Document:

Exhibit 10.10

                           MASTER REPURCHASE AGREEMENT

                      CDC MORTGAGE CAPITAL, INC., as buyer
                                   ("Buyer"),
                                     -----

                  SIB MORTGAGE CORP., as seller ("Seller"), and
                                                  ------

                          SI BANK & TRUST ("Guarantor")
                                            ---------

                             Dated February 12, 2002

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                                TABLE OF CONTENTS

                                                                   Page
                                                                   ----

1.  Applicability....................................................1

2.  Definitions......................................................1

3.  Program; Initiation of Transactions.............................16

4.  Repurchase......................................................18

5.  Price Differential..............................................18

6.  Margin Maintenance..............................................19

7.  Income Payments.................................................20

8.  Security Interest...............................................21

9.  Payment and Transfer............................................21

10. Conditions Precedent............................................22

11. Program; Costs..................................................24

12. Servicing.......................................................25

13. Representations and Warranties..................................26

14. Covenants.......................................................32

15. Events of Default...............................................36

16. Remedies Upon Default...........................................39

17. Reports.........................................................41

18. Repurchase Transactions.........................................43

19. Single Agreement................................................43

20. Notices and Other Communications................................44

21. Entire Agreement; Severability..................................45

22. Non-assignability...............................................45

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23. Set-off.........................................................46

24. Binding Effect; Governing Law; Jurisdiction.....................46

25. No Waivers, etc.................................................47

26. Intent..........................................................47

27. Disclosure Relating to Certain Federal Protections..............47

28. Power of Attorney...............................................48

29. Buyer May Act Through Affiliates................................48

30. Indemnification; Obligations....................................48

31. Counterparts....................................................49

32. Confidentiality.................................................49

33. Recording of Communications.....................................49

34. Non-Utilization Fee.............................................50

35. Periodic Due Diligence Review...................................50

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SCHEDULES

Schedule 1 - Representations and Warranties with Respect to Purchased Mortgage
             Loans

Schedule 13(a)(11) - Litigation

Schedule 13(a)(16) - Seller Trade Names

ANNEXES

Annex I - Non-Utilization Fee Formula

EXHIBITS

Exhibit A - Form of Transaction Request

Exhibit B - RESERVED

Exhibit C - Form of Mortgage Loan Schedule and Exception Report

Exhibit D - Form of Officer's Compliance Certificate

Exhibit E - Form of Guaranty

Exhibit F - Form of Opinion of Seller's and Guarantor's counsel

Exhibit G - Underwriting Guidelines

Exhibit H - Authorized Signatories of Seller and Guarantor

Exhibit I - Corporate Resolutions of Seller and Guarantor

Exhibit J - Seller's and Guarantor's Tax Identification Number

Exhibit K - Existing Indebtedness

Exhibit L -RESERVED

Exhibit M - Form of Servicer Notice

Exhibit N - UCC Filing Jurisdictions

Exhibit O - Form of Request for Additional Transactions for Excess Margin

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         1. Applicability

                        From time to time the parties hereto may enter into
transactions in which Seller agrees to transfer to Buyer Mortgage Loans (as
hereinafter defined) against the transfer of funds by Buyer, with a simultaneous
agreement by Buyer to transfer to Seller such Mortgage Loans at a date certain
or on demand, against the transfer of funds by Seller. Each such transaction
shall be referred to herein as a "Transaction" and, unless otherwise agreed in
writing, shall be governed by this Agreement, including any supplemental terms
or conditions contained in any annexes identified herein, as applicable
hereunder.

         2. Definitions

         Whenever used in this Agreement, the following words and phrases,
unless the context otherwise requires, shall have the following meanings:

         "Acceptable State" means any state acceptable pursuant to Seller's
Underwriting Guidelines.

         "Accepted Servicing Practices" means, with respect to any Mortgage
Loan, those mortgage servicing practices of prudent mortgage lending
institutions which service mortgage loans of the same type as such Mortgage Loan
in the jurisdiction where the related Mortgaged Property is located.

         "Act of Insolvency" means, with respect to any Person or its
Affiliates, (i) the filing of a petition, commencing, or authorizing the
commencement of any case or proceeding, or the voluntary joining of any case or
proceeding under any bankruptcy, insolvency, reorganization, liquidation,
dissolution or similar law relating to the protection of creditors, or suffering
any such petition or proceeding to be commenced by another which is consented
to, not timely contested or results in entry of an order for relief; (ii) the
seeking of the appointment of a receiver, trustee, custodian or similar official
for such party or an Affiliate or any substantial part of the property of
either; (iii) the appointment of a receiver, conservator, or manager for such
party or an Affiliate by any governmental agency or authority having the
jurisdiction to do so; (iv) the making or offering by such party or an Affiliate
of a composition with its creditors or a general assignment for the benefit of
creditors; (v) the admission by such party or an Affiliate of such party of its
inability to pay its debts or discharge its obligations as they become due or
mature; or (vi) that any governmental authority or agency or any person, agency
or entity acting or purporting to act under governmental authority shall have
taken any action to condemn, seize or appropriate, or to assume custody or
control of, all or any substantial part of the property of such party or of any
of its Affiliates, or shall have taken any action to displace the management of
such party or of any of its Affiliates or to curtail its authority in the
conduct of the business of such party or of any of its Affiliates.

         "Adjusted Tangible Net Worth" means, Net Worth plus 1% of the
outstanding servicing portfolio balance of such Person plus Subordinated Debt,
minus intangible assets such as capitalized servicing rights, goodwill and
trademarks, minus notes receivable from shareholders or Affiliates.

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         "Affiliate" means, with respect to any Person, any "affiliate" of such
Person, as such term is defined in the United States Bankruptcy Code of 1978, as
amended from time to time.

         "Agency" means Freddie Mac, Fannie Mae or GNMA, as applicable.

         "Agreement" means this Master Repurchase Agreement, as it may be
amended, supplemented or otherwise modified from time to time.

         "Alt A Mortgage Loan" means a Mortgage Loan with a FICO score of at
least 620 originated in accordance with the criteria established by Buyer for
Alt-A Mortgage Loans in accordance with the Underwriting Guidelines.

         "Appraised Value" means the value set forth in an appraisal made in
connection with the origination of the related Mortgage Loan as the value of the
Mortgaged Property.

         "Appropriate Federal Banking Agency" has the meaning ascribed to it by
Section 1813(q) of Title 12 of the United States Code, as amended from time to
time.

         "Asset Tape" means a remittance report delivered on a monthly basis or
as otherwise requested by Buyer pursuant to Section 17d hereof containing
servicing information, including, without limitation, those fields reasonably
requested by Buyer from time to time, on a loan-by-loan basis and in the
aggregate, with respect to the Purchased Mortgage Loans serviced by Seller or
any Servicer for the month (or any portion thereof) prior to the Reporting Date.

         "Asset Value" means as of any date of determination with respect to
each Purchased Mortgage Loan,

         (i) the lesser of (A) the outstanding principal amount thereof as set
forth on the related Mortgage Loan Schedule and Exception Report and (B) (1) the
Market Value of such Purchased Mortgage Loan as of such date multiplied by (2)
the applicable Purchase Price Percentage, or

         (ii) during the existence of a Double Leverage Event, (A) the
applicable Purchase Price Percentage multiplied by (B) the lesser of (1) the
outstanding principal amount thereof as set forth on the related Mortgage Loan
Schedule and Exception Report or (2) the Market Value of such Purchased Mortgage
Loan as of such date.

                        Without limiting the generality of the foregoing, Seller
acknowledges that the Asset Value of a Purchased Mortgage Loan may be
reduced to zero by Buyer if:

               (i) if a breach of a representation, warranty or covenant made by
          Seller in this Agreement with respect to such Purchased Mortgage Loan
          has occurred and is continuing;

               (ii) if such Purchased Mortgage Loan is a Non-Performing Mortgage
          Loan;

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               (iii) if such Purchased Mortgage Loan has been released from the
          possession of the Custodian under the Custodial Agreement (other than
          to a Take-out Investor pursuant to a Bailee Letter) for a period in
          excess of ten (10) calendar days;

               (iv) if such Purchased Mortgage Loan has been released from the
          possession of the Custodian under the Custodial Agreement to a
          Take-out Investor pursuant to a Bailee Letter for a period in excess
          of 45 calendar days;

               (v) if such Purchased Mortgage Loan has been subject to a
          Transaction hereunder for a period of greater than 60 days;

               (vi) if when the Purchase Price for such Purchased Mortgage Loan
          is added to other Purchased Mortgage Loans, the aggregate Purchase
          Price of all Second Lien Mortgage Loans that are Purchased Mortgage
          Loans exceeds $12,500,000;

               (vii) if such Purchased Mortgage Loan is a Second Lien Mortgage
          Loan which fails to satisfy the Underwriting Guidelines for Prime or
          Alt A credit quality Mortgage Loans; or

               (viii) if such Purchased Mortgage Loan is an Alt A Mortgage Loan
          with a FICO score of less than 620.

         "Assignment of Mortgage" means an assignment of the Mortgage, notice of
transfer or equivalent instrument in recordable form, sufficient under the laws
of the jurisdiction wherein the related Mortgaged Property is located to reflect
the sale of the Mortgage to Buyer.

         "Bailee Letter" has the meaning assigned to such term in the Custodial
Agreement.

         "Bankruptcy Code" means the United States Bankruptcy Code of 1978, as
amended from time to time.

         "Business Day" means any day other than (A) a Saturday or Sunday and
(B) a public or bank holiday in New York City.

         "Buyer" means CDC Mortgage Capital, Inc., and any successor hereunder.

         "Capital Lease Obligations" means, for any Person, all obligations of
such Person to pay rent or other amounts under a lease of (or other agreement
conveying the right to use) Property to the extent such obligations are required
to be classified and accounted for as a capital lease on a balance sheet of such
Person under GAAP, and, for purposes of this Agreement, the amount of such
obligations shall be the capitalized amount thereof, determined in accordance
with GAAP.

         "Change in Control" means:

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               (A) any transaction or event as a result of which the Guarantor
          ceases to own, beneficially or of record, 100% of the issued and
          outstanding shares of voting stock of Seller;

         (B) any transaction or event as a result of which Holdings ceases to
own, beneficially or of record, 100% of thIe issued and outstanding shares of
voting stock of the Guarantor;

               (C) the sale, transfer, or other disposition of all or
          substantially all of Seller's or Guarantor's assets (excluding any
          such action taken in connection with any securitization transaction);
          or

               (D) the consummation of a merger or consolidation of Seller or
          Guarantor with or into another entity or any other corporate
          reorganization, if more than 50% of the combined voting power of the
          continuing or surviving entity's stock outstanding immediately after
          such merger, consolidation or such other reorganization is owned by
          persons who were not stockholders of Seller or Guarantor, as the case
          may be, immediately prior to such merger, consolidation or other
          reorganization.

         "Code" means the Internal Revenue Code of 1986, as amended.

         "Collection Account" means one or more accounts established by the
Servicer, into which all collections and proceeds on or in respect of the
Mortgage Loans shall be deposited by Servicer.

         "Committed Mortgage Loan" means a Mortgage Loan which is the subject of
a Take-out Commitment with a Take-out Investor.

         "Confirmation" has the meaning set forth in Section 3(c).

         "Conforming Mortgage Loan" means a Mortgage Loan originated in
accordance with the criteria of an Agency for purchase of Mortgage Loans,
including, without limitation, conventional Mortgage Loans, FHA Loans and VA
Loans, as determined by Buyer in its sole discretion.

         "Custodial Agreement" means the custodial agreement dated as of the
date hereof, among Seller, Buyer and Custodian as the same may be amended from
time to time.

         "Custodian" means LaSalle Bank, National Association or such other
party specified by Buyer and agreed to by Seller, which approval shall not be
unreasonably withheld.

         "Default" means an Event of Default or an event that with notice or
lapse of time or both would become an Event of Default.

         "Dollars" and "$" means dollars in lawful currency of the United States
of America.

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         "Double Leverage Event" means, as of any date of determination, when
the sum of Holdings', determined on a non-consolidated basis, (i) aggregate
"equity investments in Subsidiaries" (as determined under GAAP) plus (ii)
goodwill (as determined under GAAP) is in excess of 100% of Holdings' Net Worth.

         "Due Date" means the day of the month on which the Monthly Payment is
due on a Mortgage Loan, exclusive of any days of grace.

         "Effective Date" means the date upon which the conditions precedent set
forth in Section 10 shall have been satisfied.

         "Electronic Tracking Agreement" means an Electronic Tracking Agreement
among Buyer, Seller, MERS and MERSCORP, Inc., to the extent applicable.

         "ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time.

         "ERISA Affiliate" means any corporation or trade or business that is a
member of any group of organizations (i) described in Section 414(b) or (c) of
the Code of which Seller is a member and (ii) solely for purposes of potential
liability under Section 302(c)(11) of ERISA and Section 412(c)(11) of the Code
and the lien created under Section 302(f) of ERISA and Section 412(n) of the
Code, described in Section 414(m) or (o) of the Code of which Seller is a
member.

         "Escrow Payments" means, with respect to any Mortgage Loan, the amounts
constituting ground rents, taxes, assessments, water rates, sewer rents,
municipal charges, mortgage insurance premiums, fire and hazard insurance
premiums, condominium charges, and any other payments required to be escrowed by
the Mortgagor with the mortgagee pursuant to the Mortgage or any other document.

         "Event of Default" has the meaning specified in Section 15 hereof.

                        "Event of Termination" means with respect to Seller or
Guarantor (i) with respect to any Plan, a reportable event, as defined in
Section 4043 of ERISA, as to which the PBGC has not by regulation waived the
requirement of Section 4043(a) of ERISA that it be notified with 30 days of the
occurrence of such event, or (ii) the withdrawal of Seller, Guarantor or any
ERISA Affiliate thereof from a Plan during a plan year in which it is a
substantial employer, as defined in Section 4001(a)(2) of ERISA, or (iii) the
failure by Seller, Guarantor or any ERISA Affiliate thereof to meet the minimum
funding standard of Section 412 of the Code or Section 302 of ERISA with respect
to any Plan, including, without limitation, the failure to make on or before its
due date a required installment under Section 412(m) of the Code or Section
302(e) of ERISA, or (iv) the distribution under Section 4041 of ERISA of a
notice of intent to terminate any Plan or any action taken by Seller, Guarantor
or any ERISA Affiliate thereof to terminate any plan, or (v) the adoption of an
amendment to any Plan that, pursuant to Section 401(a)(29) of the Code or
Section 307 of ERISA, would result in the loss of tax-exempt status of the trust
of which such Plan is a part if Seller, Guarantor or any ERISA Affiliate thereof
fails to timely provide security to the Plan in accordance with the provisions
of said sections, or (vi) the institution by the PBGC of proceedings under
Section 4042 of ERISA for the termination of, or the appointment of a trustee to
administer, any Plan, or (vii) the receipt by Seller, Guarantor or any ERISA

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Affiliate thereof of a notice from a Multiemployer Plan that action of the type
described in the previous clause (vi) has been taken by the PBGC with respect to
such Multiemployer Plan, or (viii) any event or circumstance exists which may
reasonably be expected to constitute grounds for Seller, Guarantor or any ERISA
Affiliate thereof to incur liability under Title IV of ERISA or under Sections
412(c)(11) or 412(n) of the Code with respect to any Plan.

                        "Exception Mortgage Loan" means any Mortgage Loan which
is otherwise ineligible for purchase hereunder, or which otherwise becomes
ineligible for purchase hereunder and which is approved by Buyer in its sole
discretion. The Pricing Rate, Market Value, Purchase Price and Asset Value with
respect to Exception Mortgage Loans shall be set in the sole discretion of
Buyer. Buyer may at any time, and in its sole discretion, no longer consider a
Mortgage Loan an Exception Mortgage Loan, in which case such Mortgage Loan shall
have a Market Value of zero.

         "Excess Margin" has the meaning specified in Section 6(c).

         "Existing Indebtedness" has the meaning specified in Section 13(a)(22)
hereof.

         "Fannie Mae" means Fannie Mae, the government sponsored enterprise
formerly known as the Federal National Mortgage Association.

         "FHA" means the Federal Housing Administration, an agency within the
United States Department of Housing and Urban Development, or any successor
thereto, and including the Federal Housing Commissioner and the Secretary of
Housing and Urban Development where appropriate under the FHA Regulations.

         "FHA Approved Mortgagee" means a corporation or institution approved as
a mortgagee by the FHA under the National Housing Act, as amended from time to
time, and applicable FHA Regulations, and eligible to own and service mortgage
loans such as the FHA Loans.

         "FHA Loan" means a Mortgage Loan which is the subject of an FHA
Mortgage Insurance Contract.

         "FHA Mortgage Insurance" means, mortgage insurance authorized under the
National Housing Act, as amended from time to time, and provided by the FHA.

         "FHA Mortgage Insurance Contract" means the contractual obligation of
the FHA respecting the insurance of a Mortgage Loan.

         "FHA Regulations" means the regulations promulgated by the Department
of Housing and Urban Development under the National Housing Act, as amended from
time to time and codified in 24 Code of Federal Regulations, and other
Department of Housing and Urban Development issuances relating to FHA Loans,
including the related handbooks, circulars, notices and mortgagee letters.

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         "Foreclosed Loan" means a Mortgage Loan, the property securing which
has been foreclosed upon by Seller.

         "Freddie Mac" means the Federal Home Loan Mortgage Corporation.

         "GAAP" means generally accepted accounting principles in effect from
time to time in the United States of America and applied on a consistent basis.

         "GNMA" means the Government National Mortgage Association and any
successor thereto.

         "Governmental Authority" means any nation or government, any state or
other political subdivision thereof, or any entity exercising executive,
legislative, judicial, regulatory or administrative functions over Seller,
Guarantor or Buyer, as applicable.

         "Gross Margin" means, with respect to each adjustable rate Mortgage
Loan, the fixed percentage amount set forth in the related Mortgage Note.

         "Ground Lease" means the original executed instrument evidencing a
leasehold estate with respect to a Mortgaged Property.

         "Guarantee" means, as to any Person, any obligation of such Person
directly or indirectly guaranteeing any Indebtedness of any other Person or in
any manner providing for the payment of any Indebtedness of any other Person or
otherwise protecting the holder of such Indebtedness against loss (whether by
virtue of partnership arrangements, by agreement to keep-well, to purchase
assets, goods, securities or services, or to take-or-pay or otherwise); provided
that the term "Guarantee" shall not include (i) endorsements for collection or
deposit in the ordinary course of business, or (ii) obligations to make
servicing advances for delinquent taxes and insurance or other obligations in
respect of a Mortgaged Property, to the extent required by Buyer. The amount of
any Guarantee of a Person shall be deemed to be an amount equal to the stated or
determinable amount of the primary obligation in respect of which such Guarantee
is made or, if not stated or determinable, the maximum reasonably anticipated
liability in respect thereof as determined by such Person in good faith. The
terms "Guarantee" and "Guaranteed" used as verbs shall have correlative
meanings.

         "Guarantor" means SI Bank & Trust, in its capacity as guarantor under
the Guaranty.

         "Guaranty" means the guaranty of SI Bank & Trust dated as of the date
hereof, pursuant to which SI Bank & Trust fully and unconditionally guarantees
the obligations of Seller hereunder.

         "High Cost Mortgage Loans" means any Mortgage Loans classified as (a)
"high cost" loans under the Home Ownership and Equity Protection Act of 1994, as
amended or (b) "high cost," "threshold," or "predatory" loans under any other
applicable state, federal or local law.

         "Holdings" means Staten Island Bancorp, Inc.

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         "Income" means with respect to any Purchased Mortgage Loan at any time
until repurchased by the Seller, any principal received thereon or in respect
thereof and all interest, dividends or other distributions thereon.

         "Indebtedness" means, for any Person: (a) obligations created, issued
or incurred by such Person for borrowed money (whether by loan, the issuance and
sale of debt securities or the sale of Property to another Person subject to an
understanding or agreement, contingent or otherwise, to repurchase such Property
from such Person); (b) obligations of such Person to pay the deferred purchase
or acquisition price of Property or services, other than trade accounts payable
(other than for borrowed money) arising, and accrued expenses incurred, in the
ordinary course of business, so long as such trade accounts payable are payable
within 90 days of the date the respective goods are delivered or the respective
services are rendered; (c) Indebtedness of others secured by a Lien on the
Property of such Person, whether or not the respective Indebtedness so secured
has been assumed by such Person; (d) obligations (contingent or otherwise) of
such Person in respect of letters of credit or similar instruments issued or
accepted by banks and other financial institutions for the account of such
Person; (e) Capital Lease Obligations of such Person; (f) obligations of such
Person under repurchase agreements, sale/buy-back agreements or like
arrangements; (g) Indebtedness of others Guaranteed by such Person; (h) all
obligations of such Person incurred in connection with the acquisition or
carrying of fixed assets by such Person; and (i) Indebtedness of general
partnerships of which such Person is a general partner.

         "Index" means, with respect to any adjustable rate Mortgage Loan, the
index identified on the Mortgage Loan Schedule and set forth in the related
Mortgage Note for the purpose of calculating the applicable Mortgage Interest
Rate.

         "Insured Depository Institution" has the meaning assigned to such term
by Section 1813(c)(2) of Title 12 of the United States Code, as amended from
time to time.

         "Interest Rate Adjustment Date" means the date on which an adjustment
to the Mortgage Interest Rate with respect to each Mortgage Loan becomes
effective.

         "Interest Rate Protection Agreement" means, with respect to any or all
of the Mortgage Loans, any short sale of a US Treasury Security, or futures
contract, or mortgage related security, or Eurodollar futures contract, or
options related contract, or interest rate swap, cap or collar agreement or
Take-out Commitment, or similar arrangement providing for protection against
fluctuations in interest rates or the exchange of nominal interest obligations,
either generally or under specific contingencies, entered into by Seller and an
Affiliate of Buyer or such other party acceptable to Buyer in its sole
discretion, which agreement is acceptable to Buyer in its sole discretion.

         "Jumbo Mortgage Loans" means an A quality Mortgage Loan, as determined
pursuant to the Underwriting Guidelines, which is not eligible for sale to an
Agency.

         "LIBOR" means for each day, the rate of interest (calculated on a per
annum basis) equal to the rate appearing at page 5 of the Telerate Screen as
one-month LIBOR (or such other display as may replace page 5 of the Telerate
Screen) on such date of determination, and if such rate shall not be so quoted,

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the rate per annum at which Buyer is offered Dollar deposits at or about 11:00
a.m., (New York City time), on such day, by prime banks in the interbank
eurodollar market where the eurodollar and foreign currency exchange operations
in respect of its loans are then being conducted for delivery on such day for a
one-month period, and in an amount comparable to the amount of the Purchase
Price of Transactions to be outstanding on such day.

         "Lien" means any mortgage, lien, pledge, charge, security interest or
similar encumbrance.

         "Manufactured Home Mortgage Loan" has the meaning set forth in Schedule
1(h).

         "Margin Base" means, as of any date of determination, the aggregate
Asset Value of all Purchased Mortgage Loans on such date.

         "Margin Call" has the meaning specified in Section 6(a) hereof.

         "Margin Deadline" has the meaning specified in Section 6(b) hereof.

         "Margin Deficit" has the meaning specified in Section 6(a) hereof.

         "Market Value" means, with respect to any Purchased Mortgage Loan as of
any date of determination, the whole-loan servicing released fair market value
of such Purchased Mortgage Loan on such date as determined by Buyer (or an
Affiliate thereof) in its sole discretion. Without limiting the generality of
the foregoing, Seller acknowledges that in the event that a Purchased Mortgage
Loan is not subject to a Take-out Commitment, Buyer may deem the Market Value
for such Mortgage Loan to be no greater than par.

         "Material Adverse Effect" means (a) a material adverse change in, or a
material adverse effect upon, the operations, business, properties, condition
(financial or otherwise) or prospects of Seller and Guarantor, taken as a whole,
or Holdings; (b) a material impairment of the ability of Seller or Guarantor to
perform under any Program Agreement and to avoid any Event of Default; or (c) a
material adverse effect upon the legality, validity, binding effect or
enforceability of any Program Agreement against Seller or Guarantor.

         "Maximum Aggregate Purchase Price" means ONE HUNDRED FIFTY MILLION
DOLLARS ($150,000,000).

         "MERS" means Mortgage Electronic Registration Systems, Inc., a
corporation organized and existing under the laws of the State of Delaware, or
any successor thereto.

         "MERS System" means the system of recording transfers of mortgages
electronically maintained by MERS.

         "Monthly Payment" means the scheduled monthly payment of principal and
interest on a Mortgage Loan.

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         "Moody's" means Moody's Investors Service, Inc. or any successors
thereto.

         "Mortgage" means each mortgage, assignment of rents, security agreement
and fixture filing, or deed of trust, assignment of rents, security agreement
and fixture filing, deed to secure debt, assignment of rents, security agreement
and fixture filing, or similar instrument creating and evidencing a lien on real
property and other property and rights incidental thereto.

                        "Mortgage File" means, with respect to a Mortgage Loan,
the documents and instruments relating to such Mortgage Loan and set forth
in Exhibit F to the Custodial Agreement.

         "Mortgage Interest Rate" means the rate of interest borne on a Mortgage
Loan from time to time in accordance with the terms of the related Mortgage
Note.

         "Mortgage Interest Rate Cap" means, with respect to an adjustable rate
Mortgage Loan, the limit on each Mortgage Interest Rate adjustment as set forth
in the related Mortgage Note.

         "Mortgage Loan" means any Exception Mortgage Loan, Alt A Mortgage Loan,
Second Lien Mortgage Loan, Jumbo Mortgage Loan or Conforming Mortgage Loan which
is a closed-end, fixed or floating-rate, first or second lien,
one-to-four-family residential mortgage or home equity loan evidenced by a
promissory note and secured by a mortgage, which satisfies the requirements set
forth in the Underwriting Guidelines and Section 13(b) hereof; provided,
however, that, except as expressly approved in writing by Buyer, Mortgage Loans
shall not include any "high-LTV" loans (i.e., a mortgage loan having a
loan-to-value ratio in excess of 100% or in excess of such lower percentage set
forth in the Underwriting Guidelines or with respect to Second Lien Mortgage
Loans, a combined loan-to value ratio, in excess of the lower of (i) the
percentage specified in the Underwriting Guidelines or (ii) 100%), any High Cost
Mortgage Loans or any Series 300 Mortgage Loans and; provided, further, that the
origination date with respect to such Mortgage Loan is no earlier than thirty
(30) days prior to the related Purchase Date.

         "Mortgage Loan Schedule" means with respect to any Transaction as of
any date, a mortgage loan schedule in the form of either (a) Exhibit C attached
hereto or (b) a computer tape or other electronic medium generated by Seller or
Guarantor, and delivered to Buyer and Custodian, which provides information
(including, without limitation, the information set forth on Exhibit C attached
hereto) relating to the Purchased Mortgage Loans in a format acceptable to
Buyer.

         "Mortgage Loan Schedule and Exception Report" has the meaning assigned
to such term in the Custodial Agreement.

         "Mortgage Note" means the promissory note or other evidence of the
indebtedness of a Mortgagor secured by a Mortgage.

         "Mortgaged Property" means the real property securing repayment of the
debt evidenced by a Mortgage Note.

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         "Mortgagor" means the obligor or obligors on a Mortgage Note, including
any person who has assumed or guaranteed the obligations of the obligor
thereunder.

         "Multiemployer Plan" means a multiemployer plan defined as such in
Section 3(37) of ERISA to which contributions have been or are required to be
made by Seller or any ERISA Affiliate and that is covered by Title IV of ERISA.

         "Net Losses" means, for any period and any Person, the net loss of such
Person for such period as determined in accordance with GAAP.

         "Net Worth" means, with respect to any Person, an amount equal to, on a
consolidated basis, such Person's stockholders' equity (determined in accordance
with GAAP).

         "1934 Act" means the Securities Exchange Act of 1934, as amended from
time to time.

         "Non-Performing Mortgage Loan" means as of any Reporting Date, or any
other date an Asset Tape is delivered pursuant to Section 14(d) hereof, (i) any
Mortgage Loan for which any payment of principal or interest is one payment or
more past due, (ii) any Mortgage Loan with respect to which the related
mortgagor is in bankruptcy or (iii) any Mortgage Loan with respect to which the
related mortgaged property is in foreclosure.

         "Notice Date" has the meaning given to it in Section 3(b) hereof.

         "Obligations" means (a) all of Seller's indebtedness, obligations to
pay the Repurchase Price on the Repurchase Date, the Price Differential on each
Price Differential Payment Date, and other obligations and liabilities, to
Buyer, its Affiliates or Custodian arising under, or in connection with, the
Program Agreements, whether now existing or hereafter arising; (b) any and all
sums paid by Buyer or on behalf of Buyer in order to preserve any Purchased
Mortgage Loan or its interest therein; (c) in the event of any proceeding for
the collection or enforcement of any of Seller's indebtedness, obligations or
liabilities referred to in clause (a), the reasonable expenses of retaking,
holding, collecting, preparing for sale, selling or otherwise disposing of or
realizing on any Purchased Mortgage Loan, or of any exercise by Buyer of its
rights under the Program Agreements, including, without limitation, attorneys'
fees and disbursements and court costs; and (d) all of Seller's indemnity
obligations to Buyer or Custodian or both pursuant to the Program Agreements.

         "PBCG" means the Pension Benefit Guaranty Corporation or any entity
succeeding to any or all of its functions under ERISA.

         "Person" means an individual, partnership, corporation (including a
business trust), limited liability company, unlimited liability company, joint
stock company, trust, unincorporated association, joint venture or other entity,
or a government or any political subdivision or agency thereof.

         "Plan" means an employee benefit or other plan established or
maintained by any Seller or any ERISA Affiliate and covered by Title IV of
ERISA, other than a Multiemployer Plan.

                                       11
<PAGE>

         "Post Default Rate" means an annual rate of interest equal to the
Pricing Rate plus 3%.

         "Price Differential" means with respect to any Transaction as of any
date of determination, an amount equal to the product of (A) the Pricing Rate
for such Transaction and (B) the Purchase Price for such Transaction, calculated
daily on the basis of a 360-day year for the actual number of days during the
period commencing on (and including) the Purchase Date for such Transaction and
ending on (but excluding) the Repurchase Date.

         "Price Differential Payment Date" means, with respect to a Purchased
Mortgage Loan, the 5th day of the month following the related Purchase Date and
each succeeding 5th day of the month thereafter; provided, that, with respect to
such Purchased Mortgage Loan, the final Price Differential Payment Date shall be
the related Repurchase Date; and provided, further, that if any such day is not
a Business Day, the Price Differential Payment Date shall be the next succeeding
Business Day.

         "Pricing Rate" means LIBOR plus:

         (a) 0.625% with respect to Transactions the subject of which are
Conforming Mortgage Loans or Jumbo Mortgage Loans; (b) 0.75% with respect to
Transactions the subject of which are Alt A Mortgage Loans; (c) 0.80% with
respect to Transactions the subject of which are Second Lien Mortgage Loans; or
(d) the rate determined in the sole discretion of Buyer with respect to
Transactions the subject of which are Exception Mortgage Loans.

         The Pricing Rate shall change in accordance with LIBOR, as provided in
Section 5(a) hereof.

         "Prime Mortgage Loan" means, any Conforming Mortgage Loan or Jumbo
Mortgage Loan.

         "Principal" has the meaning given to it in Annex I.

         "Program Agreements" means, collectively, the Custodial Agreement, this
Agreement, the Electronic Tracking Agreement, if entered into, the Guaranty and,
with respect to each Exception Mortgage Loan, a Confirmation.

         "Property" means any right or interest in or to property of any kind
whatsoever, whether real, personal or mixed and whether tangible or intangible.

         "Purchase Date" means the date on which Purchased Mortgage Loans are to
be transferred by Seller to Buyer.

                                       12
<PAGE>

         "Purchase Price" means (1) on the Purchase Date,

         (i) the lesser of (A) the outstanding principal amount thereof as set
forth on the related Mortgage Loan Schedule and Exception Report and (B) (1) the
Market Value of such Purchased Mortgage Loan multiplied by (2) the applicable
Purchase Price Percentage, or

         (ii) during the existence of a Double Leverage Event, (A) the
applicable Purchase Price Percentage multiplied by (B) the lesser of (1) the
outstanding principal amount thereof as set forth on the related Mortgage Loan
Schedule and Exception Report or (2) the Market Value of such Purchased Mortgage
Loan; and

         (2) thereafter, except where Buyer and Seller agree otherwise, the
amount determined under the immediately preceding clauses (i) and (ii) decreased
by the amount of any cash transferred by Seller to Buyer applied to reduce
Seller's obligations under clause (ii) of Section 4(b) hereof.

         "Purchase Price Percentage" means:

         (x) with respect to each Mortgage Loan at any time in which a Double
Leverage Event does not exist, the following percentage, as applicable:

               (a) 98% with respect to Purchased Mortgage Loans that are Alt A
          Mortgage Loans (other than Second Lien Mortgage Loans);

               (b) 98% with respect to Transactions the subject of which are
          Conforming Mortgage Loans or Jumbo Mortgage Loans (other than Second
          Lien Mortgage Loans); and

               (c) 95% with respect to Transactions the subject of which are
          Second Lien Mortgage Loans; and

         (y) with respect to each Mortgage Loan at any time in which a Double
Leverage Event exists, 90%; and

         (z) with respect to Transactions the subject of which are Exception
Mortgage Loans, a percentage to be determined by Buyer in its sole discretion.

         "Purchased Mortgage Loans" means the collective reference to Mortgage
Loans together with the Repurchase Assets related to such Mortgage Loans
transferred by Seller to Buyer in a Transaction hereunder, listed on the related
Mortgage Loan Schedule attached to the related Transaction Request, which such
Mortgage Loans the Custodian has been instructed to hold pursuant to the
Custodial Agreement.

         "Qualified Insurer" means a mortgage guaranty insurance company duly
authorized and licensed where required by law to transact mortgage guaranty
insurance business and approved as an insurer by Fannie Mae or Freddie Mac.

                                       13
<PAGE>

         "Qualified Originator" means an originator of Mortgage Loans which is
acceptable under the Underwriting Guidelines.

         "Records" means all instruments, agreements and other books, records,
and reports and data generated by other media for the storage of information
maintained by Seller or any other person or entity with respect to a Purchased
Mortgage Loan. Records shall include the mortgage notes, any Mortgages, the
Mortgage Files, the credit files related to the Purchased Mortgage Loan and any
other instruments necessary to document or service a Mortgage Loan.

         "Reporting Date" means the 5th day of each month or, if such day is not
a Business Day, the next succeeding Business Day.

         "Repurchase Assets" has the meaning assigned thereto in Section 8
hereof.

         "Repurchase Date" means the earlier of (i) the Termination Date, (ii)
the date set forth in the applicable Confirmation, (iii) the date determined by
application of Section 16 hereof or (iv) the date identified to Buyer by Seller
as the date that the related Mortgage Loan is to be sold pursuant to a Take-out
Commitment; which date shall be specified as "open" unless otherwise requested
by Seller and agreed to by Buyer; provided, that, in no event shall the
Repurchase Date be in excess of 364 days after the Purchase Date; and provided,
further, that Seller shall give the Buyer at least one Business Day's notice
with respect to any intended repurchase where the Repurchase Date is specified
as "open".

         "Repurchase Price" means the price at which Purchased Mortgage Loans
are to be transferred from Buyer to Seller upon termination of a Transaction,
which will be determined in each case (including Transactions terminable upon
demand) as the sum of the Purchase Price and the accrued but unpaid Price
Differential as of the date of such determination.

         "Request for Additional Transactions for Excess Margin" has the meaning
specified in Section 6(c)(1) hereof.

         "Request for Certification" means a notice sent to the Custodian
reflecting the sale of one or more Purchased Mortgage Loans to Buyer hereunder.

         "Requirement of Law" means, with respect to any Person, any law,
treaty, rule or regulation or determination of an arbitrator, a court or other
governmental authority, applicable to or binding upon such Person or any of its
property or to which such Person or any of its property is subject.

         "Responsible Officer" means, as to any Person, the chief executive
officer or, with respect to financial matters, the chief financial officer of
such Person.

         "SEC" means the Securities and Exchange Commission, or any successor
thereto.

         "Second Lien Mortgage Loan" means a second lien Mortgage Loan where the
second lien on the related Mortgaged Property is contemplated and incurred
simultaneously with the first lien on the related Mortgaged Property.

                                       14
<PAGE>

         "Seller" means SIB Mortgage Corp. or its permitted successors and
assigns.

         "Series 300 Mortgage Loan" means any Mortgage Loan originated or
underwritten by an Persons in the Seller's branch office in Brooklyn, New York,
whether in the name of Universal Home, or otherwise.

         "Servicer" means Seller, any Affiliate of Seller or any other servicer
approved by Buyer in its sole discretion.

         "Servicer Notice" means the notice acknowledged by the Servicer
substantially in the form of Exhibit M hereto.

         "Servicing Agreement" means a servicing agreement, if any, among
Servicer, Seller, and Buyer, as the same may be amended from time to time.

         "SIPA" means the Securities Investor Protection Act of 1970, as amended
from time to time.

         "Subordinated Debt" means, Indebtedness of Seller which is (i)
unsecured, (ii) no part of the principal of such Indebtedness is required to be
paid (whether by way of mandatory sinking fund, mandatory redemption, mandatory
prepayment or otherwise) prior to the date which is one year following the
Termination Date and (iii) the payment of the principal of and interest on such
Indebtedness and other obligations of Seller in respect of such Indebtedness are
subordinated to the prior payment in full of the principal of and interest
(including post-petition obligations) on the Transactions and all other
obligations and liabilities of Seller to Buyer hereunder on terms and conditions
approved in writing by Buyer and all other terms and conditions of which are
satisfactory in form and substance to Buyer.

         "Subsidiary" means, with respect to any Person, any corporation,
partnership or other entity of which at least a majority of the securities or
other ownership interests having by the terms thereof ordinary voting power to
elect a majority of the board of directors or other persons performing similar
functions of such corporation, partnership or other entity (irrespective of
whether or not at the time securities or other ownership interests of any other
class or classes of such corporation, partnership or other entity shall have or
might have voting power by reason of the happening of any contingency) is at the
time directly or indirectly owned or controlled by such Person or one or more
Subsidiaries of such Person or by such Person and one or more Subsidiaries of
such Person.

         "Take-out Commitment" means a commitment of Seller to sell one or more
Mortgage Loans to a Take-out Investor and the corresponding Take-out Investor's
commitment back to Seller to effectuate any of the foregoing, as applicable.
With respect to any Take-out Commitment with an Agency, the applicable agency
documents list Buyer as sole subscriber.

         "Take-out Investor" means (i) an Agency or (ii) other institution which
has made a Take-out Commitment and has been approved by Buyer.

         "Termination Date" means the earlier of (a) February 11, 2003, and (b)
the date of the occurrence of an Event of Default.

                                       15
<PAGE>

         "Transaction" has the meaning set forth in Section 1 hereof.

         "Transaction Request" means a request from Seller to Buyer, in the form
attached as Exhibit A hereto, to enter into a Transaction.

         "Trust Receipt and Certification" means, with respect to any
Transaction as of any date, a receipt and certification in the form attached as
an exhibit to the Custodial Agreement.

         "Underwriting Guidelines" means the standards, procedures and
guidelines of Seller for underwriting and acquiring Mortgage Loans, which are
set forth in the written policies and procedures of Seller, a copy of which is
attached hereto as Exhibit G and such other guidelines as are identified and
approved in writing by Buyer.

         "Uniform Commercial Code" means the Uniform Commercial Code as in
effect on the date hereof in the State of New York or the Uniform Commercial
Code as in effect in the applicable jurisdiction.

         "Universal Home" means Universal Home Mortgage Company.

         "VA" means the U.S. Department of Veterans Affairs, an agency of the
United States of America, or any successor thereto including the Secretary of
Veterans Affairs.

         "VA Approved Lender" means a lender which is approved by the VA to act
as a lender in connection with the origination of VA Loans.

         "VA Loan" means a Mortgage Loan which is subject of a VA Loan Guaranty
Agreement as evidenced by a VA Loan Guaranty Agreement, or a Mortgage Loan which
is a vender loan sold by the VA.

         "VA Loan Guaranty Agreement" means the obligation of the United States
to pay a specific percentage of a Mortgage Loan (subject to a maximum amount)
upon default of the Mortgagor pursuant to the Servicemen's Readjustment Act, as
amended.

         "Well Capitalized" means, with respect to any Insured Depository
Institution, the maintenance by such Insured Depository Institution of capital
ratios at or above the required minimum levels for such capital category under
the regulations promulgated pursuant to Section 1831(o) ("Prompt Corrective
Action") of the United States Code, as amended from time to time, by the
Appropriate Federal Banking Agency for such institution, as such regulation may
be amended from time to time.

         3. Program; Initiation of Transactions

         a. From time to time, in the sole discretion of Buyer, Buyer will
purchase from Seller certain Mortgage Loans that have been either originated by
Seller or purchased by Seller from other originators. This Agreement is not a
commitment by Buyer to enter into Transactions with Seller but rather sets forth
the procedures to be used in connection with periodic requests for Buyer to
enter into Transactions with Seller. Seller hereby acknowledges that Buyer is

                                       16
<PAGE>

under no obligation to agree to enter into, or to enter into, any Transaction
pursuant to this Agreement. All Purchased Mortgage Loans shall exceed or meet
the Underwriting Guidelines, and shall be serviced by Servicer. The aggregate
Purchase Price of Purchased Mortgage Loans subject to outstanding Transactions
shall not exceed the Maximum Aggregate Purchase Price. Buyer shall only enter
into Transactions in which the Purchase Price with respect thereto is at least
FIVE MILLION DOLLARS ($5,000,000.00).

         b. Seller shall give Buyer and Custodian at least 1 Business Day's
prior notice of any proposed Purchase Date (the date on which such notice is
given, the "Notice Date"); provided, that if Seller is delivering 25 or fewer
Mortgage Loans on a Purchase Date, the notice shall be delivered on or before
10:30 a.m. (New York City time) on the Purchase Date. On the Notice Date, Seller
shall (i) request that Buyer enter into a Transaction by furnishing to Buyer a
Transaction Request, (ii) deliver to Buyer and Custodian a Mortgage Loan
Schedule and (iii) deliver to Custodian a Request for Certification and each
Mortgage File. Following receipt of such request, Buyer may enter into such
requested Transaction or may notify Seller of its intention not to enter into
such Transaction.

         c. On each Purchase Date, Buyer shall forward to the Seller a
confirmation (a "Confirmation") by electronic transmission setting forth with
respect to each Transaction funded on such date, (1) the mortgage loan number,
(2) the Purchase Price for such Mortgage Loan, (3) the Market Value of the
related Mortgage Loans as of the date of such Confirmation, (4) the outstanding
principal amount of the related Mortgage Loans, (5) the Repurchase Date, (6) the
Pricing Rate and (7) the type of such Mortgage Loans (i.e., Alt-A Mortgage Loan,
Second Lien Mortgage Loan). Buyer shall forward to the Seller a revised
Confirmation by electronic transmission notifying the Seller as to any changes
made by Buyer in the Purchase Price Percentage or Pricing Rate pursuant to the
terms thereof.

         d. In the event Seller disagrees with any terms of the Confirmation,
the Seller shall notify Buyer in writing of such disagreement within one (1)
Business Day after receipt of such Confirmation unless a corrected Confirmation
is sent by Buyer. An objection sent by the Seller must state specifically that
it is an objection, must specify provision(s) in the manner that the Seller
believes they should be stated, and must be received by Buyer no more than one
(1) Business Day after the Confirmation was received by the Seller.

         e. Any Confirmation by Buyer shall be deemed to have been received by
the Seller on the date actually received by the Seller.

         f. Except as set forth in Section 3(d) hereof, each Confirmation,
together with this Agreement, shall constitute conclusive evidence of the terms
agreed between Buyer and the Seller with respect to the Transaction to which the
Confirmation relates, and the Seller's acceptance of the related proceeds shall
constitute the Seller's agreement to the terms of such Confirmation. It is the
intention of the parties that, with respect to each Exception Mortgage Loan,
each Confirmation shall not be separate from this Agreement but shall be made a
part of this Agreement. In the event of any conflict between this Agreement and
a Confirmation, the terms of the Confirmation shall control with respect to the
related Transaction.

                                       17
<PAGE>

         g. Upon the satisfaction of the applicable conditions precedent set
forth in Section 10 hereof, all of Seller's interest in the Repurchase Assets
shall pass to Buyer on the Purchase Date, against the transfer of the Purchase
Price to Seller. Upon transfer of the Mortgage Loans to Buyer as set forth in
this Section and until termination of any related Transactions as set forth in
Sections 4 or 16 of this Agreement, ownership of each Mortgage Loan, including
each document in the related Mortgage File and Records, is vested in Buyer;
provided that, prior to the recordation by the Custodian as provided for in the
Custodial Agreement record title in the name of Seller to each Mortgage shall be
retained by Seller in trust, for the benefit of Buyer, for the sole purpose of
facilitating the servicing and the supervision of the servicing of the Mortgage
Loans.

         4. Repurchase

         a. Seller shall repurchase the related Purchased Mortgage Loans from
Buyer on each related Repurchase Date. Such obligation to repurchase exists
without regard to any prior or intervening liquidation or foreclosure with
respect to any Purchased Mortgage Loan (but liquidation or foreclosure proceeds
received by Buyer shall be applied to reduce the Repurchase Price for such
Purchased Mortgage Loan on each Price Differential Payment Date except as
otherwise provided herein). Seller is obligated to repurchase and take physical
possession of such Purchased Mortgage Loans from Buyer or its designee
(including the Custodian) at Seller's expense on the related Repurchase Date.

         b. Provided that no Default shall have occurred and is continuing, and
Buyer has received the related Repurchase Price upon repurchase of the Purchased
Mortgage Loans, Buyer agrees to release its ownership interest hereunder in the
Purchased Mortgage Loans (including, the Repurchase Assets related thereto) at
the request of Seller. With respect to payments in full by the related Mortgagor
of a Purchased Mortgage Loan, Seller agrees to (i) provide Buyer with a copy of
a report from the related Servicer indicating that such Purchased Mortgage Loan
has been paid in full, (ii) remit to Buyer, within two Business Days, the
Repurchase Price with respect to such Purchased Mortgage Loans and (iii) provide
Buyer a notice specifying each Purchased Mortgage Loan that has been prepaid in
full. Buyer agrees to release its ownership interest in Purchased Mortgage Loans
which have been prepaid in full after receipt of evidence of compliance with
clauses (i) through (iii) of the immediately preceding sentence.

         5. Price Differential.

         a. On each Business Day that a Transaction is outstanding, the Pricing
Rate shall be reset and, unless otherwise agreed, the accrued and unpaid Price
Differential shall be settled in cash on each related Price Differential Payment
Date. Two Business Days prior to the Price Differential Payment Date, Buyer
shall give Seller written or electronic notice of the amount of the Price
Differential due on such Price Differential Payment Date. On the Price
Differential Payment Date, Seller shall pay to Buyer the Price Differential for
such Price Differential Payment Date (along with any other amounts to be paid
pursuant to Sections 7 and 34 hereof), by wire transfer in immediately available
funds.

                                       18
<PAGE>

         b. If Seller fails to pay all or part of the Price Differential by 3:00
p.m. (New York City time) on the related Price Differential Payment Date, with
respect to any Purchased Mortgage Loan, Seller shall be obligated to pay to
Buyer (in addition to, and together with, the amount of such Price Differential)
interest on the unpaid Repurchase Price at a rate per annum equal to the Post
Default Rate until the Price Differential is received in full by Buyer.

         6. Margin Maintenance

         a. If at any time the Margin Base is less than the aggregate Purchase
Price for all outstanding Transactions (such deficiency, a "Margin Deficit"),
then Buyer may by notice to any Seller require Seller to transfer to Buyer cash
in an amount at least equal to the Margin Deficit (such requirement, a "Margin
Call") so that the Margin Base of the Purchased Mortgage Loans will thereupon
equal or exceed the aggregate Purchase Price for all outstanding Transactions.
Any cash transferred by the Seller to Buyer to satisfy a Margin Call shall be
applied to reduce the Repurchase Price.

         b. Notice delivered pursuant to Section 6(a) hereof may be given by any
written means. Any notice given before 10:00 a.m. New York time on a Business
Day shall be met, and the related Margin Call satisfied, no later than 5:00 p.m.
New York time on such Business Day; notice given after 10:00 a.m. New York time
on a Business Day shall be met, and the related Margin Call satisfied, no later
than 5:00 p.m. New York time on the following Business Day (the foregoing time
requirements for satisfaction of a Margin Call are referred to as the "Margin
Deadlines"). The failure of Buyer, on any one or more occasions, to exercise its
rights hereunder, shall not change or alter the terms and conditions to which
this Agreement is subject or limit the right of Buyer to do so at a later date.
The Seller and Buyer each agree that a failure or delay by Buyer to exercise its
rights hereunder shall not limit or waive Buyer's rights under this Agreement or
otherwise existing by law or in any way create additional rights for the Seller.

         c. On any day on which the Margin Base exceeds the aggregate Purchase
Price of all Transactions, so long as no Default or Event of Default has
occurred and is continuing:

               (1) Seller may prepare a Request for Additional Transactions for
          Excess Margin in the form of Exhibit O attached hereto ("Request for
          Additional Transactions for Excess Margin"), specifying (i) the Margin
          Base with respect to such Mortgage Loans sold hereunder before giving
          effect to the requested Transaction, (ii) the aggregate outstanding
          Purchase Price of the Transactions prior to giving effect to the
          requested Transaction, and (iii) a certification that, upon the
          consummation of the additional Transactions, the Margin Base will be
          equal to or greater than the aggregate outstanding Purchase Price of
          all outstanding Transactions, and the excess of the Margin Base over
          the aggregate outstanding Purchase Price, after giving effect to the
          Transaction, shall be the "Excess Margin".

               (2) Seller shall transmit via electronic transmission the Request
          for Additional Transactions for Excess Margin to Buyer prior to 12:00
          noon, New York City time, on the requested Purchase Date. Upon
          confirming that the Request for Additional Transactions for Excess
          Margin correctly reflects the information set forth in Section 6(c)(1)
          hereof and that, after giving effect to the requested Transaction, the
          amount of the Margin Base would be equal to or greater than the
          aggregate outstanding Purchase Price of all Transactions, Buyer shall
          remit the additional Purchase Price in the amount set forth in such

                                       19
<PAGE>

          Request for Additional Transactions for Excess Margin and send a
          revised Confirmation with respect to such Purchased Mortgage Loans. In
          the event that Buyer's assessment of the Margin Base would alter the
          information set forth in any Request for Additional Transactions for
          Excess Margin, Buyer shall promptly notify Seller in writing of such
          assessment.

               (3) Buyer shall not be obligated to remit the additional Purchase
          Price requested pursuant to a Request for Additional Transactions for
          Excess Margin which (i) Buyer reasonably determines is based on
          erroneous information or would result in a Transaction other than in
          accordance with the terms of this Agreement, or (ii) does not reflect
          Buyer's current determination of Market Value as provided in the
          definition thereof.

         7. Income Payments

         a. If Income is paid in respect of any Purchased Mortgage Loan during
the term of a Transaction, such Income shall be the property of Buyer.
Notwithstanding the foregoing, and provided no Event of Default has occurred and
is continuing, (i) Buyer agrees that if a third-party Servicer is in place for
any Purchased Mortgage Loans, such Servicer shall deposit such Income to the
Collection Account and, (ii) if Seller is Servicer, Seller shall deposit all
Income received in its capacity as Servicer of any Purchased Mortgage Loans to
the Collection Account in accordance with Section 12(c) hereof.

         b. Provided no Event of Default has occurred and is continuing, on each
Price Differential Payment Date, Seller shall remit to Buyer an amount equal to
the Price Differential out of the interest portion of the Income paid in respect
to the Purchased Mortgage Loans for the preceding month in accordance with
Section 5 of this Agreement. Upon termination of any Transaction, to the extent
that there is any excess Income after repayment of all amounts to be transferred
to Buyer by Seller, Buyer, in its sole option, may apply the excess income to
reduce the Repurchase Price due upon termination of any other outstanding
Transactions.

         c. In the event that an Event of Default has occurred and is
continuing, notwithstanding any provision set forth herein, Seller shall remit
to Buyer all Income received with respect to each Purchased Mortgage Loan on the
related Price Differential Payment Date or on such other date or dates as Buyer
notifies Seller in writing.

         d. Notwithstanding any provision to the contrary in this Section 7,
within two (2) Business Days of receipt by Seller of any prepayment of principal
in full with respect to a Purchased Mortgage Loan, Seller shall remit such
amount to Buyer and Buyer shall immediately apply any such amount received by
Buyer to reduce the amount of the Repurchase Price due upon termination of the
related Transaction.

                                       20
<PAGE>

         e. Notwithstanding anything to the contrary set forth herein, upon
notice by Buyer to Seller, Seller shall remit to Buyer all collections received
by Servicer or Seller on the Purchased Mortgage Loans in accordance with Buyer's
directions no later than the day on which aggregate collections of principal and
interest (excluding principal prepayments) on the Purchased Mortgaged Loans
reaches an amount to be indicated by Buyer in its sole discretion. Any such
Income remitted to Buyer shall be applied by Buyer to the applicable Repurchase
Price as follows: first, to any accrued and unpaid Price Differential, and
second, to the remainder of the Repurchase Price.

         8. Security Interest

         Although the parties intend that all Transactions hereunder be sales
and purchases and not loans, in the event any such Transactions are deemed to be
loans, Seller hereby pledges to Buyer as security for the performance by Seller
of its Obligations and hereby grants, assigns and pledges to Buyer a fully
perfected first priority security interest in the Purchased Mortgage Loans, the
Records, and all related servicing rights, the Program Agreements (to the extent
such Program Agreements and Seller's right thereunder relate to the Purchased
Mortgage Loans), any related Take-out Commitments, Property, all insurance
policies and insurance proceeds relating to any Mortgage Loan or the related
Mortgaged Property, including, but not limited to, any payments or proceeds
under any related primary insurance, hazard insurance and FHA Mortgage Insurance
Contracts and VA Loan Guarantee Agreements (if any), Income, the Collection
Account, Interest Rate Protection Agreements, accounts (including any interest
of Seller in escrow accounts) and any other contract rights, accounts, payments,
rights to payment (including payments of interest or finance charges) general
intangibles and other assets relating to the Purchased Mortgage Loans
(including, without limitation, any other accounts) or any interest in the
Purchased Mortgage Loans, the servicing of the Purchased Mortgage Loans, and any
proceeds (including the related securitization proceeds) and distributions with
respect to any of the foregoing and any other property, rights, title or
interests as are specified on a Transaction Request and/or Trust Receipt and
Certification, in all instances, whether now owned or hereafter acquired, now
existing or hereafter created (collectively, the "Repurchase Assets"). Seller
agrees to execute, deliver and/or file such documents and perform such acts as
may be reasonably necessary to fully perfect Buyer's security interest created
hereby. Furthermore, the Seller hereby authorizes the Buyer to file financing
statements relating to the Repurchase Assets without the signature of the
Seller, as the Buyer, at its option, may deem appropriate. The Seller shall pay
the filing costs for any financing statement or statements prepared pursuant to
this Section.

         9. Payment and Transfer

         Unless otherwise mutually agreed in writing, all transfers of funds to
be made by Seller hereunder shall be made in Dollars, in immediately available
funds, without deduction, set-off or counterclaim, to Buyer at the following
account maintained by Buyer: Account for the account of Bank of New York,
Account No. 021-000.018, GLA 11569 SER, Attn: Chin-Yong-Choe or such other
account as Buyer shall specify to Seller in writing. Seller acknowledges that it
has no rights of withdrawal from the foregoing account. All Purchased Mortgage
Loans transferred by one party hereto to the other party shall be in the case of
a purchase by Buyer in suitable form for transfer or shall be accompanied by
duly executed instruments of transfer or assignment in blank and such other
documentation as Buyer may reasonably request. All Purchased Mortgage Loans

                                       21
<PAGE>

shall be evidenced by a Trust Receipt and Certification. Any Repurchase Price
received by Buyer after 2:00 p.m. (New York City time) shall be deemed received
on the next succeeding Business Day.

         10. Conditions Precedent

         a. Initial Transaction. As conditions precedent to the initial
Transaction, Buyer shall have received on or before the day of such initial
Transaction the following, in form and substance satisfactory to Buyer and duly
executed by Seller, Guarantor and each other party thereto:

               (1) Program Agreements. The Program Agreements (including the
          Guaranty, and a Custodial Agreement in a form acceptable to Buyer)
          duly executed and delivered by the parties thereto and being in full
          force and effect, free of any modification, breach or waiver.

               (2) Security Interest. Evidence that all other actions necessary
          or, in the opinion of Buyer, desirable to perfect and protect Buyer's
          interest in the Purchased Mortgage Loans and other Repurchase Assets
          have been taken, including, without limitation, duly executed and
          filed Uniform Commercial Code financing statements on Form UCC-1.

               (3) Organizational Documents. A certified copy of Seller's and
          Guarantor's charter, bylaws and corporate resolutions approving the
          Program Agreements and transactions thereunder (either specifically or
          by general resolution) and all documents evidencing other necessary
          corporate action or governmental approvals as may be required in
          connection with the Program Agreements.

               (4) Good Standing Certificate. A certified copy of a good
          standing certificate of Seller, dated as of no earlier than the date
          10 Business Days prior to the Purchase Date with respect to the
          initial Transaction hereunder.

               (5) Incumbency Certificate. An incumbency certificate of the
          corporate secretary of each of Seller and Guarantor, certifying the
          names, true signatures and titles of the representatives duly
          authorized to request transactions hereunder and to execute the
          Program Agreements.

               (6) Opinion of Counsel. An opinion of Seller's and Guarantor's
          counsel, in form and substance substantially as set forth in Exhibit F
          attached hereto.

               (7) Underwriting Guidelines. A true and correct copy of the
          Underwriting Guidelines that are effective as of the date hereof
          certified by an officer of Seller.

               (8) Fees. Payment of any fees due to Buyer hereunder, including,
          without limitation, reimbursement of all legal fees accrued by Buyer
          in connection with this Agreement on or prior to the date of this
          Agreement.

                                       22
<PAGE>

         b. All Transactions. The obligation of Buyer to enter into each
Transaction pursuant to this Agreement is subject to the following conditions
precedent:

               (1) Due Diligence Review. Without limiting the generality of
          Section 35 hereof, Buyer shall have completed, to its satisfaction,
          its due diligence review of the related Mortgage Loans and Seller,
          Guarantor and the Servicer.

         (2) Required Documents.

               With respect to each Purchased Mortgage Loan, the Mortgage File
          has been delivered to the Custodian (i) with respect to any purchase
          of 25 or fewer Mortgage Loans on a single Purchase Date, on or prior
          to 3:00 p.m. (New York City time) on the Purchase Date, and (ii) with
          respect to any purchase of 26 or more Mortgage Loans on a single
          Purchase Date, at least 24 hours prior to the Purchase Date;

         (3) Transaction Documents. Buyer or its designee shall have received on
or before the day of such Transaction (unless otherwise specified in this
Agreement) the following, in form and substance satisfactory to Buyer and (if
applicable) duly executed:

               (a) A Transaction Request delivered pursuant to Section 3(c)
          hereof.
               (b) The Request for Certification and the related Mortgage Loan
          Schedule and Exception Report (provided, that Buyer shall have no
          obligation to purchase any Mortgage Loan for which any exceptions are
          listed on the related Mortgage Loan Schedule and Exception Report),
          and the Trust Receipt.

               (c) Such certificates, opinions of counsel or other documents as
          Buyer may reasonably request.

               (4) No Default. No Default or Event of Default shall have
          occurred and be continuing;

         (5) Requirements of Law. Buyer shall not have determined that the
introduction of or a change in any Requirement of Law or in the interpretation
or administration of any Requirement of Law applicable to Buyer has made it
unlawful, and no Governmental Authority shall have asserted that it is unlawful,
for Buyer to enter into Transactions with a Pricing Rate based on LIBOR.

         (6) Representations and Warranties. Both immediately prior to the
related Transaction and also after giving effect thereto and to the intended use
thereof, the representations and warranties made by Seller in each Program
Agreement shall be true, correct and complete on and as of such Purchase Date in
all material respects with the same force and effect as if made on and as of
such date (or, if any such representation or warranty is expressly stated to
have been made as of a specific date, as of such specific date).

                                       23
<PAGE>

         (7) Electronic Tracking Agreement. To the extent Seller is selling
Mortgage Loans which are registered on the MERS(R) System, an Electronic
Tracking Agreement entered into, duly executed and delivered by the parties
thereto and being in full force and effect, free of any modification, breach or
waiver.

         (8) Material Adverse Change. None of the following shall have occurred
and/or be continuing:

               (a) an event or events shall have occurred in the good faith
          determination of Buyer resulting in the effective absence of a "repo
          market" or comparable "lending market" for financing debt obligations
          secured by mortgage loans or securities or an event or events shall
          have occurred resulting in Buyer not being able to finance Purchased
          Mortgage Loans through the "repo market" or "lending market" with
          traditional counterparties at rates which would have been reasonable
          prior to the occurrence of such event or events; or

               (b) an event or events shall have occurred resulting in the
          effective absence of a "securities market" for securities backed by
          mortgage loans or an event or events shall have occurred resulting in
          Buyer not being able to sell securities backed by mortgage loans at
          prices which would have been reasonable prior to such event or events;
          or

               (c) there shall have occurred a material adverse change in the
          financial condition of Buyer which affects (or can reasonably be
          expected to affect) materially and adversely the ability of Buyer to
          fund its obligations under this Agreement.

                               11. Program; Costs

         a. Seller shall reimburse Buyer for any of Buyer's reasonable
out-of-pocket costs, including due diligence review costs and reasonable
attorney's fees, incurred by Buyer in determining the acceptability to Buyer of
any Mortgage Loans. Seller shall also pay, or reimburse Buyer if Buyer shall
pay, any termination fee, which may be due any servicer. Seller shall pay the
fees and expenses of Buyer's counsel in connection with the Program Agreements.
Legal fees for any subsequent amendments to this Agreement or related documents
shall be borne by Seller. Seller shall pay ongoing custodial and bank fees and
expenses as set forth on Exhibit L hereto, and any other ongoing fees and
expenses under any other Program Document.

         b. If Buyer determines that, due to the introduction of, any change in,
or the compliance by Buyer with (i) any eurocurrency reserve requirement or (ii)
the interpretation of any law, regulation or any guideline or request from any
central bank or other Governmental Authority (whether or not having the force of
law), there shall be an increase in the cost to Buyer in engaging in the present
or any future Transactions, then Seller agrees to pay to Buyer, from time to
time, upon demand by Buyer (with a copy to Custodian) the actual cost of
additional amounts as specified and documented in reasonable detail in writing
by Buyer to compensate Buyer for such increased costs.

                                       24
<PAGE>

         c. With respect to any Transaction, Buyer may conclusively rely upon,
and shall incur no liability to Seller in acting upon, any request or other
communication that Buyer reasonably believes to have been given or made by a
person authorized to enter into a Transaction on Seller's behalf, whether or not
such person is listed on the certificate delivered pursuant to Section 10(a)(5)
hereof. In each such case, Seller hereby waives the right to dispute Buyer's
record of the terms of the Confirmation, request or other communication.

         d. Notwithstanding the assignment of the Program Agreements with
respect to each Purchased Mortgage Loan to Buyer, Seller agrees and covenants
with Buyer to enforce diligently Seller's rights and remedies set forth in the
Program Agreements. e. Any payments made by Seller or Guarantor to Buyer shall
be free and clear of, and without deduction or withholding for, any taxes;
provided, however, that if such payer shall be required by law to deduct or
withhold any taxes from any sums payable to Buyer, then such payer shall (A)
make such deductions or withholdings and pay such amounts to the relevant
authority in accordance with applicable law, (B) pay to Buyer the sum that would
have been payable had such deduction or withholding not been made, and (C) at
the time Price Differential is paid, pay to Buyer all additional amounts as
specified by Buyer to preserve the after-tax yield Buyer would have received if
such tax had not been imposed.

         12. Servicing

         a. Seller, on Buyer's behalf, shall contract with Servicer to, or if
Seller is the Servicer, Seller shall, service the Mortgage Loans consistent with
the degree of skill and care that Seller customarily requires with respect to
similar Mortgage Loans owned or managed by it and in accordance with Accepted
Servicing Practices. The Servicer shall (i) comply with all applicable Federal,
State and local laws and regulations, (ii) maintain all state and federal
licenses necessary for it to perform its servicing responsibilities hereunder
and (iii) not impair the rights of Buyer in any Mortgage Loans or any payment
thereunder. Buyer may terminate the servicing of any Mortgage Loan with the
then-existing servicer in accordance with Section 12(e) hereof.

         b. Seller shall cause the Servicer to hold or cause to be held all
escrow funds collected by Servicer with respect to any Purchased Mortgage Loans
in trust accounts and shall apply the same for the purposes for which such funds
were collected.

         c. Seller shall cause the Servicer to deposit all collections received
by Servicer on the Purchased Mortgage Loans in the Collection Account no later
than the 5th Business Day following receipt; provided, however, that any amounts
required to be remitted to Buyer shall be deposited in the Collection Account on
or prior to the day on which such remittance is to occur.

         d. Upon Buyer's request, Seller shall provide promptly to Buyer (i) a
Servicer Notice addressed to and agreed to by the Servicer of the related
Purchased Mortgage Loans, advising such Servicer of such matters as Buyer may
reasonably request, including, without limitation, recognition by the Servicer
of Buyer's interest in such Purchased Mortgage Loans and the Servicer's

                                       25
<PAGE>

agreement that upon receipt of notice of an Event of Default from Buyer, it will
follow the instructions of Buyer with respect to the Purchased Mortgage Loans
and any related Income with respect thereto.

         e. Upon the occurrence of an Event of Default hereunder or a material
default under the Servicing Agreement, Buyer shall have the right to immediately
terminate the Servicer's right to service the Purchased Mortgage Loans under the
Servicing Agreement without payment of any penalty or termination fee. Seller
and the Servicer shall cooperate in transferring the servicing of the Purchased
Mortgage Loans to a successor servicer appointed by Buyer in its sole
discretion.

         f. If Seller should discover that, for any reason whatsoever, Seller or
any entity responsible to Seller for managing or servicing any such Purchased
Mortgage Loan has failed to perform fully Seller's obligations under the Program
Agreements or any of the obligations of such entities with respect to the
Purchased Mortgage Loans, Seller shall promptly notify Buyer.

         13. Representations and Warranties

         a. Each of Seller and Guarantor represents and warrants to Buyer as of
the date hereof and as of each Purchase Date for any Transaction that:

         (1) Seller and Guarantor Existence. Seller has been duly organized and
is validly existing as a corporation in good standing under the laws of the
State of New Jersey. Guarantor has been duly organized and is validly existing
as a federally chartered, FDIC insured thrift in good standing under the laws of
the United States.

         (2) Licenses. Each of Seller and Guarantor is duly licensed or is
otherwise qualified in each jurisdiction in which it transacts business for the
business which it conducts and is not in default of any applicable federal,
state or local laws, rules and regulations unless, in either instance, the
failure to take such action is not reasonably likely (either individually or in
the aggregate) to cause a Material Adverse Effect and is not in default of such
state's applicable laws, rules and regulations. Each of Seller and Guarantor has
the requisite power and authority and legal right to originate and purchase
Mortgage Loans (as applicable) and to own, sell and grant a lien on all of its
right, title and interest in and to the Mortgage Loans, and to execute and
deliver, engage in the transactions contemplated by, and perform and observe the
terms and conditions of, this Agreement, each Program Agreement and any
Transaction Request or, if applicable, Confirmation. Seller is an FHA Approved
Mortgagee and VA Approved Lender.

         (3) Power. Each of Seller and Guarantor has all requisite corporate or
other power, and has all governmental licenses, authorizations, consents and
approvals necessary to own its assets and carry on its business as now being or
as proposed to be conducted, except where the lack of such licenses,
authorizations, consents and approvals would not be reasonably likely to have a
Material Adverse Effect.

         (4) Due Authorization. Each of Seller and Guarantor has all necessary
corporate or other power, authority and legal right to execute, deliver and
perform its obligations under each of the Program Agreements, as applicable.
This Agreement, any Transaction Request,

                                       26
<PAGE>

Confirmation and the Program Agreements have been (or, in the case of Program
Agreements and any Transaction Request, Confirmation not yet executed, will be)
duly authorized, executed and delivered by Seller and Guarantor, all requisite
corporate action having been taken, and each is valid, binding and enforceable
against Seller or the Guarantor in accordance with its terms except as such
enforcement may be affected by bankruptcy, by other insolvency laws, or by
general principles of equity.

         (5) Financial Statements. Guarantor has heretofore furnished to Buyer a
copy of (a) its consolidated and consolidating balance sheet and the
consolidated balance sheets of its consolidated Subsidiaries for the fiscal year
of the Guarantor ended December 31, 2000 and the related consolidated and
consolidating statements of income and retained earnings and of cash flows for
the Guarantor and its consolidated Subsidiaries for such fiscal year, setting
forth in each case in comparative form the figures for the previous year, with
the opinion thereon of Arthur Andersen LLP and (b) its consolidated and
consolidating balance sheet and the consolidated balance sheets of its
consolidated Subsidiaries for the quarterly fiscal periods of the Guarantor
ended March 31, 2001, June 30, 2001 and September 30, 2001 and the related
consolidated and consolidating statements of income and retained earnings and of
cash flows for the Guarantor and its consolidated Subsidiaries for such
quarterly fiscal periods, setting forth in each case in comparative form the
figures for the previous year. All such financial statements are complete and
correct and fairly present, in all material respects, the consolidated financial
condition of the Guarantor and its Subsidiaries and the consolidated and
consolidating results of their operations as at such dates and for such fiscal
periods, all in accordance with GAAP applied on a consistent basis. Since
September 30, 2001, there has been no material adverse change in the
consolidated business, operations, financial condition, properties or prospects
of the Guarantor and its consolidated Subsidiaries taken as a whole from that
set forth in said financial statements nor is the Guarantor aware of any state
of facts which (without notice or the lapse of time) would or could result in
any such material adverse change. The Guarantor has, on the date of the
statements delivered pursuant to this Section (the "Statement Date") no
liabilities, direct or indirect, fixed or contingent, matured or unmatured,
known or unknown, or liabilities for taxes, long-term leases or unusual forward
or long-term commitments not disclosed by, or reserved against in, said balance
sheets and related statements, and at the present time there are no material
unrealized or anticipated losses from any loans, advances or other commitments
of the Guarantor except as heretofore disclosed to Buyer in writing.

         (6) Event of Default. There exists no Event of Default under Section
15(b) hereof, which default gives rise to a right to accelerate indebtedness as
referenced in Section 15(b) hereof, under any mortgage, borrowing agreement or
other instrument or agreement pertaining to indebtedness for borrowed money or
to the repurchase of mortgage loans or securities.

         (7) Solvency. Each of Seller and Guarantor is solvent and will not be
rendered insolvent by any Transaction and, after giving effect to such
Transaction, will not be left with an unreasonably small amount of capital with
which to engage in its business. Neither Seller nor Guarantor intends to incur,

                                       27
<PAGE>

nor believes that it has incurred, debts beyond its ability to pay such debts as
they mature and is not contemplating the commencement of insolvency, bankruptcy,
liquidation or consolidation proceedings or the appointment of a receiver,
liquidator, conservator, trustee or similar official in respect of such entity
or any of its assets. Seller is not transferring any Purchased Mortgage Loans
with any intent to hinder, delay or defraud any of its creditors.

         (8) No Conflicts. The execution, delivery and performance by each of
Seller and Guarantor of this Agreement, any Transaction Request or Confirmation
hereunder and the Program Agreements do not conflict with any term or provision
of the certificate of incorporation or by-laws of Seller or Guarantor or any
law, rule, regulation, order, judgment, writ, injunction or decree applicable to
Seller or Guarantor of any court, regulatory body, administrative agency or
governmental body having jurisdiction over Seller or Guarantor, which conflict
would have a Material Adverse Effect and will not result in any violation of any
such mortgage, instrument, agreement or repurchase agreement.

         (9) True and Complete Disclosure. All information, reports, exhibits,
schedules, financial statements or certificates of Seller, Guarantor, any
Affiliate thereof or any of their officers furnished or to be furnished to Buyer
in connection with the initial or any ongoing due diligence of Seller,
Guarantor, or any Affiliate or officer thereof, negotiation, preparation, or
delivery of the Program Agreements are true and complete and do not omit to
disclose any material facts necessary to make the statements herein or therein,
in light of the circumstances in which they are made, not misleading.

         (10) Approvals. No consent, approval, authorization or order of,
registration or filing with, or notice to any governmental authority or court is
required under applicable law in connection with the execution, delivery and
performance by Seller or Guarantor of this Agreement, any Transaction Request,
Confirmation and the Program Agreements.

         (11) Litigation. Except as disclosed on Schedule 13(a)(11) hereto,
there is no action, proceeding or investigation pending with respect to which
either Seller or Guarantor has received service of process or, to the best of
Seller's or Guarantor's knowledge threatened against it before any court,
administrative agency or other tribunal (A) asserting the invalidity of this
Agreement, any Transaction, Transaction Request, Confirmation or any Program
Agreement, (B) seeking to prevent the consummation of any of the transactions
contemplated by this Agreement, any Transaction Request, Confirmation or any
Program Agreement, (C) makes a claim individually in an amount greater than $10
million or in an aggregate amount greater than $20 million (D) which requires
filing with the Securities and Exchange Commission in accordance with the 1934
Act or any rules thereunder or (E) which might materially and adversely affect
the validity of the Mortgage Loans or the performance by it of its obligations
under, or the validity or enforceability of, this Agreement, any Transaction
Request, Confirmation or any Program Agreement.

         (12) Ownership. Upon payment of the Purchase Price and the filing of
the financing statement and delivery of the Mortgage Files to the Custodian and
the Custodian's receipt of the related Request for Certification, Buyer shall

                                       28
<PAGE>

become the sole owner of the Purchased Mortgage Loans and related Repurchase
Assets, free and clear of all liens and encumbrances.

         (13) Underwriting Guidelines. The Underwriting Guidelines provided to
Buyer are the true and correct Underwriting Guidelines of Seller.

         (14) Taxes. Seller, Guarantor and its Subsidiaries have filed all
Federal income tax returns and all other material tax returns that are required
to be filed by them and have paid all taxes due pursuant to such returns or
pursuant to any assessment received by any of them, except for any such taxes as
are being appropriately contested in good faith by appropriate proceedings
diligently conducted and with respect to which adequate reserves have been
provided. The charges, accruals and reserves on the books of Seller, Guarantor
and its Subsidiaries in respect of taxes and other governmental charges are, in
the opinion of Seller or Guarantor, as applicable, adequate.

         (15) Investment Company. Neither Seller, Guarantor nor any of its
Subsidiaries is an "investment company", or a company "controlled" by an
"investment company," within the meaning of the Investment Company Act of 1940,
as amended.

         (16) Chief Executive Office; Jurisdiction of Organization. During the
four months immediately preceding July 1, 2001 and on the Effective Date,
Seller's chief executive office, is, and has been, located at 1250 Route 28,
Branchburg, New Jersey 08876. On the Effective Date, Seller's jurisdiction of
organization is New Jersey. Seller shall provide Buyer with thirty days advance
notice of any change in Seller's principal office or place of business or
jurisdiction. Except as disclosed on Schedule 13(a)(16), Seller has no trade
name. During the preceding five years, Seller has not been known by or done
business under any other name, corporate or fictitious, and has not filed or had
filed against it any bankruptcy receivership or similar petitions nor has it
made any assignments for the benefit of creditors.

         (17) Location of Books and Records. The location where Seller keeps its
books and records, including all computer tapes and records relating to the
Purchased Mortgage Loans and the related Repurchase Assets is its chief
executive office.

         (18) Adjusted Tangible Net Worth. On the Effective Date, the
Guarantor's Adjusted Tangible Net Worth is greater than $425 million.

         (19) ERISA. Each Plan to which Seller or its Subsidiaries make direct
contributions, and, to the knowledge of Seller, each other Plan and each
Multiemployer Plan, is in compliance in all material respects with, and has been
administered in all material respects in compliance with, the applicable
provisions of ERISA, the Code and any other Federal or State law.

         (20) Adverse Selection. Seller has not intentionally selected the
Purchased Mortgage Loans in a manner so as to adversely affect Buyer's
interests.

                                       29
<PAGE>

         (21) Agreements. Neither Seller nor any Subsidiary of Seller is a party
to any agreement, instrument, or indenture or subject to any restriction
materially and adversely affecting its business, operations, assets or financial
condition, except as disclosed in the financial statements described in Section
13(a)(5) hereof. Neither Seller nor any Subsidiary of Seller is in default in
the performance, observance or fulfillment of any of the obligations, covenants
or conditions contained in any agreement, instrument, or indenture which default
could have a material adverse effect on the business, operations, properties, or
financial condition of Seller as a whole. No holder of any indebtedness of
Seller or of any of its Subsidiaries has given notice of any asserted default
thereunder. (22) Other Indebtedness. All Indebtedness (other than Indebtedness
evidenced by this Agreement) of Seller existing on the date hereof is listed on
Exhibit K hereto (the "Existing Indebtedness").

         (23) Agency Approvals. To the extent necessary, Seller, and Guarantor
is an FHA Approved Mortgagee and a VA Approved Lender. Seller and Guarantor is
also approved by Fannie Mae as an approved lender and Freddie Mac as an approved
seller/servicer, and, to the extent necessary, approved by the Secretary of
Housing and Urban Development pursuant to Sections 203 and 211 of the National
Housing Act. In each such case, Seller and Guarantor are in good standing, with
no event having occurred or Seller or Guarantor having any reason whatsoever to
believe or suspect will occur prior to the consummation of the Take-out
Commitment, as the case may be, including, without limitation, a change in
insurance coverage which would either make Seller unable to comply with the
eligibility requirements for maintaining all such applicable approvals or
require notification to the relevant Agency or to the Department of Housing and
Urban Development, FHA or VA. Should Seller or Guarantor for any reason cease to
possess all such applicable approvals, or should notification to the relevant
Agency or to the Department of Housing and Urban Development, FHA or VA be
required, Seller or Guarantor shall so notify Buyer immediately in writing.
Seller has adequate financial standing, servicing facilities, procedures and
experienced personnel necessary for the sound servicing of mortgage loans of the
same types as may from time to time constitute Mortgage Loans and in accordance
with Accepted Servicing Practices.

         (24) Insured Depository Institution Representations. Guarantor is an
Insured Depository Institution and accordingly, Guarantor makes the following
additional representations and warranties:

          (a) The Program Agreements do not violate any statutory or regulatory
     requirements applicable to Guarantor;

          (b) The Program Agreements have been (i) executed contemporaneously
     with the definitive agreement reached by Buyer and Guarantor, (ii)
     Guarantor's board of directors has authorized Guarantor's officers to
     negotiate and enter into the Agreement, which authorization shall be
     reflected in the minutes of said board, and (iii) entered into the official
     records of Guarantor, a copy of which approvals, certified by a vice
     president or higher officer of Guarantor, has been provided to Buyer;

                                       30
<PAGE>

          (c) The aggregate amount of the Purchase Price of the Transactions,
     after giving effect to any Transactions being made on the date hereof,
     between Buyer and Seller does not exceed any restrictions or limitations
     imposed by the board of directors of Guarantor;

          (d) (1) As of the Effective Date and as of the end of each month,
     Guarantor is Well Capitalized; and (2) As of any other date of
     determination, to the best of Guarantor's knowledge, Guarantor is Well
     Capitalized.

         (25) No Broker. Seller has not dealt with any broker, investment
banker, agent, or other person, except for Buyer, who may be entitled to any
commission or compensation in connection with the sale of Purchased Mortgage
Loans pursuant to this Agreement.

         (26) Ability to Perform. Neither Seller nor the Guarantor believes nor
has any reason or cause to believe, that it cannot perform each and every
covenant contained in the Program Agreements applicable to it to which it is a
party.

         (27) Upon the filing of financing statements on Form UCC-1 naming Buyer
as "Secured Party", the Seller as "Debtor" and describing the Repurchase Assets,
in the jurisdictions and recording offices listed on Exhibit N attached hereto,
the security interests granted hereunder in the Repurchase Assets will
constitute fully perfected first priority security interests under the Uniform
Commercial Code in all right, title and interest of the Seller in, to and under
such Repurchase Assets, which can be perfected by filing under the Uniform
Commercial Code.

         (28) ERISA. Each Plan to which Seller or any of its Subsidiaries make
direct contributions, and, to the knowledge of Seller, each other Plan and each
Multiemployer Plan, is in compliance in all material respects with, and has been
administered in all material respects in compliance with, the applicable
provisions of ERISA, the Code and any other Federal or State law. No event or
condition has occurred and is continuing as to which Seller would be under an
obligation to furnish a report to Buyer under Section 16(a)(7)(a) hereof.

         b. With respect to every Purchased Mortgage Loan, each of Seller and
Guarantor represents and warrants to Buyer as of the applicable Purchase Date
for any Transaction and each date thereafter that each representation and
warranty set forth on Schedule 1 is true and correct.

         c. The representations and warranties set forth in this Agreement shall
survive transfer of the Purchased Mortgage Loans to Buyer and shall continue for
so long as the Purchased Mortgage Loans are subject to this Agreement. Upon
discovery by Seller, Servicer or Buyer of any breach of any of the
representations or warranties set forth in this Agreement, the party discovering
such breach shall promptly give notice of such discovery to the others. Buyer
has the right to require, in its unreviewable discretion, Seller to repurchase

                                       31
<PAGE>

within 1 Business Day after receipt of notice from Buyer any Purchased Mortgage
Loan (i) for which a breach of one or more of the representations and warranties
referenced in Section 13(b) exists and which breach has a material adverse
effect on the value of such Mortgage Loan or the interests of Buyer or (ii)
which is determined by Buyer, in its good faith discretion, to be unacceptable
for inclusion in a securitization.

         14. Covenants

         Each of Seller and Guarantor covenants with Buyer that, during the term
of this facility:

         a. Adjusted Tangible Net Worth. For each quarter commencing after
September 30, 2001, Guarantor shall maintain an Adjusted Tangible Net Worth of
greater than $425 million.

         b. Litigation. Except with respect to any class action litigation, with
respect to which the Seller shall update the Buyer monthly as to any material
changes in the status or proceedings in connection therewith, the Seller will
promptly, and in any event within ten (10) days after service of process on any
of the following, give to Buyer notice of all litigation, actions, suits,
arbitrations, investigations (including, without limitation, any of the
foregoing which are threatened or pending) or other legal or arbitrable
proceedings affecting Seller or any of its Subsidiaries or affecting any of
their Properties of any of them before any Governmental Authority that (i)
questions or challenges the validity or enforceability of any of the Program
Agreements or any action to be taken in connection with the transactions
contemplated hereby, (ii) makes a claim individually in an amount greater than
$2 million or in an aggregate amount greater than $5 million, or (iii) which,
individually or in the aggregate, if adversely determined, could be reasonably
likely to have a Material Adverse Effect.

         c. Prohibition of Fundamental Changes. Seller shall not enter into any
transaction of merger or consolidation or amalgamation, or liquidate, wind up or
dissolve itself (or suffer any liquidation, winding up or dissolution) or sell
all or substantially all of its assets; provided, that Seller may merge or
consolidate with (a) any wholly owned subsidiary of Seller, or (b) any other
Person if Seller is the surviving corporation; and provided further, that if
after giving effect thereto, no Default would exist hereunder.

         d. Servicer; Asset Tape. Upon the occurrence of any of the following
(a) the occurrence and continuation of an Event of Default, (b) the fifth
Business Day of each month, or (c) upon the request of Buyer, Seller shall cause
Servicer to provide to Buyer, electronically, in a format mutually acceptable to
Buyer and Seller, an Asset Tape by no later than the Reporting Date. Seller
shall not cause the Mortgage Loans to be serviced by any servicer other than
Seller or a servicer expressly approved in writing by Buyer, which approval
shall be deemed granted by Buyer with respect to Seller with the execution of
this Agreement; provided, however, that Buyer shall have the right, in the Event
of Default, to cause Seller to transfer servicing to such other servicer
selected by Buyer in its sole discretion.

         e. Insurance. Seller, Guarantor or their Affiliates, will continue to
maintain, for Seller and its Subsidiaries, insurance coverage with respect to
employee dishonesty, forgery or alteration, theft, disappearance and

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<PAGE>

destruction, robbery and safe burglary, property (other than money and
securities) and computer fraud in an aggregate amount acceptable to Fannie Mae
and Freddie Mac.

         f. No Adverse Claims. Seller warrants and will defend, and shall cause
any Servicer to defend, the right, title and interest of Buyer in and to all
Purchased Mortgage Loans and the related Repurchase Assets against all adverse
claims and demands.

         g. Assignment. Except as permitted herein, neither Seller nor any
Servicer shall sell, assign, transfer or otherwise dispose of, or grant any
option with respect to, or pledge, hypothecate or grant a security interest in
or lien on or otherwise encumber (except pursuant to the Program Agreements),
any of the Purchased Mortgage Loans or any interest therein, provided that this
Section shall not prevent any transfer of Purchased Mortgage Loans in accordance
with the Program Agreements. h. Security Interest. Seller shall use its best
efforts to preserve the Purchased Mortgage Loans and the related Repurchase
Assets so that they remain subject to a first priority perfected security
interest hereunder. Without limiting the foregoing, Seller will comply with all
rules, regulations and other laws of any Governmental Authority and cause the
Purchased Mortgage Loans or the related Repurchase Assets to comply with all
applicable rules, regulations and other laws. Seller will not allow any default
for which Seller is responsible to occur under any Purchased Mortgage Loans or
the related Repurchase Assets or any Program Agreement and Seller shall fully
perform or cause to be performed when due all of its obligations under any
Purchased Mortgage Loans or the related Repurchase Assets and any Program
Agreement.

         i. Records.

         (1) Seller shall collect and maintain or cause to be collected and
maintained all Records relating to the Purchased Mortgage Loans in accordance
with industry custom and practice for assets similar to the Purchased Mortgage
Loans, and all such Records shall be in Custodian's possession unless Buyer
otherwise approves. Seller will use its best efforts to prevent any such papers,
records or files that are an original or an only copy to leave Custodian's
possession, except for individual items removed in connection with servicing a
specific Mortgage Loan, in which event Seller will obtain or cause to be
obtained a receipt from a financially responsible person for any such paper,
record or file. Seller will, and use its best efforts to cause the Servicer of
the Purchased Mortgage Loans to maintain all such Records not in the possession
of Custodian in good and complete condition in accordance with industry
practices for assets similar to the Purchased Mortgage Loans and preserve them
against loss.

         (2) For so long as Buyer has an interest in or lien on any Purchased
Mortgage Loan, Seller will hold or cause to be held all related Records in trust
for Buyer. Seller shall notify, or cause to be notified, every other party
holding any such Records of the interests and liens in favor of Buyer granted
hereby.

         (3) Upon reasonable advance notice from Custodian or Buyer, Seller
shall (x) make any and all such Records available to Custodian or Buyer to
examine any such Records, either by its own officers or employees, or by agents
or contractors, or both, and make copies of all or any portion thereof, and (y)

                                       33
<PAGE>

permit Buyer or its authorized agents to discuss the affairs, finances and
accounts of Seller with its chief operating officer and chief financial officer
and to discuss the affairs, finances and accounts of Seller with its independent
certified public accountants.

         j. Books. Seller shall keep or cause to be kept in reasonable detail
books and records of account of its assets and business and shall clearly
reflect therein the transfer of Purchased Mortgage Loans to Buyer.

         k. Approvals. Seller shall maintain all licenses, permits or other
approvals necessary for Seller to conduct its business and to perform its
obligations under the Program Agreements, and Seller shall conduct its business
strictly in accordance with applicable law.

         l. Material Change in Business. Neither Seller nor Guarantor shall make
any material change in the nature of its business as carried on at the date
hereof.

         m. Underwriting Guidelines. Seller shall provide Buyer with 10 Business
Days' prior written notice of any amendment or other modification of the
Underwriting Guidelines. Without limiting the foregoing, in the event that
Seller makes any amendment or modification to the Underwriting Guidelines,
Seller shall promptly deliver to Buyer a complete copy of the amended or
modified Underwriting Guidelines.

         n. Distributions. If an Event of Default arising from the failure to
make a payment required hereunder, including, without limitation, the failure to
satisfy a Margin Call hereunder, has occurred and is occurring, Seller shall not
pay any dividends with respect to any capital stock or other equity interests in
such entity, whether now or hereafter outstanding, or make any other
distribution in respect thereof, either directly or indirectly, whether in cash
or property or in obligations of Seller.

         o. Applicable Law. Seller and Guarantor shall comply with the
requirements of all applicable laws, rules, regulations and orders of any
Governmental Authority.

         p. Existence. Seller and the Guarantor shall preserve and maintain
their legal existence and all of their material rights, privileges, licenses and
franchises.

         q. Chief Executive Office; Jurisdiction of Organization. Seller shall
not move its chief executive office from the address referred to in Section
13(a)(17) hereof or change its jurisdiction of organization from the
jurisdiction referred to in Section 13(a)(17) hereof unless it shall have
provided Buyer 30 days' prior written notice of such change.

         r. Taxes. Seller shall pay and discharge all taxes, assessments and
governmental charges or levies imposed on it or on its income or profits or on
any of its property prior to the date on which penalties attach thereto, except
for any such tax, assessment, charge or levy the payment of which is being
contested in good faith and by proper proceedings and against which adequate
reserves are being maintained.

s. Transactions with Affiliates. Seller will not enter into
any transaction, including, without limitation, any purchase, sale, lease or
exchange of property or the rendering of any service, with any Affiliate unless

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<PAGE>

such transaction is (a) otherwise not prohibited under the Program Agreements,
(b) in the ordinary course of Seller's business and (c) upon fair and reasonable
terms no less favorable to Seller than it would obtain in a comparable arm's
length transaction with a Person which is not an Affiliate, or make a payment
that is not otherwise permitted by this Section to any Affiliate.

         t. Hedging. Seller shall maintain Interest Rate Protection Agreements
with respect to the Alt A Mortgage Loans, Jumbo Mortgage Loans and Conforming
Mortgage Loans, having terms with respect to protection against fluctuations in
interest rates acceptable to Buyer in its sole discretion.

         u. True and Correct Information. All information, reports, exhibits,
schedules, financial statements or certificates of Seller, Guarantor, any
Affiliate thereof or any of their officers furnished to Buyer hereunder and
during Buyer's diligence of Seller and Guarantor are and will be true and
complete and do not omit to disclose any material facts necessary to make the
statements herein or therein, in light of the circumstances in which they are
made, not misleading. All required financial statements, information and reports
delivered by Seller to Buyer pursuant to this Agreement shall be prepared in
accordance with U.S. GAAP, or, if applicable, to SEC filings, the appropriate
SEC accounting regulations.

         v. Agency Approvals; Servicing. Seller shall maintain its status with
Fannie Mae as an approved lender and Freddie Mac as an approved seller/servicer,
in each case in good standing. Seller shall service all Purchased Mortgage Loans
which are Committed Mortgage Loans in accordance with the applicable agency
guide. Should Seller, for any reason, cease to possess all such applicable
Agency Approvals, or should notification to the relevant Agency or to the
Department of Housing and Urban Development, FHA or VA be required, such Seller
shall so notify Buyer immediately in writing. Notwithstanding the preceding
sentence, Seller shall take all necessary action to maintain all of their
applicable Agency Approvals at all times during the term of this Agreement and
each outstanding Transaction. Seller has adequate financial standing, servicing
facilities, procedures and experienced personnel necessary for the sound
servicing of mortgage loans of the same types as may from time to time
constitute Mortgage Loans and in accordance with Accepted Servicing Practices.

         w. Take-out Payments. With respect to each Committed Mortgage Loan,
Seller shall arrange that all payments under the related Take-out Commitment
shall be paid directly to Buyer at the account set forth in Section 9 hereof, or
to an account approved by Buyer in writing prior to such payment; provided that,
any funds received by Buyer with respect to a Take-out Commitment shall be
applied to the outstanding Repurchase Price of such Purchased Mortgage Loan.
With respect to any Agency Take-out Commitment, if applicable, (1) with respect
to the wire transfer instructions as set forth in Freddie Mac Form 987 (Wire
Transfer Authorization for a Cash Warehouse Delivery) such wire transfer
instructions are identical to Buyer's wire instructions or Buyer has approved
such wire transfer instructions in writing in its sole discretion, or (2) the
Payee Number set forth on Fannie Mae Form 1068 (Fixed-Rate, Graduated-Payment,
or Growing-Equity Mortgage Loan Schedule) or Fannie Mae Form 1069
(Adjustable-Rate Mortgage Loan Schedule), as applicable, is identical to the
Payee Number that has been identified by Buyer in writing as Buyer's Payee
Number or Buyer has previously approved the related Payee Number in writing in
its sole discretion; with respect to any Take-out Commitment with an Agency, the

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<PAGE>

applicable agency documents list Buyer as sole subscriber, unless otherwise
agreed to in writing by Buyer, in Buyer's sole discretion.

         x. No Pledge. Seller shall not pledge, transfer or convey any security
interest in the Collection Account to any Person without the express written
consent of Buyer.

         y. Sub-Limits. The Seller shall not sell to Buyer any Mortgage Loans
if, after giving effect to such Transaction, the aggregate principal balance of
all Purchased Mortgage Loans are in excess of any sub-limit specified in the
definition of Market Value.

         z. Inconsistent Agreements. The Seller will not, nor will it permit any
of its Subsidiaries to, directly or indirectly, enter into any agreement
containing any provision which would be violated or breached by any Transaction
hereunder or by the performance by such Seller of its obligations under any
Program Agreement.

         aa. Escrow Imbalance. The Seller will, no later than five (5) Business
Days after learning (from any source) of any material imbalance in any escrow
account, fully and completely correct and eliminate such imbalance including,
without limitation, depositing its own funds into such account to eliminate any
overdrawal or deficit.

         bb. Independence of Covenants. All covenants hereunder shall be given
independent effect so that if a particular action or condition is not permitted
by any of such covenants, the fact that it would be permitted by an exception
to, or be otherwise within the limitations of, another covenant shall not avoid
the occurrence of an Event of Default or Default if such action is taken or
condition exists.

         15. Events of Default

         Each of the following shall constitute an "Event of Default" hereunder:

         a. Payment Failure. Failure of Seller to (i) make any payment of Price
Differential or Repurchase Price or any other sum which has become due, on a
Price Differential Payment Date or a Repurchase Date or otherwise, whether by
acceleration or otherwise, under the terms of this Agreement, any other
warehouse and security agreement or any other document evidencing or securing
indebtedness of Seller to Buyer or to any affiliate of Buyer, or (ii) cure any
Margin Deficit when due pursuant to Section 6 hereof.

         b. Cross Default. (i) Seller or any of Seller's Affiliates shall be in
default under (i) any Indebtedness of Seller or of such Affiliate which default
(1) involves the failure to pay a matured obligation, or (2) permits the
acceleration of the maturity of obligations by any other party to or beneficiary
with respect to such Indebtedness, or (ii) any other contract to which Seller or
such Affiliate is a party which default (1) involves the failure to pay a
matured obligation, or (2) permits the acceleration of the maturity of
obligations by any other party to or beneficiary of such contract.

         c. Assignment. Assignment or attempted assignment by Seller or
Guarantor of this Agreement or any rights hereunder without first obtaining the
specific written consent of Buyer, or the granting by Seller of any security

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<PAGE>

interest, lien or other encumbrances on any Purchased Mortgage Loans to any
person other than Buyer.

         d. Enforceability. The Custodial Agreement, the Guaranty or any other
Program Agreement shall for whatever reason be terminated or cease to be in full
force (except following satisfaction of al of Seller's Obligations hereunder)
and effect, or the enforceability thereof shall be contested by either the
Seller or the Guarantor.

         e. Insolvency. An Act of Insolvency shall have occurred with respect to
Seller, Guarantor or any Affiliate.

         f. Material Adverse Change. Any material adverse change in the
Property, business, financial condition or operations of Seller or Guarantor or
any of its Affiliates shall occur, in each case as determined by Buyer in its
sole good faith discretion, or any other condition shall exist which, in Buyer's
sole good faith discretion, constitutes a material impairment of Seller's
ability to perform its obligations under this Agreement or any other Program
Agreement.

         g. Breach of Financial Representation or Covenant or Obligation. A
breach by Seller of any of the representations, warranties or covenants or
obligations set forth in Sections 13(a)(1), 13(a)(7), 13(a)(18), 13(a)(22),
13(a)(27), 14a, 14b, 14c, 14n, 14p, 14q, 14v and 14x of this Agreement.

         h. Breach of Non-Financial Representation or Covenant. A breach by
Seller or Guarantor of any other material representation, warranty or covenant
set forth in this Agreement (and not otherwise specified in Section 15(g) above)
is not cured within five (5) Business Days (other than the representations and
warranties set forth in Schedule 1, which shall be considered solely for the
purpose of determining the Market Value and the obligation to repurchase such
Mortgage Loan) unless (i) Seller shall have made any such representations and
warranties with knowledge that they were materially false or misleading at the
time made, (ii) any such representations and warranties have been determined by
Buyer in its sole discretion to be materially false or misleading on a regular
basis, or (iii) Buyer, in its sole discretion, determines that such breach of a
material representation, warranty or covenant materially and adversely affects
(A) the condition (financial or otherwise) of Seller, its Subsidiaries or
Affiliates; or (B) Buyer's determination to enter into this Agreement or
Transactions with Seller, then such breach shall constitute an immediate Event
of Default and Seller shall have no cure right hereunder.

         i. Guarantor Breach. A breach by Guarantor of any material
representation, warranty or covenant set forth in the Guaranty or any other
Program Agreement, any "event of default" by Guarantor under the Guaranty, any
repudiation of the Guaranty by the Guarantor, or if the Guaranty is not
enforceable against the Guarantor.

         j. Regulatory Action. Guarantor shall become the subject of a cease and
desist order of the Appropriate Federal Banking Agency or enter into a
memorandum of understanding or consent agreement with the Appropriate Federal

                                       37
<PAGE>

Banking Agency, any of which, would have, or is purportedly the result of any
condition which would be reasonably likely to have, a Material Adverse Effect.

         k. Change of Control. The occurrence of a Change in Control.

         l. Failure to Transfer. Seller fails to transfer the Purchased Mortgage
Loans to Buyer on the applicable Purchase Date (provided Buyer has tendered the
related Purchase Price).

         m. Judgment. A final judgment or judgments for the payment of money in
excess of $10 million in the aggregate shall be rendered against the Seller or
the Guarantor by one or more courts, administrative tribunals or other bodies
having jurisdiction and the same shall not be satisfied, discharged (or
provision shall not be made for such discharge) or bonded, or a stay of
execution thereof shall not be procured, within 30 days from the date of entry
thereof.

n. Government Action. Any Governmental Authority or any person, agency or entity
acting or purporting to act under governmental authority shall have taken any
action to condemn, seize or appropriate, or to assume custody or control of, all
or any substantial part of the Property of Seller, Guarantor or any Affiliate,
or shall have taken any action to displace the management of Seller, Guarantor
or any Affiliate or to curtail its authority in the conduct of the business of
Seller, Guarantor or any Affiliate, or takes any action in the nature of
enforcement to remove, limit or restrict the approval of Seller, Guarantor or
Affiliate as an issuer, buyer or a seller/servicer of Loans or securities backed
thereby, and such action provided for in this subparagraph

         (m) shall not have been discontinued or stayed within 30 days.

         o. Inability to Perform. An officer of Seller or Guarantor shall admit
its inability to, or its intention not to, perform any of Seller's Obligations
or Guarantor's obligations hereunder.

         p. Security Interest. This Agreement shall for any reason cease to
create a valid, first priority security interest in any material portion of the
Purchased Mortgage Loans purported to be covered hereby.

         q. Financial Statements. Seller's or Guarantor's audited annual
financial statements or the notes thereto or other opinions or conclusions
stated therein shall be qualified or limited by reference to the status of
Seller or Guarantor as a "going concern" or a reference of similar import.

         r. FDIC Proceeding. The occurrence of any proceeding seeking to revoke,
terminate or suspend the insurance by the Federal Deposit Insurance Corporation
of the Guarantor's deposit accounts is instituted by any regulatory official or
authority with jurisdiction.

         s. Well Capitalized. Guarantor ceases to be Well Capitalized.

         An Event of Default shall be deemed to be continuing unless expressly
waived by Buyer in writing.

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<PAGE>

         16. Remedies Upon Default

         In the event that an Event of Default shall have occurred:

         a. Buyer may, at its option (which option shall be deemed to have been
exercised immediately upon the occurrence of an Act of Insolvency), declare an
Event of Default to have occurred hereunder and, upon the exercise or deemed
exercise of such option, the Repurchase Date for each Transaction hereunder
shall, if it has not already occurred, be deemed immediately to occur (except
that, in the event that the Purchase Date for any Transaction has not yet
occurred as of the date of such exercise or deemed exercise, such Transaction
shall be deemed immediately canceled). Buyer shall (except upon the occurrence
of an Act of Insolvency) give notice to Seller and Guarantor of the exercise of
such option as promptly as practicable.

         b. If Buyer exercises or is deemed to have exercised the option
referred to in subparagraph (a) of this Section, (i) Seller's obligations in
such Transactions to repurchase all Purchased Mortgage Loans, at the Repurchase
Price therefor on the Repurchase Date determined in accordance with subparagraph
(a) of this Section, shall thereupon become immediately due and payable, (ii)
all Income paid after such exercise or deemed exercise shall be retained by
Buyer and applied, in Buyer's sole discretion, to the aggregate unpaid
Repurchase Prices for all outstanding Transactions and any other amounts owing
by Seller hereunder, and (iii) Seller shall immediately deliver to Buyer the
Mortgage Files relating to any Purchased Mortgage Loans subject to such
Transactions then in Seller's possession or control.

         c. Buyer also shall have the right to obtain physical possession, and
to commence an action to obtain physical possession, of all Records and files of
Seller relating to the Purchased Mortgage Loans and all documents relating to
the Purchased Mortgage Loans (including, without limitation, any legal, credit
or servicing files with respect to the Purchased Mortgage Loans) which are then
or may thereafter come in to the possession of Seller or any third party acting
for Seller. To obtain physical possession of any Purchased Mortgage Loans held
by Custodian, Buyer shall present to Custodian a Trust Receipt and
Certification. Buyer shall be entitled to specific performance of all agreements
of Seller contained in this Agreement.

         d. Buyer shall have the right to direct all servicers then servicing
any Purchased Mortgage Loans to remit all collections thereon to Buyer, and if
any such payments are received by Seller, Seller shall not commingle the amounts
received with other funds of Seller and shall promptly pay them over to Buyer.
Buyer shall also have the right to terminate any one or all of the servicers
then servicing any Purchased Mortgage Loans with or without cause. In addition,
Buyer shall have the right to immediately sell the Purchased Mortgage Loans.
Such disposition of Purchased Mortgage Loans may be, at Buyer's option, on
either a servicing-released or a servicing-retained basis. Buyer shall be
entitled to place the Purchased Mortgage Loans in a pool for issuance of
mortgage-backed securities at the then-prevailing price for such securities and
to sell such securities for such prevailing price in the open market. Buyer
shall also be entitled to sell any or all of such Mortgage Loans individually
for the prevailing price.

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<PAGE>

         e. Seller agrees that Buyer may obtain an injunction or an order of
specific performance to compel Seller to fulfill its obligations as set forth in
Section 12, if Seller fails or refuses to perform its obligations as set forth
therein. f. Upon the happening of one or more Events of Default, Buyer shall
apply any proceeds from the liquidation of the Purchased Mortgage Loans to the
Repurchase Prices hereunder and all other Obligations in the manner Buyer deems
appropriate in its sole discretion.

         g. Seller shall be liable to Buyer for (i) the amount of all reasonable
legal or other expenses (including, without limitation, all costs and expenses
of Buyer in connection with the enforcement of this Agreement or any other
agreement evidencing a Transaction, whether in action, suit or litigation or
bankruptcy, insolvency or other similar proceeding affecting creditors' rights
generally, further including, without limitation, the reasonable fees and
expenses of counsel (including the costs of internal counsel of Buyer) incurred
in connection with or as a result of an Event of Default, (ii) damages, in an
amount equal to the non-utilization fee which would have otherwise accrued from
and after such Event of Default for the remaining term of this Agreement
notwithstanding the occurrence of such Event of Default, calculated in
accordance with Annex II hereof, and entering into or terminating hedge
transactions in connection with or as a result of an Event of Default, and (iii)
any other loss, damage, cost or expense directly arising or resulting from the
occurrence of an Event of Default in respect of a Transaction.

         h. To the extent permitted by applicable law, Seller shall be liable to
Buyer for interest on any amounts owing by Seller hereunder, from the date
Seller becomes liable for such amounts hereunder until such amounts are (i) paid
in full by Seller or (ii) satisfied in full by the exercise of Buyer's rights
hereunder. Interest on any sum payable by Seller under this Section 16(g) shall
be at a rate equal to the Post-Default Rate.

         i. Buyer shall have, in addition to its rights hereunder, any rights
otherwise available to it under any other agreement or applicable law.

         j. Buyer may exercise one or more of the remedies available to Buyer
immediately upon the occurrence of an Event of Default and, except to the extent
provided in subsections (a) and (d) of this Section, at any time thereafter
without notice to Seller. All rights and remedies arising under this Agreement
as amended from time to time hereunder are cumulative and not exclusive of any
other rights or remedies which Buyer may have.

         k. Buyer may enforce its rights and remedies hereunder without prior
judicial process or hearing, and Seller hereby expressly waives any defenses
Seller might otherwise have to require Buyer to enforce its rights by judicial
process. Seller also waives any defense (other than a defense of payment or
performance) Seller might otherwise have arising from the use of nonjudicial
process, enforcement and sale of all or any portion of the Purchased Mortgage
Loans, or from any other election of remedies. Seller recognizes that
nonjudicial remedies are consistent with the usages of the trade, are responsive
to commercial necessity and are the result of a bargain at arm's length.

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<PAGE>

         l. Buyer shall have the right to perform reasonable due diligence with
respect to Seller and the Mortgage Loans, which review shall be at the expense
of Seller.

         17. Reports

         a. Notices. Seller or Guarantor shall furnish to Buyer (x) promptly,
copies of any material and adverse notices (including, without limitation,
notices of defaults, breaches, potential defaults or potential breaches) and any
material financial information that is not otherwise required to be provided by
Seller hereunder which is given to Seller's lenders, (y) immediately, notice of
the occurrence of any Event of Default hereunder or default or breach by Seller
or Guarantor, or, to the extent known by Seller, Servicer of any obligation
under any Program Agreement or any material contract or agreement of Seller or
Servicer or Guarantor or the occurrence of any event or circumstance that such
party reasonably expects has resulted in, or will, with the passage of time,
result in, a Material Adverse Effect or an Event of Default or such a default or
breach by such party and (z) the following:

          (1) as soon as available and in any event within forty-five (45)
     calendar days after the end of each calendar quarter, the unaudited
     consolidated balance sheets of Guarantor and its consolidated Subsidiaries
     as at the end of such period and the related unaudited consolidated
     statements of income and retained earnings and of cash flows for the
     Guarantor and its consolidated Subsidiaries for such period and the portion
     of the fiscal year through the end of such period, accompanied by a
     certificate of a Responsible Officer of Guarantor and Seller, which
     certificate shall state that said consolidated financial statements fairly
     present in all material respects the consolidated financial condition and
     results of operations of Guarantor and its consolidated Subsidiaries in
     accordance with GAAP, consistently applied, as at the end of, and for, such
     period (subject to normal year-end adjustments);

          (2) as soon as available and in any event within ninety (90) days
     after the end of each fiscal year of Guarantor, the consolidated balance
     sheets of Guarantor and its consolidated Subsidiaries as at the end of such
     fiscal year and the related consolidated statements of income and retained
     earnings and of cash flows for the Guarantor and its consolidated
     Subsidiaries for such year, setting forth in each case in comparative form
     the figures for the previous year, accompanied by an opinion thereon of
     independent certified public accountants of recognized national standing,
     which opinion and the scope of audit shall be acceptable to Buyer in its
     sole discretion, shall have no "going concern" qualification and shall
     state that said consolidated financial statements fairly present the
     consolidated financial condition and results of operations of Guarantor and
     its consolidated Subsidiaries as at the end of, and for, such fiscal year
     in accordance with GAAP;

          (3) such other prepared statements that Buyer may reasonably request;

          (4) if applicable, copies of any 10-Ks, 10-Qs, registration statements
     and other "corporate finance" SEC filings (other than 8-Ks) by Seller,
     within 5 Business Days of their filing with the SEC; provided, that,
     Seller, or any Affiliate will provide Buyer with a copy of the annual 10-K

                                       41
<PAGE>

     filed with the SEC by Seller or its affiliates, no later than 90 days after
     the end of the year;

         (5) promptly after filing its regulatory call report (or equivalent
report) with the Appropriate Federal Banking Agency or with any applicable state
bank regulatory agency, a copy of such report including an analysis of the
Guarantor's capital ratios demonstrating that the Guarantor is Well Capitalized;

         (6) from time to time such other information regarding the financial
condition, operations, or business of the Guarantor and Seller as Buyer may
reasonably request;

         (7) as soon as reasonably possible, and in any event within thirty (30)
days after a Responsible Officer of the Guarantor and Seller has knowledge of
the occurrence of any Event of Termination, stating the particulars of such
Event of Termination in reasonable detail;

         (8) as soon as reasonably possible, notice of any of the following
events:

          (a) change in the insurance coverage required of Seller, Servicer or
     any other Person pursuant to any Program Agreement, with a copy of evidence
     of same attached;

          (b) any material dispute, litigation, investigation, proceeding or
     suspension between Seller or, to the extent known by Seller, Servicer, on
     the one hand, and any Governmental Authority or any Person;

          (c) any material change in accounting policies or financial reporting
     practices of Seller;

          (d) with respect to any Purchased Mortgage Loan, immediately upon
     receipt of notice or knowledge thereof, that the underlying Secured
     Property has been damaged by waste, fire, earthquake or earth movement,
     windstorm, flood, tornado or other casualty, or otherwise damaged so as to
     affect adversely the value of such Mortgaged Loan;

          (e) any material issues raised upon examination of Seller or Seller's
     facilities by any Governmental Authority;

          (f) promptly upon receipt of notice or knowledge of (i) any default
     related to any Repurchase Asset, (ii) any lien or security interest (other
     than security interests created hereby or by the other Program Agreements)
     on, or claim asserted against, any of the Purchased Mortgage Loans; and

          (g) any other event, circumstance or condition that has resulted, or
     has a reasonable likelihood of resulting, in a Material Adverse Effect with
     respect to Seller.

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<PAGE>

          b. Officer's Certificates. Seller will furnish to Buyer, at the time
     the Seller furnishes each set of financial statements pursuant to Section
     17(a)(1) or (2) above, a certificate of a Responsible Officer of Seller in
     the form of Exhibit D hereto.

          c. Mortgage Loan Reports. Seller will furnish to Buyer monthly
     electronic Mortgage Loan performance data, including, without limitation,
     delinquency reports (i.e., delinquency, foreclosure and net charge-off
     reports).

          d. Asset Tape. Seller shall provide to Buyer, electronically, in a
     format mutually acceptable to Buyer and Seller, an Asset Tape by no later
     than the Reporting Date.

          e. Series 300 Mortgage Loans. Seller shall furnish to Buyer by no
     later than the Reporting Date monthly reports as to the status of any
     Series 300 Mortgage Loans, including, without limitation, copies of any
     volume reports, quality control reports and an update as to any material
     change in the litigation with respect to Universal Home.

          f. Additional Reports. Seller shall deliver to Buyer copies of the
     "financial and statistical data" from its monthly Board of Directors
     package of the Seller and any updates to the Reynolds Group operational
     report prepared with respect to the Seller.

          g. Other. Seller shall deliver to Buyer any other reports or
     information reasonably requested by Buyer or as otherwise required pursuant
     to this Agreement.

         18. Repurchase Transactions

         Buyer may, in its sole election, engage in repurchase transactions with
the Purchased Mortgage Loans or otherwise pledge, hypothecate, assign, transfer
or otherwise convey the Purchased Mortgage Loans with a counterparty of Buyer's
choice. Unless an Event of Default shall have occurred, no such transaction
shall relieve Buyer of its obligations to transfer Purchased Mortgage Loans to
Seller pursuant to Section 4 or 6 hereof, or of Buyer's obligation to credit or
pay Income to, or apply Income to the obligations of, Seller pursuant to Section
7 hereof. In the event Buyer engages in a repurchase transaction with any of the
Purchased Mortgage Loans or otherwise pledges or hypothecates any of the
Purchased Mortgage Loans, Buyer shall have the right to assign to Buyer's
counterparty any of the applicable representations or warranties herein and the
remedies for breach thereof, as they relate to the Purchased Mortgage Loans that
are subject to such repurchase transaction.

         19. Single Agreement

         Buyer and Seller acknowledge that, and have entered hereunto, and will
enter into each Transaction hereunder, in consideration of and in reliance upon
the fact that, all Transactions hereunder constitute a single business and
contractual relationship and have been made in consideration of each other.
Accordingly, each of Buyer and Seller agrees (i) to perform all of its
obligations in respect of each Transaction hereunder, and that a default in the
performance of any such obligations shall constitute a default by it in respect
of all Transactions hereunder, (ii) that each of them shall be entitled to
set-off claims and apply property held by them in respect of any Transaction
against obligations owing to them in respect of any other Transactions hereunder
and (iii) that payments, deliveries and other transfers made by either of them

                                       43
<PAGE>

in respect of any Transaction shall be deemed to have been made in consideration
of payments, deliveries and other transfers in respect of any other Transactions
hereunder, and the obligations to make any such payments, deliveries and other
transfers may be applied against each other and netted.

         20. Notices and Other Communications

         Any and all notices (with the exception of Transaction Requests or
Confirmations, which shall be delivered via facsimile only), statements, demands
or other communications hereunder may be given by a party to the other by mail,
facsimile, messenger or otherwise to the address specified below, or so sent to
such party at any other place specified in a notice of change of address
hereafter received by the other. All notices, demands and requests hereunder may
be made orally, to be confirmed promptly in writing, or by other communication
as specified in the preceding sentence.

                   If to Seller:

                               SIB Mortgage Corp.
                               1250 Route 28
                               Branchburg, NJ  08876
                               Attention:  Richard Payne
                               Phone Number:
                               Fax Number:

                   with a copy to:

                               Elias, Matz, Tiernan & Herrick, L.L.P.
                               12th Floor
                               734 15th Street, N.W.
                               Washington, DC 20005
                               Attention:  Hugh Wilkinson
                               Phone Number: (202) 347-0300
                               Fax Number:  (202) 347-2172

                   If to the Guarantor:

                               SI Bank & Trust
                               15 Beach Street
                               Staten Island,  NY 10304
                               Attention:
                               Phone Number:
                               Fax Number:

                                       44
<PAGE>

                   If to Buyer:

                   For Transaction Requests:

                               9 West 57th Street
                               New York, NY 10019
                               Attention:  Raymond Sullivan
                               Phone No.: (212) 891-5815
                               Fax No.:  (212) 891-3350

                   For all other Notices:

                               9 West 57th Street
                               New York, NY 10019
                               Attention:  Raymond Sullivan
                               Phone No.: (212) 891-5815
                               Fax No.:  (212) 891-3350

                   with a copy to:

                               9 West 57th Street
                               New York, NY 10019
                               Attention:  Al Zakes, Esq., General Counsel
                               Telecopier No.:  (212) 891-1922
                               Phone No.:  (212 891-6137
                               Email:  albert.zakes@cdcixis-cnma.com

         21. Entire Agreement; Severability

         This Agreement shall supersede any existing agreements between the
parties containing general terms and conditions for repurchase transactions.
Each provision and agreement herein shall be treated as separate and independent
from any other provision or agreement herein and shall be enforceable
notwithstanding the unenforceability of any such other provision or agreement.
Each provision and agreement herein shall be treated as separate and independent
from any other provision or agreement herein and shall be enforceable
notwithstanding the unenforceability of any such other provision or agreement.

         22. Non-assignability

         The Program Agreements are not assignable by Seller or Guarantor. Buyer
may from time to time assign all or a portion of its rights and obligations
under this Agreement and the Program Agreements; provided, however that Buyer
shall maintain, for review by Seller upon written request, a register of
assignees and a copy of an executed assignment and acceptance by Buyer and
assignee ("Assignment and Acceptance"), specifying the percentage or portion of
such rights and obligations assigned. Such Assignment and Acceptance shall
specifically provide that (i) the assignee shall become a party to this
Agreement and each of the Program Agreements to the extent of the percentage or
portion set forth in such Assignment and Acceptance, (ii) the assignee shall

                                       45
<PAGE>

succeed to the applicable rights and obligations of Buyer hereunder and (iii)
the assignee shall agree to perform all of its obligations under this Agreement
and the Program Agreements as set forth therein. Upon such assignment, (a) such
assignee shall be a party hereto and to each Program Agreement to the extent of
the percentage or portion set forth in the Assignment and Acceptance, and shall
succeed to the applicable rights and obligations of Buyer hereunder, and (b)
Buyer shall, to the extent that such rights and obligations have been so
assigned by it to either (i) an Affiliate of Buyer which assumes the obligations
of Buyer or (ii) to another Person approved by Seller (such approval not to be
unreasonably withheld) which assumes the obligations of Buyer, be released from
its obligations hereunder and under the Program Agreements. Unless otherwise
stated in the Assignment and Acceptance, Seller shall continue to take
directions solely from Buyer unless otherwise notified by Buyer in writing.
Buyer may distribute to any prospective assignee any document or other
information delivered to Buyer by Seller.

         23. Set-off

         In addition to any rights and remedies of Buyer provided by law, Buyer
shall have the right, without prior notice to Seller, any such notice being
expressly waived by Seller to the extent permitted by applicable law, upon any
amount becoming due and payable by Seller hereunder (whether at the stated
maturity, by acceleration or otherwise) to set-off and appropriate and apply
against such amount any and all deposits (general or special, time or demand,
provisional or final), in any currency, and any other credits, indebtedness or
claims, in any currency, in each case whether direct or indirect, absolute or
contingent, matured or unmatured, at any time held or owing by Buyer or any
branch or agency thereof to or for the credit or the account of Seller. Buyer
agrees promptly to notify Seller after any such set-off and application made by
Buyer; provided, that the failure to give such notice shall not affect the
validity of such set-off and application.

         24. Binding Effect; Governing Law; Jurisdiction

         a. This Agreement shall be binding and inure to the benefit of the
parties hereto and their respective successors and permitted assigns. Seller
acknowledges that the obligations of Buyer hereunder or otherwise are not the
subject of any guaranty by, or recourse to, any direct or indirect parent or
other Affiliate of Buyer. THIS AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH,
AND GOVERNED BY, THE LAW OF THE STATE OF NEW YORK, WITHOUT GIVING EFFECT TO THE
CONFLICT OF LAWS PRINCIPLES THEREOF.

         b. SELLER AND GUARANTOR HEREBY WAIVE TRIAL BY JURY. SELLER AND
GUARANTOR HEREBY IRREVOCABLY CONSENT TO THE EXCLUSIVE JURISDICTION OF ANY COURT
OF THE STATE OF NEW YORK, OR IN THE UNITED STATES DISTRICT COURT FOR THE
SOUTHERN DISTRICT OF NEW YORK, ARISING OUT OF OR RELATING TO THE PROGRAM
AGREEMENTS IN ANY ACTION OR PROCEEDING. SELLER AND GUARANTOR HEREBY SUBMIT TO,
AND WAIVE ANY OBJECTION THEY MAY HAVE TO, EXCLUSIVE PERSONAL JURISDICTION AND
VENUE IN THE COURTS OF THE STATE OF NEW YORK AND THE UNITED STATES DISTRICT
COURT FOR THE SOUTHERN DISTRICT OF NEW YORK, WITH RESPECT TO ANY DISPUTES

                                       46
<PAGE>

ARISING OUT OF OR RELATING TO THE PROGRAM AGREEMENTS.

         25. No Waivers, Etc.

         No express or implied waiver of any Event of Default by either party
shall constitute a waiver of any other Event of Default and no exercise of any
remedy hereunder by any party shall constitute a waiver of its right to exercise
any other remedy hereunder. No modification or waiver of any provision of this
Agreement and no consent by any party to a departure herefrom shall be effective
unless and until such shall be in writing and duly executed by both of the
parties hereto. Without limitation on any of the foregoing, the failure to give
a notice pursuant to Section 6(a), 16(a) or otherwise, will not constitute a
waiver of any right to do so at a later date.

         26. Intent

         a. The parties recognize that each Transaction is a "repurchase
agreement" as that term is defined in Section 101 of Title 11 of the United
States Code, as amended (except insofar as the type of Purchased Mortgage Loans
subject to such Transaction or the term of such Transaction would render such
definition inapplicable), and a "securities contract" as that term is defined in
Section 741 of Title 11 of the United States Code, as amended (except insofar as
the type of assets subject to such Transaction would render such definition
inapplicable).

         b. It is understood that either party's right to liquidate Purchased
Mortgage Loans delivered to it in connection with Transactions hereunder or to
exercise any other remedies pursuant to Section 16 hereof is a contractual right
to liquidate such Transaction as described in Sections 555 and 559 of Title 11
of the United States Code, as amended.

         c. The parties agree and acknowledge that if a party hereto is an
"insured depository institution," as such term is defined in the Federal Deposit
Insurance Act, as amended ("FDIA"), then each Transaction hereunder is a
"qualified financial contract," as that term is defined in FDIA and any rules,
orders or policy statements thereunder (except insofar as the type of assets
subject to such Transaction would render such definition inapplicable). d. It is
understood that this Agreement constitutes a "netting contract" as defined in
and subject to Title IV of the Federal Deposit Insurance Corporation Improvement
Act of 1991 ("FDICIA") and each payment entitlement and payment obligation under
any Transaction hereunder shall constitute a "covered contractual payment
entitlement" or "covered contractual payment obligation", respectively, as
defined in and subject to FDICIA (except insofar as one or both of the parties
is not a "financial institution" as that term is defined in FDICIA).

         27. Disclosure Relating to Certain Federal Protections

         The parties acknowledge that they have been advised that:

         a. in the case of Transactions in which one of the parties is a broker
or dealer registered with the SEC under Section 15 of the 1934 Act, the
Securities Investor Protection Corporation has taken the position that the

                                       47
<PAGE>

provisions of the SIPA do not protect the other party with respect to any
Transaction hereunder;

         b. in the case of Transactions in which one of the parties is a
government securities broker or a government securities dealer registered with
the SEC under Section 15C of the 1934 Act, SIPA will not provide protection to
the other party with respect to any Transaction hereunder; and

         c. in the case of Transactions in which one of the parties is a
financial institution, funds held by the financial institution pursuant to a
Transaction hereunder are not a deposit and therefore are not insured by the
Federal Deposit Insurance Corporation or the National Credit Union Share
Insurance Fund, as applicable.

         28. Power of Attorney

         Seller hereby authorizes Buyer to file such financing statement or
statements relating to the Purchased Mortgage Loans without Seller's signature
thereon as Buyer, at its option, may deem appropriate. Seller hereby appoints
Buyer as Seller's agent and attorney-in-fact to execute any such financing
statement or statements in Seller's name and to perform all other acts which
Buyer deems appropriate to perfect and continue its ownership interest in and/or
the security interest granted hereby, if applicable, and to protect, preserve
and realize upon the Purchased Mortgage Loans, including, but not limited to,
the right to endorse notes, complete blanks in documents, transfer servicing,
and sign assignments on behalf of Seller as its agent and attorney-in-fact. This
agency and power of attorney is coupled with an interest and is irrevocable
without Buyer's consent. Notwithstanding the foregoing, the power of attorney
hereby granted may be exercised only during the occurrence and continuance of
any Event of Default hereunder. Seller shall pay the filing costs for any
financing statement or statements prepared pursuant to this Section 28.

         29. Buyer May Act Through Affiliates

         Buyer may, from time to time, designate one or more affiliates for the
purpose of performing any action hereunder.

         30. Indemnification; Obligations

a. Each of Seller and Guarantor agrees to hold Buyer and each of its respective
Affiliates and their officers, directors, employees, agents and advisors (each,
an "Indemnified Party") harmless from and indemnify each Indemnified Party (and
will reimburse each Indemnified Party as the same is incurred) against all
liabilities, losses, damages, judgments, costs and expenses (including, without
limitation, reasonable fees and expenses of counsel) of any kind which may be
imposed on, incurred by, or asserted against any Indemnified Party relating to
or arising out of this Agreement, any Transaction Request, Confirmation, any
Program Agreement or any transaction contemplated hereby or thereby resulting
from anything other than the Indemnified Party's gross negligence or willful
misconduct. Each of Seller and Guarantor also agrees to reimburse each
Indemnified Party for all reasonable expenses in connection with the enforcement
of this Agreement and the exercise of any right or remedy provided for herein,

                                       48
<PAGE>

any Transaction Request, Confirmation and any Program Agreement, including,
without limitation, the reasonable fees and disbursements of counsel. Seller's
and Guarantor's agreements in this Section 30 shall survive the payment in full
of the Repurchase Price and the expiration or termination of this Agreement.
Each of Seller and Guarantor hereby acknowledges that its obligations hereunder
are recourse obligations of Seller and the Guarantor and are not limited to
recoveries each Indemnified Party may have with respect to the Purchased
Mortgage Loans. Each of Seller and the Guarantor also agrees not to assert any
claim against Buyer or any of its Affiliates, or any of their respective
officers, directors, employees, attorneys and agents, on any theory of
liability, for special, indirect, consequential or punitive damages arising out
of or otherwise relating to the facility established hereunder, the actual or
proposed use of the proceeds of the Transactions, this Agreement or any of the
transactions contemplated thereby. THE FOREGOING INDEMNITY AND AGREEMENT NOT TO
ASSERT CLAIMS EXPRESSLY APPLIES, WITHOUT LIMITATION, TO THE NEGLIGENCE (BUT NOT
GROSS NEGLIGENCE OR WILLFUL MISCONDUCT) OF THE INDEMNIFIED PARTIES. b. Without
limitation to the provisions of Section 4, if any payment of the Repurchase
Price of any Transaction is made by Seller other than on the then scheduled
Repurchase Date thereto as a result of an acceleration of the Repurchase Date
pursuant to Section 16 or for any other reason, Seller shall, upon demand by
Buyer, pay to Buyer an amount sufficient to compensate Buyer for any losses,
costs or expenses that it may reasonably incur as of a result of such payment.
c. Without limiting the provisions of Section 30(a) hereof, if Seller fails to
pay when due any costs, expenses or other amounts payable by it under this
Agreement, including, without limitation, fees and expenses of counsel and
indemnities, such amount may be paid on behalf of Seller by Buyer, in its sole
discretion.

         31. Counterparts

         This Agreement may be executed in one or more counterparts, each of
which shall be deemed to be an original, and all such counterparts shall
together constitute one and the same instrument.

         32. Confidentiality

         This Agreement and its terms, provisions, supplements and amendments,
and notices hereunder, are proprietary to Buyer and Agent and shall be held by
Seller and Guarantor in strict confidence and shall not be disclosed to any
third party without the written consent of Buyer except for (i) disclosure to
Seller's or Guarantor's direct and indirect affiliates and Subsidiaries,
attorneys or accountants, but only to the extent such disclosure is necessary
and such parties agree to hold all information in strict confidence, or (ii)
disclosure required by law, rule, regulation or order of a court or other
regulatory body.

         33. Recording of Communications

         Buyer and Seller and Guarantor shall have the right (but not the
obligation) from time to time to make or cause to be made tape recordings of
communications between its employees and those of the other party with respect
to Transactions. Buyer and Seller and Guarantor consent to the admissibility of
such tape recordings in any court, arbitration, or other proceedings. The

                                       49
<PAGE>

parties agree that a duly authenticated transcript of such a tape recording
shall be deemed to be a writing conclusively evidencing the parties' agreement.

         34. Non-Utilization Fee

         No later than the 5th day following the end of each calendar month, the
Seller shall pay in immediately available funds to Buyer a non-refundable
monthly fee for the preceding month, calculated in accordance with the formula
set forth in the schedule attached hereto as Annex I. Such payment shall be made
in Dollars, in immediately available funds, without deduction, set-off or
counterclaim, to Buyer at such account designated by Buyer.

         35. Periodic Due Diligence Review

         Seller acknowledges that Buyer has the right to perform continuing due
diligence reviews with respect to the Mortgage Loans, including, without
limitation a review of any title insurance policy related to the Mortgage Loans,
for purposes of verifying compliance with the representations, warranties and
specifications made hereunder, or otherwise, and Seller agrees that upon
reasonable (but no less than one (1) Business Day's) prior notice unless an
Event of Default shall have occurred, in which case no notice is required, to
Seller, Buyer or its authorized representatives will be permitted during normal
business hours to examine, inspect, and make copies and extracts of, the
Mortgage Files and any and all documents, records, agreements, instruments or
information relating to such Mortgage Loans in the possession or under the
control of Seller and/or the Custodian. Seller also shall make available to
Buyer a knowledgeable financial or accounting officer for the purpose of
answering questions respecting the Mortgage Files and the Mortgage Loans.
Without limiting the generality of the foregoing, Seller acknowledges that Buyer
may purchase Mortgage Loans from Seller based solely upon the information
provided by Seller to Buyer in the Mortgage Loan Schedule and the
representations, warranties and covenants contained herein, and that Buyer, at
its option, has the right at any time to conduct a partial or complete due
diligence review on some or all of the Mortgage Loans purchased in a
Transaction, including, without limitation, ordering Broker's price opinions,
new credit reports and new appraisals on the related Mortgaged Properties and
otherwise re-generating the information used to originate such Mortgage Loan.
Buyer may underwrite such Mortgage Loans itself or engage a mutually agreed upon
third party underwriter to perform such underwriting. Seller agrees to cooperate
with Buyer and any third party underwriter in connection with such underwriting,
including, but not limited to, providing Buyer and any third party underwriter
with access to any and all documents, records, agreements, instruments or
information relating to such Mortgage Loans in the possession, or under the
control, of Seller. From and after the occurrence of a Default, Seller agrees
that Seller shall pay all out-of-pocket costs and expenses incurred by Buyer in
connection with Buyer's activities pursuant to this Section 35 ("Due Diligence
Costs").

                            [Signature Page Follows]

                                       50
<PAGE>

CDC MORTGAGE CAPITAL, INC.

By: /s/ Adil Nathani
    ------------------------------------------------

Title: Managing Director
       ---------------------------------------------

Date:
       ---------------------------------------------

By: /s/ William Branagh
   -------------------------------------------------

Title: Director
      ----------------------------------------------

Date:
       ---------------------------------------------

SIB MORTGAGE CORP.
as Seller

By: /s/ Richard W. Payne
   -------------------------------------------------

Title: President and Chief Executive Officer
       ---------------------------------------------

Date:
       ---------------------------------------------

SI BANK & TRUST
as Guarantor

By: /s/ James R. Coyle
   -------------------------------------------------

Title: President and Chief Operating Officer
       ---------------------------------------------

Date:
       ---------------------------------------------

                                       51EXHIBIT 10.7

                                  LEASE BETWEEN

                     Sunrise Park Realty, Inc., as Landlord

                                       and

                         Balchem Corporation, as Tenant

                          dated as of February 8, 2002

<PAGE>

                            GLOSSARY OF DEFINED TERMS

      This glossary is for reference purposes only and shall not be used to
     interpret or construe the Lease or any term in the Lease. Not all words
   and phrase that are defined in the Lease are necessarily in this glossary.
<TABLE>
<CAPTION>

TERM                                                                                                       SECTION
----                                                                                                       -------
<S>                                                                                              <C>
"American" ............................................................................................Section 8(a)
"any"   . . . . . . . . . . . . . . . . .  . . . . . . . . . . . . . . . . ....................................14.2
"Application for Payment"................................................................................7.3(c)(ii)
"Approved Plan"    . . ........................................................................................ 6.1
"Appurtenances" . . . . . . . . . . . . . . . . . . . . . . . . . . . . ..................... . . . . . . . . . 1.2
"Building"  ................. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.2
"CPI" . . . . . . . . . .  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .................. 4.3(b)(iii)
"Consent Threshold"  . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  . . .......................  8.2(a)
"Construction Mortgage" . . . . . . . . . . . . . . . . . . . . . . . . . . . .  . ............................ 5.1
"Construction Period"........................................................................................3.1(a)
"Cure Period" . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  . . . . . . . . . . .............. 12(vii)
"Defaulting Party"  . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  . . . . . . ...............  13.2(d)
"Delivery of Possession"  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ......................... 1.3
"Effective Date"   ............................................................................................ 1.1
"Event of Default".......................................................................................13.1(a)(i)
"Excluded Costs" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ..............4.2(ii)(1)
"Final Application for Payment".........................................................................7.3(c)(iii)
"Fulton".......................................................................................................14.9
"Fulton Vehicle"...............................................................................................14.9
"HVAC Equipment" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ....................... 4.3(iv)(c)
"Hazardous Substances" . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  .........................  5.2(a)
"Holdover Period" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  .............. 3.2(b)(i)
"Incidental Property"   ...................... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  1.2
"include" .................................................................................................... 14.2
"Institutional Mortgagee"...............................................................................11.2(a)(ii)
"Intended Use"  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ................... 2.1
"Interest Rate"  . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  . . . . . . . . .........  13.2(b)(iii)
"Land"  ............................. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.2
"Landlord".............................................................................................Introduction
"Landlord's Engineer"..................................................................................Exhibit B(c)
"Landlord's Work"  . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  . . . . .......................   7.1
"Landlord Work Period"  . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  . .........................  7.1
"laws".........................................................................................................14.2
"Lease Year"   . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  . . .............  3.2(a)
"Leased Premises"......................................................................................Introduction
"Leasing Costs Attributable to the Sublease". . . . . . . . . . . . . . . . . ...............................2.2(5)
"legal requirements"...........................................................................................14.2
"Lienors".................................................................................................7.3(c)(v)
"Minimum Rent"..................................................................................................4.1
</TABLE>

                                        i
<PAGE>
<TABLE>
<CAPTION>

TERM                                                                                                       SECTION
----                                                                                                       -------
<S>                                                                                           <C>
"Net Subrent"..................................................................................Section 2.2(d)(i)(3)
"New Lease"  . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  . . . . . . . . .  . ...........   13.2(ii)
"Nondefaulting Party" . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  . .  . .................   13.2(d)
"Orange and Rockland" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ...............   4.3(a)(iii)
"Permitted Designee"  . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  . ......................   10.1(a)
"Potable Water Charge" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ...................  4.3(b)(iii)
"profit" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                ...2.2(d)
"Property Insurance Policy".................................................................................11.4(a)
"Real estate taxes" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ...........    4.2(ii)(1)
"Reinforced Area"......................................................................................Exhibit B(c)
"Rent"  . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  . . . . . . . . . . . . . .  ...........    14.2
"Rent Commencement Date" . . . . . . . . . . . . . . . . . . . . . . . . . . . .   ......................3.2(a)( i)
"Rent to Landlord Allocable to the Subleased Premises". . . . . . . ........................................ 2.2(4)
"repair"  . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  . . . . . . . . . . . . . .............   14.2
"Result"............................................................................................... 13.2(a)(ii)
"soft cost"................................................................................................. 7.3(a)
"Special Lab Costs"  . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  . . . . ...................  7.3(a)
"Special Lab Items" . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  . . . . ...................   7.3(b)
"Stop Work Period"......................................................................................3.1(a)(iii)
"Sublandlord" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  . ..........2.2(2)
"Sublandlord Expenses". . . . . . . . . . . . . . . ................... . . . . . . . . . . . . . . . . . . .2.2(2)
"Sublease Year" ............... . . . . . . . . . . . . . .  . . . . . . . . . . . . . . . . . . . . . .     2.2(1)
"Subrent" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ......     2.2(1)
"substantial completion"  . . . . . . . . . . . . . . . . . . . . . . . . . . . . ......................     7.3(c)
"Subtenant's Fraction".............................................................................................
"Surplus" . . . . . .  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ..........2.2(4)
"Taking" . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  . . . . . . . . . . . . . . . ....   12.2(a)(i)
"Taking Date"  . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  . . . . . . . . . . .......   12.2(a)(ii)
"Taxing Authority" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ..............   4.2(a)(i)
"Tenant"...............................................................................................Introduction
"Tenant Reimbursement".......................................................................................7.3(a)
"Tenant Release"   . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  . . . . ................   5.2(2)(aa)
"Tenant's Architect"....................................................................................Exhibit B5.
"Tenant's Property" . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  . . .  ......................    8.4
"Tenant's Work"  . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  . . . . . . . . .................   7.1
"Transfer". . .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ...............  2.2
"Transferee" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ................ 2.2
"Transferor" . . .  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ................ .2.2
"Unamortized Costs of Improvements Allocable
to the Subleased Premises". . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ...................... 2.2(5)
</TABLE>

                                       ii
<PAGE>

                                TABLE OF CONTENTS

     This table of contents is for reference purposes only and shall not be used
     to construe or interpret the Lease.
<TABLE>
<CAPTION>
                                                                                                              Page

<S>         <C>                                                                                                <C>
ARTICLE 1.  THE LEASED PREMISES, EFFECTIVE DATE ..................................................................1

Section 1.1             The Effective Date; Glossary..............................................................1
Section 1.2             The Leased Premises.......................................................................1
Section 1.3             Landlord's Entry onto the Leased Premises.................................................1

ARTICLE 2.              USE, ASSIGNMENT AND SUBLEASE .............................................................2

Section 2.1             Use of the Leased Premises................................................................2
Section 2.2             Assignment and Sublease...................................................................2

ARTICLE 3.              TERM......................................................................................4

Section 3.1             Rent Commencement Date....................................................................4
Section 3.2             Term......................................................................................5

ARTICLE 4.              RENT......................................................................................6

Section 4.1             Minimum Rent..............................................................................7
Section 4.2             Taxes.....................................................................................7
Section 4.3             Utilities.................................................................................8

ARTICLE 5.              CONDITION OF BUILDING....................................................................11

Section 5.1             Title, Possession........................................................................11
Section 5.2             Hazardous Materials......................................................................11

ARTICLE 6.              PLANS, APPROVALS, DELIVERY OF POSSESSION.................................................15

Section 6.1             Approved Plan............................................................................15
Section 6.2             Permits, Approvals.......................................................................15
Section 6.3             Delivery of Possession, Outside Date.....................................................15

ARTICLE 7.              CONSTRUCTION.............................................................................16
Section 7.1             Landlord's Work..........................................................................16
Section 7.2             Tenant's Work............................................................................17
Section 7.3             Reimbursement of Tenant's Work...........................................................17

ARTICLE 8.              TENANT REPAIRS, ALTERATIONS                                                       .......20
</TABLE>

                                       iii
<PAGE>
<TABLE>
<CAPTION>
                                                                                                              Page

<S>         <C>                                                                                                <C>
Section 8.1             Building Repairs.........................................................................20
Section 8.2             Alterations..............................................................................21
Section 8.3             Liens....................................................................................21
Section 8.4             Tenant's Property........................................................................22

ARTICLE 9.              SECURITY DEPOSIT, LANDLORD TRANSFERS.....................................................22

Section 9.1             Security Deposit.........................................................................22
Section 9.2             Transfers by Landlord....................................................................22

ARTICLE 10.             ESTOPPEL, SUBORDINATION..................................................................23

Section 10.1            Estoppel Certificates....................................................................23
Section 10.2            Subordination and Nondisturbance........................................................ 23

ARTICLE 11.             INSURANCE ...............................................................................24

Section 11.1            Tenant's Insurance.......................................................................24
Section 11.2            Landlord's Insurance.....................................................................24
Section 11.3            Insurance Certificates...................................................................25
Section 11.4            Mutual Release, Waiver of Subrogation....................................................26
Section 11.5            Insurance Rating.........................................................................27

ARTICLE 12.             DAMAGE, TAKING...........................................................................27

Section 12.1            Damage...................................................................................27
Section 12.2            Taking of the Leased Premises............................................................29

ARTICLE 13.             DEFAULTS, RIGHTS AND REMEDIES............................................................29

Section 13.1            Events of Default........................................................................29
Section 13.2            Rights and Remedies Upon Default.........................................................30
Section 13.3            Emergency Repairs........................................................................32

ARTICLE 14.             INTERPRETATION AND NOTICES...............................................................32

Section 14.1            Notices..................................................................................32
Section 14.2            Interpretation...........................................................................33
Section 14.3            Interest.................................................................................34
Section 14.4            Binding Effect...........................................................................34
Section 14.5            Waiver of Landlord's Lien................................................................34
Section 14.6            Brokers..................................................................................34
Section 14.7            Notice of Lease..........................................................................35
Section 14.8            Board Approval...........................................................................35

EXHIBITS
</TABLE>

                                       iv

<PAGE>

                    Lease of Sunrise Park Building, Route 17M
                    -----------------------------------------
                   Town of Wawayanda, Orange County, New York
                   ------------------------------------------

The parties agree to the following as of February 8, 2002:

         Sunrise Park Realty, Inc., a New York corporation with an address of
P.O. Box 519, Middletown, New York, 10940 and a street address of Fulton
Chevrolet Building, Intersection 17M and Route 6, Middletown, NY 10940,
("Landlord"), leases the "Leased Premises" to Balchem Corporation , a Maryland
corporation with an address of 2007 Route 284, Slate Hill, NY 10973, ("Tenant")
on the following terms and conditions:

                 ARTICLE 1. THE LEASED PREMISES, EFFECTIVE DATE
                            -----------------------------------

Section 1.1 The Effective Date; Glossary.
-----------------------------------------

         The "Effective Date" is the first day both Landlord and Tenant have
fully executed and delivered a counterpart of this Lease. A Glossary of all
defined terms in this Lease is set forth after the signature page.

Section 1.2 The Leased Premises.
--------------------------------

         The "Leased Premises" consists of (a) all of that certain plot of land
identified on the attached Exhibit A (the "Land"); (b) the entire building
constructed on the Land, all other structures, buildings and improvements on the
Land from time to time, and all fixtures, equipment, and machinery of Landlord
and now or hereafter attached or affixed to or located on and used or employed
in connection with the use, operation, maintenance or occupancy of the Land
and/or the structures, buildings and improvements on the Land (collectively, the
"Building"); (c) all right, title and interest of Landlord in and to all
engineering, architectural and like studies and reports performed in connection
with the Land and/or the Building (collectively, the "Incidental Property"); and
(d) all easements, rights of way or use, privileges, licenses, and appurtenances
and rights to the same thereunto belonging or appertaining to the Land and/or
the Building, or otherwise owned by Landlord and relating to the use or
operation of the Land and/or Building, including without limitation all right,
title and interest of Landlord, if any, in and to the land lying in the bed of
any street or highway in front of or adjoining the Land to the center line
thereof (collectively, the "Appurtenances").

Section 1.3 Landlord's Entry onto the Leased Premises.
------------------------------------------------------

         (a) Landlord and its mortgagees may enter the Leased Premises from time
to time during reasonable business hours and after reasonable notice in order to
inspect the Leased Premises or, during the last Lease Year, to show the Leased
Premises to perspective tenants. (ii) Landlord and its contractors may enter the
Leased Premises to the extent necessary to perform Landlord's Work or any other
obligations pursuant to this Lease. (iii) Landlord may enter the Leased

                                        1
<PAGE>

Premises as otherwise expressly provided pursuant to this Lease. Landlord shall
comply with Tenant's reasonable regulations in connection with any entry onto
the Leased Premises permitted Landlord pursuant to this Lease.

         (b) After "Delivery of Possession" (hereinafter defined), Tenant may
enter, use and possess and may permit any person or entity to enter, use and
possess the Leased Premises except to the extent expressly prohibited by this
Lease, but Landlord may not enter, use, or possess the Leased Premises or permit
any other person or entity to enter, use, or possess the Leased Premises except
as expressly provided in the preceding subsection (a). Landlord acknowledges
that it may not park any vehicles on the Leased Premises or authorize vehicles
to be parked except as may be reasonably incidental to an entry upon the Leased
Premises expressly permitted in subsection (a).

                     ARTICLE 2. USE, ASSIGNMENT AND SUBLEASE
                                ----------------------------

Section 2.1 Use of the Leased Premises.
---------------------------------------

         The Leased Premises may be used for general and/or administrative
offices and/or for research and development laboratory purposes (all of which
are collectively referred to as the "Intended Use") or for any other lawful
purpose with Landlord's approval which will not be unreasonably withheld. If a
use is permitted, uses incidental thereto are permitted. Incidental uses include
storage rooms, storage areas, file rooms, reception areas, mechanical rooms and
areas, service areas, lobbies, corridors, stairways, bathrooms, kitchen areas
and break rooms for employee use, and meeting and conference rooms.

Section 2.2 Assignment and Sublease.
------------------------------------

         (a) Except as provided in subsection (b), Tenant may not assign any
interest in this Lease or sublet any portion of the Leased Premises (each of
which is referred to as a "Transfer") without Landlord's consent. Landlord shall
not unreasonably withhold its consent. An assignor or sublessor is referred to
as "Transferor." An assignee or a sublessee is referred to as a "Transferee."
Requests for Landlord's approval of a Transfer shall be in writing, and a copy
of the request shall be sent to Landlord's co-copy addresses in accordance with
Section 14.1. If Tenant makes a written request for Landlord's consent to a
Transfer, Landlord shall be deemed to have approved the proposed Transfer unless
Tenant receives a written notice from Landlord disapproving the proposed
Transfer on or before the fifteenth day after Landlord has received the request
for approval. Any notice of disapproval of a Transfer shall set forth the
reasons for the disapproval in reasonable detail.

         (b) Landlord's approval shall not be required to any of the following
Transfers:

                   (i) any Transfer to a parent, subsidiary, or affiliate of
Tenant;

                                        2
<PAGE>

                   (ii) any merger or acquisition involving Tenant whether or
not Tenant is the surviving entity;

                   (iii) any Transfer in which the Transferee is also purchasing
substantially all of Tenant's assets used or located at the Leased Premises; or

                   (iv) any leasehold mortgage or collateral assignment of the
Lease, and any Transfer arising from the exercise of a right pursuant to a
collateral assignment or leasehold mortgage.

         (c) Whether or not a Transfer requires Landlord's consent, after a
Transfer has occurred, Tenant shall provide Landlord with a copy of the
instrument of assignment or sublease, if any, effecting the Transfer.

         (d) (i) If a sublease occurs and Tenant is not excused from the
obligation to obtain Landlord's consent to the sublease pursuant to subsection
(b), Tenant shall pay Landlord one half of the "profit," if any, ultimately
received by Tenant as a result of the sublease. The "profit," if any, resulting
from the sublease shall be calculated as follows:

                           (1) The payments actually made by the subtenant to
the Tenant on account of rent and additional rent for the subleased premises
(the "Subrent") for a "Sublease Year" shall be ascertained. If the term of the
sublease is 13 months or less, the "Sublease Year"" shall be the term of the
sublease. If the term of the sublease exceeds 13 months, the first "Sublease
Year" shall be from the commencement of the sublease term through the end of the
12th full calendar month thereafter, and each successive 12 month period shall
be a "Sublease Year" except that the last "Sublease Year" shall end on the last
day of the term of the sublease and shall begin on the day following the end of
the immediately preceding Sublease Year.

                           (2) The "Sublandlord Expenses" expended by the Tenant
(sometimes referred to in this Section as the "Sublandlord") for the Sublease
Year shall be ascertained. "Sublandlord Expenses" are the cost and expenses of
providing any goods and services or performing any work to or with respect to
the subleased premises as required by the sublease, and the costs and expenses
of enforcing any rights of Sublandlord or obligations of subtenant pursuant to
the sublease, including attorneys fees expended to enforce the Sublandlord's
rights and to defend against claims of subtenant and/or third parties (other
than Landlord) relating to the subleased premises.

                           (3) The Sublandlord Expenses for the Sublease Year
shall be subtracted from the Subrent from the subtenant for the Sublease Year,
and the result is referred to as the "Net Subrent."

                                        3
<PAGE>

                           (4) The "Rent to Landlord Allocable to the Subleased
Premises" for a Sublease Year shall be subtracted from the Net Subrent for the
Sublease Year, and the result is referred to as the "Surplus" for the Sublease
Year. The "Rent to Landlord Allocable to the Subleased Premises" means the rent
and additional rent payable by Tenant to Landlord pursuant to this Lease for the
Sublease Year multiplied by a fraction. The numerator of the fraction is the
gross square footage of the subleased premises. The denominator of the fraction
is 20,000 square feet. The gross square footage of the subleased premises
includes the subleased premises' pro rata share of hallways, lobbies, common
corridors, elevators and stairwells, maintenance rooms, utility rooms, and other
common areas. The fraction is referred to as the "Subtenant's Fraction."

                           (5) The "Unamortized Costs of Improvements Allocable
to the Subleased Premises" and the "Leasing Costs Attributable to the Sublease"
shall be ascertained as soon as practicable after the commencement of the term
of the sublease. The "Unamortized Costs of Improvements Allocable to the
Subleased Premises" means the cost of Tenant's improvements to the Leased
Premises unamortized as of the commencement of the sublease multiplied by
Subtenant's Fraction. The "Leasing Costs Attributable to the Sublease" mean the
cost of brokers commission, attorneys fees, improvements to the subleased
premises paid by Tenant, and other expenditures expended by Tenant in connection
with the sublease.

                           (6) From the commencement of the term of the sublease
through the end of the term of the sublease, for each Sublease Year in which the
Surplus is a positive number, Sublandlord shall retain the entire Surplus until
Sublandlord has been reimbursed in full for the Unamortized Costs of
Improvements Allocable to the Subleased Premises, the Leasing Costs Attributable
to the Sublease, and all prior negative Surpluses. After Sublandlord has been
reimbursed in full, and provided no negative Surplus thereafter accrues, any
positive Surplus thereafter paid to Sublandlord shall be deemed "profit" and one
half of it shall be paid to Landlord within thirty days after its receipt by
Sublandlord. If a negative Surplus accrues, any positive Surplus that is
thereafter paid to Sublandlord shall be retained in full until Sublandlord has
been reimbursed for all prior negative Surpluses.

                                 ARTICLE 3. TERM
                                            ----

Section  3.1 Rent Commencement Date.
------------------------------------

                  (a) The "Rent Commencement Date" shall be the first day after
the end of the "Construction Period." The "Construction Period" shall begin on
the date Delivery of Possession occurs and, except as provided in subsection (b)
below, shall end on the earliest of (i) the issuance of all permits and
approvals, including a permanent Certificate of Occupancy, by the applicable
governmental authorities required for Tenant to use the Leased Premises for the
Intended Use after the construction of Tenant's Work; (ii) the first day that
(1) all of the office space and laboratory space have been fully completed, and
(2) Tenant shall be using substantially

                                        4
<PAGE>

all of the office space and laboratory space in the Leased Premises for the
Intended Use; or (iii) the 365th day after the Effective Date.

                  (b) (i) Notwithstanding anything in subsection (a) to the
contrary, if by the end of the Construction Period, as computed in accordance
with subsection (a), Landlord has not completed Landlord's Work, the
Construction Period shall be deemed extended and the Rent Commencement Date
deferred until Landlord has completed all of Landlord's Work.

                  (ii) If by the end of the Construction Period, as computed in
accordance with subsection (a) and parts (i) and (iii) of this subsection (b),
(1) a permanent Certificate of Occupancy permitting the Leased Premises to be
used for the Intended Use has not been issued as a result of an act or omission
by Landlord or failure by Landlord to perform or satisfy any obligation or
condition under this Lease, and (2) Tenant is not then in material default of
its obligations pursuant to the Lease after receipt of notice of the default
from Landlord and after the expiration of any cure period provided pursuant to
this Lease, then (3) the Construction Period shall be deemed extended to, and
shall not be deemed to end until, (and the Rent Commencement Date shall be
deferred until) the first day that all of the following shall have occurred:
Landlord shall have cured its breach of the Lease and shall have rectified its
act or omission preventing the issuance of the Certificate of Occupancy and the
Certificate of Occupancy shall have been issued.

                  (iii) Tenant is not required to commence "Tenant's Work" (as
defined in Article 7) or if its has been commenced to continue the prosecution
of Tenant's Work if Landlord is then in material default of its obligations
pursuant to this Lease. Any period in which Tenant discontinues the prosecution
of Tenant's Work as a result of the material default of Landlord in its
obligations pursuant to this Lease is referred to as a "Stop Work Period." If
during the Construction Period, as computed in accordance with subsection (a)
and parts (i) and (ii) of this subsection (b), a Stop Work Period occurs, for
each day of the Stop Work Period that occurs, the Construction Period shall be
extended by one day, except that the Construction Period shall in no event be
extended pursuant to this part (iii) past the first day that (1) all of the
office space and laboratory space have been fully completed, and (2) Tenant
shall be using substantially all of the office space and laboratory space in the
Leased Premises for the Intended Use. The Rent Commencement Date shall be
deferred until the end of the Construction Period as extended hereunder.

                  (iv) Extension of the Construction Period shall not be deemed
to excuse a default by Landlord or prevent the default from becoming an Event of
Default by Landlord under the Lease.

Section  3.2 Term.
------------------

         (a) (i) The period from the Rent Commencement Date through the last day
of the twelfth full calendar month after the Rent Commencement Date is the first
"Lease Year." Thereafter, every successive twelve month period is a "Lease
Year." The term of this Lease will

                                        5
<PAGE>

commence on the Effective Date and expire on the last day of the tenth "Lease
Year" or such earlier date as is provided in this Lease or by law.

                   (ii) Notwithstanding anything in this Lease to the contrary,
Tenant may terminate this Lease as of the last day of the seventh Lease Year by
sending Landlord a notice of Tenant's exercise of its option to terminate on or
before the 180th day prior to the last day of the seventh Lease Year accompanied
by a termination fee of $240,000.

                   (iii) Notwithstanding anything in this Lease to the contrary,
Tenant may terminate this Lease as of the last day of the eighth Lease Year by
sending Landlord a notice of Tenant's exercise of its option to terminate on or
before the 180th day prior to the last day of the eighth Lease Year accompanied
by a termination fee of $120,000.

                   (iv) Notwithstanding anything in this Lease to the contrary,
Tenant may terminate this Lease as of the last day of the ninth Lease Year by
sending Landlord a notice of Tenant's exercise of its option to terminate on or
before the 180th day prior to the last day of the ninth Lease Year accompanied
by a termination fee of $75,000.

                   (v) Tenant shall not be deemed to have terminated this Lease
pursuant to the preceding parts (ii), (iii), or (iv) if Tenant has terminated
the term of this Lease pursuant to any other provision of the Lease or pursuant
to law.

         (b) (i) If Tenant remains in possession of the Leased Premises after
the expiration of the term of this Lease without Landlord's consent, Tenant
shall be deemed a holdover tenant from the day after the end of the term of the
Lease through the date Tenant surrenders the Leased Premises to Landlord (the
"Holdover Period"). Tenant shall pay Landlord $30,625.00 per month plus
Additional Rent that accrues during the Holdover Period as a use and occupancy
charge. All charges for Tenant's use and occupancy during the Holdover Period
shall be prorated for the period Tenant remains in possession of the Leased
Premises after the expiration of the term, and Tenant shall have no obligation
to pay any rent, use or occupancy charges for the period after the Holdover
Period. All of the nonmonetary terms of the Lease other than the preceding
subsection (a) shall apply during the Holdover Period. If Tenant has remained on
the Leased Premises without Landlord's consent, Tenant shall be in breach of its
obligations pursuant to this Lease, and Landlord shall be entitled to exercise
all of its remedies as a result of the breach pursuant to this Lease and
pursuant to law, except that Landlord may not hold Tenant to any year to year,
month to month, or any other periodic tenancy and may not recover the charges
for use and occupancy of the Leased Premises during the Holdover Period in
excess of those set forth in this part (i). Landlord agrees that Landlord will
insert a provision in any subsequent lease of the Leased Premises, or a portion
thereof, to any third party to the effect that Landlord's failure to timely
deliver possession of the premises because of any holdover of any prior tenant
shall not be a breach of the lease and shall merely postpone the commencement of
the term, rent commencement, and expiration date of the subsequent lease.

                                        6
<PAGE>

                  (ii) If Tenant remains in possession of the Leased Premises
after the expiration of the term of this Lease with Landlord's consent, Tenant
shall be deemed a month-to month Tenant thereafter, and all of the nonmonetary
terms of this Lease (other than the preceding subsection (a) shall apply to the
month-to-month tenancy. The Minimum Rent during the month-to-month tenancy shall
be $20,416.67 per month unless the parties otherwise agree, and Tenant shall pay
Additional Rent that accrues during the month-to-month tenancy.

                                 ARTICLE 4. RENT
                                            ----

Section 4.1 Minimum Rent.
-------------------------

         Tenant shall pay rent to Landlord of $20,416.67 per month for each
month from the Rent Commencement Date through the end of the term of this Lease.
This rent is referred to as "Minimum Rent." Minimum Rent for a full calendar
month shall be paid in advance on the first business day of the month. Minimum
Rent for any partial month shall be prorated and shall be paid on the first
business day of the partial month that the number of days in the partial month
can be calculated.

Section 4.2 Taxes.
------------------

         (a) (i) Subject to the proration provisions set forth herein, Tenant
shall pay all of the real estate taxes imposed on the Leased Premises allocable
to the period from the Rent Commencement Date through the balance of the term of
the Lease. Tenant may elect to send Landlord a check for real estate taxes
payable to the order of, or may pay such real estate taxes directly to, the
authority imposing the real estate taxes (the "Taxing Authority"), and such
check shall be deemed to satisfy Tenant's obligations pursuant to this Section
to pay the taxes to Landlord. If Tenant pays real estate taxes directly to the
Taxing Authority, Tenants will send Landlord a copy of the paid receipt promptly
after Tenant has received it from the Taxing Authority. Real estate taxes for a
tax fiscal year that lies partly within and partly outside the period from the
Rent Commencement Date through the end of the term of this Lease shall be
prorated between Landlord and Tenant. Tenant's payment of real estate taxes
shall be due prior to the date the real estate taxes become delinquent, but in
no event shall the real estate taxes be due earlier than the fifteenth day after
Tenant has received a statement from Landlord for the real estate taxes due
together with a tax bill from the applicable governmental authorities indicating
the real estate taxes payable. Landlord agrees to cause all real estate taxes to
be paid in a timely manner.

                  (ii) (1) "Real estate taxes" shall exclude assessments imposed
on the Leased Premises as of the Effective Date, and any assessments thereafter
imposed arising from or connected with any "Excluded Costs". "Excluded Costs are
(A) the construction, extension, installation, or connection to any water mains,
sewer mains, or water meters; (B) the

                                        7
<PAGE>

construction, extension, or installation of any roads, curbs, shoulders,
sidewalks, paving, traffic control devices, or drainage required by the
applicable governmental authorities as a condition to the use of the Leased
Premises for the Intended Use; or (C) any impact fees or other development fees
and charges imposed by any governmental authority in connection with the
development of the Leased Premises for Tenant's Intended Use. "Real estate
taxes" shall include any water and sewer charges assessed through a special
taxing district that includes the Leased Premises provided the charges are for
water used and consumed on the Leased Premises, but "real estate taxes" shall
not include any portion of the charges assessed through a special taxing
district which are intended to recover or finance any Excluded Costs.

                           (2) "Real estate taxes" shall include assessments
that are not excluded pursuant to the preceding subpart (1), but subject to the
following. If an assessment is imposed on the Leased Premises after the date of
this Lease, Landlord agrees to elect to pay the assessment over the longest time
permitted by law. Thereafter, each annual installment of the assessment shall be
included in "real estate taxes" for the tax fiscal year in which the installment
becomes due. Tenant shall have no obligation to pay any portion of an
installment allocable to a period prior to the Rent Commencement Date of after
the termination of the term of the Lease.

         (b) If Tenant appeals or makes any application for an abatement of the
real estate taxes, Landlord shall cooperate in any appeal or application for
abatement, but shall not be required to incur any out-of-pocket expenses
pursuant thereto, unless Tenant agrees to promptly pay the same.

         (c) Real estate taxes shall exclude any income, excess profits, excise,
gift, franchise, estate, transfer, recording, mortgage or inheritance taxes, and
any real estate tax increases arising from a reassessment of the Leased Premises
as a result of the sale or transfer of all or any portion thereof.

         (d) Landlord shall diligently take all steps that are required to
maintain the tax exemptions now or hereafter applicable to the Leased Premises,
including any annual filings which may be required to maintain the exemptions,
if any.

Section 4.3 Utilities.
----------------------

         (a) (i) Tenant shall pay for electricity and natural gas consumed by
Tenant on the Leased Premises from the Delivery of Possession through the
expiration of the term of the Lease directly to the utility providers.

                  (ii) Tenant may select the utility providers, and if any
provider requires the grant of a utility easement to provide the service,
Landlord shall execute the grant of the easement to the utility provided the
grant of the easement does not materially diminish the value of the Leased
Premises. Landlord shall grant the easement within a commercially reasonable
period of

                                        8
<PAGE>

time after receipt of the request, but in any event, on or before the thirtieth
day after receipt of the request to grant the easement.

                  (iii) (1) Orange and Rockland Utilities, Inc. provides
electricity and natural gas to the Town of Wawayanda as of the Effective Date.
Orange and Rockland Utilities, Inc., its successors and assigns and is referred
to as "Orange and Rockland". Landlord shall pay the costs to fully connect the
entire Leased Premises to all utilities for the first time. If the costs have
been paid by Tenant, Landlord shall reimburse Tenant the costs paid. Except as
provided in subpart (2) of this part (iii), if Tenant elects to obtain a utility
supplied by Orange and Rockland from another utility provider, Tenant shall pay
the costs to connect the utility to the Leased Premises, and Landlord shall be
obligated to reimburse Tenant the costs that would have been incurred had the
utility been obtained from Orange and Rockland. Landlord shall pay any
reimbursement due Tenant pursuant to this part (iii) on or before the 15th day
after receipt of a bill from Tenant requesting the reimbursement.

                           (2) If Tenant obtains a utility from Orange and
Rockland and subsequently elects to obtain the utility from another utility
provider, Landlord shall not be obligated to reimburse Tenant the cost of
connecting the utility to the other utility provider.

         (b) (i) Landlord shall maintain, repair, and replace any well and water
system on the Leased Premises and any septic tanks and sewerage system on the
Leased Premises such that they are at all times in good order and repair, in
compliance with all legal requirements, and adequate for Tenant's Intended Use
of the Leased Premises to Tenant's reasonable satisfaction. Notwithstanding the
foregoing, if a portion of a system is no longer in use because of the
connection of the Leased Premises to a public water and sewer system, Landlord,
at Tenant's reasonable request or if required by law, shall remove the unused
portion of the system (other than the leach field, unless its removal is
required by law) from the Leased Premises and shall repair any damage to the
Leased Premises caused by the removal.

                  (ii) Landlord shall cause the Leased Premises to become
connected to the public water and public sewer system on or before the ninetieth
day after public water and public sewer service is available to the Leased
Premises. This shall include disconnection of the Leased Premises from the well
water and any septic system, removal of any septic tanks and systems as is
required by law or reasonably required by Tenant, capping of any wells as is
required by law or reasonably required by Tenant, connection of the Leased
Premises to the public water and sewer system in a good and workman like manner
and in compliance with all legal requirements and in conformity with the
drawings and specifications for such connections referred to in Exhibit B, and
installation of a good quality water meter of sufficient size for the Leased
Premises. All disconnection and connection referred to herein shall be in
accordance with the reasonable requirements of Tenant, including Tenant's
scheduling, in order to avoid a disruption of Tenant's business.

                                        9
<PAGE>

                  (iii) Landlord acknowledges that well water from the Leased
Premises is not potable pursuant to Tenant's requirements. If Tenant determines
in its sole discretion as of Delivery of Possession that Landlord may not be
able to connect the Leased Premises to the public water and sewer system by
completion of "Tenant's Work" (hereinafter defined), Tenant may arrange for the
Leased Premises to obtain potable water for the Leased Premises' Intended Use
from bottled water or from any other source acceptable to Tenant. If the Leased
Premises has not been connected to a public water and sewer system in accordance
with this Lease by the first anniversary of the Effective Date, Landlord shall
thereafter pay Tenant the "Potable Water Charge" from the first anniversary of
the Effective Date through the date the Leased Premises shall have been fully
connected to the public water and sewer system. From the first anniversary of
the Effective Date through the end of the calendar year in which the first
anniversary of the Effective Date occurs, the Potable Water Charge shall be
$502.28 per month. Each calendar year thereafter, the Potable Water Charge shall
be $502.28 per month multiplied by a fraction. The numerator of the fraction for
a calendar year shall be the "CPI" for the November immediately preceding the
beginning of the calendar year. The denominator of the fraction shall be the
"CPI" for the second month prior to the Effective Date. "CPI" means the Consumer
Price Index for All Urban Consumers - U.S. City Average, all items
1982-1984=100. The CPI is presently published by the United States Bureau of
Labor Statistics. If publication of the CPI ceases, Landlord shall designate
(subject to Tenant's written approval not to be unreasonably withheld) a
substitute index then published which is reasonably comparable to the CPI.
Landlord's payment for a month shall be paid in advance and shall be due Tenant
on or before the fifteenth day of the month. If Landlord fails to make a Potable
Water Charge payment for a month when due, Tenant may deduct the charge from
Minimum and Additional Rent due Landlord. Tenant agrees that Tenant will pay the
cost of all water required for laboratory purposes, and Landlord acknowledges
that the Potable Water Charge is not for water required for laboratory purposes.

                  (iv) After the installation of a water meter in accordance
with preceding part (ii) (but not earlier than Delivery of Possession), if the
bill for water is sent to Landlord, upon receipt of a bill for water consumed on
the Leased Premises during the term of the Lease, as measured by the Leased
Premises' water meter, from the public utility supplying water to the Leased
Premises, Landlord shall forward the bill to Tenant and Tenant shall send
Landlord a check payable to the order of, or shall pay directly to, the public
utility supplying water for the amount of the bill subject to Tenant's right to
dispute any bill it considers in good faith to be in error. Tenant shall send
the payment of the bill prior to the date the bill is due, except that Tenant is
not required to send the payment earlier that the fifteenth day after Tenant has
received the bill. If the water bill for water used on the Leased Premises
during the term of the Lease is sent directly to Tenant, Tenant shall pay the
bill directly to the public utility supplying water for the amount of the bill
prior to the date the bill is due subject to Tenant's right to dispute any bill
it considers in good faith to be in error.

         (c) (i) Heating, ventilation, air conditioning, and hot water equipment
is referred to as the "HVAC Equipment." Landlord and Tenant agrees that the HVAC
Equipment to be installed

                                       10
<PAGE>

in the Leased Premises will be manufactured by either Carrier, Lennox, or
another manufacturer approved by Landlord. If Tenant installs any HVAC
Equipment, Tenant agrees to use a contractor for the installation approved by
Landlord. Tenant shall make a written request for Landlord's approval of the
contractor, and if Tenant does not receive a written disapproval of a proposed
contractor for installation of the HVAC Equipment within five days of Landlord's
receipt of the request for approval, Landlord shall be deemed to have approved
the contractor. Landlord agrees that Landlord will not unreasonably withhold any
approval requested by Tenant pursuant to this part (i).

                  (ii) After the Rent Commencement Date, Tenant shall maintain
and be responsible for all regular and routine maintenance of HVAC Equipment
serving the Leased Premises. Any repairs required by the HVAC Equipment (other
than repairs required as a result of Tenant's alterations) in excess of $1,000
shall not be deemed regular and routine and shall be performed by Landlord
promptly after Tenant requests Landlord to perform the repairs unless Tenant
elects to perform the repairs. If Tenant performs the repairs that reasonably
cost in excess of $1,000, Landlord shall reimburse Tenant for the reasonable
cost of the repairs on or before the fifteenth day after a receipt of a
statement from Tenant requesting the reimbursement. After the Rent Commencement
Date, Tenant shall maintain a customary, routine service contract for the HVAC
Equipment at Tenant's sole expense, and the maintenance of such a service
contract shall satisfy Tenant's obligations as to maintenance of the HVAC
Equipment. Landlord hereby assigns all warranties now or hereafter obtained by
Landlord with respect to the HVAC Equipment to Tenant, and Landlord shall so
notify the providers of the warranties at Tenant's request. Except for minor
replacements performed as part of regular and routine repairs and except as
provided in part (iii) below, Landlord warrants that no piece of HVAC Equipment
will require replacement during the term of the Lease, and if any HVAC Equipment
reasonably requires replacement during the term, Landlord shall promptly perform
the replacement at Landlord's expense.

                  (iii) Landlord agrees that Landlord is not required to replace
any the HVAC Equipment servicing Tenant's laboratory on the Leased Premises if
Landlord establishes by a preponderance of the evidence that the HVAC Equipment
would not have required replacement but for corrosive chemicals used by Tenant
in the operation of its business on the Leased Premises.

         (d) Tenant may install a satellite dish and/or other communications
devices solely for its own use in or on the Building without Landlord's consent.
Tenant shall remove the devices on or before the end of the term and shall
repair any damage caused by the removal.

                                       11
<PAGE>

                        ARTICLE 5. CONDITION OF BUILDING.
                                   ---------------------

         5.1 Title, Possession.
         ----------------------

         Landlord represents, warrants and covenants that throughout the term of
the Lease: (a) Landlord owns and shall own the Leased Premises in fee simple
subject to no easements, encumbrances or restrictions that would impair the
operation or use of the Leased Premises for the Intended Use; (b) as of the
Effective Date, the Leased Premises will be subject to no mortgage other than to
the Mortgage described on Exhibit C (the "Construction Mortgage"); (c) the
Leased Premises is and shall be free of tenants and occupants other than Tenant,
its successors and assigns and those claiming by or through Tenant, its
successors and assigns; (d) there are and shall be no violations of record or
open applications with respect to the Leased Premises or the Building that would
impair or prevent (i) obtaining all permits required to construct Landlord's
Work and Tenant's Work on the Leased Premises, (ii) constructing Landlord's Work
and Tenant's Work, or (iii) obtaining any certificates, licenses, or permits
required to operate the Leased Premises for the Intended Use; (e) to Landlord's
knowledge as of the Effective Date and as of Delivery of Possession, no material
change or event is planned by any governmental entity or private party,
including Landlord, that would adversely affect Tenant's operations on or the
Intended Use of the Leased Premises; (f) (i) there is and shall be no violation
of any legal requirements (excluding violations by Tenant), (ii) use of the
Leased Premises for the Intended Use does not and will not breach or violate any
covenant or restriction which is or is alleged to be enforceable and which
encumbers or which is claimed to encumber the Leased Premises, and (iii) there
is not and shall not be any lawsuit, claim, or administrative hearing arising
from any breach or violation (or alleged breach or violation) of any covenant or
restriction encumbering all or part of the Leased Premises which in any manner
adversely affects or could adversely affect the construction, improvement,
operation, or use of the Leased Premises for its Intended Use, or any of
Tenant's Work, or any work or obligations of Landlord; (g) Landlord has the
right to execute, deliver and perform this Lease, and Landlord's execution,
delivery or performance of this Lease does not require the approval or joinder
of any other person; and (h) Tenant shall at all times be entitled peaceably and
quietly occupy and enjoy the Leased Premises in accordance with the terms of
this Lease. Landlord shall defend against all others Tenant's right to occupy,
use and enjoy the Leased Premises in accordance with the terms of this Lease.
Landlord shall defend, indemnify, and hold Tenant harmless from all claims,
loss, liability and damages (including attorneys fees paid or incurred by
Tenant) arising from or connected with a breach by Landlord of any covenant,
warranty, or representation of Landlord set forth in this Section, and this
indemnity shall survive the termination of the Lease. If a condition,
restriction, suit, action, occurrence, or event prevents or materially impairs
Tenant's use of all or any part of the Building for the Intended Use, and if
such condition, restriction, suit, action, occurrence, or event also constitutes
a breach by Landlord of a covenant, representation, or warranty pursuant to this
Section, Minimum Rent and Additional Rent shall wholly abate (if the entire
Building may not be used for the Intended Use) or abate in proportion to the
portion of the Building that cannot be used for the Intended Use (if only a
portion of the Building may not be used for the Intended Use) until the breach
is eliminated and use for the Intended Use is

                                       12
<PAGE>

permitted, but this abatement shall not be deemed Tenant's sole remedy, or
deemed a cure of the breach by Landlord, or limit Tenant's damages or other
remedies, or the exercise thereof, as a result of the breach.

         5.2 Hazardous Materials.
         ------------------------

         (a) "Hazardous Substances" are oil, petroleum or hazardous chemical
liquids or solids, hazardous liquid or gaseous products or any hazardous wastes
or hazardous substance as those terms are used in any appropriate and applicable
law, code or ordinance now or hereafter applicable to the Leased Premises
including the New York Environmental Conservation Law ECL 15-0514 of McKinney's
Consolidated Laws of New York. "Hazardous Substances" also include any material
or substance that is now or hereafter defined or classified under federal,
state, or local laws applicable to the Leased Premises as: (i) a "hazardous
substance" pursuant to the Comprehensive Environmental Response, Compensation
and Liability Act, 42 U.S.C. ss.9601 and the Federal Water Pollution Control
Act, 33 U.S.C. ss.1321 as now or hereafter amended; (ii) a "hazardous waste"
pursuant to the Resource Conservation and Recovery Act, 42 U.S.C. ss.ss.6903,
6921, as now or hereafter amended; (iii) a toxic pollutant under section the
Federal Water Pollution Control Act, 33 U.S.C. ss.1317 as now or hereafter
amended; and (iv) a "hazardous air pollutant" under section 112 of the Clean Air
Act, 42 U.S.C.ss.7412, as now or hereafter amended; or as (v) a "hazardous
material" under the Hazardous Materials Transportation Uniform Safety Act of
1990, 49 U.S.C. App. ss.1802(4), as now or hereafter amended. Substances,
wastes, materials, and like matters shall not be deemed to be Hazardous
Substances if they are on the Leased Premises at a level or in a condition so
that they are not prohibited or required to be remediated by any applicable
legal requirements.

         (b) (i) Landlord warrants, represents and covenants that there are no
Hazardous Substances at the Building or on the Leased Premises as of the date of
this Lease. Landlord shall defend, indemnify, and hold Tenant harmless from all
loss, liability and damages arising from any Hazardous Substances at, on, or
under or released, transported or removed on or from the Leased Premises other
than Hazardous Substances that may be generated or introduced by Tenant, its
employees, agents, and contractors. Tenant agrees that it will not use any
Hazardous Substances on the Leased Premises other than in compliance with
applicable laws pertaining to their use, handling, and disposal. Tenant agrees
to defend, indemnify, and hold Landlord harmless from all loss, liability and
damages arising from introduction or generation of any Hazardous Substances at
the Leased Premises in violation of this subsection by Tenant, its employees,
agents, or contractors.

                  (ii) (1) Landlord shall remediate in compliance with
applicable laws any Hazardous Substances at, on, or under or released on the
Leased Premises in violation of applicable laws other than Hazardous Substances
that may be generated or introduced by Tenant, its employees, agents, and
contractors. Landlord shall commence the remediation promptly after

                                       13
<PAGE>

Landlord receives notice of the Hazardous Substances and shall diligently
prosecute the remediation.

                           (2) (aa) A "Tenant Release" is a spill or release of
Hazardous Substances onto the Leased Premises by Tenant, its employees, agents,
or contractors in violation of applicable laws during the term of the Lease
which results in the presence of Hazardous Substances on the Leased Premises in
such quantities as require remediation under applicable law. Tenant shall
remediate any Tenant Release in to the extent required under applicable laws and
in compliance with applicable laws.

                                    (bb) Tenant shall commence the remediation
of a Tenant Release promptly after receipt of notice from Landlord requesting
the remediation and shall diligently prosecute the remediation. If the
remediation requires access by Tenant or its contractors and consultants to the
Leased Premises in order to comply with this requirement after the end of the
term of the Lease, Landlord shall permit Tenant, its contractors and consultants
to enter the Leased Premises and bring such materials onto the Leased Premises
as Tenant or its contractors and consultants may reasonably require in order to
perform its obligations pursuant to this subpart (2), and the same shall not be
construed as a holdover by Tenant. Landlord shall reasonably cooperate with
Tenant with respect to any remediation that may be required of Tenant.

                                    (cc) During the last Lease Year of the term
of the Lease, Landlord, at Landlord's sole cost, may enter the Leased Premises
during Tenant's normal business hours to perform environmental tests and studies
on the Leased Premises as are reasonable under the circumstances. Landlord shall
not interfere with the operation of any business on the Leased Premises in the
course of its performance of any tests or studies and shall provide Tenant with
a copy of all of the reports, tests and study results arising from the tests and
studies immediately upon their receipt by Landlord.

                                    (dd) Landlord shall be deemed to have waived
any claim that a Tenant Release has occurred and any rights in any way relating
to the claim or the Tenant Release (including any right to be defended, held
harmless, and indemnified from any loss, liability or damages with respect to
the Tenant Release or the claim) if Tenant has not received a written notice
from Landlord on or before the end of the term of the Lease asserting in good
faith based on tests and studies performed by Landlord the results of which have
been delivered to Tenant that the Tenant Release has occurred and requesting
that Tenant remediate the Tenant Release.

         (c) Landlord warrants and represents that there is no asbestos or
asbestos containing material on the Leased Premises. If any inspection of the
Leased Premises indicates the presence of asbestos, including any asbestos
containing materials, Landlord shall; at its sole cost and expense, and without
limiting Tenant's rights and remedies promptly remove all such asbestos and
asbestos containing materials with no disruption of Tenant's use of the Leased
Premises.

                                       14
<PAGE>

         (d) If use of any chemical on the Leased Premises requires a permit
from any governmental authority, Tenant shall maintain the permit while the
chemical is in use at the Leased Premises, shall comply with any requirements of
the permit, and shall upon receipt of Landlord's request, provide Landlord with
a copy of the permit. If any liability insurance maintained by Tenant insures
Tenant against the release of any Hazardous Substances by Tenant, Tenant shall
comply with the requirements of the insurance. Landlord acknowledges that Tenant
intends to use chemicals on the Leased Premises that include those listed on
Exhibit D.

                      ARTICLE 6. PLANS, APPROVALS, DELIVERY
                                 --------------------------
                                 OF POSSESSION.
                                 --------------

Section 6.1 Approved Plan.
--------------------------

         On or before the 60th day after the Effective Date, Tenant shall submit
to Landlord drawings and specifications for the improvements Tenant proposes to
construct at the Leased Premises (including an elevator and mechanical systems
for the Building) to make them suitable for Tenant's Intended Use. When Landlord
approves Tenant's drawings and specifications, they are referred to as the
"Approved Plan." Landlord may not withhold or delay its approval to the
submission or any revision to the Approved Plan except to the extent the same
constitutes a material violation of law or materially impairs the structural
integrity of the Building. A submission not disapproved within thirty days of
receipt is deemed definitively approved. Any disapproval shall specify the
specific items disapproved and the reasons for the disapprovals. A submission
that is disapproved by Landlord may be revised and resubmitted by Tenant until
it has been approved or deemed approved by Landlord. If Landlord does not
promptly approve Tenant's revised plans after Tenant's good faith effort to
accommodate Landlord's objections, Tenant shall have the right to terminate this
Lease by written notice to Landlord.

Section 6.2 Permits, Approvals.
-------------------------------

         Landlord shall promptly apply in the name of Landlord for the permits
and approvals required to construct Tenant's improvements in accordance with the
Approved Plan promptly after Landlord has approved (or is deemed to have
approved) Tenant's drawings and specifications pursuant to the preceding Section
6.1. Tenant shall reasonably cooperate with Landlord in connection with any
application and shall promptly pay any permit fees and reasonable out of pocket
costs expended by Landlord to obtain permits to perform Tenant's improvements.
If a permit or approval is denied, Landlord, at Tenant's expense, shall, if
requested by Tenant, institute and diligently prosecute all appropriate
proceedings to appeal the denial. If a permit or approval is granted, Landlord,
at Tenant's sole cost and expense, shall defend any such favorable decision
against all opponents thereof. Notwithstanding the foregoing, Landlord shall
apply for all permits and approvals required to perform "Landlord's Work" (as
defined in Exhibit B), shall institute and diligently prosecute all appropriate

                                       15
<PAGE>

proceedings to appeal any denial, and if a permit or approval is granted shall
defend any such favorable decision against all opponents thereof all at
Landlord's expense.

Section 6.3 Delivery of Possession, Outside Date.
-------------------------------------------------

         (a) Landlord shall deliver possession of the Leased Premises to Tenant
after all of the following conditions have been satisfied: (i) the Leased
Premises are free and clear of all tenancies, occupants, and roof leaks; and
(ii) all permits and approvals required to perform Landlord's Work and to
perform all of Tenant's improvements to the Leased Premises in accordance with
the Approved Plan have been issued by the applicable governmental authorities.
When Landlord has delivered possession of the Leased Premises to Tenant after
satisfying all of the aforedescribed conditions, Landlord shall be deemed to
have made "Delivery of Possession." Tenant shall not be deemed to have waived
any condition Landlord is required to satisfy in order to make "Delivery of
Possession" unless the waiver by Tenant is in writing. Notwithstanding Delivery
of Possession, Landlord shall have access to the Leased Premises as is
reasonably required in order to perform Landlord's Work.

         (b) If Delivery of Possession does not occur by February 15, 2002
(referred to as the "Outside Date"), Tenant may terminate the Lease. If Tenant
accepts in writing Delivery of Possession after the Outside Date, Tenant's
termination rights pursuant to this subsection (b) shall be void.

                                       16
<PAGE>

                             ARTICLE 7. CONSTRUCTION
                                        ------------

Section 7.1 Landlord's Work.
----------------------------

         Landlord shall perform the "Landlord's Work" (as defined in Exhibit B),
and any other work performed by Landlord in accordance with this Lease,
diligently, in a good and workmanlike manner, and in compliance with all
applicable legal requirements, including any applicable permits and directions
of any building inspector. Landlord shall commence the performance of Landlord's
Work prior to Delivery of Possession or promptly thereafter. After commencement,
Landlord shall diligently construct Landlord's Work until it has been completed.
In the performance of Landlord's Work, Landlord shall not unreasonably interfere
with the performance of "Tenant's Work" or with the operation of any business on
the Leased Premises by Tenant. Landlord agrees to complete Landlord's Work on or
before the end of the "Landlord Work Period", except that (i) any portions of
Landlord's Work that cannot not be completed prior to the completion of Tenant's
improvements to the Leased Premises shall be completed promptly after Tenant has
completed the applicable improvements, and (ii) if all of the asphalt plants
which provide asphalt for construction in Orange County, New York have closed
for the winter by the time Landlord is about to commence asphalting the Leased
Premises as part of Landlord's Work, Landlord may postpone the asphalting until
at least one of the asphalt plant providing asphalt for construction in Orange
County, New York has reopened. The "Landlord Work Period" shall begin on the day
the all of the permits and approvals required to perform Landlord's Work are
issued and shall end on the 90th day thereafter, except that for each day during
the 90 day period that exceptional winter weather which could not be reasonably
anticipated materially delays the performance of Landlord's Work, the Landlord
Work Period shall be extended by one day.

                                       17
<PAGE>

Section 7.2 Tenant's Work.
--------------------------

         (a) (i) Tenant's improvement of the Leased Premises substantially as
set forth in, contemplated by, and reasonably inferable from the Approved Plan
is referred to as "Tenant's Work." Notwithstanding the foregoing, Tenant may
install, but shall not be required to install, any sprinklers in the Building
that may be described in the Approved Plan unless their installation is required
by the municipality in which the Leased Premises is located. Tenant shall begin
construction of Tenant's Work promptly after the Delivery of Possession and the
issuance of all permits and approvals for the construction of Tenant's Work have
occurred. After commencement and so long as such permits and approvals remain in
effect, Tenant shall diligently prosecute the construction of Tenant's Work in a
good and workmanlike manner and in compliance with all applicable legal
requirements (including any applicable permits and approvals or directions of
governmental authorities) substantially in accordance with the Approved Plan
until it has been completed. In the performance of Tenant's Work, Tenant shall
not unreasonably interfere with the performance of Landlord's Work.

                  (ii) Tenant represents and warrants to Landlord that all of
Tenant's Work will be of good workmanship and quality and will comply in all
material respects with all legal requirements, and Tenant shall promptly repair
(and replace if reasonably required) any part of Tenant's Work that does not
comply with these representations and warranties during the term of this Lease.
The same Tenant warranties, representations, repair and replacement requirements
shall apply to any repairs or replacements or alterations performed by Tenant as
apply to the original Tenant's Work. Notwithstanding the foregoing, Tenant shall
not be obligated to perform any repair or replacement, including a repair or
replacement of any alteration, if the need therefor was caused by Landlord's
negligence, gross negligence, intentional misconduct, or breach of this Lease.

                  (b) Notwithstanding anything in this Lease to the contrary,
Tenant is not required to perform Tenant's Work at any time that Landlord is in
material default of its obligations pursuant to this Lease. Material defaults by
Landlord include the following:

                  (i). An Event of Default by Landlord under this Lease;

                  (ii) Landlord's Work is materially inconsistent with the
requirements of Exhibit B or violates legal requirements in a material respect;
or

                  (iii) Landlord is in breach of any covenant, warranty, or
representation set forth in Section 5.1.

Section 7.3 Reimbursement of Tenant's Work.
-------------------------------------------

         (a) Landlord agrees to pay Tenant $630,000 (the "Tenant Reimbursement")
in accordance with this Section. Tenant warrants that no portion of the Tenant
Reimbursement shall be used to

                                       18
<PAGE>

pay for the cost of any soft costs or "Special Lab Costs." "Special Lab Costs"
are the costs of any "Special Lab Items." "Special Lab Items" are portable
laboratory equipment and the installation of any special plumbing or HVAC
Equipment for the laboratory that would not have been installed had the
laboratory space been office space. All soft costs and Special Lab Costs shall
be paid for by Tenant from other than the Tenant Reimbursement. A "soft cost" as
the phrase is used in this Lease, means an engineering, architectural, or
attorney fee. "Tenant's Work" for the purposes of this Section 7.3 excludes
Special Lab Items and engineering, architectural, and attorney's work.

         (b) Exhibit F sets forth a Schedule of Values for the estimated costs
of performing Tenant's Work on a line item basis. The Schedule of Values
proportionately allocates the Tenant Reimbursement among the line items.

         (c) (i) Landlord shall pay progress payments to Tenant as the
construction of Tenant's Work's progresses until Tenant's Work has been
substantially completed. The phrase, "substantial completion", means completion
of the work except for minor items that do not significantly affect the use of
Tenant's Work for its intended purposes.

                  (ii) After the end of a calendar month, Tenant may make an
application for a progress payment (an "Application for Payment") of the portion
of the Tenant Reimbursement allocable to the Tenant's Work completed from the
commencement of construction of Tenant's Work through the end of the calendar
month less the amount of the Tenant Reimbursement then paid through the date of
the Application for Payment. Each Application for Payment shall contain the
information in the chart attached as Exhibit G and be accompanied by a
certification from Tenant's Architect that the Tenant's Work completed through
the end of the calendar month has been completed in a good and workmanlike
manner, and a statement from an officer of Tenant stating (1) that the amount
set forth in the Application for Payment (which amount shall also be set forth
in the officer's statement) is the amount of the Tenant Reimbursement then due
and payable by Landlord to Tenant pursuant to the Lease, and (2) (aa) whether or
not Tenant contends, as of the date of the Application for Payment, that
Landlord is in default of its obligations pursuant to the Lease, and (bb)
whether or not as a result of the default Tenant will claim an offset as a
credit against the Rent. If Tenant does contend that such a default exists and
that Tenant will claim an offset as a credit against the Rent, the statement
shall also provide a short description of the nature of the default contended.

                  (iii) After substantial completion of Tenant's Work, if any
portion of the Tenant Reimbursement has not yet been paid, Tenant may make an
application for a final payment (the "Final Application for Payment") of the
balance of the Tenant Reimbursement. The application shall consist of a request
for payment of the balance of the Tenant Reimbursement and shall be accompanied
by a certification from Tenant's Architect that substantial completion of
Tenant's Work has occurred, and a statement of an officer of Tenant stating (1)
that the balance of the Tenant Reimbursement is then due and payable by Landlord
to Tenant pursuant to the Lease, and (2) (aa) whether or not Tenant contends, as
of the date of the Final Application for Payment, that

                                       19
<PAGE>

Landlord is in default of its obligations pursuant to the Lease, and (bb)
whether or not as a result of the default Tenant will claim an offset as a
credit against the Rent. If Tenant does contend that such a default exists and
that Tenant will claim an offset as a credit against the Rent, the statement
shall also provide a short description of the nature of the default contended.

                  (iv) Landlord shall pay an application for payment, whether a
progress payment or a final payment, which conforms to the requirements of this
subsection by the end of the calendar month in which it is submitted provided
the application is submitted to Landlord by the 15th of the calendar month. An
application not submitted to Landlord by the 15th of a calendar month shall be
paid on or before the end of the following calendar month. Applications for
payment shall be submitted no more frequently than once per month. If an
application for payment, whether a progress payment or a final payment, is not
paid when due, it shall bear interest payable to Tenant in accordance with this
Lease; Tenant may, but is not required to reflect the interest due on any
subsequent application for payment, but failure to do so shall not be deemed a
waiver of the interest due or otherwise limit Tenant's rights.

                  (v) Each application for payment shall be accompanied by (i)
Tenant's list of each general contractor with a direct contract with Tenant who
performed any portion of the Tenant Work in excess of $5,000 through the date of
the preceding application for payment (collectively referred to as "Lienors"),
(ii) partial releases of mechanics liens from each Lienor for work performed by
the Lienor in excess of $5,000 through the date of the preceding application for
payment and not covered by a previous release or partial release of mechanics
lien, and (iii) invoices, purchase orders, contracts, or bills which are
individually in excess of $5,000 for work performed or services rendered by each
Lienor for the pay period before the application for payment. The releases from
the Lienors shall be in a form that will be reasonably acceptable to the title
insurance company insuring the lien of Lender's mortgage on the Leased Premises.

         (d) Anything herein to the contrary notwithstanding, in addition to the
other rights and remedies that may be available to Landlord, Landlord shall not
be obligated to make any payment of the Tenant Reimbursement to Tenant that has
not yet been paid and that may otherwise be due or hereafter becomes due if and
for so long as any one or more of the following exist:

                  (i). An Event of Default by Tenant exists under the Lease;

                  (ii) Tenant's Work is materially inconsistent with the
Approved Plan and Landlord has not waived or approved the inconsistency (except
Landlord may not withhold an amount more than the amount reasonably required to
cure the inconsistency) ;

                  (iii) Tenant's Work violates legal requirements in a material
respect (except Landlord may not withhold more than the amount reasonably
required to cure the legal violation); or

                                       20
<PAGE>

                   (iv) A person or entity retained by Tenant to perform
Tenant's Work has placed a lien on the Leased Premises;

provided, however, that Landlord shall promptly make payment to Tenant after the
one or more of these events are cured. If a person or entity retained by Tenant
to perform Tenant's Work has placed a lien on the Leased Premises, the event
shall be deemed cured if such lien is bonded, or Landlord's lender's title
company is willing to omit the lien from its title policy after deposit in
escrow with the title company of the amount claimed in the lien, or otherwise so
long as the same has the practical effect of removing the lien of record or
omitting the lien from Landlord's lender's title policy. If an event causing a
payment to be withheld is cured, Landlord shall promptly release to Tenant the
amount so withheld upon receipt of reasonable evidence of same.

     (e) Tenant shall use commercially reasonable efforts to assist Landlord
with submitting its request for advances under Landlord's Building Loan
Agreement with its mortgagee. Payments by Landlord's lender or the failure of
Landlord's lender to make any payment shall not limit or modify Landlord's
obligations pursuant to the Lease.

                           ARTICLE 8.  TENANT REPAIRS, ALTERATIONS
                                       ---------------------------

Section 8.1 Building Repairs.
-----------------------------

         (a) After Delivery of Possession, and subject to the performance of
Tenant's Work, Tenant shall be responsible for all routine and customary
maintenance for the interior, nonstructural portions of the Leased Premises
(including plumbing and electrical systems installed by Tenant) such that they
are maintained in good order and repair, ordinary wear and tear and casualty
excepted. Tenant shall maintain all exterior landscaping. Tenant shall perform
snow removal. Tenant shall repair any roof leaks resulting solely from Tenant's
HVAC Equipment installation, maintenance, or repair. HVAC Equipment includes
Tenant's ventilation equipment. During the term, Tenant shall comply with all
material legal requirements applicable to the interior, nonstructural portions
of the Leased Premises. Notwithstanding the forgoing, maintenance of the HVAC
Equipment shall be governed by Article 4 of the Lease and not by this subsection
(a).

         (b) (i) Except for the maintenance by Tenant of portions of the Leased
Premises pursuant to the preceding subsection (a) and the maintenance of HVAC
Equipment by Tenant to the extent required in accordance with Article 4,
Landlord shall maintain and repair all portions of the Building. This includes
maintenance and repair of the roof (including keeping the roof watertight except
as otherwise provided in subsection (a)), the exterior, and the structural
portions of the Building. Landlord represents and warrants that all of the
improvements constructed by Landlord as part of Landlord's Work, and any other
work performed by Landlord at the Leased Premises, will be of good workmanship
and quality, will comply with all legal requirements, and will remain free from
defects and fit for their intended purpose during the term of the Lease.
Landlord shall promptly repair (and replace if reasonably required) any part of

                                       21
<PAGE>

Landlord's Work that does not comply with these warranties or representations
during the term of the Lease. The same Landlord warranties, representations,
repair and replacement requirements shall apply to any repairs or replacements
as apply to the original Landlord Work. Notwithstanding the foregoing, Landlord
shall not be obligated to perform any repair if the need for the repair was
caused by Tenant's negligence and the loss is not covered by insurance that
Tenant maintains or Landlord is required to maintain pursuant to this Lease.
During the term, Landlord shall comply with all legal requirements applicable to
the Building (other than those applicable to Tenant's maintenance of interior,
nonstructural portions of the Leased Premises pursuant to Section 8.1(a) above).

                  (ii) Any maintenance and repairs conducted in the Building
shall be conducted with due regard for and in a manner which minimizes any
effect upon Tenant's operation and use of the Leased Premises.

Section 8.2 Alterations.
------------------------

         (a) After completion of construction of the initial improvements in
accordance with the Approved Plan, Tenant may construct alterations in and to
the Leased Premises from time to time. No Landlord consent shall be required as
to any alterations performed by Tenant provided the aggregate cost of the
particular alterations constructed does not exceed the "Consent Threshold." The
"Consent Threshold"for the first Lease Year shall be $20,000. Thereafter the
"Consent Threshold" for a Lease Year shall equal 105% of the Consent Threshold
for the preceding Lease Year If Landlord's consent is required for the
performance of any alterations, Tenant shall request Landlord's approval in
writing with the drawings and specifications for the proposed alterations, and
Tenant shall send a copy of the request to Landlord's co-copies set forth in
Section 14.1. It shall not be necessary for Tenant to send Landlord's co-copies
the drawings and specifications for the proposed alterations. Landlord shall not
unreasonably withhold its consent. If Landlord fails to expressly disapprove
proposed alterations, together with a detailed written explanation of its good
faith detailed reasons therefor on or before the fifteenth day after Landlord
has received the written request for approval and the drawings and
specifications for the alterations, Landlord shall be deemed to have approved
the proposed alterations. Tenant's alterations shall be performed in a good and
workmanlike manner, in compliance with all legal requirements.

         (b) Notwithstanding anything in this Lease to the contrary, Tenant may
install, remove, reinstall, and alter Tenant's signage from time to time
provided that such signage complies with the applicable legal requirements.
Signs intended to be viewed from the public roads shall be subject to Landlord's
approval which shall not be unreasonably withheld. At the end of the term of the
lease, Tenant shall remove its signs from the Leased Premises and shall repair
any damage caused by the removal.

                                       22
<PAGE>

Section 8.3 Liens.
------------------

         A party shall commence an appropriate legal proceeding to discharge,
bond or stay any mechanic's liens on the Leased Premises arising from work
performed by the party on or before the thirtieth day after receipt of notice of
the lien. After commencement, the proceeding shall be diligently prosecuted
unless the mechanics' lien is otherwise discharged. A title insurance policy or
endorsement benefitting the other party (or benefitting Landlord's lender) that
insures over the mechanics' lien shall be deemed tantamount to and shall have
the same effect as the discharge of the lien. If work is within the scope of
work of a contractor that the party has hired to perform the work, the party
shall be deemed to be performing the work within the meaning of this Section.

Section 8.4 Tenant's Property.
------------------------------

         "Tenant's Property" means all machinery, equipment, and other trade
fixtures used in the operation of or kept at the Leased Premises in connection
with Tenant's business whether or not affixed to the Leased Premises, and all
furniture, furnishings, decorations to the Leased Premises, Tenant's signs, and
any personal property of Tenant. Tenant shall remain the owner of Tenant's
Property and may remove Tenant's Property from the Leased Premises on or before
the expiration of the term. Tenant shall repair any damage caused by Tenant's
removal of any of Tenant's Property from the Leased Premises. Any partitioning,
HVAC Equipment, plumbing, lighting, and permanent floor coverings installed by
Tenant at the Leased Premises is not included in Tenant's Property and shall be
surrendered by Tenant with the Leased Premises at the end of the term.

                 ARTICLE 9. SECURITY DEPOSIT, LANDLORD TRANSFERS
                            ------------------------------------

Section 9.1 Security Deposit.
-----------------------------

         (a) Tenant shall deposit with Landlord by good check the sum of
$40,833.33 on or before the seventh day after the latest to occur of the
following: (i) approval of this Lease by the Board of Directors of Tenant; (ii)
the Effective Date; or (iii) Delivery of Possession. Such deposit will be
deposited and held by Landlord in a separate segregated, interest bearing escrow
account for the benefit of Tenant. If an Event of Default by Tenant occurs and
is continuing, Landlord may use, apply or retain the whole or any part of the
security and accrued interest so deposited to the extent required to cure the
Event of Default. If at the end of the term of the Lease there is no uncured
Event of Default which is then continuing, the security (including all interest
thereon except the portion paid to Landlord pursuant to subsection (b) below)
shall be immediately returned to Tenant.

         (b) For each Lease Year that Landlord holds the security deposit,
Landlord may pay itself an administrative charge from the interest earned by the
security deposit. The administrative charge shall for a Lease Year shall not
exceed the lesser of $250.00 or the interest earned by the security deposit
during the Lease Year.

                                       23
<PAGE>

Section 9.2 Transfers by Landlord.
----------------------------------

         (a) Landlord and the then fee owner of the Leased Premises shall at all
times be bound to perform all of the Landlord's obligations pursuant to the
Lease and is liable for any breach of any of Landlord's obligations. This
includes obligations that may have accrued prior to the date the then fee owner
of the Leased Premises acquired its fee interest.

         (b) Upon the transfer of Landlord's interest in the Leased Premises to
a transferee, the transferor shall transfer any security deposit and accrued
interest to the transferee. Upon the occurrence of the transfer, the transferor
shall be deemed released by Tenant from all liability for the return of such
security and the transferee shall be deemed to have assumed all of the
Landlord's obligations pursuant to the Lease to return the security deposit.

                       ARTICLE 10. ESTOPPEL, SUBORDINATION
                                   -----------------------

Section 10.1 Estoppel Certificates.
-----------------------------------

         (a) A party shall execute and deliver an Estoppel Certificate addressed
to the other party's "Permitted Designee" within twenty days after receipt of a
request. An Estoppel Certificate may not be relied upon by the then existing
Landlord or Tenant but only by the "Permitted Designee" or "Permitted Designees"
to whom it is addressed, their respective successors and assigns, and if
addressed to the holder of any mortgage encumbering the Land and the Building or
encumbering Tenant's leasehold estate, the purchaser at any foreclosure sale of
the mortgage. If a Permitted Designee subsequently acquires the interest of
Landlord or Tenant, the Permitted Designee may continue to rely on the Estoppel
Certificate in its capacity as Landlord or Tenant. Actual or prospective
lenders, purchasers (including purchasers at a foreclosure sale), assignees and
sublessees are "Permitted Designees" and each is a "Permitted Designee."

         (b) An Estoppel Certificate shall state to the best of the party's
knowledge: (i) whether the Lease has been amended, and if so, the date of any
amendments; (ii) whether this Lease is in full force and effect; (iii) the date
to which Minimum Rent and Additional Rent have been paid; (iv) whether the party
contends that an Event of Default has occurred and continues to exist and a
description of any Event of Default so contended.

Section 10.2 Subordination and Nondisturbance.
----------------------------------------------

         (a) Provided Landlord is not in default of the terms of this Lease
beyond any applicable cure period after receipt of notice of the default, Tenant
shall subordinate this Lease to each first mortgage which encumbers the Leased
Premises as long as the mortgagee executes a nondisturbance agreement
satisfactory to Tenant which contains the following provision:

                                       24
<PAGE>

         "Mortgagee recognizes the Lease and shall not disaffirm the Lease even
if mortgagee shall foreclose the mortgage; (ii) the purchaser at a foreclosure
sale will recognize and not disaffirm the Lease; (iii) Tenant shall be entitled
to all of its rights under the Lease; (iv) insurance proceeds and Awards shall
be disbursed as provided in the Lease; (v) subject to Landlord's rights with
respect to the continuation of an Event of Default under the Lease, Tenant's
possession of the Leased Premises shall not be disturbed by mortgagee or by any
person or entity whose rights are acquired as a result of foreclosure
proceedings or a deed or conveyance in lieu thereof."

         (b) If Tenant subleases any portion of the Leased Premises to a
sublessee in accordance with this Lease, Landlord, upon the Tenant's request
(and provided Landlord approves the request, Landlord's approval not to be
unreasonably withheld), shall execute a nondisturbance and attornment agreement
for the sublessee's benefit consistent with the provisions of this Section 10.2
and reasonably satisfactory to the sublessee, Landlord, and the holder of any
first mortgage on the Leased Premises provided the Minimum Rent per square foot
of the sublease is no less than the Minimum Rent per square foot of the Lease
and the other terms of the sublease are not materially less favorable to Tenant
than this Lease is to Landlord.

                           ARTICLE 11.  INSURANCE
                                        ---------

Section 11.1 Tenant's Insurance.
--------------------------------

         (a) During the term of this Lease, Tenant shall maintain: (i) public
liability and property damage insurance covering the Leased Premises with a
minimum single combined limit of $2,000,000.00 naming Landlord and any Mortgagee
designated by Landlord as an additional insured; (ii) all-risk property
insurance on Tenant's Property.

         (b) At any time from Delivery of Possession through the surrender of
the Leased Premises to Landlord that Tenant maintains pollution legal liability
insurance coverage for the Leased Premises, Tenant agrees that it will cause
Landlord to be an additional insured with respect to such coverage. Tenant
agrees that Tenant will be covered by pollution legal liability coverage on the
Effective Date.

Section 11.2 Landlord's Insurance
---------------------------------

         (a) (i) Landlord shall carry an "All Risk" insurance policy which shall
include any endorsements. The coverage limits shall not be less than the cost of
replacing the Building. Coverage shall be at least sufficient so that losses
shall be paid in full up to the face amount of the policy. Landlord shall also
carry any endorsements required such that the full cost of repairing damage to
the Building or if necessary, replacing the Building, is available from
insurance proceeds in the event of a loss. This may include the following
endorsements: "Contingent Liability From the Operation of Building Laws,"
"Increased Cost of Construction" and "Demolition Costs Which May be Necessary to
Comply With Building Laws." Any

                                       25
<PAGE>

mortgage obtained by Landlord encumbering all or a portion of the Land and/or
Building shall provide that if a loss occurs, the proceeds of any property
insurance policy maintained by or for Landlord shall be applied to the repair
the Leased Premises to the extent necessary to repair all damage to the Building
including the improvements installed by any tenant(s) of the Building, and if
the repairs are performed by Tenant, the insurance proceeds shall be paid to
Tenant on Landlord's behalf in accordance with this Lease.

                  (ii) An "Institutional Mortgagee" is an institutional
mortgagee holding a first mortgage on Landlord's fee interest in the Leased
Premises. Except to the extent that Landlord is required to pay the proceeds of
any Property Insurance Policy to an Institutional Mortgagee pursuant to a first
mortgage encumbering the Leased Premises, Landlord shall apply the proceeds of
any Property Insurance Policy paid or payable to Landlord or any of its
affiliates or nominees to the payment and performance of its obligations
pursuant to the Lease. Landlord hereby grants Tenant a security interest in any
Property Insurance Policy and its proceeds maintained by or for Landlord
insuring the Leased Premises to secure the performance of Landlord's obligations
pursuant to the Lease. Tenant's security interest shall be subordinate in all
respects to the security interest in such Property Insurance Policy and its
proceeds held by any Institutional Mortgagee pursuant to a first mortgage now or
hereafter encumbering the Leased Premises. Landlord authorizes Tenant to file a
financing statement and any extension thereof during the term of the Lease in
the public records to perfect Tenant's security interest and such financing
statement shall not require the signature of Landlord, but such financing
statement shall state that Tenant's interest in the policy and proceeds of any
Property Insurance Policy maintained by or for Landlord insuring the Leased
Premises is subordinate in all respects to the security interest in such
Property Insurance Policy and its proceeds held by an Institutional Mortgagee
pursuant to a first mortgage now or hereafter encumbering the Leased Premises.
To the extent funds are used for the payment or performance of Landlord's
obligations pursuant to the Lease, they shall be deemed free of Tenant's
security interest.

         (b) Tenant shall pay Landlord's costs of maintaining the insurance
described in the preceding subsection (a). Landlord shall send a copy of the
bill for the insurance premium to Tenant, and Tenant may elect to pay the amount
to Landlord or through a check payable to the order of the insurer, either of
which will satisfy Tenant's obligations pursuant to this subsection.
Notwithstanding anything in this Lease to the contrary, Tenant is not obligated
to pay the portion of any insurance premium allocable to coverage for a period
prior to the Rent Commencement Date or after the expiration of the term of this
Lease.

         (c) Notwithstanding the foregoing, Tenant, on thirty days prior written
notice, may elect to procure and maintain the insurance described in subsection
(a) at Tenant's cost in lieu of payment of Landlord's insurance costs pursuant
to the preceding subsection (b).

Section 11.3 Insurance Certificates.
------------------------------------

                                       26
<PAGE>

         Each party shall provide the other with a certificate of insurance
indicating compliance with this Article within ten days after receipt of
request. Within twenty days prior to the date of expiration of any policy, the
party maintaining the policy shall cause notice of the renewal or replacement of
the policy to be sent to the other party.

Section 11.4 Mutual Release, Waiver of Subrogation.
---------------------------------------------------

         (a) Landlord is not responsible for any damage to the tangible property
of Tenant in the Leased Premises that would be insured against by a "Property
Insurance Policy" maintained by Tenant, and Tenant is not responsible for any
damage to the Building that would be insured against by a "Property Insurance
Policy" maintained by Landlord. Landlord and Tenant hereby release each other
and anyone claiming through subrogation from any liability for any loss of or
damage to the Building or tangible property in the Building that would be
insured against by a "Property Insurance Policy". In addition, each party shall
cause any "Property Insurance Policy" it maintains with respect to the Leased
Premises or the Building or its contents to be written to provide that the
insurer waives all rights of recovery by way of subrogation against the other
party. A "Property Insurance Policy" is an "All Risk" insurance policy which
includes sufficient coverage to pay the full cost of repairing, and if
necessary, replacing the property insured. Landlord and Tenant shall remain
responsible to each other for property damage caused by the intentional acts of
their respective officers, employees, or agents which violate the Lease or which
violate applicable laws and which are not insured against by a Property
Insurance Policy.

         (b) Subsection (a) does not apply to property or property rights
insured by title insurance or any other insurance other than that which is
provided under a Property Insurance Policy.

         (c) If Tenant's title insurer seeks to prosecute or provide for the
defense of any action or proceeding, Landlord agrees that Tenant's title insurer
may do so in the name of Tenant and/or Landlord. Landlord shall give Tenant's
title insurer all reasonable aid (i) in any action or proceeding, securing
evidence, obtaining witnesses, prosecuting or defending the action or
proceeding, or effecting settlement, and (ii) in any other lawful act which in
the opinion of Tenant's title insurer may be necessary or desirable which may be
necessary or desirable to establish Landlord's and Tenant's title to the Land
and the Building free and clear of any easements, restrictions or encumbrances
which would interfere with any use of the Leased Premises by Tenant permitted
pursuant to this Lease. Landlord covenants that Tenant may quietly use and enjoy
the Leased Premises free of any easement, covenant, and restriction that would
interfere with any Tenant use of the Leased Premises permitted pursuant to this
Lease, and this subsection shall not be deemed to limit this covenant of
Landlord.

         (d) Landlord agrees that Landlord will obtain an owner's title
insurance policy from First American Title Insurance Company of New York with a
face amount of at least $2,500,000 and an effective date as of the date of this
Lease which insures Landlord's fee interest in the Leased Premises and which is
satisfactory to Landlord and Tenant. Landlord hereby grants Tenant a security
interest in the owner's title insurance policy and its proceeds to secure the
performance

                                       27
<PAGE>

of Landlord's obligations pursuant to the Lease. Landlord authorizes Tenant to
file a financing statement and any extension thereof during the term of the
Lease in the public records to perfect Tenant's security interest, and such
financing statement shall not require the signature of Landlord. If any proceeds
are payable pursuant to the policy, such amounts shall be paid in escrow to an
attorney selected by Landlord and reasonably acceptable to Tenant and shall be
held by such attorney in escrow until the settlement and discharge of all claims
between Landlord and Tenant through the agreement of Landlord and Tenant or
through the order of a court of competent jurisdiction. Any amounts payable to
Landlord after the settlement and discharge of all claims between Landlord and
Tenant shall be deemed free of Tenant's security interest.

Section 11.5 Insurance Rating.
------------------------------

         All insurance carried by Landlord or Tenant pursuant to this Lease
shall be with an insurance company which may legally insure property and
liability in the State of New York and which has a rating by A.M. Best of at
least A Category XII.

                           ARTICLE 12. DAMAGE, TAKING
                                       --------------

Section 12.1 Damage.
--------------------

                  (a) If the Leased Premises is damaged by fire or other
catastrophe, either party may take reasonable steps to secure undamaged property
from theft and additional damage.

                  (b) Except as provided in subsection (e), Landlord shall
repair all damage to the Leased Premises and the Building including the
improvements installed by any tenant(s) of the Building. Landlord shall commence
the repair as soon as reasonably possible after the damage and shall diligently
prosecute the repair until completion.

                  (c) Rent shall abate from the date of the damage to the
earlier to occur of (i) the 30th day after the repair has been substantially
completed and the entire Leased Premises are available to Tenant and suitable
for the Intended Uses; or (ii) the date Tenant resumes operation of its business
throughout the entire Leased Premises. If the Leased Premises are repaired such
that they are partially tenantable and Tenant determines to operate from the
tenantable portion, Rent shall abate only to the extent to and in proportion
with the portion of the Building that is not reasonably usable for the operation
of Tenant's business consistent with Tenant's past practice.

                  (d) (i) Notwithstanding the foregoing, except as provided in
subsection (e), if Landlord fails to substantially complete the repair within
180 days of the date the damage occurs, or if the damage occurs in the last 36
months of the term, Tenant may elect to terminate the Lease and surrender the
Leased Premises to Landlord. If Landlord has not substantially completed the
repairs within 180 days of the date the damage occurred and if Tenant terminates
this Lease pursuant to this subsection (d), Landlord agrees to immediately pay
Tenant the then unamortized cost of Tenant's investment in the Leased Premises
as of the date Tenant elects to

                                       28
<PAGE>

terminate the Lease, and Landlord's obligation shall survive the termination of
the Lease. This Section shall govern in lieu of Section 227 of the Real Property
Law.

                           (ii) The following is an example of amortization; it
is not intended to create or limit rights pursuant to this Lease. If X invests
$100 in a leased premises on or before the commencement of the term of a 10 year
lease, the investment would be amortized over the term at the rate of $10.00 per
year. If X invests $800 as of the end of the second year of a 10 year lease, the
investment is amortized over the remainder of the term at the rate of $100 per
year. As of the end of the sixth year of the lease, the then unamortized amount
of X's investment is $40 plus $400 for a total of $440.

                  (e) If the Leased Premises is damaged by fire or other
catastrophe and Landlord has not yet physically commenced the repair in a bona
fide manner (excluding securing of damaged property in accordance with
subsection (a)), Tenant may request Landlord approve Tenant's performance of the
repair of the damage in Landlord's stead. Landlord shall not unreasonably
withhold its approval. Tenant shall not be deemed to have made such request
unless Tenant sends written notice of the request to Landlord. If Tenant
requests Landlord's approval to repair the damage, and Landlord approves, Tenant
and not Landlord shall perform Landlord's repair obligations pursuant to
subsection (b), and Tenant shall be deemed to have waived its right to terminate
the Lease pursuant to the preceding subsection (d) as a result of the particular
fire or other catastrophe or the failure to complete its repair (but not as to
any subsequent fire or catastrophe). If Tenant repairs the damage pursuant to
this subsection (e), Tenant shall commence the repair as soon as practicable
after Landlord has approved performance by the Tenant and shall diligently
prosecute the repair until it has been completed. If Tenant performs the repair,
Landlord agrees to pay Tenant for the costs paid or incurred by Tenant in
performing the repair on or before the fifteenth day after Tenant has sent a
statement requesting the reimbursement including bills or other documents
reasonably supporting the request. This includes all costs and expenses for all
labor, materials, overhead, contractor profit, and all other costs and expenses
paid or incurred by Tenant for the repair including the amounts paid or incurred
with respect to any contractors hired by Tenant to perform the work. After the
commencement of the repair, Tenant may bill Landlord periodically or from time
to time for costs and expenses paid or incurred by Tenant through the date of
the statement. A payment shall be due Tenant on or before the fifteenth day
after Tenant has sent Landlord a statement requesting the payment. If Tenant
performs repairs in accordance with this subsection (e), Landlord shall cause
any mortgagee of any interest in the Land and/or Building to apply any insurance
proceeds in its possession arising from insurance maintained by or on behalf of
Landlord to be promptly paid directly to the Tenant on Landlord's behalf to the
extent necessary to satisfy Landlord's payment obligations pursuant to this
Lease, but Landlord's payment or performance obligations shall not be deemed
limited to the proceeds of any insurance policy maintained by or on behalf of
Landlord.

                  (f) Notwithstanding anything in subsection (e) to the
contrary, if Landlord fails to commence, continuously prosecute the performance
with due diligence, or complete a repair, and

                                       29
<PAGE>

the failure becomes an Event of Default, Tenant may nevertheless exercise its
remedies pursuant to this Lease including performing the repair at Landlord's
expense and on Landlord's behalf in order to cure Landlord's default and
including Tenant's other rights and remedies pursuant to Section 13.2.

Section 12.2 Taking of the Leased Premises.
-------------------------------------------

         (a) (i) "Taking" means the taking of property as a result of the
exercise of a power of eminent domain or purchase under threat of the exercise.
(ii) "Taking Date" means the date on which a condemning authority first has the
right of possession of property Taken.

         (b) Tenant may cancel this Lease if, after giving effect to the Taking
and all previous Takings: (i) access to or from the public streets reasonably
deemed material by Tenant is impaired; or (ii) any portion of the Building or
parking areas is Taken; or (iii) it would be unreasonable to expect Tenant to
continue to conduct business as fully and as completely as theretofore conducted
from the Leased Premises. Tenant may exercise its option to cancel the Lease by
sending Landlord notice of cancellation on or before the 180th day after Tenant
has received notice of the Taking from Landlord.

         (c) If the Lease is not cancelled and any portion of the Leased
Premises is Taken, Landlord shall repair and reconstruct the portion of the
Leased Premises damaged or affected by the Taking to the extent practicable as
soon as practicable in a good and workmanlike manner. The annual rate of Minimum
Rent shall be reduced by the percentage diminution of the floor area of the
Building as a result of the Taking. During any restoration or reconstruction of
the Leased Premises as a result of a Taking, Rent and all other charges shall
entirely abate except for periods and then shall be appropriately prorated and
reduced corresponding to those portions of the Leased Premises in which Tenant
elects to operate from the Leased Premises. If any temporary Taking of Tenant's
rights in the Leased Premises occurs, Tenant shall be entitled to the entire
award for the temporary Taking.

                                       30
<PAGE>

                  ARTICLE 13.  DEFAULTS, RIGHTS AND REMEDIES
                               -----------------------------

Section 13.1 Events of Default.
-------------------------------

         (a) (i) Each of the following events shall constitute an "Event of
Default" under this Lease committed by Tenant:

                           (1) If Tenant fails to pay any Minimum Rent when due
and the failure con tinues for ten days after Tenant receives notice of the
failure from Landlord; or

                           (2) If Tenant fails to comply with any of its other
obligations under this Lease and the failure continues after the expiration of
the "Cure Period."

                  (ii) Each of the following events shall constitute an "Event
of Default" under this Lease committed by Landlord:

                           (1) If Landlord fails to pay any amount owed Tenant
and the failure continues for ten days after Landlord receives notice of the
failure from Tenant;

                           (2) If Landlord fails to timely commence Landlord's
Work or any other work Landlord is required to perform pursuant to this Lease
and fails to cure the default within 30 days after receipt of notice of the
default from Tenant;

                           (3) If Landlord fails to diligently prosecute any
material portion of Landlord's Work (or any other work Landlord is required to
perform pursuant to this Lease) with a full construction crew as is reasonably
required for the work and fails to cure the default within 30 days after receipt
of notice of the default from Tenant;

                           (4) If Landlord fails to complete Landlord's Work
within the time required by this Lease (or fails to complete any other work
Landlord is required to perform pursuant to this Lease within a reasonable time
after its commencement) and fails to cure the default within 30 days after
receipt of notice of the default from Tenant;

                           (5) If Landlord is in breach of a covenant,
representation, or warranty, and an order relating to, involving, in connection
with, or resulting in or from such breach is entered in any court prohibiting or
materially impairing Tenant's use of the Leased Premises for the Intended Use,
or any use forming part of the Intended Use, regardless of whether the order is
later stayed, lifted, appealed or reversed; or

                           (6) If Landlord fails to comply with any of its other
obligations under this Lease and the failure continues after the expiration of
the "Cure Period."

         (c) The "Cure Period" shall be thirty days after receipt of notice of
default , except as follows. If a party is unable to cure the failure within
thirty days by the exercise of reasonable

                                       31
<PAGE>

diligence, the Cure Period shall begin on the date the notice of failure is
received and shall continue as long as necessary for diligent prosecution of the
cure provided the curing party commences the cure as soon as practicable after
receipt of a notice of the default and diligently prosecutes the cure.

Section 13.2 Rights and Remedies Upon Default.

         (a) If Tenant's default results in an uncured Event of Default,
Landlord may take any action it deems advisable under one or more of the
provisions of this Section. (i) Landlord may cancel the Lease and terminate
Tenant's right to possession of the Leased Premises.

                  (ii) Landlord may sue for damages at law, but Landlord shall
take commercially reasonable steps to mitigate its damages. Landlord shall not
be entitled to a remedy at law or in equity which would provide for the
acceleration of rent for the remainder of the term of the Lease. For the purpose
of computing Landlord's damages, any bona fide arms length brokerage commission
paid by Landlord to an unrelated and unaffiliated broker to relet the Leased
Premises or portion thereof (the lease re-letting the Leased Premise or a
portion thereof being referred to as a "New Lease") shall be considered as part
of Landlord's damages, but calculated only as follows: the broker commission
shall be divided by the number of months in the initial term of the New Lease,
the result shall be referred to as the "Result", and the amount of rent per
month received by Landlord pursuant to the New Lease shall be deemed lowered by
an amount equal to the Result.

                  (iii) Landlord may cure the default on Tenant's behalf. If
Landlord does so, Tenant shall reimburse Landlord for the reasonable amounts
expended by Landlord to cure.

         (b) (i) If Landlord's default results in an Event of Default, Tenant
may: (1) cure the default on Landlord's behalf, and Landlord shall promptly
reimburse Tenant for the reasonable costs of the cure; (2) terminate this Lease;
and, in either case, (3) Tenant may exercise the remedies otherwise provided by
law or this Lease, including specific performance. If Tenant terminates this
Lease as a result of an Event of Default of Landlord, Landlord shall immediately
pay Tenant the unamortized cost of Tenant's investment in the Leased Premises as
of the termination date and any other damages arising from the default.

                  (ii) If Tenant begins to perform any portion of Landlord's
Work or any other work Landlord was required to perform pursuant to this Lease,
Tenant may elect to continue to perform the work until it has been completed.
Landlord shall pay Tenant all costs and expenses paid or incurred by Tenant in
the performance of Landlord's Work or any other work Landlord was required to
perform pursuant to the Lease. This includes all costs and expenses for all
labor, materials, overhead, contractor profit, and all other costs and expenses
paid or incurred by Tenant for Landlord's Work or other work Landlord was
required to perform including the amounts paid or incurred with respect to any
contractors hired by Tenant to perform the work. After the commencement of the
Landlord's Work or other work performed by Tenant that

                                       32
<PAGE>

Landlord was required to perform, Tenant may bill Landlord periodically or from
time to time for costs and expenses paid or incurred by Tenant. A payment shall
be due Tenant on or before the fifteenth day after Tenant has sent Landlord a
statement requesting the payment.

                  (iii) If Landlord fails to pay Tenant any amount owed to
Tenant pursuant to this Lease or otherwise, Tenant may deem such amount to be a
credit against Minimum Rent, Additional Rent and any other charges payable by
Tenant pursuant to the Lease in such order as Tenant shall elect, and Tenant may
offset any credit against the Minimum Rent, Additional Rent and other charges
payable by Tenant pursuant to the Lease until the credit has been exhausted. If
Tenant has elected to take any amount Landlord owes Tenant as a credit, Tenant
may from time to time change its election as to any balance owed and may require
Landlord to pay the amount owed to Tenant in cash on the fifteenth day after a
statement requesting payment has been sent to Landlord. In either event, the
balance owed by Landlord shall bear interest at the "Interest Rate" (as
described in Section 14.3), and the interest shall be paid to Tenant or shall be
a credit against the Minimum Rent, Additional Rent and other charges payable by
Tenant, as Tenant shall elect from time to time.

         (d) If one party (the "Defaulting Party") fails to perform an
obligation pursuant to this Lease and the failure results in an Event of
Default, and the other party (the "Nondefaulting Party") elects to cure the
failure by performing the obligation on the Defaulting Party's behalf, the
Nondefaulting Party shall have access to the Leased Premises reasonably required
to effect the cure regardless of whether Delivery of Possession has occurred or
not. Tenant's entry onto the Leased Premises to cure a Landlord default prior to
Delivery of Possession shall not constitute for any reason or purpose whatsoever
Delivery of Possession or a waiver by Tenant of Delivery of Possession.

         (e) Except for the provisions of part (ii) of subsection 13.2(a),
neither party's right to damages as a result of an Event of Default of the other
party shall be deemed limited by this Section 13.2.

         (f) If a party is in default of its obligations pursuant to this Lease,
no performance of Landlord's Work, Tenant's Work, or other act or omission of
the other party shall be deemed a waiver of the default. No party shall be
deemed to have waived a right pursuant to this Lease unless the party shall have
expressly waived the right in writing.

Section 13.3 Emergency Repairs
------------------------------

         If Landlord's failure to make a roof or window repair as required
pursuant to this Lease creates a material threat to any person or property,
Tenant may, upon notice to Landlord, elect to perform the repair on Landlord's
behalf without waiting for the expiration of any Cure Period. Landlord shall pay
Tenant all costs and expenses paid or incurred by Tenant in the performance of
the repair. This includes all costs and expenses for all labor, materials,
overhead, contractor profit, and all other costs and expenses paid or incurred
by Tenant for the repair including the amounts paid or incurred with respect to
any contractors used or retained by Tenant to perform

                                       33
<PAGE>

the work. After the commencement of the repair, Tenant may bill Landlord
periodically or from time to time for costs and expenses paid or incurred by
Tenant through the date of the statement, and each statement shall be supported
by bills or other documents supporting the statement. A payment shall be due
Tenant on or before the fifteenth day after Tenant has sent Landlord a statement
requesting the payment.

                  ARTICLE 14.  INTERPRETATION AND NOTICES
                               --------------------------

Section 14.1 Notices.
---------------------

         (a) A notice to a party shall be valid only if it's in writing and sent
to the party's notice address via certified mail return receipt requested or by
Federal Express or other private courier which customarily requires the person
receiving a delivery to sign for the delivery. If failure to send a notice
before the end of a time period waives a right, the notice is effective when
sent. All other notices are effective on the day received unless the recipient
refuses delivery. If delivery is refused, the notice is effective when sent.
Notwithstanding the foregoing, a statement or submission of a bill and any
supporting documentation and associated correspondence (but excluding a notice
of default) may be sent via fax (provided confirmation is received) or by U.S.
mail and need not be sent certified mail, return receipt requested and will be
deemed effective when it is sent provided it is properly addressed.

         (b) The notice addresses of the parties are set forth on page one of
the Lease. A party may change its notice address by sending a notice to other
party of the change.

         (c) If a notice is sent to a party, co-copies shall be simultaneously
sent as follows:

                  (i) If to Landlord:

                  Ronald Helhoski, Esq.
                  517 East Main Street
                  Middletown, NY 10940

                  and

                  Putnam County National Bank
                  P.O. Box 10
                  43 Gleneida Avenue
                  Carmel, NY 10940
                  Attn: Dean Ryder

                  (ii) If to Tenant:

                                       34
<PAGE>

                  Golenbock, Eiseman, Assor, Bell & Peskoe
                  437 Madison Avenue
                  New York, NY 10022
                  Att: Nathan Assor, Esq.

         A party may change the address to which a co-copy shall be sent by
sending a notice to the other party of the change.

Section 14.2 Interpretation.
----------------------------

         Captions and headings used in this instrument are for reference only. A
provision of this instrument which requires a party to perform an action shall
be construed so as to require the party to perform the action or to cause the
action to be performed at its own expense. A provision of this instrument which
prohibits a party from performing an action shall be construed so as to prohibit
the party from performing the action or permitting others to perform the action.
The singular includes the plural, and the plural includes the singular. The verb
"to include" whether used in the form of "include," "includes," "including," or
"included" means "to include without limitation." "Any" means "any and all".
"Repair" means repair, and if reasonably necessary, replace (except that this
shall not apply to Tenant's obligations to repair HVAC Equipment). "Rent" means
Minimum Rent and all other rents and charges payable to Landlord pursuant to
this Lease. If a party may not unreasonably withhold consent, it may not
unreasonably delay or condition consent. The word "laws" and the phrase "legal
requirements" includes all applicable Federal, State, municipal and local laws,
rules, regulations, and the orders of all courts and governmental agents. All
riders and exhibits to this instrument are part of this instrument. If the last
day of any period of time set forth in this Lease falls on a Saturday, Sunday,
or legal holiday in the jurisdiction in which the Leased Premises is located,
the period shall be deemed extended through the end of the first business day to
occur after what would otherwise be the last day of the period. Both Landlord
and Tenant have been involved in the drafting of this Lease, and this Lease
shall be construed neither for nor against either Landlord or Tenant.

Section 14.3 Interest.
----------------------

         If an amount is properly billed pursuant to this Lease and is not paid
on or before the fifteenth day after a statement is first sent which includes
the amount (except if the amount is a periodic charge not paid when due and no
statement is sent, on or before the fifteenth day after the amount becomes due),
it shall bear interest from the date the statement is first sent (or for a
periodic charge for which no statement is sent, from the date due) until paid at
the "Interest Rate." The "Interest Rate" is the lower of: (i) the then prime
rate published in the Wall Street Journal or any similar or successor U.S.
publication plus four percentage points per annum; or (ii) the highest rate
legally permissible under the circumstances.

Section 14.4 Binding Effect.
----------------------------

                                       35
<PAGE>

         This instrument shall be binding only upon the entities named in this
Lease as Landlord and Tenant and their respective successors and assigns. Each
party covenants not to sue (a) those who (or which) own or control the other's
entity, or (b) the entity's officers, directors and employees, for the entity's
obligation. This instrument may be modified only by an instrument in writing
executed and delivered by Landlord and Tenant. The submission of an unexecuted
copy of this instrument shall not constitute an offer or acceptance of an offer.
This instrument may be executed in counterparts; each counterpart constitutes
the same instrument.

Section 14.5 Waiver of Landlord's Lien.
---------------------------------------

         Landlord waives any lien against any of Tenant's Property on the Leased
Premises created by operation of law or otherwise. If any lender to Tenant
requires Landlord to execute any documentation relating to such lender's
interest or perspective interest in Tenant's Property and its right to remove
the property from the Lease Premises, and/or with respect to any collateral
assignment of this Lease in favor of such lender, Landlord shall promptly
execute such documentation and shall cause Landlord's mortgagee to execute such
documentation if requested.

Section 14.6 Brokers.
---------------------

         Landlord agrees to pay the entire commission payable to any broker in
respect of this Lease. Landlord's broker is McBride Corporate Real Estate, Inc.,
and Tenant represents that it has dealt with no other broker. If a party
breaches this Section, the breaching party shall defend, indemnify, and hold the
nonbreaching party harmless from the claims of any broker for a commission.

Section 14.7 Notice of Lease.
-----------------------------

         The parties shall execute, acknowledge and deliver a Memorandum of
Lease in the form attached as Exhibit E when they execute this Lease. Upon the
occurrence of the Rent Commencement Date, the parties agree to execute,
acknowledge and deliver an amended and restated Memorandum of Lease that sets
forth the information on Exhibit E as well as the exact date of termination of
the term of the Lease. If the Lease is amended from time to time hereafter, the
parties agree to execute, acknowledge and deliver a memorandum of the amendment
of the Lease in recordable form. The parties agree to fully complete, execute,
deliver, and acknowledge any TP-584, equalization form, or other document
required to file the Memorandum of Lease, the amended and restated Memorandum of
Lease, and the Memorandum of any amendment to the Lease. Landlord authorizes the
recordation of the Memorandum of Lease, the amended and restated Memorandum of
Lease, and the Memorandum of any amendment to the Lease.

Section 14.8 Board Approval.
----------------------------

                                       36
<PAGE>

         Notwithstanding Tenant's execution of this Lease, this Lease is subject
to the approval of the Board of Directors of Tenant. If the Board of Directors
of Tenant has not approved this Lease on or before the 15th day after the
Effective Date, this Lease shall be deemed to have terminated and neither party
shall have any obligation with respect to the Lease.

Section 14.9 Fulton Letter.
---------------------------

         Landlord and Tenant refer to a letter from Fulton Chevrolet, Cadillac
Co., Inc., d/b/a Fulton Chevrolet and Landlord to Tenant. The letter states, in
part:

                  "Fulton Chevrolet, Cadillac Co., Inc. is referred to as
                  "Fulton." Fulton is an affiliate of Landlord. Landlord and
                  Fulton warrant and represent that Fulton is the owner and
                  operator of an automotive dealership at the intersection of
                  Route 6 and 17 M, New York, doing business as Fulton
                  Chevrolet. Any vehicle that is owned, controlled, or in the
                  possession of Fulton or any of its parents, subsidiaries, or
                  affiliates, and their respective successors and assigns, is
                  referred to as a "Fulton Vehicle." In order to induce Tenant
                  to enter into the Lease, Landlord and Fulton jointly and
                  severally agree that neither Fulton nor its parents,
                  subsidiaries, or affiliates and their respective successors
                  and assigns will park any Fulton Vehicle or allow any Fulton
                  Vehicle be parked in any 'No Park Zone.' Neither Landlord nor
                  Fulton shall be deemed to have breached its obligations
                  pursuant to this paragraph if a Fulton Vehicle suffers
                  mechanical break down in a 'No Park Zone' provided the vehicle
                  is towed or otherwise removed from the 'No Park Zone' promptly
                  thereafter.

                  The 'No Park Zone' consists of the Leased Premises, the areas
                  between Leased Premises and the traveled portions of
                  Interstate 84, Sunrise Park Road, and Sunrise Park Extension,
                  and any area between Carpenter Creek and the Leased Premises."

The letter shall be deemed incorporated herein by reference, and Landlord agrees
that any breach of the terms of the letter by Landlord or by Fulton shall be
deemed a default by Landlord under this Lease, and if Landlord does not cause
the default to be cured, Tenant may deem the same to be an Event of Default in
accordance with this Lease.

                  [Balance of page intentionally blank.]

                                       37
<PAGE>

To signify their agreement to this Lease, Landlord and Tenant have caused this
Lease to be executed by their respective officers.

                                  Landlord: Sunrise Park Realty, Inc.

/s/_______________________        By:/s/
Witness: Ronald Helhoski           Thomas F. Worth, its Sr. Vice Pres.

/s/_______________________
Witness: Charles Rich
                                  Tenant:  Balchem Corporation

/s/_______________________        By:/s/
Witness      Joan M. Maietta             Dino Rossi, its President

/s/
Witness: Kathleen M. Perry

/s/                               And By: /s/_____________________
Witness: Charles Rich                       Frank Fitzpatrick, its
                                            Assistant Secretary
/s/
Witness:   Colleen T. Joyce

                                       38
<PAGE>
                                    EXHIBIT A

                           CLARK PATTERSON ASSOCIATES

                                   DESCRIPTION
                          SUNRISE PARK OFFICE BUILDING
                    TOWN OF WAWAYANDA ORANGE COUNTY NEW YORK

Section 6, Block 1, Lot 72.2

All that certain piece or parcel of land situated in the Town of Wawayanda,
County of Orange, State of New York, and being more accurately described as
follows:

Beginning at a granite highway monument, said monument being on the
southwesterly bounds of a Town road known as Sunrise Park Road and the most
northwesterly bounds of Sunrise Park Road Extension, and proceeding on the
following courses and distances:

      1)  Along said sunrise Park Road Extension South 53(degree)-47'-00" West
          164.98 feet to lands N/F Carole Sutton, Tax Map Section 6, Block 1,
          Lot 88.

Thence along lands of Tax Map Section 6, Block 1, Lot 88, on the following three
courses and distances:

      2)  North 37(degree)-26"-00" West 150.00 feet

      3)   South 53(degree)-47'-00" West 100.00 feet

      4)  South 37(degree)-26'-00" East 123.96 feet to the most northerly bounds
          of New York State Route 84.

Thence along the northerly bounds of said Route 84 on the following three
courses and distances:

      5)  North 66(degree)-24'-00" West 284.52 feet to a highway monument

      6)  South 86(degree)-47'-00" West 48.10 feet to a highway monument

      7)  South 86(degree)-47'-00" West 312.13 feet to a highway monument on the
          northeasterly bounds of New York State Route 17M and U.S. Highway 6.

Thence along said Highway U.S. 6 and NYS Route 17M

                                       39
<PAGE>

      8)  North 41(degree)-44'-14" West 104.78 feet to a pipe at the most
          southeasterly corner of N/F Cloverleaf Realty Corp., Tax Map Section4,
          Block 1, Lot 36.22.

                                   DESCRIPTION
                          SUNRISE PARK OFFICE BUILDING
                    TOWN OF WAWAYANDA ORANGE COUNTY NEW YORK

Thence along said lands on the following five courses and distances:

      9)  North 55(degree)-34'-08" East 263.91 feet to a point

      10) North 68(degree)-59'-00" East 127.40 feet to a point

      11) North 65(degree)-46'-00" East 101.83 feet to a point

      12) North 60(degree)-14'-00" East 69.77 feet to a point

      13) North 43(degree)-40'-00" East 60.88 feet to the southwesterly bounds
          of said Sunrise Park Road.

Thence along the southwesterly bounds of said road on the following four courses
and distances:

      14) South 60(degree)-49'-00" East 243.00 feet to a point

      15) South 52(degree)-14'-00" East 51.10 feet to a monument

      16) South 27(degree)-35'-00" East 86.62 feet to a monument

      17) South 37(degree)-18'-00" East 156.89 feet to the point and place of
          beginning and containing 5.124 acres, more or less.

                                       40
<PAGE>

                                    EXHIBIT B

                                 LANDLORD'S WORK

            A. Landlord shall obtain all permits and approvals legally required
to construct "Landlord's Work". If any portion of the Leased Premises subject
to"Landlord's Work" is a wetland, this includes the issuance of any permit
required to construct on or over a wetland. If any permit is required to
discharge stormwater into a stream, sewer, or otherwise, this includes obtaining
the appropriate stormwater related permit for the Leased Premises.

            B. Performance of "Landlord's Work" includes the performance of all
of the work, the construction of all improvements, and the installation of all
systems and equipment described or referenced in, set forth in, contemplated by,
or reasonably inferable from part C of this Exhibit B in accordance with all
applicable laws, good construction practices, and in compliance with this Lease
(including this Exhibit B). Performance of "Landlord's Works" includes providing
and paying for all labor, materials, equipment and services required to
construct all improvements and install all systems and equipment described or
referenced in part C of this Exhibit B. All of the sheets, drawings and
specifications described in part C of this Exhibit B are collectively referred
to as the "Drawings". The interpretations of Section 14.2 of the Lease apply to
this Exhibit.

            C. 1. No Exposure Certification. If no permit is required for the
discharge of stormwater, Landlord shall file as part of Landlord's Work any No
Exposure Certification for Exclusion from NPDES Stormwater Permitting, and any
other certification, as may be required with respect to the Leased Premises.

                      2. Fusco Plans. Landlord's Work includes all of the work
described, contemplated or referenced on Sheets 1 through 6 of Alfred A. Fusco,
Jr., Engineer dated and last revised as set forth in the following chart:

     Sheet Number        Date of Drawing                    Date Last Revised
     ------------        ---------------                    -----------------

             1           December 10, 1986                   September 7, 1988

             2           December 10, 1986                   January 20, 1988

             3           December 10, 1986                   January 20, 1988

             4           December 10, 1986                   October 8, 1987

             5           December 10, 1986                   September 16, 1987

             6           December 10, 1986                   August 5, 1987

                                       41
<PAGE>

            3. Houghton, Quarty & Warr Plans. Landlord's Work includes all of
the work described, contemplated or referenced in sheets F-1 and A-1 through A-4
of Houghton, Quarty & Warr, architects, dated and last revised as set forth in
the following chart:

     Sheet Number        Date of Drawing                    Date Last Revised
     ------------        ---------------                    -----------------

         A-1                October 6, 1987                     May 19, 1988

         A-2                October 6, 1987                     June 24, 1988

         A-3                October 6, 1987                     June 24, 1988

         A-4                October 6, 1987                     June 24, 1988

         F-1                October 6, 1987                     April 15, 1987

            4. American Buildings Plans Landlord's Work includes all of the work
described, contemplated or referenced in the following sheets of American
Buildings Company dated and last revised as set forth in the following chart:

     Sheet Number        Date of Drawing                    Date Last Revised
     ------------        ---------------                    -----------------

        AB-1               May 11, 1988                        May 18, 1988

        AB-2               May 11, 1988                        none

        E-1                May 12, 1988                        none

        E-2                May 12, 1988                        none

        E-3                May 12, 1988                        none

        E-4                May 12, 1988                        none

        E-5                May 12, 1988                        none

        E-6                May 13, 1988                        none

        FN-1               April, 1983                         October, 1987

                                       42
<PAGE>

        D-1                July, 1985                          December, 1987

        D-8                July, 1985                          December, 1987

        D-12               July, 1985                          December, 1987

        D-14               July, 1985                          December, 1987

        SOH-2              May, 1982                           October, 1987

        EOH-1              July, 1982                          April, 1987

        FD-4               none                                April, 1988

        FD-5               none                                April, 1988

        SS-1               February, 1983                      April, 1987

        SS-3               February, 1983                      October, 1987

        SS-4               February, 1983                      October, 1987

        SS-5               February, 1983                      May, 1986

        SS-10              April, 1986                         October, 1987

Landlord's Work also includes the work described in the 7/19/01 letter from
American Buildings Company attached to the Report relating to the plumbness of
column line 4 of the Building frame.

                      5. Dry Water and Sewer Lines. Landlord's Work includes
installing dry water and sewer lines which service the Leased Premises that are
satisfactory to "Tenant's Architect." "Tenant's Architect", as of the Effective
Date, is Design Group, Architects, 233 Route 32, Central Valley, NY 10917.
Tenant may change Tenant's Architect from time to time by notice to Landlord.
"Tenant's Architect" includes any engineers or other consultants retained by
Tenant's Architect. "Tenant's Architect" may be an architect, engineer or other
qualified professional.

                      6. Utilities. Landlord's Work includes bringing all
utilities required by Tenant into the Building to a location satisfactory to
Tenant's Architect in such capacities as are satisfactory to Tenant's Architect.
The utilities shall be installed in a manner satisfactory to Tenant's Architect.

                                       43
<PAGE>

                      7. Watertight Roof. Landlord's Work includes making the
entire roof of the Building watertight except that Landlord shall not be liable
for any roof leaks caused solely by Tenant's roof penetrations.

                      8. Micucci Report Work. The Report of Inspection of
Existing Office Building, Sunrise Drive, Wawayanda, New York, dated August 3,
2001 by Micucci Engineering, P.C. is referred to as the "Report." Landlord's
Work includes performing any additional work described in the Report, including
the corrective measures described in the Report, and any additional work and
corrective measures described in a response to the Report by Trimble Building
Systems, Inc. dated August 29, 2001. This includes the following:

                              (a) Penetration of Roof Girders. The Report
indicates that there is a penetration of the roof girders by the drain piping.
The Landlord shall notify American Buildings Company ("American") of this
condition and request American to review the girder design to determine if
reinforcement of the members is required. If American is willing to certify to
Balchem Corporation in writing that American has reviewed the girder design and
its penetration by drain piping at Sunrise Park Building, Route 17M, Town of
Wawayanda, Orange County, New York, and that no reinforcement of the members is
required notwithstanding the penetration, then Tenant will accept the roof
girders as penetrated by the drain piping. Otherwise, Landlord shall reinforce
the members in accordance with American's recommendations and to the
satisfaction of Tenant's Architect.

                              (b) Missing Frame Braces. The Report indicates
that missing frame braces need to be installed at column line 3 at the purlin to
the east of column line C and at column line 2 at the purlin to the east of
column line C. (The coordinate system used in this Exhibit B is the same as used
in the Report.) Landlord shall install the missing frame braces.

                              (c) Roof and Building Load Capacity. "Landlord's
Engineer" means a professional engineer hired by Landlord who is licensed in the
State of New York and who has well recognized expertise with respect to
structural steel. Landlord shall cause Landlord's Engineer to certify to Tenant
in writing (i) the design load of the Building structure, (ii) the design load
of the roof structure, (iii) the present load capacity of the roof in the area
in which the additional purlins have been installed underneath (the "Reinforced
Area"), (iv) the load capacity for which the Reinforced Area was designed by
American; (v) the maximum weight of mechanical units, exhaust fans, and other
roof mounted equipment that may be installed on the roof of the Building over
the Reinforced Area, and (vi) the load capacity of the roof other than the
Reinforced Area, and the maximum weight of mechanical units, exhaust fans, and
other roof mounted equipment that may be installed on the roof of the Building
other than on the Reinforced Area. Landlord shall install any additional framing
that may be required in the opinion of Tenant's Architect if Landlord's Engineer
does not certify to Tenant that the existing purlins are adequate to provide the
Reinforced Area with the load capacity for which the Reinforced Area was
designed by American. Tenant agrees that Landlord may use Alfred A. Fusco Jr. as
Landlord's Engineer.

                                       44
<PAGE>

                              (d) Roof Girder Correction. Landlord shall correct
the sway in the roof girders along column lines 3 and 4 as described in the
letter from American Buildings dated 7/19/2001 attached to the Report.
Specifically, and without limiting the foregoing, the bracing shall be loosened
prior to realignment and tightened upon completion of the alignment process.

                              (e) Welded Splices. Landlord shall cause American
to certify to Balchem Corporation that the members provided with welded splices
meet or exceed standard industry practices and the applicable building code
requirements. If they do not, Landlord shall correct any deficiency to the
satisfaction of Tenant's Architect.

                              (f) Second Floor Load Capacity. Landlord shall
cause Landlord's Engineer to provide to Balchem Corporation the design load
criteria used for the Building frame girders and columns and shall cause
Landlord's Engineer to certify to Balchem Corporation that the load capacity of
the second floor of the Building equals or exceeds 171 psf of total load and 115
psf of live load. If the Building's second floor does not have a load capacity
that equals or exceeds 171 psf of total load and 115 psf of live load, Landlord
shall cause the second floor of the Building to be reinforced to the
satisfaction of Tenant's Architect so that it has a load capacity that equals or
exceeds 171 psf of total load and 115 psf of live load.

                      9. Additional Work. Landlord's Work includes the
performance of the following additional work:

                      (a) Intentionally Deleted.

                      (b) Steel Columns. Perimeter columns at the second floor
have been furred in wood, and this is not standard for this type of
construction; Landlord shall correct the furring such that it comports with the
Drawings and good construction practices.

                      (c) Deleted

                      (d) Deleted

                      (e) Damaged Insulation. Landlord shall replace with new
insulation any areas of the existing insulation that have been damaged
(including, without limitation, any damage by water and/or birds).

                      (f) Piping. Landlord shall install a sanitary clean-out
inside of the Building as required by the building and fire codes and to the
satisfaction of Tenant's Architect.

                      (g) Elevator Pit. Landlord shall modify the elevator sump
pit to the extent required to accommodate an Otis holeless hydraulic elevator
Model # LVM2100L including any recess in the pit floor that may be required for
the elevator to properly function in the Building.

                                       45
<PAGE>

                      (h) Governmental Requirements, Engineer Requirements,
Partially Performed Work.

                              (i) Landlord shall perform any work in, on, or at
the Leased Premises that shall be required by the Town of Wawayanda, or its
officials, or any other governmental authority excluding Tenant's Work.

                              (ii) All of Landlord's Work shall be performed in
accordance with the Drawings. If any portion of this part C of Exhibit B
modifies any work set forth in the Drawings, Landlord shall perform the work as
modified by this part C. If any portion of the work described in this part C of
Exhibit B is not clearly described in the Drawings or in this part C, Landlord
shall, as part of Landlord's Work, perform the work to the satisfaction of
Tenant's Architect.

                              (iii) If any portion of Landlord's Work has been
performed as of the Effective Date, Tenant's execution and delivery of this
Lease shall not be deemed acceptance of the work performed to date. If any
Landlord's Work performed as of the Effective Date does not conform to the
requirements of this Exhibit B and the balance of the Lease, Landlord shall, as
part of Landlord's Work, cause it to conform.

             D. 1. Landlord warrants and represents throughout the term of the
Lease that Landlord's Work has been and shall be performed in conformity with
Exhibit B and is free of defects and fit for its intended purpose. No payment to
Landlord or acceptance of the Leased Premises by Tenant shall be deemed a waiver
of this or any other warranty and representation.

                      2. A material breach of any of Landlord's obligations
pursuant to this Exhibit B, including a breach of a warranty or representation
made pursuant to the preceding subpart 1, shall be deemed a default by Landlord
in the performance of its obligations under the Lease.

                      3. A nonmaterial breach of any of Landlord's obligations
pursuant to this Exhibit B shall be deemed a default by Landlord in the
performance of its obligations under the Lease except that if such nonmaterial
breach becomes an Event of Default, Tenant may not terminate the Lease as a
result thereof. Tenant shall nevertheless have all of its other remedies
pursuant to the Lease and pursuant to applicable laws if such nonmaterial breach
of any of Landlord's obligations pursuant to this Exhibit B becomes an Event of
Default.

                                       46
<PAGE>

                                    EXHIBIT C

                                       Mortgage

             Mortgage from Landlord to PUTNAM COUNTY NATIONAL BANK, its
successors and assigns, whose address is 43 Gleneida Avenue, Carmel, NY 10940,
dated the same day as the date of this Lease.

                                       47
<PAGE>

                                       EXHIBIT D

                                       Chemicals

CHEMICALS
Organic Solvents
----------------
Acetone
Ethyl Alcohol
Ethyl Ether
Ethyl Acetate
iso-Propanol
Methanol
Hexane
Heptane
Chioroform

Acids/Bases
-----------
Sodium Hydroxide
Potassium Hydroxide
Hydrochloric Acid
Acetic Acid
Perchloric Acid (0.1 N Standard Solution)
Sulfuric Acid

General Chemicals/Reagents
--------------------------
Sodium Phosphate (mono, di & tribasic)
Potasium Phosphate (mono, di & tribasic)
Calcium Phosphates
Common salts (e.g., NaCl, PCl, etc.)
Sodium Thiosulfide
Various Gums
Various Acid/Base Indicators
Fatty Acid Standards (individual or mix)
Amino Acid Standards (individual or mix)
Vitamin Standards (e.g., alpha-tocopherol, ascorbic acid, thiamin, etc.)
Sugar Standards (e.g., sucrose, fructose, ribose, etc.)
Lowry Reagent Kit for Protein
Ninhydrin Reagent Kit for Protein
Boron Triflouride in Methanol Reagent
Selective Standards for Flavors (e.g., cinnamaldehyde)
EDTA
Very small quantity of oxidizers (e.g., CaO2)

Ongoing List of Food Grade Materials for Pilot Area (TBD)
---------------------------------------------------------

<PAGE>

                                       48
GAS

Nitrogen     (* House Nitrogen may be OK if purity is high enough)
Helium
Air
Hydrogen
Carbon Dioxide

                                       49
<PAGE>

                                          EXHIBIT E

                                      MEMORANDUM OF LEASE
                                      -------------------

             This is a memorandum of the Lease between Sunrise Park Realty,
Inc., a New York corporation with an address of P.O. Box 519, Middletown, New
York, 10940 and a street address of Fulton Chevrolet Building, Intersection 17M
and Route 6, Middletown, NY 10940, ("Landlord") and Balchem Corporation, a
Maryland corporation ("Tenant") with an address of 2007 Route 284, Slate Hill,
NY 10973.

             Landlord and Tenant executed the Lease on February __, 2002.

             The premises leased pursuant to the Lease is set forth on the
attached Exhibit A.

             The term of the Lease commenced on February __, 2002, and the term
will end on the last day of the tenth "Lease Year" (as defined in the Lease)
unless sooner terminated in accordance with the terms of the Lease.

             There is no right of extension or renewal set forth in the Lease.

             This Memorandum of Lease is executed by the parties as of February
__, 2002.

                                         Landlord: Sunrise Park Realty, Inc.

__________________________               By:
Witness                                         ______________, its ________

__________________________
Witness
                                         Tenant:  Balchem Corporation

__________________________               By:
Witness                                         Dino Rossi, its President

______________________
Witness

___________________________          And By:__________________________
Witness                                     Frank Fitzpatrick,
                                            its Assistant Secretary
___________________________
Witness

                                       50
<PAGE>

State of New York )
                             ) ss:
County of Orange  )

On the __nd day of February, in the year 2002, before me, the undersigned,
personally appeared _______________, personally known to me or proved to me on
the basis of satisfactory evidence to be the individual whose name is subscribed
to the within instrument and acknowledged to me that he executed the same in his
capacity, and that by his signature on the instrument, the individual(s), or the
person upon behalf of which the individual(s) acted, executed the instrument.

                                                     _________________________
                                                         Notary Public

State of New York  )
                         ) ss:
County of Orange   )

On the __nd day of February, in the year 2002, before me, the undersigned,
personally appeared _______________________, personally known to me or proved to
me on the basis of satisfactory evidence to be the individual whose name is
subscribed to the within instrument and acknowledged to me that he executed the
same in his capacity, and that by his signature on the instrument, the
individual(s), or the person upon behalf of which the individual(s) acted,
executed the instrument.

                                                     _________________________
                                                           Notary Public

State of New York  )
                         ) ss:
County of Orange   )

On the __nd day of February, in the year 2002, before me, the undersigned,
personally appeared _______________________, personally known to me or proved to
me on the basis of satisfactory evidence to be the individual whose name is
subscribed to the within instrument and acknowledged to me that he executed the
same in his capacity, and that by his signature on the instrument, the
individual(s), or the person upon behalf of which the individual(s) acted,
executed the instrument.

                                                     _________________________
                                                           Notary Public

                                       51
<PAGE>

                        EXHIBIT A to Memorandum of Lease

                           CLARK PATTERSON ASSOCIATES

                                   DESCRIPTION
                          SUNRISE PARK OFFICE BUILDING
                    TOWN OF WAWAYANDA ORANGE COUNTY NEW YORK

Section 6, Block 1, Lot 72.2

All that certain piece or parcel of land situated in the Town of Wawayanda,
County of Orange, State of New York, and being more accurately described as
follows:

Beginning at a granite highway monument, said monument being on the
southwesterly bounds of a Town road known as Sunrise Park Road and the most
northwesterly bounds of Sunrise Park Road Extension, and proceeding on the
following courses and distances:

      18) Along said sunrise Park Road Extension South 53(degree)-47'-00" West
164.98 feet to lands N/F Carole Sutton, Tax Map Section 6, Block 1, Lot 88.

Thence along lands of Tax Map Section 6, Block 1, Lot 88, on the following three
courses and distances:

      19) North 37(degree)-26'-00" West 150.00 feet

      20) South 53(degree)-47'-00" West 100.00 feet

      21) South 37(degree)-26'-00" East 123.96 feet to the most northerly bounds
of New York State Route 84.

Thence along the northerly bounds of said Route 84 on the following three
courses and distances:

      22) North 66(degree)-24'-00" West 284.52 feet to a highway monument

      23) South 86(degree)-47'-00" West 48.10 feet to a highway monument

      24) South 86(degree)-47'-00" West 312.13 feet to a highway monument on the
northeasterly bounds of New York State Route 17M and U.S. Highway 6.

Thence along said Highway U.S. 6 and NYS Route 17M

      25) North 41(degree)-44'-14" West 104.78 feet to a pipe at the most
southeasterly corner of N/F Cloverleaf Realty Corp., Tax Map Section4, Block 1,
Lot 36.22.

                                       52
<PAGE>

                                   DESCRIPTION
                          SUNRISE PARK OFFICE BUILDING
                    TOWN OF WAWAYANDA ORANGE COUNTY NEW YORK

Thence along said lands on the following five courses and distances:

      26) North 55(degree)-34'-08" East 263.91 feet to a point

      27) North 68(degree)-59'-00" East 127.40 feet to a point

      28) North 65(degree)-46'-00" East 101.83 feet to a point

      29) North 60(degree)-14'-00" East 69.77 feet to a point

      30) North 43(degree)-40'-00" East 60.88 feet to the southwesterly bounds
of said Sunrise Park Road.

Thence along the southwesterly bounds of said road on the following four courses
and distances:

      31) South 60(degree)-49'-00" East 243.00 feet to a point

      32) South 52(degree)-14'-00" East 51.10 feet to a monument

      33) South 27(degree)-35'-00" East 86.62 feet to a monument

34) South 37(degree)-18'-00" East 156.89 feet to the point and place of
beginning and containing 5.124 acres, more or less.

                                       53
<PAGE>
<TABLE>
<CAPTION>

                                              EXHIBIT F

                                       Schedule of Values

                                      Tenant's Estimate of                                       Allocable
Category                             Hard Costs of Tenant's Work                        Tenant Reimbursement
                                     (excludes Special Lab Costs
                                         and soft costs)

<S>                                        <C>                                                <C>
Sheetrock, Paint, Trim                       $258,000                                           $129,000
Glass, Doors                                   61,000                                             30,000
Ceilings                                       40,000                                             20,000
Flooring                                         62,0                                             31,000
Masonry                                          97,0                                             48,000
Window Covering                                16,000                                              8,000
Kitchen & Bath                                 14,000                                              7,000
Elevator                                         60,0                                             30,000
Electrical                                     324,00                                            162,000
HVAC                                           229,00                                            114,000
Plumbing                                       103,00                                             51,000
                                           $1,264.000                                            630,000

</TABLE>

         The column on the left represents Tenant's good faith estimate of the
cost of performing Tenant's Work excluding Special Lab Costs and soft costs.
Tenant shall not be in breach of its obligations pursuant to the Lease if the
cost of performing the line item is less than or greater than the estimate or
the cost of performing all of the line items is less than or greater than the
sum of the estimated costs. The amount of the Tenant Reimbursement payable to
Tenant with respect to a line item is a function of the percentage completion of
the line item and is not dependent of the actual cost expended by Tenant with
respect to the line item.

                                       54

                                    EXHIBIT G
                          PROGRESS PAYMENT INFORMATION

Progress Payment for Tenant's Work* completed through the end of the month
_________, 200_

Date of Application for Payment: _________________

The amount of the Tenant Reimbursement due and payable by Landlord to Tenant
pursuant to this Application for Payment: _____________________

<TABLE>
<CAPTION>

          1                      2                     3                      4                     5                      6
                                                                    Portion of Tenant
                                                                    Reimbursement
                                                                    Allocable to
                                             % of Tenant's          Tenant's Work*        Tenant
                       Tenant                Work*                  Completed             Reimbursement          Amount of Tenant
                       Reimbursement         Completed              through End of        paid though date       Reimbursement
                       Allocable to Line     through End of         Month                 of Application for     due (columns 4
Line Items             Items                 Month                  (columns 2 x 3)       Payment                minus 5)

<S>                         <C>
Sheetrock, Paint            $129,000
Trim
Glass, Doors                  30,000
Ceilings                      20,000
Flooring                      31,000
Masonry                       48,000
Window                         8,000
Covering
Kitchen & Bath                 7,000
Elevator                      30,000
Electrical                   162,000
HVAC                         114,000
Plumbing                      51,000
TOTAL                       $630,000

</TABLE>

*excluding Special Lab Items and architectural, engineering and attorney work

                                        1
<PAGE>

                 Fulton Chevrolet and Sunrise Park Realty, Inc.
                      Intersection of Route 17M and Route 6
                              Middletown, NY 10940

                                January 24, 2002

Balchem Corporation
2007 Route 284
Slate Hill, NY 10973
att: Dino Rossi

     Re: Lease (the "Lease") between Sunrise Park Realty, Inc., a New York
corporation with an address of P.O. Box 519, Middletown, New York, 10940 and a
street address of Fulton Chevrolet Building, Intersection 17M and Route 6,
Middletown, NY 10940, ("Landlord") and Balchem Corporation , a Maryland
corporation ("Tenant") with an address of 2007 Route 284, Slate Hill, NY 10973.
The premises leased pursuant to the Lease is referred to as the "Leased
Premises."

Gentlemen:

     Fulton Chevrolet, Cadillac Co., Inc. is referred to as "Fulton." Fulton is
an affiliate of Landlord. Landlord and Fulton warrant and represent that Fulton
is the owner and operator of an automotive dealership at the intersection of
Route 6 and 17 M, New York, doing business as Fulton Chevrolet. Any vehicle that
is owned, controlled, or in the possession of Fulton or any of its parents,
subsidiaries, or affiliates, and their respective successors and assigns, is
referred to as a "Fulton Vehicle." In order to induce Tenant to enter into the
Lease, Landlord and Fulton jointly and severally agree that neither Fulton nor
its parents, subsidiaries, or affiliates and their respective successors and
assigns will park any Fulton Vehicle or allow any Fulton Vehicle be parked in
any 'No Park Zone.' Neither Landlord nor Fulton shall be deemed to have breached
its obligations pursuant to this paragraph if a Fulton Vehicle suffers
mechanical break down in a 'No Park Zone' provided the vehicle is towed or
otherwise removed from the 'No Park Zone' promptly thereafter.

     The 'No Park Zone' consists of the Leased Premises, the areas between
Leased Premises and the traveled portions of Interstate 84, Sunrise Park Road,
and Sunrise Park Extension, and any area between Carpenter Creek and the Leased
Premises.

     This letter is binding on Landlord, Fulton, their respective successor and
assigns, any purchaser of substantially all of the assets of Fulton, and any
operator of any automotive dealership or operation operating from all or part of
the premises currently operated as Fulton Chevrolet. Tenant may deem any breach
of this letter to be a breach of the Lease. This letter may be recorded as an
exhibit to the Notice of Lease.

                    Very truly yours,

                    Fulton Chevrolet, Cadillac Co., Inc., d/b/a Fulton Chevrolet

                    By:/s/
                          John Worts, its President
                    and

                    Sunrise Park Realty, Inc.

                    By: /s/
                           John Worts, its President

                                       2
<PAGE>

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