contained in this Mortgage  shall for any reason be held to be invalid,  illegal
or unenforceable in any respect, such invalidity, illegality or unenforceability
shall,  at the  option of  Mortgagee,  not affect  any other  provision  of this
Mortgage but this  Mortgage  shall be construed as if such  invalid,  illegal or
unenforceable provision had never been contained herein or therein.

     Section 4.03 Notices.  All notices hereunder shall be given pursuant to the
terms of Section 9.1 of the Agreement.



<PAGE>29


     Section 4.04 Governing Law. This Mortgage shall, without regard to place of
contract or payment,  be  construed  and  enforced  according to the laws of the
state where the Mortgaged Property is located,  all without regard to principles
of conflict of laws.

     Section 4.05 No Change.  Neither this Mortgage nor any provision hereof may
be  changed,  waived,  discharged  or  terminated,  except by an  instrument  in
writing, signed by Mortgagee and Mortgagor.

     Section 4.06 Security Agreement and Fixture Filing.  This Mortgage shall be
deemed to be a security  agreement  and fixture  filing  pursuant to the Uniform
Commercial Code of the state where the Mortgaged Property is located.

     Section 4.07 No Usury. In the event that Mortgagee, in enforcing its rights
hereunder,  determines  that charges and fees  incurred in  connection  with the
Secured  Obligations  may, under the applicable  usury laws,  cause the interest
rate herein to exceed the maximum  allowed by law, then such  interest  shall be
recalculated  and any excess over the maximum  interest  permitted  by said laws
shall be  credited  to the then  principal  outstanding  balance to reduce  said
balance by that amount.  It is the intent of the parties  hereto that  Mortgagor
under no circumstances shall be required to pay, nor shall Mortgagee be entitled
to collect,  any interest which is in excess of the maximum legal rate permitted
under the applicable usury laws.

     Section  4.08  Effect of  Partial  Release.  No  release of any part of the
Mortgaged  Property  or of any other  property  conveyed  to secure the  Secured
Obligations shall in any way alter,  vary or diminish the force,  effect or lien
or security  interest  of this  Mortgage  on the  Mortgaged  Property or portion
thereof remaining subject to the lien and security interest created hereby.

     Section 4.09 Mortgagee's  Dealing with Successors and Lessees. In the event
Mortgagor or any of Mortgagor's  successors  conveys or leases without the prior
approval of Mortgagee (except as otherwise permitted herein or in the Agreement)
any interest in the Mortgaged Property, or any part thereof, to any other party,
Mortgagee  may  deal  with  any  owner or  lessee  of any part of the  Mortgaged
Property with reference to this Mortgage and to the Secured Obligations,  either
by  forbearance  on the part of  Mortgagee  or release of all or any part of the
Mortgaged  Property  or of any other  property  securing  payment of any Secured
Obligations,  without in any way  modifying  or  affecting  Mortgagee's  rights,
remedies, liens or security interests hereunder (including the right to exercise
any one or more of the  remedies  described or referred to in Article I, Article
II,  Article  III or Article IV hereof in the event such  conveyance  is made in
contravention  of the provisions of this Mortgage) or the liability of Mortgagor
or any other party liable for the payment of the Secured  Obligations,  in whole
or in part.  This shall not be construed to allow any such conveyance or leasing
by Mortgagor, except as permitted herein or in the Agreement.



<PAGE>30


     Section  4.10 No Waiver by  Mortgagee.  All  options and rights of election
herein provided for the benefit of Mortgagee are continuing,  and the failure to
exercise  any such  option or right or  election  upon a  particular  default or
breach or upon any  subsequent  default  or breach  shall  not be  construed  as
waiving the right to exercise  such option or election at any later date. By the
acceptance  of payment of  principal or interest  after its due date,  Mortgagee
does not waive the right either to require  prompt payment when due of all other
amounts  secured  hereby or to regard as an Event of Default  the failure to pay
any other such amounts.  No exercise of the rights and powers herein granted and
no delay or omission in the  exercise of such rights and powers shall be held to
exhaust the same or be construed as a waiver  thereof,  and every such right and
power may be exercised at any time and from time to time. All grants, covenants,
terms and conditions  hereof shall bind  Mortgagor and all successive  owners of
the Premises.

     Section 4.11 Headings Descriptive. The headings of the several sections and
subsections of this Mortgage are inserted for convenience  only and shall not in
any way affect the meaning or construction of any provision of this Mortgage.

     SECTION 4.12 WAIVER OF TRIAL BY JURY. THE MORTGAGOR AND THE MORTGAGEE WAIVE
THE RIGHT TO TRIAL BY JURY IN ANY ACTION OR PROCEEDING  BASED UPON,  ARISING OUT
OF OR IN ANY WAY CONNECTED TO THIS MORTGAGE.

     Section 4.13  Indemnification.  The  Mortgagor  agrees to pay, and to save,
indemnify  and  keep  the  Mortgagee  and its  respective  directors,  officers,
employees,   attorneys,   experts,   and  agents  harmless  from,  any  and  all
liabilities,  costs and expenses (including,  without limitation, legal fees and
expenses),  losses or damages (i) with respect to, or resulting  from, any delay
in paying,  any and all  excise,  sales or other  taxes  which may be payable or
determined  to be payable with respect to any of the  Mortgaged  Property,  (ii)
with respect to, or resulting  from, any delay in complying with any requirement
of law applicable to any of the Mortgaged  Property or (iii) in connection  with
any of the  transactions  contemplated by this Mortgage,  including the fees and
disbursements  of  counsel  and of any other  experts,  which  Mortgagee  or its
respective  directors,  officers,  employees,  attorneys,  experts or agents may
incur in connection with (w) the administration or enforcement of this Mortgage,
including  such  expenses as are incurred to preserve the value of the Mortgaged
Property  and the  validity,  perfection,  rank and value of any  liens  granted
hereunder, (x) the collection, sale or other disposition of any of the Mortgaged
Property,  (y) the exercise by the Mortgagee of any of the rights conferred upon
it  hereunder  or (z) any Default or Event of Default,  but  excluding  any such
liabilities,  costs and expenses, losses or damages incurred solely by reason of
the  gross  negligence  or  willful  misconduct  of  the  party  seeking  to  be
indemnified  as  determined by a final order or judgment of a court of competent
jurisdiction.

     Any amount due hereunder which is not paid on demand shall bear interest at
a rate equal to the Default Rate and shall be a lien upon the Mortgaged Property
and shall be secured hereby.


<PAGE>31


     The  agreements  of the  Mortgagor  contained  in this  Section  4.13 shall
survive  the  payment  and  performance  of  the  Secured  Obligations  and  the
termination  of the liens and  security  interests  granted  hereby.  All of the
Mortgagor's  obligations  to indemnify  Mortgagee and its  directors,  officers,
employees,  attorneys,  experts and agents hereunder shall (without duplication)
be  in  addition  to,  and  shall  not  limit  in  any  way,   the   Mortgagor's
indemnification  obligations  contained  in the  Agreement  or in any other Loan
Document.

     Section 4.14 Advances under the Agreement. It is understood and agreed that
the funds to be advanced  under this Mortgage are to be advanced  subject to and
in accordance with the provisions of the Agreement and the other Loan Documents,
and that all sums  advanced  thereunder  or hereunder  are  included  within the
Secured Obligations secured hereby.

     Section 4.15 Particular State Provisions. There is attached hereto and made
a part hereof Exhibit B containing  additional  provisions that are necessary or
appropriate  under  the laws of the  state in which the  Mortgaged  Property  is
located or pursuant to the provisions of any permitted property liens.

                                    ARTICLE V

                            AMENDMENT AND RESTATEMENT

     Section 5.01  Pre-Petition  Mortgage.  This Mortgage amends and restates in
its entirety the  Pre-Petition  Mortgage to which this Mortgage  relates and the
Post-Petition  Mortgage Liens;  provided,  however,  that, to the fullest extent
permitted by law, (a) the priority of all liens,  security  interests  and other
encumbrances evidenced hereby or arising hereunder shall relate back to the date
and time the Pre-Petition  Mortgage to which this Mortgage relates was recorded,
or to such earlier date and time as  permitted  by  applicable  law; (b) nothing
herein  shall impair the  creation,  attachment,  perfection  or priority of the
liens,  security interests and other encumbrances  evidenced by or arising under
the Pre-Petition  Mortgage to which this Mortgage  relates or the  Post-Petition
Mortgage Liens;  and (c) nothing herein shall constitute a novation or discharge
of the obligations  secured by the Pre-Petition  Mortgage to which this Mortgage
relates or the Post-Petition Mortgage Liens.

     IN WITNESS  WHEREOF,  this Mortgage has been duly executed by Mortgagor and
Mortgagee as of the day and year first above written.

                                       MORTGAGOR:

                                       PAYLESS CASHWAYS, INC.




<PAGE>32


                                       By:  
                                          --------------------------------
                                          Name:
                                          Title:


                                       MORTGAGEE:

                                       CANADIAN  IMPERIAL BANK OF COMMERCE,  
                                         as Coordinating and Collateral Agent



                                       By:  
                                          --------------------------------
                                          Name:
                                          Title:




                            [NOTARY BLOCK -- PAYLESS]


                             [NOTARY BLOCK -- CIBC]



<PAGE>33



                                    EXHIBIT A

                              (DESCRIPTION OF LAND)


<PAGE>34



                                    EXHIBIT B

                             (LOCAL LAW PROVISIONS)