OPEN-END MORTGAGE AND SECURITY AGREEMENT

THIS IS AN OPEN-END MORTGAGE AND SECURITY AGREEMENT
SECURING FUTURE ADVANCES UP TO A MAXIMUM PRINCIPAL AMOUNT
OF $2,619,954.25 PLUS ACCRUED INTEREST AND OTHER
INDEBTEDNESS AS DESCRIBED IN 42 Pa. C.S.A. ss.8143


      THIS OPEN-END MORTGAGE AND SECURITY  AGREEMENT made as of this 29th day of
April,  1998 (as amended,  modified,  extended,  supplemented,  restated  and/or
replaced from time to time, this "Mortgage") is between  PIERCING  PAGODA,  INC.
("Mortgagor"),  a Delaware corporation having its chief executive office at 3910
Adler Place,  Lehigh Valley,  Pennsylvania  18002,  and CORESTATES BANK, N.A., a
national bank with offices at 600 Penn Street,  Reading,  Pennsylvania 19603, as
administrative  agent for the Lenders  (hereinafter  defined) under that certain
Syndicated Loan Agreement dated March 27, 1997 (as amended, modified,  extended,
supplemented,  restated and/or replaced from time to time, the "Syndicated  Loan
Agreement") by and among Mortgagor,  the lending  institutions from time to time
parties  thereto  (each  a  "Lender"  and  collectively,   the  "Lenders"),  and
Mortgagee,  as  administrative  agent for itself and the other  Lenders and as a
Lender (in such capacity, the "Mortgagee").

W I T N E S S E T H T H A T:

      Pursuant  to the  terms and  subject  to the  conditions  set forth in the
Syndicated Loan Agreement and that certain  Reimbursement  Agreement dated as of
the date hereof (as amended, modified, extended,  supplemented,  restated and/or
replaced  from  time  to  time,  the  "Reimbursement  Agreement")  by and  among
Mortgagor, the Lenders and Mortgagee, as the administrative agent for itself and
the  other  Lenders,  Mortgagee,  on behalf of each  Lender  (according  to such
Lender's  Pro Rata Share [as  defined in the  Syndicated  Loan  Agreement])  has
issued  for the  account  of  Mortgagor  its  irrevocable  letter of credit  (as
amended, modified, extended, supplemented, restated and/or replaced from time to
time,  the  "Letter of  Credit")  in an amount  equal to Two Million Six Hundred
Nineteen Thousand Nine Hundred Fifty-Four and 25/100 ($2,619,954.25)  Dollars to
provide credit  enhancement for Mortgagor's  Taxable Variable Rate  Demand/Fixed
Rate Bonds,  Series of 1998, in the aggregate amount of Two Million Five Hundred
Sixty-Five Thousand  ($2,565,000.00)  Dollars (as amended,  modified,  extended,
supplemented,  restated  and/or  replaced from time to time,  collectively,  the
"Bonds").

      The  reimbursement  obligation of Mortgagor to the Lenders is evidenced by
the  Reimbursement  Agreement,  the Letter of Credit and those certain Revolving
Loan Notes  executed and delivered by Mortgagor to the Lenders  pursuant to, and
as described in, the Syndicated Loan Agreement.  To induce the Lenders,  through
Mortgagee  as  administrative  agent and as issuer of the Letter of  Credit,  to
issue the Letter of Credit,  Mortgagor is executing and delivering this Mortgage
to secure  the  existing  and  future  debts,  liabilities  and  obligations  of
Mortgagor to the Lenders under the Reimbursement Agreement.

      NOW, THEREFORE,  in consideration of the issuance of the Letter of Credit,
and as security for payment and performance to Mortgagee under the Reimbursement
Agreement and this Mortgage,  according to their respective terms and conditions
(including  but not  limited to any  restructuring,  refinancing,  extension  or
modification  thereof)  and  for  performance  of  the  agreements,  conditions,
covenants,  provisions and  stipulations  contained  herein and therein,  and in
certain  other  agreements  and  instruments  made  and  given by  Mortgagor  to
Mortgagee in connection therewith,  Mortgagor has granted, conveyed,  bargained,
sold,  aliened,  enfeoffed,  released,  confirmed  and  mortgaged,  and by these
presents does hereby grant,  convey,  bargain,  sell, alien,  enfeoff,  release,
confirm and mortgage  unto  Mortgagee  all that  certain real estate  located in
Hanover Township,  Northampton County, Pennsylvania, all as more fully described
in Exhibit A, attached hereto,  incorporated herein by this reference and hereby
made a part hereof (the "Land").

      TOGETHER WITH all of  Mortgagor's  right,  title and interest now owned or
hereafter acquired in:

1)              all buildings and improvements erected or
hereafter erected on the Land; and

2) all fixtures, appliances,  machinery, furniture, furnishings and equipment of
any nature whatsoever and other articles of personal property owned by Mortgagor
now or at any time  hereafter  installed in,  attached to or situated in or upon
the Land or any buildings and improvements now or hereafter erected thereon,  or
used or intended to be used in connection  with the Land, or in the operation of
any buildings  and  improvements  now or hereafter  erected  thereon,  or in the
operation or maintenance of any such building or improvement,  plant or business
situate  thereon,  whether or not the  personal  property is or shall be affixed
thereto (the aforesaid buildings,  improvements and fixtures located on the Land
being sometimes  hereinafter  collectively referred to as the "Improvements" and
the Land and Improvements being sometimes  hereinafter  collectively referred to
as the "Real Estate"); and

3) all building materials,  fixtures,  building machinery and building equipment
delivered  to the  Land  during  the  course  of,  or in  connection  with,  the
construction  of, or  reconstruction  of, or  remodeling  of, any  buildings and
improvements from time to time during the term hereof; and

4) any and all tenements,  hereditaments and appurtenances belonging to the Real
Estate or any part thereof hereby  mortgaged or intended so to be, or in any way
appertaining thereto, and all streets,  alleys,  passages,  ways, water courses,
and  all  leases,  licenses,  permits,  approvals,   agreements,  easements  and
covenants now existing or hereafter  created for the benefit of Mortgagor or any
subsequent  owner or tenant of the Real Estate over  ground  adjoining  the Real
Estate and all rights to enforce the maintenance  thereof, and all other rights,
liberties and privileges of whatsoever kind or character, and the reversions and
remainders,  income,  rents,  issues and profits arising therefrom,  and all the
estate,  right,  title,  interest,   property,   possession,  claim  and  demand
whatsoever,  at law or in equity,  of Mortgagor in and to the Real Estate or any
part thereof; and

5) all rents, income,  issues and profits arising or issuing from all leases and
subleases  now or after the date of this  Mortgage  entered into covering all or
any part of the Real Estate, all of which rents, income,  issues and profits are
hereby  assigned and, if requested by  Mortgagee,  shall be caused to be further
assigned by Mortgagor to Mortgagee.  The  foregoing  assignment  shall  include,
without  limitation,  cash  or  securities  deposited  under  leases  to  secure
performance by lessees of their obligations under such leases, whether such cash
or securities are to be held until the expiration of the terms of such leases or
applied to one or more  installments  of rent coming due prior to the expiration
of such terms; and

6) 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.

      All of the above-mentioned real estate, buildings, improvements, fixtures,
machinery,  furniture, equipment, other personal property, materials, tenements,
hereditaments  and  appurtenances,  leases  and  subleases  and  other  property
interests  are  sometimes  collectively  referred  to herein  as the  "Mortgaged
Property".

      TO HAVE AND TO HOLD the Mortgaged  Property  hereby  conveyed or mentioned
and intended so to be, unto Mortgagee, to its own use forever.

      PROVIDED ALWAYS,  and this instrument is upon the express  condition that,
if  Mortgagor  pays or  causes to be paid to the  Lenders  all sums  payable  by
Mortgagor  to  Mortgagee  as are  secured  hereby,  with  interest  thereon,  as
applicable, in accordance with the provisions of the Reimbursement Agreement and
this  Mortgage,  at the times and in the manner  specified,  without  deduction,
fraud or delay,  and Mortgagor  performs and complies  with all the  agreements,
conditions,  covenants,  provisions and stipulations contained herein and in the
Reimbursement Agreement,  then this Mortgage and the estate hereby granted shall
cease and become void.

      MORTGAGOR  REPRESENTS,  COVENANTS AND WARRANTS to and with  Mortgagee that
until the indebtedness secured hereby is fully repaid:

1. Payment and Performance. Mortgagor shall pay to Mortgagee, in accordance with
the terms of the Reimbursement  Agreement,  the principal sums set forth therein
and in this Mortgage and interest thereon; shall perform and comply with all the
agreements,   conditions,   covenants,   provisions  and   stipulations  of  the
Reimbursement   Agreement  and  this  Mortgage  and  all  related   instruments,
agreements and documents;  and shall timely perform all of its  obligations  and
duties under any lease, easement agreement,  license, permit, approval, covenant
or other agreement relating to, affecting, created for the benefit of or used in
connection  with the operation of all or any portion of the  Mortgaged  Property
now or hereafter in effect. 2. Warranty of Title. Mortgagor warrants that (i) it
possesses  a good  and  marketable  unencumbered  fee  simple  title to the Real
Estate,  and a good and a marketable  unencumbered title to the remainder of the
Mortgaged  Property,  except for those title exceptions  listed in the mortgagee
title  insurance  policy  approved  by and  issued to  Mortgagee,  insuring  the
priority  of the lien of this  Mortgage,  and (ii) this  Mortgage is a valid and
enforceable first lien on the Mortgaged Property,  subject only to the aforesaid
exceptions. Mortgagor shall preserve such title and the validity and priority of
the lien of this Mortgage and shall forever  warrant and defend the same against
the claims of all persons and parties whomsoever.

3. Maintenance of Mortgaged Property. Mortgagor shall keep and maintain or cause
to be kept and  maintained  the  Mortgaged  Property and the sidewalks and curbs
abutting  the Real  Estate,  in good order and  condition  and in a rentable and
tenantable  state  of  repair,  and will  make or cause to be made,  as and when
necessary, all repairs, renewals and replacements, structural and nonstructural,
exterior and  interior,  ordinary and  extraordinary,  foreseen and  unforeseen.
Mortgagor  shall abstain from and shall not permit the commission of waste in or
about the Real  Estate;  shall not remove or  demolish  any  portion of the Real
Estate,  or  alter  the  structural   character  of  any  building,   structure,
improvement  or  fixture  erected  at any time on the  Land,  without  the prior
written  consent of  Mortgagee;  and shall not permit the Real  Estate to become
deserted or abandoned.

4.         Insurance.

(a) Mortgagor shall keep the Improvements  and all personal  property located on
the Real  Estate  continuously  insured,  to the extent of their full  insurable
replacement  value,  as such  replacement  value  is  reasonably  determined  by
Mortgagee  from time to time,  against  loss or damage  by fire,  with  extended
coverage and business interruption coverage,  boiler and machinery coverage, and
coverage  against loss or damage by  vandalism,  malicious  mischief,  sprinkler
leakage and, if required by federal law,  against flood,  and against such other
hazards as Mortgagee may reasonably  require from time to time.  Mortgagor shall
also maintain  commercial  general  liability and property damage insurance with
contractual   liability   endorsement  and  employer's  liability  and  worker's
compensation insurance, in such total amounts as Mortgagee may require from time
to time,  but in no event  less than  $1,000,000  per  occurrence,  with  excess
umbrella  coverage  of at  least  $2,000,000.  Mortgagee  shall  be  named as an
additional  insured under such general  liability  policy.  Such insurance shall
include protection for continuation of income for a period of twelve (12) months
in the event of any damage caused by the perils referred to above.

(b) All policies,  including  policies for any amounts  carried in excess of the
required minimum and policies not specifically  required by Mortgagee,  shall be
in form satisfactory to Mortgagee,  shall be issued by companies satisfactory to
Mortgagee,  shall be maintained in full force and effect,  shall be delivered to
Mortgagee,  with  premiums  prepaid,  and shall provide for at least thirty (30)
days' notice of cancellation  to Mortgagee,  and all hazard  insurance  policies
shall be  endorsed  with a  standard  mortgagee/loss  payee  clause  in favor of
Mortgagee, not subject to contribution,  and shall be for a term of at least one
year. Certificates of insurance, addressed to Mortgagee,  evidencing such hazard
insurance,   general  liability,   property  damage  and  worker's  compensation
insurance may be delivered to Mortgagee in lieu of the policies therefor.

(c) If the insurance,  or any part thereof,  shall expire,  or be cancelled,  or
become  void or  voidable by reason of breach of any  condition  thereof,  or if
Mortgagee  determines  that such  coverage  is  unsatisfactory  by reason of the
failure or  impairment  of the capital of any company in which the insurance may
then  be  carried,  or if  for  any  reason  whatever  the  insurance  shall  be
unsatisfactory to Mortgagee,  Mortgagor shall place new insurance,  satisfactory
to Mortgagee.  All renewal  policies,  with premiums paid, shall be delivered to
Mortgagee at least thirty (30) days before expiration of the old policies.

(d) In the  event of loss,  Mortgagor  will give  immediate  notice  thereof  to
Mortgagee,  and  Mortgagee  may  make  proof  of loss if not  made  promptly  by
Mortgagor;  provided,  however,  that any  adjustment  of a proof of loss  shall
require the prior written consent of Mortgagee.  Each insurance  company issuing
hazard  insurance  policies  in respect of the  Improvements  and the  aforesaid
personal  property is hereby  authorized and directed to make payment under such
insurance,  including return of unearned premiums, directly to Mortgagee instead
of to  Mortgagor  and  Mortgagee  jointly,  and  Mortgagor  appoints  Mortgagee,
irrevocably,  as  Mortgagor's  attorney-in-fact  to endorse any draft  therefor.
Mortgagee  shall  have the right to retain  and apply the  proceeds  of any such
insurance,  at its election, to reduction of the indebtedness secured hereby or,
on such reasonable  terms as Mortgagee may specify,  to restoration or repair of
the property damaged. The contrary notwithstanding, however, the Mortgagee shall
permit  the  Mortgagor  to use all or a  portion  of the loss  proceeds  for the
purpose of repairing, restoring, renovating or replacing the damaged property in
the event that the cost of the repair,  restoration,  renovation or  replacement
(as reasonably determined by Mortgagee) is less than One Million ($1,000,000.00)
Dollars  and:  (a)  the  insurance  carrier  shall  have  waived  any  right  of
subrogation  against the Mortgagor under its policy;  (b) no Event of Default or
event which,  with the passage of time or the giving of notice,  or both,  could
constitute an Event of Default shall have occurred and be continuing at the time
of the casualty loss;  (c) no Event of Default or event which,  with the passage
of time or the giving of notice,  or both,  could constitute an Event of Default
shall  occur  during  the  course of such  repair,  restoration,  renovation  or
replacement;  (d) the amount of the insurance proceeds and any separate funds to
be  contributed  by the  Mortgagor,  are  sufficient,  in the  Mortgagee's  sole
opinion,  to effect such repair,  restoration,  renovation or  replacement  in a
satisfactory  manner;  (e) the Mortgagor  submits to the Mortgagee an acceptable
construction  budget and  construction  schedule  for the  repair,  restoration,
renovation or replacement,  as well as plans and specifications  indicating that
such repair,  restoration,  renovation or replacement can be accomplished within
the time and cost restrictions shown on the construction budget and construction
schedule;  and (f) the funds which are used to effect such repair,  restoration,
renovation  or  replacement   (whether  in  the  form  of  insurance   proceeds,
undisbursed loan proceeds,  or an equity contribution by the Mortgagor) are held
and disbursed by the Mortgagee. Mortgagee's application of insurance proceeds to
reduction of the  indebtedness  secured by this  Mortgage or to  restoration  or
repair of the property damaged shall not excuse or modify Mortgagor's obligation
to continue to pay the installments of interest and/or principal  required under
the Note unless the amount of such insurance  proceeds received by Mortgagee and
applied to reduction of the indebtedness  secured by this Mortgage is sufficient
to repay in full all interest,  principal and all other sums required to be paid
to Mortgagee under the Note and this Mortgage. Such hazard policies of insurance
and all renewals thereof are hereby assigned to Mortgagee as additional security
for payment of the indebtedness  hereby secured and Mortgagor hereby agrees that
after default  hereunder any values  available  thereunder upon  cancellation or
termination  of any of said policies or renewals,  whether in the form of return
of premiums or otherwise,  shall be payable to Mortgagee as assignee thereof. If
Mortgagee  becomes the owner of the  Mortgaged  Property or any part  thereof by
foreclosure or otherwise, such policies, including all right, title and interest
of Mortgagor thereunder, shall become the absolute property of Mortgagee.

5. Taxes and Other Charges.  Mortgagor shall pay when due and payable and before
interest or penalties are due thereon,  without any  deduction,  defalcation  or
abatement, all taxes,  assessments,  water and sewer rents and all other charges
or claims which may be assessed,  levied or filed at any time against Mortgagor,
the Mortgaged  Property or any part thereof or against the interest of Mortgagee
therein,  or which by any  present  or  future  law may have  priority  over the
indebtedness  secured  hereby  either  in  lien  or in  distribution  out of the
proceeds of any judicial  sale;  and  Mortgagor  shall  produce to Mortgagee not
later than such dates receipts for the payment thereof. If, however, pursuant to
this Mortgage or otherwise, Mortgagor shall have deposited with Mortgagee before
the due date thereof sums sufficient to pay any such taxes,  assessments,  water
and sewer rents, charges or claims, and there does not exist an Event of Default
(as such term is hereinafter  defined) or any event or condition which, with the
giving of notice or passage of time, or both,  could become an Event of Default,
they shall be paid by Mortgagee.  If there does not exist an Event of Default or
any such event or  condition,  and  Mortgagor  in good faith and by  appropriate
legal action shall contest the validity of any such item, or the amount thereof,
and shall have established on its books or by deposit of cash with Mortgagee, as
Mortgagee  may  elect,  a reserve  for the  payment  thereof  in such  amount as
Mortgagee may require  (including  but not limited to any interest and penalties
which may be payable  in  connection  therewith),  then  Mortgagor  shall not be
required to pay the item or to produce the required  receipts  while the reserve
is maintained and so long as the contest that operates to prevent  collection is
maintained and prosecuted with diligence,  and shall not have been terminated or
discontinued  adversely to Mortgagor.  Further,  Mortgagor will not apply for or
claim any deduction,  by reason of this Mortgage,  from the taxable value of all
or any part of the  Mortgaged  Property.  It is expressly  agreed that no credit
shall be claimed or allowed on the  interest  payable on the Note because of any
taxes or other charges paid.

6. Mortgagee's Right to Require Deposit of Certain Sums. At Mortgagee's request,
after  the  occurrence  and  during  the  continuance  of an Event  of  Default,
Mortgagor shall deposit with Mortgagee,  monthly, an amount equal to one-twelfth
(1/12)  of the  annual  premiums  for  the  insurance  policies  referred  to in
paragraph 4 hereof and the annual real estate taxes,  water and sewer rents, any
special assessments,  charges or claims and any other item which at any time may
be or  become  a lien  upon  the  Mortgaged  Property  prior to the lien of this
Mortgage;  and on demand from time to time Mortgagor  shall pay to Mortgagee any
additional sums necessary to pay the premiums and other items,  all as estimated
by  Mortgagee.  Mortgagor  hereby  pledges  the  funds  deposited  hereunder  to
Mortgagee as additional  security for the  obligations  secured  hereby.  Unless
there shall have occurred an Event of Default,  or any event or condition which,
with the giving of notice or passage of time, or both,  could become an Event of
Default,  Mortgagee shall apply the funds deposited hereunder to payment of said
taxes,  assessments and insurance  premiums.  Mortgagee shall pay no interest to
Mortgagor  on any funds  deposited  pursuant  hereto,  and may retain any income
therefrom  for its own  benefit.  Mortgagee  may  commingle  such funds with its
general  funds.  Mortgagee's  acceptance  of and holding of such deposits is not
intended to create any fiduciary  relationship  between Mortgagee and Mortgagor;
nor has Mortgagee by holding such payments consented to act as Mortgagor's agent
for the  payment of taxes,  assessments,  water and sewer  charges or  insurance
premiums.  In the event that title to the Mortgaged Property or any part thereof
passes,  subject to the lien of this Mortgage,  to any party either by action of
Mortgagor  or any other  person or by  operation  of law or by order of court or
otherwise  in any  manner  whatsoever,  Mortgagor's  rights in the funds held by
Mortgagee  pursuant  hereto (or in such pro rata part of such funds as Mortgagee
shall  reasonably  determine if the  transfer is of less than all the  Mortgaged
Property)  shall pass to the  transferee  of the  Mortgaged  Property.  Upon any
assignment or other  transfer of this  Mortgage by Mortgagee,  any deposits then
held by Mortgagee shall automatically be deemed to be assigned to the transferee
thereof, and Mortgagee shall have no further liability to Mortgagor therefor.

7.  Corporate  Existence and Taxes.  If Mortgagor or any successor or grantee of
Mortgagor is a corporation,  it shall keep in effect its existence and rights as
a corporation  under the laws of the state of its incorporation and its right to
own  property  and  transact  business  in the state in which the Real Estate is
situated  during the entire time that it has any ownership  interest in the Real
Estate. For all periods during which title to the Mortgaged Property or any part
thereof shall be held by a corporation or association subject to corporate taxes
or taxes similar to corporate taxes, Mortgagor shall file returns for such taxes
with the proper  authorities,  bureaus or departments and it shall pay, when due
and payable and before interest or penalties are due thereon, all taxes owing by
Mortgagor to the United States,  to such state of incorporation and to the state
in which the Real Estate is situated and any political subdivision thereof, and,
at Mortgagee's  request,  shall produce to Mortgagee receipts showing payment of
any and all such  taxes,  charges  or  assessments  prior to the last dates upon
which such taxes, charges or assessments are payable without interest or penalty
charges, and within ten (10) days of receipt thereof all notices of settlements,
notices of deficiency  or  overassessment  and any other  notices  pertaining to
Mortgagor's tax liability,  which may be issued by the United States, such state
of  incorporation,  the  state  in which  the Real  Estate  is  situated  or any
political subdivision thereof.

8. Documentary and Other Stamps. If at any time the United States,  the state in
which the Real Estate is located or any political  subdivision  thereof,  or any
department or bureau of any of the foregoing shall require documentary,  revenue
or other stamps on the Note or this Mortgage,  Mortgagor on demand shall pay for
them together with any interest or penalties payable thereon.

9. Other Taxes. If any law or ordinance now or hereafter  imposes a tax directly
or indirectly on Mortgagee with respect to the Mortgaged Property,  the value of
Mortgagor's  equity  therein,  or the  indebtedness  evidenced  by the  Note and
secured by this  Mortgage,  Mortgagor  shall promptly pay such tax. If Mortgagor
fails to pay such tax or if Mortgagor is not lawfully  permitted to pay such tax
or to  reimburse  Mortgagee  for amounts  advanced  on account of such  payment,
Mortgagee,  at its election,  shall have the right at any time to give Mortgagor
written  notice  declaring  that the  principal  debt,  with  interest and other
appropriate  charges,  shall be due on a specified date not less than sixty (60)
days thereafter;  provided, however, that such election shall be ineffective if,
prior to the specified date, Mortgagor lawfully pays the tax (in addition to all
other payments required hereunder) or reimburses  Mortgagee for amounts advanced
and agrees to pay the tax whenever it becomes due and payable thereafter,  which
agreement shall then constitute a part of this Mortgage.

10. Security Agreement. This Mortgage constitutes a security agreement under the
Uniform  Commercial  Code and creates a security  interest in all that  property
(and the  proceeds  thereof)  included  in the  Mortgaged  Property  which might
otherwise be deemed "personal property". Upon filing this Mortgage in the office
of the  recorder  of deeds in and for  Northampton  County,  Pennsylvania,  this
Mortgage shall also be effective as a financing  statement  filed in such office
as a fixture  filing.  Mortgagor  shall  execute,  deliver,  file and refile any
financing  statements,  continuation  statements  or other  security  agreements
Mortgagee  may require  from time to time to confirm  the lien of this  Mortgage
with respect to such property. Without limiting the foregoing,  Mortgagor hereby
irrevocably  appoints  Mortgagee  attorney-in-fact  for  Mortgagor  to  execute,
deliver and file such  instruments for and on behalf of Mortgagor.  All costs of
such filing and refiling shall be paid by Mortgagor.  Mortgagor shall not change
its principal  place of business  without giving  Mortgagee at least thirty (30)
days' prior written  notice  thereof,  which notice shall be  accompanied by new
financing  statements  executed by Mortgagor  in the same form as the  financing
statements  delivered to  Mortgagee on the date hereof  except for the change of
address;  provided,   however,  that  if  the  standard  form  accepted  by  the
Commonwealth of  Pennsylvania  for such financing  statements has changed,  then
such new  financing  statements  shall be in such new  form.  Upon any  Event of
Default  hereunder  or under the Note,  Mortgagee  shall have in addition to any
other  rights and remedies  hereunder  or under the Note,  all of the rights and
remedies  granted to a secured  party  under the  Uniform  Commercial  Code with
respect to all personal property.  To the extent permitted by law, the items set
forth on the  financing  statements  shall be treated as part of the Real Estate
regardless  of the  fact  that  such  items  are  set  forth  in  the  financing
statements.  Such items are  contained in the  financing  statements to create a
security  interest in favor of Mortgagee in the event such items are  determined
to be personal property under the law. Notwithstanding any release of any or all
of that  property  included  in the  Mortgaged  Property  which is deemed  "real
property",  any  proceedings to foreclose this Mortgage or its  satisfaction  of
record,  the terms hereof shall survive as a security  agreement with respect to
the security  interest  created hereby and referred to above until the repayment
or  satisfaction in full of the obligations of Mortgagor as are now or hereafter
evidenced by the Note.

11.  Compliance with Law and Regulations.  Mortgagor shall comply with all laws,
ordinances,  regulations and orders of all federal,  state,  municipal and other
governmental authorities relating to the Mortgaged Property.

12. Inspection. Mortgagee and any persons authorized by Mortgagee shall have the
right at any time, upon reasonable notice to Mortgagor, to enter the Real Estate
at a reasonable  hour and to inspect and  photograph  its condition and state of
repair.

13.  Declaration of No Set-Off.  Within one (1) week after requested to do so by
Mortgagee,  Mortgagor shall certify to Mortgagee or to any proposed  assignee of
this Mortgage, in a writing duly acknowledged, the amount of principal, interest
and other charges then owing on the  obligation  secured by this Mortgage and by
prior  liens,  if any, and whether  there are any  set-offs or defenses  against
them.

14.  Required  Notices.   Mortgagor  shall  notify  Mortgagee  promptly  of  the
occurrence of any of the following:

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

(b)             receipt of notice of eminent domain proceedings or
condemnation of all or any part of the Mortgaged Property;

(c) receipt of notice from any governmental authority relating to the structure,
use or occupancy of the Mortgaged  Property or any real property adjacent to the
Real Estate;

(d)             receipt of any default or termination notice from
any tenant of all or any portion of the Mortgaged Property;

(e)             substantial change in the occupancy of the
Mortgaged Property;

(f)             receipt of any default or acceleration notice from
the holder of any lien or security interest in the Mortgaged
Property; or

(g)             commencement of any material litigation affecting
the Mortgaged Property.

15.        Condemnation.

(a) In the event of any  condemnation  or  taking  of any part of the  Mortgaged
Property by eminent  domain,  alteration  of the grade of any  street,  or other
injury to or  decrease in the value of the  Mortgaged  Property by any public or
quasi-public  authority  or  corporation,  all  proceeds  (that is, the award or
agreed  compensation for the damages  sustained)  allocable to Mortgagor,  after
deducting therefrom all costs and expenses  (regardless of the particular nature
thereof and whether  incurred with or without suit) including but not limited to
attorney's  fees incurred by Mortgagee in connection with the collection of such
proceeds,  shall be applied as set forth in this  paragraph 15,  subject only to
any  prior  claim of the  holder  of a prior  lien  approved  by  Mortgagee.  No
settlement  for  the  damages  sustained  shall  be made  by  Mortgagor  without
Mortgagee's  prior written approval,  which shall not be unreasonably  withheld.
Receipt  by  Mortgagee  of any  proceeds  less than the full  amount of the then
outstanding debt shall not alter or modify Mortgagor's obligation to continue to
pay the installments of principal,  interest and other charges  specified in the
Note and herein. All proceeds, after the aforesaid deductions,  shall be applied
in the order and in the amounts that Mortgagee,  in Mortgagee's sole discretion,
may elect,  to payment of the  principal  (whether or not then due and payable),
interest or any sums secured by this Mortgage,  or, on such reasonable  terms as
Mortgagee  may  specify,  to  payment  of the costs of  altering,  restoring  or
rebuilding  any part of the  Mortgaged  Property  which may have  been  altered,
damaged or  destroyed  as a result of the taking,  alteration  of grade or other
injury to the Mortgaged Property.

(b) If following such  condemnation or taking,  but prior to the receipt of such
proceeds  by  Mortgagee,   the  Mortgaged  Property  shall  have  been  sold  on
foreclosure  of this  Mortgage,  Mortgagee  shall have the right to receive  the
proceeds to the extent of:

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

(ii)  if any  one  other  than  Mortgagee  is the  successful  purchaser  at the
foreclosure  sale, any deficiency (as  hereinafter  defined) due to Mortgagee in
connection  with  the  foreclosure  sale,  with  legal  interest  thereon,   and
reasonable  counsel  fees,  costs and  disbursements  incurred by  Mortgagee  in
connection  with  collection  of such  proceeds  and the  establishment  of such
deficiency.  For purposes of this subparagraph 15(b)(ii),  the word "deficiency"
shall  be  deemed  to mean the  difference  between  (A) the net  sale  proceeds
actually  received by  Mortgagee as a result of such  foreclosure  sale less any
costs and expenses  incurred by Mortgagee in connection with  enforcement of its
rights under the Note, this Mortgage and the other security  instruments and (B)
the  aggregate  amount of all sums which  Mortgagee is entitled to collect under
the Note, this Mortgage and the other security instruments.

(c) If the  proceeds of the initial  award of damages  for the  condemnation  or
taking are  insufficient to pay in full the  indebtedness  and all other amounts
secured   hereby,   Mortgagee  shall  have  the  right  to  prosecute  to  final
determination  or settlement an appeal or other  appropriate  proceedings in the
name of  Mortgagee  or  Mortgagor,  for  which  Mortgagee  is  hereby  appointed
irrevocably as  attorney-in-fact  for Mortgagor,  which  appointment,  being for
security,  is  irrevocable.  In that event,  the  expenses  of the  proceedings,
including reasonable counsel fees, shall be paid first out of the proceeds,  and
only the excess, if any, paid to Mortgagee shall be credited against the amounts
due under this Mortgage.

(d) Nothing herein shall limit the rights otherwise  available to Mortgagee,  at
law or in equity, including but not limited to the right to intervene as a party
to any condemnation proceeding.

16.  Completion  of  Construction.   Mortgagor  shall  complete  and,  within  a
reasonable time,  shall pay for any construction  which is commenced at any time
on the Land, free of any mechanics' liens or other liens.

17. Leases.  Mortgagor hereby  represents that there are no leases or agreements
to lease all or any part of the  Mortgaged  Property  now in  effect.  Mortgagor
agrees not to enter into any  leases or  agreements  to lease all or any part of
the Mortgaged Property without the prior written approval thereof by Mortgagee.

18.        Environmental Representations, Warranties and Covenants.

(a)             Compliance with Law.

(i) Mortgagor  represents,  to the best of its knowledge and reasonable  belief,
that no activity at the Mortgaged  Property has been  conducted,  and represents
and warrants that no activity is being conducted,  except in compliance with all
statutes,  ordinances,  regulations,  orders  and  requirements  of  common  law
concerning  (A)  those   activities,   (B)  repairs  or   construction   of  any
improvements,  (C) handling of any  materials,  (D) discharges to the air, soil,
surface  water or ground  water and (E)  storage,  treatment  or disposal of any
waste at or connected with any activity at the Mortgaged Property (collectively,
"Environmental Statutes").

(ii)  Mortgagor  shall  cause all  activities  at the  Mortgaged  Property to be
conducted in compliance with all Environmental  Statutes.  Mortgagor shall cause
all  permits,  licenses  or  approvals  to be  obtained,  and  shall  cause  all
notifications  to be made,  as required  by  Environmental  Statutes.  Mortgagor
shall, at all times,  cause compliance with the terms and conditions of any such
approvals or notifications.

(iii) Mortgagor shall, upon receipt thereof, provide to Mortgagee copies of:

(A)  applications or other  materials  submitted to any  governmental  agency in
compliance with Environmental Statutes;

(B) any notifications submitted to any person pursuant to
Environmental Statutes;

(C) any permit,  license,  approval,  amendment or modification  thereto granted
pursuant to Environmental Statutes;

(D) any record or manifest  required to be maintained  pursuant to Environmental
Statutes; and

(E) any correspondence,  notice of violation, summons, order, complaint or other
document received by Mortgagor, its lessees,  sublessees or assigns,  pertaining
to compliance with any Environmental Statutes.

(b)             Site Contamination.

(i) Mortgagor  represents,  to the best of its knowledge and reasonable  belief,
that there is no contamination on or in the Mortgaged Property.  Mortgagor shall
not  permit  contamination  of  Mortgaged  Property  by  hazardous   substances.
Mortgagor  shall, at all times cause  hazardous  substances to be handled on the
Mortgaged  Property  in  a  manner  which  will  not  cause  an  undue  risk  of
contamination of the Mortgaged Property.

(ii) For  purposes  of this  section,  the term  "contamination"  shall mean the
uncontained  presence of hazardous  substances  at the  Mortgaged  Property,  or
arising from the Mortgaged  Property,  which may require  remediation  under any
applicable law.

(iii)                     For purposes of this section, "hazardous
substances" shall mean "hazardous substances" or "contaminants"
as defined pursuant to the Comprehensive Environmental Response,
Compensation and Liability Act, 42 U.S.C. ss.ss. 9601-9675, as
amended by the Superfund Amendments and Reauthorization Act of
1986, Pub. L. No. 99-499, 100 Stat. 1613 (Oct. 17, 1986),
"regulated substances" within the meaning of subtitle I of the
Resource Conservation and Recovery Act, 42 U.S.C. ss.ss. 6991-6991i,
as amended by the Superfund Amendments and Reauthorization Act of
1986, Pub. L. No. 99-499, 100 Stat. 1613 (Oct. 17, 1986), and
"hazardous wastes" or "hazardous substances" as defined pursuant
to the Pennsylvania Solid Waste Management Act, Pa. Stat. Ann.
tit. 35, ss.ss. 6018.101 to .1003 (Purdon Supp. 1987), or any other
substances which may be the subject of liability pursuant to
Sections 316 or 401 of the Pennsylvania Clean Streams Law, Pa.
Stat. Ann. tit. 35, ss.ss. 691.1 to .1001 (Purdon 1977 and Supp.
1987).

(c)             Other Hazardous or Toxic Materials.

Mortgagor  represents  and  warrants  that,  to the  best of its  knowledge  and
reasonable belief, there are no:

(i)                  polychlorinated biphenyls or substances
containing polychlorinated biphenyls present on or in the
Mortgaged Property;

(ii)                 asbestos or materials containing asbestos
present on or in the Mortgaged Property, or

(iii)                     urea formaldehyde foam insulation on or
in the Mortgaged Property.

(d)             Environmentally Sensitive Areas.

Mortgagor  represents  and warrants  that no portion of the  Mortgaged  Property
constitutes any of the following "Environmentally Sensitive Areas":

(i) a wetland or other "water of the United  States" for purposes of Section 404
of the  federal  Clean  Water Act,  33 U.S.C.  ss.  1344,  or any  similar  area
regulated under any state law;

(ii)                 a floodplain or other flood hazard area as
defined pursuant to the Pennsylvania Flood Plain Management Act,
Pa. Stat. Ann. tit. 32, ss.ss. 679.101 to .601 (Purdon Supp. 1987);

(iii)                     a portion of the coastal zone for
purposes of the federal Coastal Zone Management Act, 16 U.S.C.
ss.ss.  1451-1464; or

(iv) any  other  area  development  of which is  specifically  restricted  under
applicable law by reason of its physical characteristics or prior use.

(e)             Radon.

(i) Mortgagor  represents  that,  to the best of its  knowledge  and  reasonable
belief,  there is no investigation of the Mortgaged Property for the presence of
radon gas or the presence of the radioactive decay products of radon.

(ii) Mortgagor  shall cause all  construction of new structures on the Mortgaged
Property  to use  design  features  which  safeguard  against  or  mitigate  the
accumulation  of  radon  on  radon-products   in  concentrations   exceeding  an
acceptable level in any such new structure. At the earliest feasible time during
or after construction of any new structure on the Mortgaged Property,  Mortgagor
shall  commission  an  investigation  of such new  structure for the presence of
radon or  radon-products  and shall  provide a report of such  investigation  to
Mortgagee.

(iii) For purposes of this paragraph,  "acceptable  level" shall mean the lowest
applicable  maximum  concentration  established by any governmental  agency with
jurisdiction  over the Mortgaged  Property.  In the absence of a legally binding
maximum concentration, the "acceptable level" shall be an air concentration of 4
picocuries/liter. (f) Tanks.

(i) Mortgagor  represents and warrants there are no tanks  presently or formerly
used for the  storage of any liquid or gas above or below  ground are present on
the Mortgaged Property.

(ii) Mortgagor shall neither install nor permit to be installed any temporary or
permanent  tanks for the  storage  of any  liquid  or gas above or below  ground
except as in  compliance  with the other  provisions  of this  section and after
obtaining written permission to do so from Mortgagee.

19.        Environmental Investigations.

(a)  Mortgagee  may,  at its  discretion,  at any  time  or from  time to  time,
commission an investigation  at Mortgagor's  expense (after the occurrence of an
Event of Default, if Mortgagee  reasonably believes the existence of a violation
of  Environmental  Statutes,  or receipt by Mortgagor of any notice described at
Subparagraph  18(a)(iii)  of this  Mortgage) of (i)  compliance at the Mortgaged
Property with Environmental  Statutes, (ii) the presence of hazardous substances
or contamination in the Mortgaged Property,  (iii) the presence in the Mortgaged
Property  of  materials  which are the  subject  of  Paragraph  18(c),  (iv) the
presence at the Mortgaged Property of Environmentally  Sensitive Areas which are
the subject of Paragraph  18(d),  (v) the presence at the Mortgaged  Property of
radon-products,  or (vi) the presence on the  Mortgaged  Property of tanks which
are the subject of Paragraph 18(f).

(b) In connection with any  investigation  pursuant to Subparagraph  (a) of this
Paragraph 19, Mortgagor, its lessees,  sublessees and assigns, shall comply with
any  reasonable  request  for  information  made by  Mortgagee  or its agents in
connection with any such investigation.  Mortgagor  represents and warrants that
any response to any such request for information will be full and complete.

(c)  Mortgagor  will assist  Mortgagee  and its agents in obtaining  any records
pertaining to the Mortgaged Property or to Mortgagor and the lessees, sublessees
or  assigns  of  Mortgagor  in  connection  with an  investigation  pursuant  to
Subparagraph (a) of this Paragraph 19.

(d)  Mortgagor  will accord  Mortgagee and its agents access to all areas of the
Mortgaged  Property at reasonable times and in reasonable  manners in connection
with any investigation pursuant to Subparagraph (a) of this Paragraph 19.

(e) No  investigation  commissioned  pursuant to this  paragraph  shall have any
effect upon the  representations or warranties made by Mortgagor to Mortgagee in
this Mortgage.

20. Indemnification.  Mortgagor hereby agrees to indemnify Mortgagee and to hold
Mortgagee harmless of, from and against any and all expenses,  loss or liability
suffered by Mortgagee by reason of  Mortgagor's  breach of any of the provisions
of this  Section,  including,  but not limited to, (i) any and all expenses that
Mortgagee may incur in complying with any Environmental  Statutes;  (ii) any and
all costs that Mortgagee may incur in studying or remedying any contamination of
the Mortgaged  Property;  (iii) any and all fines,  penalties or other sanctions
(including a voiding of any transfer of the  Mortgaged  Property)  assessed upon
Mortgagee  by  reason  of  a  failure  of  Mortgagee  to  have   complied   with
Environmental Statutes; (iv) any and all loss of value of the Mortgaged Property
by reason of (A) failure to comply with Environmental Statutes; (B) the presence
on the Mortgaged Property of any Hazardous  Substances;  (C) the presence on the
Mortgaged  Property of any  materials  which are the subject of paragraph (c) of
Section 18; (D) the presence on the  Mortgaged  Property of any  Environmentally
Sensitive  Areas which are the subject of  paragraph  (d) of Section 18; (E) the
presence  on the  Mortgaged  Property  of  radon  or  radon  decay  products  in
concentrations not disclosed pursuant to paragraph (e) of Section 18; or (F) the
presence on the Mortgaged Property of any tank undisclosed pursuant to Paragraph
(f)(i) and not installed in compliance with Paragraph (f)(ii) of Section 18; and
(v) any and all legal and  professional  fees and costs incurred by Mortgagee in
connection with the foregoing. This indemnification shall survive payment of the
Note.

21.        Other Financing or Liens.

(a) Mortgagee may, at its sole option,  declare the entire unpaid balance of the
principal of and the accrued  interest on the Note and all other sums secured by
this  Mortgage  immediately  due and  payable if  Mortgagor,  without  the prior
written consent of Mortgagee,  shall (i) lease any personal property, as lessee,
which is now or hereafter  intended to be a part of the Mortgaged Property or is
necessary for the operation of Mortgagor's  business at the Land, or (ii) create
or cause or permit to exist any lien on, or security  interest in the  Mortgaged
Property,  including any  furniture,  fixtures,  appliances,  equipment or other
items of  personal  property  which are  intended  to be or  become  part of the
Mortgaged  Property,  except the lien created hereby and any other liens granted
to or heretofore approved by Mortgagee including,  without limitation, a lien in
favor of the  Pennsylvania  Industrial  Development  Authority  to secure a loan
(through the auspices of the Northampton  County New Jobs Corp.) to Mortgagor in
the  amount  of  One  Million  ($1,000,000.00)   Dollars,  or  (iii)  incur  any
indebtedness  for money borrowed to purchase the Mortgaged  Property or any part
thereof  or any  personal  property  or  fixtures  in  substitution,  renewal or
replacement of any portion of the Mortgaged  Property,  except the  indebtedness
secured hereby and indebtedness heretofore approved by Mortgagee.

(b) Mortgagee may, at its sole option,  declare the entire unpaid balance of the
principal of and the accrued  interest on the Note and all other sums secured by
this  Mortgage  immediately  due and payable if any lien or  encumbrance  of any
type,  whether  voluntary  or  involuntary,  shall be  permitted  to be filed or
entered  against  all or any part of the  Mortgaged  Property  without the prior
written consent of Mortgagee.

(c)  Mortgagor  shall  have no right to permit  the  holder  of any  subordinate
mortgage or other subordinate lien, whether or not consented to by Mortgagee, to
terminate any lease of all or a portion of the Mortgaged Property whether or not
such  lease is  subordinate  (whether  by law or the  terms  of such  lease or a
separate  agreement)  to the lien of this Mortgage  without first  obtaining the
prior written consent of Mortgagee.  The holder of any  subordinate  mortgage or
other  subordinate lien shall have no such right,  whether by foreclosure of its
mortgage or lien or  otherwise,  to  terminate  any such  lease,  whether or not
permitted  to do so by  Mortgagor or as a matter of law, and any such attempt to
terminate any such lease shall be ineffective  and void without first  obtaining
the prior written consent of Mortgagee.

(d) In the event  that the  Mortgaged  Property  or any part  thereof  is now or
hereafter  subject  to a prior  mortgage,  lien or  encumbrance,  which has been
approved by Mortgagee ("Approved Prior Lien"):

(i) Mortgagor will pay the  principal,  interest and all other sums when due and
payable thereunder no later than five (5) days prior to their due date, and will
comply with all of the other terms, covenants and conditions thereof; and

(ii) if requested  hereafter by Mortgagee,  Mortgagor  will produce to Mortgagee
from  time to time no less  than  three  (3)  days  prior to the due date of the
installments of principal, interest and other sums payable on the Approved Prior
Lien,  receipts or other evidence of payment thereof  satisfactory to Mortgagee;
and

(iii) Mortgagor will not enter into any  modification,  amendment,  agreement or
arrangement,  without the prior written consent of Mortgagee,  pursuant to which
Mortgagor is granted any forbearance or indulgence (as to time or amount) in the
payment of any  principal,  interest  or other sums due in  accordance  with the
terms and provisions of the Approved Prior Lien; and

(iv) Mortgagor will obtain,  whenever  possible,  the agreement of the holder of
any such Approved Prior Lien to send Mortgagee copies of all notices; and

(v) Mortgagor shall notify Mortgagee promptly of the receipt of any notice given
by the holder of any Approved Prior Lien.

(e) Any default by Mortgagor  under any Approved  Prior Lien, by failure to make
payment  or  otherwise  to comply  with the terms  thereof,  or any  failure  by
Mortgagor to produce receipts,  at the option of Mortgagee,  shall constitute an
Event of Default under this Mortgage, and Mortgagee shall have the right, at its
election, to declare immediately due and payable the entire indebtedness secured
hereby with interest and other appropriate charges.  Mortgagee, at its election,
and without  notice to Mortgagor,  may make, but shall not be obligated to make,
any payments  which  Mortgagor has failed to make under the Approved Prior Lien,
but such  payments by Mortgagee  shall not release  Mortgagor  from  Mortgagor's
obligations or constitute a waiver of Mortgagor's default hereunder.

22. Management.  Mortgagor shall not enter into any agreement for the management
or operation of all or part of the Mortgaged  Property without (i) furnishing to
Mortgagee a copy thereof  together with such financial and other  information in
respect of the  managing  party as  Mortgagee  may  reasonably  request and (ii)
receiving  Mortgagee's  prior written  consent  thereto,  such consent not to be
unreasonably  withheld.  As security for the indebtedness and other  obligations
secured  by this  Mortgage,  Mortgagor  hereby  grants to  Mortgagee  a security
interest  in all of its  rights  under  any  agreement  for  the  management  or
operation of all or part of the  Mortgaged  Property,  now existing or hereafter
created.  All such  agreements  shall  recite that  Mortgagor's  rights (but not
Mortgagor's  obligations) thereunder have been assigned to Mortgagee as security
for Mortgagor's obligations hereunder and under the Note.

23. Acceleration upon Transfer.  Mortgagee may, at its sole option,  declare the
entire unpaid  balance of the principal of and the accrued  interest on the Note
and all other  sums  secured by this  Mortgage  immediately  due and  payable if
Mortgagor,  without  the prior  written  consent of  Mortgagee,  shall  cause or
permit,  to the  extent it may do so,  any  transfer  of title to or  beneficial
interest  in the  Mortgaged  Property  or any part  thereof,  voluntarily  or by
operation  of law  (other by  execution  on the Note or  foreclosure  under this
Mortgage).

24. Right to Remedy  Defaults.  If Mortgagor should fail to pay corporate taxes,
real estate taxes or other taxes,  assessments,  water and sewer rents,  charges
and claims,  sums due under any prior lien or Approved  Prior Lien or  insurance
premiums, or fail to complete construction of any improvements or make necessary
repairs,  or permit  waste,  or fail to cure any default under any prior lien or
Approved Prior Lien, Mortgagee, at its election and without notice to Mortgagor,
shall have the right to make any payment or  expenditure  and to take any action
which Mortgagor should have made or taken, or which Mortgagee deems advisable to
protect  the  security  of this  Mortgage  or the  Mortgaged  Property,  without
prejudice  to any of  Mortgagee's  rights or  remedies  available  hereunder  or
otherwise,  at law or in equity.  All such sums,  as well as costs,  advanced by
Mortgagee  pursuant to this Mortgage shall be due immediately  from Mortgagor to
Mortgagee, shall be secured hereby and the lien thereof shall relate back to the
date of this  Mortgage,  and shall  bear  interest  from the date of  payment by
Mortgagee  until the date of  repayment  at a rate  equal to the lesser of (i) a
rate five percent (5%) above the rate  specified in the Note or (ii) the highest
rate permitted by applicable law.

25. Events of Default.  The  occurrence of an Event of Default as defined in the
Reimbursement  Agreement or the Syndicated  Loan Agreement  shall  constitute an
event of default ("Event of Default") hereunder.

26.        Remedies.

(a) Upon the  occurrence of any Event of Default,  the entire unpaid  balance of
the principal of and the accrued interest on the Note and all other sums secured
by this  Mortgage  shall become  immediately  due and payable,  at the option of
Mortgagee,  without  notice or demand,  and  Mortgagee may do one or more of the
following:  (i)  Foreclosure.  Mortgagee  may  institute  an action of  mortgage
foreclosure against the Mortgaged Property,  or take such other action at law or
in equity for the  enforcement of this Mortgage and  realization on the mortgage
security or any other security herein or elsewhere  provided for, as the law may
allow,  and may proceed  therein to final  judgment and execution for the entire
unpaid balance of the principal  debt,  with interest at the rate  stipulated in
the Note to the date of default, and thereafter at a rate equal to the lesser of
a rate five  percent  (5%) above the rate  specified  in the Note or the highest
rate permitted by applicable law,  together with all other sums due by Mortgagor
in accordance  with the provisions of the Note and this Mortgage,  including all
sums which may have been loaned by Mortgagee to Mortgagor after the date of this
Mortgage,  and all sums which may have been  advanced  by  Mortgagee  for taxes,
water or sewer rents, charges or claims,  payments on prior liens,  insurance or
construction  of  improvements  or repairs to the  Mortgaged  Property  (whether
incurred  before or after the entry of  judgment in favor of  Mortgagee  for the
unpaid balance of the amounts due under the Note or this Mortgage), all costs of
suit,  together with interest at said rate on any judgment obtained by Mortgagee
from and after the date of any  Sheriff's  sale until actual  payment is made by
the Sheriff of the full amount due Mortgagee,  and an attorney's  commission for
collection.

(ii) Possession.  Mortgagee may enter into possession of the Mortgaged Property,
with or without legal action,  and by force if necessary;  collect therefrom all
rentals (which term shall also include sums payable for use and occupation) and,
after deducting all costs of collection and  administration  expense,  apply the
net  rentals  to any or all of the  following  in  such  order  and  amounts  as
Mortgagee, in Mortgagee's sole discretion, may elect: to the payment of any sums
due under any prior lien,  and to the payment of taxes,  water and sewer  rents,
charges and claims,  insurance premiums,  and all other carrying charges, and to
the  completion of  construction  of any  improvements  on the Land,  and to the
maintenance, repair or restoration of the Mortgaged Property, and on account and
in reduction of the principal or interest,  or both, hereby secured;  in and for
that  purpose  Mortgagor  hereby  confirms  the  assignment  to Mortgagee of all
rentals  due and to  become  due  under any lease or leases or rights to use and
occupation of the Mortgaged Property  hereafter  created,  as well as all rights
and  remedies  provided  in such  lease or leases or at law or in equity for the
collection of the rentals.  The taking of possession  and collection of rents by
Mortgagee shall not be construed to be an affirmation of any lease of all or any
portion of the Mortgaged  Property.  FOR THE PURPOSE OF OBTAINING  POSSESSION OF
THE  MORTGAGED  PROPERTY IN THE EVENT OF ANY EVENT OF ANY DEFAULT  HEREUNDER  OR
UNDER THE NOTE,  MORTGAGOR  HEREBY  AUTHORIZES  AND EMPOWERS ANY ATTORNEY OF ANY
COURT OF RECORD IN THE  COMMONWEALTH OF  PENNSYLVANIA OR ELSEWHERE,  AS ATTORNEY
FOR MORTGAGOR AND ALL PERSONS CLAIMING UNDER OR THROUGH MORTGAGOR, TO APPEAR FOR
AND CONFESS JUDGMENT AGAINST  MORTGAGOR,  AND AGAINST ALL PERSONS CLAIMING UNDER
OR THROUGH MORTGAGOR,  IN AN ACTION IN EJECTMENT FOR POSSESSION OF THE MORTGAGED
PROPERTY,  IN FAVOR OF  MORTGAGEE,  FOR WHICH THIS  MORTGAGE,  OR A COPY THEREOF
VERIFIED BY AFFIDAVIT,  SHALL BE A SUFFICIENT  WARRANT;  AND THEREUPON A WRIT OF
POSSESSION  MAY  IMMEDIATELY  ISSUE FOR  POSSESSION OF THE  MORTGAGED  PROPERTY,
WITHOUT  ANY  PRIOR  WRIT OR  PROCEEDING  WHATSOEVER  AND  WITHOUT  ANY  STAY OF
EXECUTION.  IF FOR ANY REASON  AFTER SUCH ACTION HAS BEEN  COMMENCED IT SHALL BE
DISCONTINUED,  OR  POSSESSION OF THE  MORTGAGED  PROPERTY  SHALL REMAIN IN OR BE
RESTORED TO  MORTGAGOR,  MORTGAGEE  SHALL HAVE THE RIGHT FOR THE SAME DEFAULT OR
ANY SUBSEQUENT DEFAULT TO BRING ONE OR MORE FURTHER ACTIONS AS ABOVE PROVIDED TO
RECOVER POSSESSION OF THE MORTGAGED PROPERTY.  MORTGAGEE MAY CONFESS JUDGMENT IN
AN  ACTION  IN  EJECTMENT  BEFORE OR AFTER THE  INSTITUTION  OF  PROCEEDINGS  TO
FORECLOSE  THIS  MORTGAGE  OR TO ENFORCE  THE NOTE,  OR AFTER  ENTRY OF JUDGMENT
THEREIN OR ON THE NOTE,  OR AFTER A  SHERIFF'S  SALE OR  JUDICIAL  SALE OR OTHER
FORECLOSURE SALE OF THE MORTGAGED  PROPERTY IN WHICH MORTGAGEE IS THE SUCCESSFUL
BIDDER,  IT BEING THE  UNDERSTANDING  OF THE PARTIES THAT THE  AUTHORIZATION  TO
PURSUE SUCH  PROCEEDINGS FOR CONFESSION OF JUDGMENT THEREIN IS AN ESSENTIAL PART
OF THE REMEDIES FOR  ENFORCEMENT OF THE MORTGAGE AND THE NOTE, AND SHALL SURVIVE
ANY EXECUTION SALE TO MORTGAGEE.

(iii)  Receiver.  Mortgagee may apply for the  appointment  of a receiver of the
Mortgaged Property and/or the rents from the Mortgaged Property,  without notice
except  as  required  by law,  and shall be  entitled  to the  appointment  of a
receiver as a matter of right,  without  consideration of value of the Mortgaged
Property,  the solvency of the person  liable for the payment of the Note or the
effect of the  receivership  on the operation of the  Mortgaged  Property or the
Mortgagor's  business  thereon.  Mortgagor  acknowledges that this paragraph was
specifically  included  in this  Mortgage to induce the  Mortgagee  to issue the
Letter of Credit.

(b) Mortgagee  shall have the right,  from time to time, to bring an appropriate
action to recover any sums  required to be paid by Mortgagor  under the terms of
this  Mortgage,  as they  become  due,  without  regard  to  whether  or not the
principal  indebtedness  or any other sums secured by the Note or this  Mortgage
shall be due,  and without  prejudice to the right of  Mortgagee  thereafter  to
bring an action of mortgage foreclosure, or any other action, for any default by
Mortgagor existing at the time the earlier action was commenced.

(c) Any real estate sold pursuant to any writ of execution  issued on a judgment
obtained  by  virtue  of the Note or this  Mortgage,  or  pursuant  to any other
judicial  proceedings  under this  Mortgage,  may be sold in one  parcel,  as an
entirety,  or in such parcels, and in such manner or order as Mortgagee,  in its
sole discretion, may elect.

(d) Mortgagee  shall have the right to set off all or any part of any amount due
by Mortgagor to Mortgagee  under the Note,  this Mortgage or otherwise,  against
any  indebtedness,  liabilities or obligations owing by Mortgagee for any reason
and in any  capacity  to  Mortgagor,  including  any  obligation  to disburse to
Mortgagor  or its  designee  any  funds or other  property  on  deposit  with or
otherwise in the possession, control or custody of Mortgagee.

27.        Rights and Remedies Cumulative.

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

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

(c)  Neither  Mortgagor  nor any other  person now or  hereafter  obligated  for
payment of all or any part of the sums now or hereafter secured by this Mortgage
shall be relieved of such  obligation  by reason of the failure of  Mortgagee to
comply with any request of Mortgagor or of any other person so obligated to take
action to foreclose on this Mortgage or otherwise enforce any provisions of this
Mortgage or the Note, or by reason of the release,  regardless of consideration,
of all or any part of the  security  held for the  indebtedness  secured by this
Mortgage,  or by reason of any agreement or  stipulation  between any subsequent
owner of the Mortgaged  Property and Mortgagee  extending the time of payment or
modifying the terms of this  Mortgage or the Note without first having  obtained
the consent of Mortgagor or such other person; and in the latter event Mortgagor
and all  such  other  persons  shall  continue  to be  liable  to make  payments
according to the terms of any such extension or modification  agreement,  unless
expressly released and discharged in writing by Mortgagee.

(d) Mortgagee may release, regardless of consideration, any part of the security
held for the indebtedness  secured by this Mortgage without, as to the remainder
of the security,  in any way impairing or affecting the lien of this Mortgage or
its priority over any subordinate lien.

(e) For payment of the indebtedness secured hereby,  Mortgagee may resort to any
other security  therefor held by Mortgagee in such order and manner as Mortgagee
may elect.

(f) The receipt by Mortgagee of any sums from Mortgagor  after the date on which
Mortgagee  elects to accelerate the  indebtedness  secured hereby by reason of a
default  hereunder  or under the Note shall not  constitute  a cure or waiver of
such default or a reinstatement  of the Note or this Mortgage  unless  Mortgagee
expressly  agrees,  by written  notice to Mortgagor,  that such payment shall be
accepted as a cure or waiver of the default.

28. Mortgagor's Waivers. Mortgagor hereby waives and releases:

(a)             all procedural errors, defects and imperfections
in any proceeding instituted by Mortgagee under the Note or this
Mortgage or both;

(b) all  benefit  that might  accrue to  Mortgagor  by virtue of any  present or
future law exempting the Mortgaged Property, or any part of the proceeds arising
from any sale thereof, from attachment,  levy or sale or execution, or providing
for any stay of execution, exemption from civil process or extension of time for
payment; and

(c) unless  specifically  required herein or in any other agreement of Mortgagee
delivered  in  connection  herewith,  all notices of  Mortgagor's  default or of
Mortgagee's election to exercise,  or Mortgagee's actual exercise of, any option
under the Note or this Mortgage.

Mortgagor  irrevocably  as an independent  covenant  waives a jury trial and the
right  thereto in any  action or  proceeding  between  Mortgagor  and  Mortgagee
whether hereunder or otherwise.

29.  Counsel  Fees.  If  Mortgagee  becomes  a party to any  suit or  proceeding
affecting  the  Mortgaged  Property or title  thereto,  the lien created by this
Mortgage or Mortgagee's interest therein, or if Mortgagee has engaged counsel to
prepare or review the Note,  this Mortgage or any other  documents  securing the
Note as a condition  precedent to the granting of the loan evidenced by the Note
and  whose  fees  and  costs  Mortgagor  has  agreed  to pay as a  condition  of
Mortgagee's  commitment  to make this loan, or if Mortgagee  engages  counsel to
collect any of the  indebtedness  or to enforce  performance of the  agreements,
conditions,  covenants, provisions or stipulations of this Mortgage or the Note,
Mortgagee's costs,  expenses and reasonable counsel fees, whether or not suit is
instituted, shall be paid to Mortgagee by Mortgagor, on demand, with interest at
the then  effective  rate set forth in the Note,  and until  paid they  shall be
deemed to be part of the indebtedness  evidenced by the Note and secured by this
Mortgage.

30.  Further  Assurances.  Mortgagor  will  execute  and  deliver  such  further
instruments  and perform  such further  acts as may be  reasonably  requested by
Mortgagee  from time to time to confirm the  provisions  of this Mortgage or the
Note, to carry out more  effectively  the purposes of this Mortgage or the other
documents  securing the Note,  or to confirm the priority of the lien created by
this Mortgage on any property,  rights or interest  encumbered or intended to be
encumbered  by the lien of this  Mortgage or the other  documents  securing  the
Note. Mortgagor agrees to pay all costs of recording,  filing, and acknowledging
such  documents in such public  offices as Mortgagee  may require.  31.  Advance
Money Mortgage.

(a) This  Mortgage  secures  future  advances  made pursuant to this Mortgage or
pursuant to the Reimbursement  Agreement.  Without limiting the foregoing,  this
Mortgage  secures all advances made by Mortgagee of any kind or nature described
in 42 Pa. C.S.A. ss. 8144.

(b) If Mortgagor sends a written notice to Mortgagee which purports to limit the
indebtedness secured by this Mortgage and to release the obligation of Mortgagee
to make any  additional  advances  to or for the  benefit of  Mortgagor,  such a
notice  shall be  ineffective  as to any  future  advances  made:  (i) to enable
completion of the improvements on the Land for which the loan secured hereby was
originally  made;  (ii)  to pay  taxes,  assessments,  maintenance  charges  and
insurance premiums; (iii) for costs incurred for the protection of the Mortgaged
Property or the lien of this Mortgage;  (iv) on account of expenses  incurred by
Mortgagee  by  reason  of  a  default  of  Mortgagor   hereunder  or  under  the
Reimbursement Agreement or under the Note; and (v) on account of any other costs
incurred by Mortgagee to protect and preserve the Mortgaged Property or the lien
of this  Mortgage.  It is the  intention  of the  parties  hereto  that any such
advance made by Mortgagee after any such notice by Mortgagor shall be secured by
the lien of this Mortgage on the Mortgaged Property.

32.  Severability and Savings Clauses. If any provision of this Mortgage is held
to be invalid or unenforceable by a court of competent  jurisdiction,  the other
provisions of this  Mortgage  shall remain in full force and effect and shall be
liberally  construed in favor of Mortgagee in order to effect the  provisions of
this  Mortgage.  In addition,  in no event shall the rate of interest  under the
Note  exceed  the  maximum  rate of  interest  permitted  to be  charged  by the
applicable  law  (including  the choice of law rules) and any  interest  paid in
excess of the permitted  rate shall be refunded to Mortgagor.  Such refund shall
be made by  application  of the  excessive  amount of interest  paid to any sums
outstanding  under the Note and shall be applied in such order as Mortgagee  may
determine. If the excessive amount of interest paid exceeds the sums outstanding
under the Note the portion  exceeding the said sums  outstanding  under the Note
shall be refunded in cash by Mortgagee.  Any such  crediting or refund shall not
cure or waive any default by Mortgagor  hereunder  or under the Note.  Mortgagor
agrees,  however,  that in determining whether or not any interest payable under
the Note or this  Mortgage  exceeds  the  highest  rate  permitted  by law,  any
non-principal  payment (except  payments  specifically  stated in the Note to be
"interest"), including without limitation, prepayment premiums and late charges,
shall be deemed to the extent  permitted by law, to be an expense,  fee, premium
or penalty rather than interest.

33.  Communications.  Any notice,  demand or request  under this Mortgage or the
Note shall be in writing, and shall be delivered by personal service or shall be
sent by postage prepaid, certified or registered mail, return receipt requested,
or by reputable national  overnight delivery service addressed,  if to Mortgagor
or  Mortgagee,  at the  respective  address  set  forth in the  heading  of this
Mortgage,  or at such other  address as the  addressee may designate in writing.
Each notice, demand or request hereunder shall be deemed given on the date it is
delivered,  in the case of personal  service,  or the date it is deposited  with
sufficient  postage  with  the  Postal  Service,  in the  case of  certified  or
registered  mail, or the date it is delivered to the overnight  delivery service
in the case of overnight delivery.

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

35.        Amendment.  This Mortgage cannot be changed or amended
except by agreement in writing signed by the party against whom
enforcement of the change is sought.

36.        Applicable Law.  This Mortgage shall be governed by and
construed according to the laws of the Commonwealth of
Pennsylvania, without regard to the choice of law principles
thereof.

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

(a) The word "Mortgagor"  shall mean the person who executes this Mortgage,  any
subsequent owner (beneficially or of record) of the Mortgaged Property and their
respective heirs, executors, administrators, successors and assigns;

(b) The word  "Mortgagee"  shall mean the person  specifically  named  herein as
"Mortgagee" or any subsequent holder of this Mortgage;

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

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

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

(f) If Mortgagor is more than one person, all agreements, conditions, covenants,
provisions,   stipulations,  warrants  of  attorney,  authorizations,   waivers,
releases, options, undertakings,  rights and benefits made or given by Mortgagor
shall be joint and  several,  and shall  bind and  affect  all  persons  who are
defined as  "Mortgagor" as fully as though all of them were  specifically  named
herein wherever the word "Mortgagor" is used.

38. Captions. The captions preceding the text of the paragraphs or subparagraphs
of this  Mortgage are inserted only for  convenience  of reference and shall not
constitute  a part of this  Mortgage,  nor  shall  they  in any way  affect  its
meaning, construction or effect.

      PARAGRAPH 26 OF THIS  MORTGAGE  PROVIDES FOR THE REMEDY OF  CONFESSION  OF
JUDGMENT IN  EJECTMENT.  IN  CONNECTION  THEREWITH,  MORTGAGOR  VOLUNTARILY  AND
KNOWINGLY WAIVES ITS RIGHTS,  IF ANY, TO NOTICE AND TO BE HEARD BEFORE THE ENTRY
OF SUCH JUDGMENT.  MORTGAGOR  ACKNOWLEDGES THAT IT IS REPRESENTED BY COUNSEL AND
THAT COUNSEL HAS REVIEWED  WITH AND  EXPLAINED TO MORTGAGOR  THE MEANING OF THIS
REMEDY.


      IN WITNESS  WHEREOF,  Mortgagor has duly executed this Mortgage under seal
the day and year first above written.

(CORPORATE SEAL)               PIERCING PAGODA, INC.



ATTEST:_______________________
By:_______________________________________
          Name:                      Name:
          Title:                     Title:



The Address of Mortgagee is:        600 Penn Street
                               Reading, Pennsylvania 19603


                               ------------------------------
                             On Behalf of Mortgagee

COMMONWEALTH OF PENNSYLVANIA   :
                                      : ss.
COUNTY OF __________________        :


      On the _____ day of April,  1998,  before  me,  the  subscriber,  a Notary
Public in and for the Commonwealth  and County  aforesaid,  personally  appeared
_________________________,   who   acknowledged   himself/herself   to  be   the
_____________ of Piercing Pagoda, Inc., a Delaware corporation, and that he/she,
being  authorized  to do so,  executed the  foregoing  Mortgage for the purposes
therein contained by signing the name of the corporation by  himself/herself  as
such officer.

           WITNESS my hand and seal the day and year aforesaid.




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

                                    My Commission Expires:

PHIL1\106224-3