bank leumi USA
--------------


                                                              January 15, 2000


Elk Associates Funding Corporation ("Borrower")
747 Third Avenue
New York, NY  10017

Attn: Mr. Gary Granoff, President


Dear Mr. Granoff:

     Reference  is  made  to  promissory  note  dated  January  15,  2000 in the
principal amount of $8,000,000.

     You have agreed that for good and valuable consideration  including but not
limited to the extension and increase of credit  accommodations to Borrower,  in
the amount of $8,000,000  that letter  agreement  dated January 20, 1998,  shall
continue  to be in full force and effect with  respect to credit  accommodations
now or in the future outstanding to Borrower.

     You have  agreed  that the fist  paragraph  os such  letter is  modified to
provide as follows:

     "In order to induce you to make  and/or  continue  loans for the account of
     the  undersigned  pursuant to  Promissory  Note  (Grid) dated  January  15,
     2000,  as such note is hereafter  modified,  extended,  renewed or replaced
     with other notes,  the Borrower  will,  and will cause each  affiliate  and
     subsidiary (to the extent applicable) to:".

     Please  confirm your  agreement to the foregoing by signing and returning a
copy of this letter to the undersigned.

                                             Very truly yours,

                                             BANK LEUMI USA


                                             By:________________________________
                                                Fran Davis, Vice President

                                             By:________________________________
                                                Iris Schechter, Vice President




<PAGE>



Consented and agreed to

ELK ASSOCIATES FUNDING CORPORATION

By:____________________________
   Gary Granoff, President

By:____________________________
   Margaret Chance, Secretary



<PAGE>



"THIS NOTE SUPERSEDES, REPLACES AND INCREASES THE PRINCIPAL AMOUNT OF THAT
CERTAIN PROMISSORY NOTE (GRID) DATED SEPTEMBER 13, 1999 IN THE ORIGINAL
PRINCIPAL AMOUNT OF $8,000,000.00"

                             PROMISSORY NOTE (GRID)

New York, N.Y. January  15, 2000                                      $8,000,000


     For value  received,  ELK ASSOCIATES  FUNDING CORP.  promises to pay to the
order of BANK LEUMI USA (the "Bank"),  at its offices at 579 Fifth  Avenue,  New
York, New York, the principal sum of Eight Million Dollars  ("Maximum  Principal
Amount") or, if less,  the aggregate  unpaid  principal sum of all loans made by
the Bank, in its sole  discretion,  to the maker of this Note from time to time.
The principal sum of each such loan shall be payable November 1, 1999.

     Within the limits of the Maximum  Principal  Amount,  the maker may borrow,
prepay, and reborrow in the manner provided herein.

     Each loan shall bear interest  (from the date of such loan),  at the option
of the  maker,  at a rate  per  annum  which  shall  be equal to (a) the rate of
interest  designated  by the  Bank,  and in  effect  from  time to time,  as its
"Reference Rate" minus 1/2% per annum, adjusted when said Reference Rate changes
(the maker  acknowledges  that the Reference Rate may not necessarily  represent
the lowest rate of interest  charged by the Bank to customers) or (b) 1 1/2% per
annum above the Libor Rate (Reserve  Adjusted)(1)

----------
     (1)"Libor Rate means, relative to any Interest Period (hereinafter defined)
for loans made  pursuant to this Note and which bear interest at the "Libor Rate
(Reserve Adjusted),  the rate of interest per annum determined by the Bank to be
the  arithmetic  mean (rounded  upward to the next 1/16th of 1%) of the rates of
interest per annum at which  dollar  deposits in the  approximate  amount of the
amount of the loan to be made or  continued  hereunder  by the Bank and having a
maturity  comparable to such Interest Period would be offered to the Bank in the
London Interbank market at its request at approximately 11:00 a.m. (London time)
two Business Days prior to the commencement of such Interest Period.

"Libor  Reserve  Percentage"  means,  relative to any Interest  Period for loans
hereunder,  the percentage  (expressed as a decimal,  rounded upward to the next
1/100th of 1%) in effect on such day  (whether  or not  applicable  to the Bank)
under  regulations  issued from time to time by the Federal Reserve System Board
for  determining  the maximum  reserve  requirement  (including  any  emergency,
supplemental or other marginal reserve requirement) with respect to Eurocurrency
funding (currently referred to as "Eurocurrency  Liabilities" in Regulation D of
the Federal Reserve System Board).

"Libor  Rate  (Reserve  Adjusted)"  means,  relative  to any  loan to be made or
continued  hereunder  for any  Interest  Period,  the rate of interest per annum
(rounded upwards to the next 1/16th of 1%) determined by the Bank as follows:

          Libor Rate         =      Libor Rate
                                    -------------------------------
          (Reserve Adjusted)        1.00 - Libor Reserve Percentage


<PAGE>


for a one, two or three month term,  as elected by the maker and  calculated  by
the Bank, in the manner hereinafter  provided,  but in no event in excess of the
maximum rate permitted by applicable  law;  provided,  that in the even the Bank
shall have determined that by reason of  circumstances  affecting the Libor Rate
(Reserve  Adjusted)  adequate and reasonable means do not exist for ascertaining
the Libor Rate (Reserve  Adjusted) for any Interest Period,  the applicable rate
of interest  during such Interest  Period shall be equal to its  Reference  Rate
minus 1/2% per annum adjusted when said Reference Rate changes,  but in no event
in excess of the maximum rate permitted by law; further provided that if, at the
end of any Interest  Period,  the maker has failed to timely  notify the Bank of
its election of the choice of interest  rate for or length of the next  Interest
Period,  then the interest rate in effect  thereafter shall be at the Libor Rate
(Reserve  Adjusted)  plus 1 1/2% per annum for an Interest  Period the length of
which  shall be the same length as the  immediately  preceding  Interest  Period
unless such  Interest  Period would end after the stated  maturity  date of this
Note, in which case the Interest Period shall be of a duration equal to the next
longest  Interest Period which would end prior to such scheduled  maturity date,
provided further that no Libor Rate (Reserve  Adjusted)-based loan shall be made
less than one month  before the stated  maturity  date of this Note or after the
occurrence  and  continuance  of an Event of  Default  or an event  which,  upon
notice,  passage of time or both would  constitute an Even of Default.  Interest
hereunder  shall  be  payable  on the last day of each  Interest  Period  and at
maturity  (whether by acceleration or otherwise).  The term "Interest Period" as
used in this Note shall mean a period of one, two or three month(s),  as elected
by the maker by  written  or  facsimile  notice to the Bank given not later than
12:00 noon three Business Days prior to the  commencement of an Interest Period.
No Interest  Period shall extend  beyond the stated  maturity date of this Note.
The  initial  Interest  Period  shall  begin on the last day of the  immediately
preceding  Interest  Period.  The Bank  shall  give  notice  to the maker of the
interest rate determined for each interest Period as provided  herein,  and such
notice shall be  conclusive  and binding upon the maker for all purposes  absent
manifest effort.  The maker shall pay to the Bank to compensate it for any loss,
cost or expense that the Bank  determines is attributable to any prepayment of a
loan made by the Bank to the maker using the Libor Rate (Reserve Adjusted). Such
compensation  shall  include  an amount  equal to the excess (if any) of (i) the
amount of interest that otherwise would have accrued on the principal  amount so
prepaid for the period from the date of such  prepayment  to the last day of the
then current  Interest  Period for such loan at the applicable  rate of interest
for such loan  provided  for  herein  over  (ii) the  amount  of  interest  that
otherwise would have accrued on such principal  amount at a rate per annum equal
to the  interest  component  of the amount the Bank would have bid in The London
Interbank  market for dollar deposits of leading banks in amounts  comparable to
such  principal  amount  and  with  maturities  comparable  to such  period  (as
reasonably  determined by the Bank).  The term "Business Day" shall mean any day
of the year on which the Bank is open for  business (as required or permitted by
law or otherwise) and on which dealings in U.S.  dollar  deposits are carried on
in London, England.

     If any  law,  treaty,  rule,  regulation  or  determination  of a court  or
governmental  authority  or  any  change  therein  or in the  interpretation  or
application  thereof  (each,  a "Change in Law") shall make it unlawful  for the
Bank to make Libor Rate (Reserve  Adjusted)-based loans, or to maintain interest
rates  based on Libor,  then in the former  event,  any  obligation  of the Bank
contained herein or in any agreement of the Bank to make available such unlawful
Libor Rate (Reserve-Adjusted)-based loans shall immediately be cancelled, and in
the latter event,  any such unlawful Libor Rate (Reserve  Adjusted)-based  loans
then outstanding  shall be converted,  at the Bank's option,  so the interest on
the  outstanding  principal  balance subject hereto is determined in relation to
the Reference Rate as hereinabove  provided;  provided however, that if any such
Change in Law shall  permit any Libor  Rate  (Reserve  Adjusted)-based  loans to
remain in effect until the expiration of the Interest Period applicable thereto,
then such permitted Libor Rate (Reserve


<PAGE>



Adjusted)-based  loans shall  continue in effect  until the  expiration  of such
Interest Period. Upon the occurrence of any of the foregoing events, maker shall
pay to the Bank  immediately  upon demand such  amounts as may be  necessary  to
compensate  the Bank for any fines,  fees,  charges,  penalties  or other  costs
incurred or payable by the Bank as a result  thereof and which are  attributable
to any Libor Rate (Reserve  Adjusted) options make available to maker hereunder,
and any reasonable  allocation  made by the Bank among its  operations  shall be
conclusive and binding upon maker.

     If any  Change  in Law or  compliance  by the  Bank  with  any  request  or
directive  (whether or not having the for of law) from any central bank or other
governmental authority shall:

     (A)  subject the Bank to any tax,  duty or other charge with respect to any
          Libor Rate (Reserve Adjusted) options, or change the basis of taxation
          of  payments  to the Bank of  principal,  interest,  fees or any other
          amount payable hereunder (except for changes in the rate of tax on the
          overall net income of the Bank); or

     (B)  impose,  modify  or hold  applicable  any  reserve,  special  deposit,
          compulsory  loan  or  similar  requirement  against  assets  held  by,
          deposits or other  liabilities  in or for the account of,  advances or
          loans by, or any other acquisition of funds by any office of the Bank;
          or

     (C)  impose on the Bank any other condition;

and the result of any of the  foregoing  is to increase  the cost to the Bank of
making,  renewing or maintaining  any Libor Rate (Reserve  Adjusted)-based  loan
hereunder  and/or to reduce  any  amount  receivable  by the Bank in  connection
therewith,  then in any such case,  maker shall pay to the Bank immediately upon
demand  such  amounts  as may be  necessary  to  compensate  the  Bank  for  any
additional  costs incurred by the Bank and/or  reductions in amounts received by
the Bank are attributable to any Libor Rate (Reserve  Adjusted)-based  loan made
to  maker  hereunder,  any  reasonable  allocation  made by the Bank  among  its
operations shall be conclusive and binding upon maker.

     The Bank is hereby  authorized to enter on the schedule attached hereto the
amount of each loan and each payment of principal  thereon,  without any further
authorization  on the part of the maker or any  endorser  or  guarantor  of this
Note,  but the Bank's  failure to make such entry  shall not limit or  otherwise
affect the  obligations  of the maker or any endorser or guarantor of this Note.
In the event that any other  Liabilities (as hereinafter  indicated) of maker to
the Bank are due at  anytime  that the Bank  receives  a payment  from  maker on
account of this Note or any such other  liabilities of maker, the Bank may apply
such  payments to amounts due under this Note or any such other  Liabilities  in
such  manner  as  the  Bank,  in  its  discretion,  elects,  regardless  of  any
instructions from the maker to the contrary.

     The maker and each  endorser  and  guarantor of this Note  acknowledge  and
agree that the use of this form of Note is for their  convenience,  and there is
no obligation on the part of the Bank to make loans to the maker whatsoever.

     Interest shall be computed on the basis of a 360-day year.

     Each maker or endorser authorizes (but shall not require) the Bank to debit
any account  maintained  by the maker or endorser  with the Bank, at any date on
which the payment of principal or of interest an any of the  Liabilities is due,
in an  amount  equal to any  unpaid  portion  of such  payment.  If the time for
payment of principal of or interest on any of the Liabilities or any other money
payable hereunder or with respect to any of the Liabilities becomes due on a day
on which the Bank's offices are


<PAGE>


closed (as required by law or otherwise), such payment shall be made on the next
succeeding  business  day,  and such  extension  shall be included in  computing
interest in connection with such payment.  All payments by any maker or endorser
of this Note on account of principal,  interest or fees hereunder  shall be made
in lawful money of the United States of America, in immediately available funds.

     All Property (as hereafter  defined) held by the Bank shall be subject to a
security  interest in favor of the Bank or holder hereof as security for any and
all  Liabilities.  The term  "Property"  shall mean the balance of every deposit
account of the maker with the Bank or any of the Bank's  nominees  or agents and
all other obligations of the Bank or any of its nominees or agents to the maker,
whether not existing or hereafter  arising,  and all other personal  property of
the  maker  (including   without   limitation  all  money,   accounts,   general
intangibles, goods, instruments, documents and chattel paper) which, or evidence
of which, are not or at any time in the future shall come into the possession or
under the  control of or be in transit  to the Bank or any of its'  nominees  or
agents for any  purpose,  whether or not  accepted for the purposes for which it
was delivered.  The term "Liabilities" shall mean the indebtedness  evidenced by
this note and all other indebtedness,  liabilities or obligations of any kind of
the maker (or any  partnership or other group of which the maker is a member) to
(a) the Bank,  (b) any  group of which  the bank is a  member,  or (c) any other
person if the Bank has a participation  or other interest in such  indebtedness,
liabilities  or  obligation,  whether (i) for the Bank's own account or as agent
for others,  (ii) acquired  directly or indirectly by the Bank from the maker or
others,  (iii) absolute or contingent,  joint or several,  secured or unsecured,
liquidated  or  unliquidated,  due or not  due,  contractual  or  tortious,  now
existing or  hereafter  arising,  or (iv)  incurred  by the maker as  principal,
surety,  endorser,  guarantor or otherwise, and including without limitation all
expenses,  including attorneys' fees, incurred by the Bank i connection with any
such indebtedness,  liabilities or obligations or any of the Property (including
any sale or other disposition of the Property).

     Upon the  happening,  with  respect to any maker,  endorser or guarantor of
this Note or any assets of any such maker, endorser or guarantor,  of any of the
following events (each an "Event of Default"):  death of the maker,  endorser or
guarantor or any member of the maker,  endorser or guarantor (if a partnership);
the failure to furnish  the Bank with any  requested  information  or failing to
permit  inspection  of books or  records by the Bank or any of its  agents;  the
making of any misrepresentation to the Bank in obtaining credit for any of them;
dissolution  (if a  corporation  or  partnership);  the making of a mortgage  or
pledge; the commencement of a foreclosure proceeding;  default in the payment of
principal or interest on this Note or int eh payment of any other  obligation of
any said maker,  endorser or guarantor  held by the Bank or holder  hereof or in
the  performance  or  observance  of any covenant or agreement  contained in the
instrument evidencing such obligation; default in the payment of principal of or
interest on any  indebtedness  for  borrowed  money owed to any other  person or
entity  (including any such indebtedness in the nature of a lease) or default in
the  performance or observance of the terms of any instrument  pursuant to which
such  indebtedness was created or is secured,  the effect of which default is to
cause or permit any holder of any such  indebtedness to cause the same to become
due prior to its stated  maturity  (and whether or not such default is waived by
the holder  thereof);  a change in the financial  condition or affairs of any of
them which in the opinion of the Bank or  subsequent  holder  hereof  materially
reduces  his,  their or its  ability to pay his,  their or its  obligation;  the
suspension  of a  business;  the  making of an  assignment  for the  benefit  of
creditors,  of the  appointment  of a trustee,  receiver or  liquidator  for the
maker,  endorser  or  guarantor  or for  any  guarantor  under  any  bankruptcy,
reorganization,   arrangement  of  debt,   insolvency,   readjustment  of  debt,
receivership,  liquidation  or  dissolution  law or statute  (including,  if the
maker,  endorser or guarantor is a partnership,  its dissolution pursuant to any
agreement or statute),  or the commencement of any such proceedings  without the
consent  of the  maker,  endorser  or  guarantor,  as the case may be,  and such
proceedings  shall  continue  discharges for a period of 30 days; the sending of
notice of an intended bulk sale; the entry of judgements or any attachment, levy
or execution  against any of his, their or its properties shall not be released,
discharged,


<PAGE>



dismissed,  stayed or fully  bonded  for a period  of 30 days or more  after its
entry,  issue or levy,  as the case may be;  or the  issuance  of a  warrant  of
distraint or assertion of a lien for unpaid taxes, this Note, if not then due or
payable on demand , shall become due and payable  immediately  without demand or
notice and all other debts or obligations or the makers and endorsers  hereof to
the  bank  of  holder  hereof,  whether  due or not due and  whether  direct  or
contingent and howsoever  evidenced,  shall, at the option of the Bank or holder
hereof, also become due and payable immediately without demand or notice.  After
this Note becomes due, at stated maturity or on acceleration, any unpaid balance
hereof shall bear interest from the date it becomes due until paid at a rate per
annum 3% above the rate borne by this Note when it becomes  due or, if such rate
shall not be lawful with respect to the undersigned,  then at the highest lawful
rate. The liability of any party to commercial  paper held by the bank or holder
hereof,  other thank the makers and endorsers  hereof,  shall remain  unaffected
hereby and such  parties  shall remain  liable  thereon in  accordance  with the
original  tenor thereof.  Each maker and endorser  agrees that if an attorney is
retained to enforce or collect this Note or any other  obligations  by reason of
non-payment of this Note when due or made due hereunder, a reasonable attorney's
fee  shall be paid in  addition,  which  fees  shall be as  follows:  15% of the
principal,interest  and all  other  sums due and owing to the payee or holder of
the reasonable value of the attorney's services, whichever is greater.

     This Note shall be  governed by the laws of the State of New York and shall
be binding upon the maker and each endorser and the maker's and each  endorser's
heirs,  administrators,  successors  and  assigns.  The maker and each  endorser
hereby irrevocably  consent to the jurisdiction of any New York State or Federal
court located in New York City over any action or proceeding  arising out of any
dispute  between the maker and each endorser and the Bank, and the maker further
irrevocably  consents to the service of process in any such action or proceeding
by the  mailing of a copy of such  process to the maker at the address set forth
below.  In the event of litigation  between the Bank and the maker of nay matter
connected with this Note or resulting from transactions hereunder,  the right to
a trial by jury is hereby  waived  by the Bank and the  maker.  The  maker  also
waives the right to interpose  any set-off or  counterclaim  of any nature.  The
Bank or any holder may accept late payments,  or partial  payments,  even though
marked  "payment  in  full"  or  containing  words of  similar  import  or other
conditions,  without  waiving any of its rights.  no amendment,  modification or
waiver of any  provision  of this Note nor  consent  to any  departure  by maker
therefrom shall be effective,  irrespective of any course of dealing, unless the
same shall be in writing and signed by the Bank, and then such waiver or consent
shall be effective  only in the specific  instance and for the specific  purpose
for which given.

     The rights and remedies of the Bank provided for hereunder  (including  but
not limited to the right to  accelerate  Liabilities  of maker and to realize on
any  security  for any such  Liabilities)  are  cumulative  with the  rights and
remedies of the Bank available under any other  instrument or agreement or under
applicable law.

     The  undersigned,  if more than one, shall be jointly and severally  liable
hereunder.


                                               ELK ASSOCIATES FUNDING CORP.


                                               By:
                                                        Gary Granoff, President

                                               By:


                                                Margaret Chance, Secretary

                                                  (Address)
                                                747 Third Avenue
                                                New York, New York  10017

VALUE RECEIVED