Document:

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                                                                   EXHIBIT 10.76

                          MORTGAGE, SECURITY AGREEMENT,
                              ASSIGNMENT OF LEASES
                          AND RENTS AND FIXTURE FILING

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                         in maximum principal amount of

                                  $2,000,000.00

                                     made by

                              DECORA, INCORPORATED

                                   Mortgagor,

                                   IN FAVOR OF

                             ABLECO FINANCE LLC, AS
                              COLLATERAL AGENT FOR
                                  THE LENDERS,

                                    Mortgagee

                               DATED: May 2, 2000

                        THIS INSTRUMENT AFFECTS REAL AND
                    PERSONAL PROPERTY SITUATED IN THE STATE
                      OF NEW YORK, SECTION 163.17, BLOCK 4,
                         LOT 22 IN FORT EDWARD, NEW YORK

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                              RECORD AND RETURN TO:

                              Schulte Roth & Zabel LLP
                              900 Third Avenue
                              New York, New York 10022
                              Attention: Frederic L. Ragucci, Esq.

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 MORTGAGE, SECURITY AGREEMENT, ASSIGNMENT OF LEASES AND RENTS AND FIXTURE FILING

        THIS MORTGAGE, SECURITY AGREEMENT, ASSIGNMENT OF LEASES AND RENTS AND
FIXTURE FILING dated May 2, 2000 (this "Mortgage"), made by DECORA,
INCORPORATED, a Delaware corporation, having its principal place of business at
1 Mill Street, Fort Edward, New York 12828 (the "Mortgagor"), in favor of ABLECO
FINANCE LLC, a Delaware limited liability company, as collateral agent for the
Lenders (as hereinafter defined), having its principal place of business at 450
Park Avenue, New York, New York 10022 (the "Mortgagee").

                             W I T N E S S E T H :

        WHEREAS, Mortgagor and Mortgagee are parties to a certain Financing
Agreement, of even date herewith (as amended, restated, supplemented or
otherwise modified from time to time, the "Financing Agreement"), by and among
Mortgagor, Decora Industries, Inc., a Delaware corporation (the "Parent"; the
Mortgagor and the Parent are each sometimes hereinafter referred to individually
as a "Borrower" and collectively as the "Borrowers"), the financial institutions
from time to time party to the Financing Agreement (such financial institutions,
together with their respective successors and assigns, are referred to
hereinafter each individually as a "Lender" and collectively as the "Lenders"),
Mortgagee, as collateral agent for the Lenders and The CIT Group/Business
Credit, Inc., as administrative agent for the Lenders;

        WHEREAS, pursuant to Article II of the Financing Agreement, the Lenders
have agreed to make to the Borrowers a term loan in the aggregate principal
amount of up to $2,000,000.00 (the "Loan"), for purposes set forth in the
Financing Agreement;

        WHEREAS, it is a condition precedent to the making by the Lenders of the
Loan to Mortgagor pursuant to the Financing Agreement that the Mortgagor shall
have executed and delivered to the Mortgagee this Mortgage, as security for the
indebtedness of the Borrowers with respect to the Obligations (as defined in
Section 3 hereof), providing for, among other things, the grant to Mortgagee of
a lien on certain real property, fixtures and other property of the Mortgagor,
as more particularly described herein;

        WHEREAS, the maximum principal amount secured by this Mortgage shall not
exceed the total sum of $2,000,000.00, together with interest thereon,
attorneys' fees and costs;

        WHEREAS, the Mortgagor is the owner of that certain real property
located in Fort Edward, County of Washington and State of New York and more
particularly described herein;

        NOW, THEREFORE, in consideration of the premises and the agreements
herein and in order to induce the Lenders to make and maintain the Loan pursuant
to the Financing Agreement, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the Mortgagor hereby
agrees with the Mortgagee as follows:

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        SECTION 1. Definitions.

        (a) Reference is hereby made to the Financing Agreement for a statement
of the terms thereof. All terms used in this Mortgage which are defined in the
Financing Agreement or in Article 9 of the Uniform Commercial Code (the "UCC")
currently in effect in the State of New York and which are not otherwise defined
herein shall have the same meanings herein as set forth therein.

        (b) As used in this Mortgage, the following terms shall have the
respective meanings indicated below, such meanings to be applicable equally to
both the singular and the plural forms of the terms defined:

        "Applicable Law" means all laws, rules, regulations, and orders of any
governmental authority which exercises jurisdiction over the Mortgaged Property,
including the Fair Labor Standards Act and the Americans With Disabilities Act.

        "Business Day" shall have the meaning ascribed to it in the Financing
Agreement.

        "Building Equipment" has the meaning specified in Section 2(c)(ii)
hereof.

        "Event of Default" has the meaning specified in Section 7 hereof.

        "Financing Agreement" has the meaning specified in the recitals hereto.

        "Governmental Approval" means the approval of any governmental authority
which exercises jurisdiction over the Mortgaged Property, including but not
limited to the United States of America, the State of New York, any political
subdivision of either, any agency, department, commission, board, bureau or
instrumentality of any of them, or any quasi-public agency established by any of
the foregoing including any insurance rating organization or board of fire
underwriters.

        "Hazardous Materials" means any chemical, material or substance defined
as or included in the definition of "hazardous substances," "hazardous wastes,"
"hazardous materials," "regulated substances," "extremely hazardous waste,"
"restricted hazardous waste," or "toxic substances" or words of similar import
under any applicable local, state or federal law as now or at any time hereafter
in effect or under the regulations adopted or publications promulgated pursuant
thereto, including the Comprehensive Environmental Response, Compensation and
Liability Act of 1980, as amended, 42 U.S.C. Sec. 9601, et. seq.; the Hazardous
Materials Transportation Act, as amended, 49 U.S.C. Sec. 1801, et. seq.; the
Resource Conservation and Recovery Act, as amended, 42 U.S.C. Sec. 6901, et.
seq.; the Federal Water Pollution Control Act, as amended, 33 U.S.C. Sec. 1251,
et seq.; and all state and local statutes of like import as now or at any time
hereafter in effect. Without limiting the generality of the foregoing, the term
"Hazardous Materials" shall include, to the extent such materials are regulated
by any Hazardous Materials Law (a) any oil, flammable substances, explosives,
radioactive materials, hazardous wastes, chemicals, or substances, or toxic
wastes; (b) asbestos in any form; (c) urea formaldehyde foam insulation; (d)
transformers or other equipment which contain polychlorinated biphenyls; and (e)
radon gas.

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        "Improvements" has the meaning specified in Section 2 hereof.

        "Indebtedness" has the meaning specified in Section 3 hereof.

        "Loan Documents" has the meaning ascribed to it in the Financing
Agreement.

        "Mortgage" or "this Mortgage" means this Mortgage, Security Agreement,
Assignment of Leases and Rents and Fixture Filing, as modified from time to
time.

        "Mortgaged Property" has the meaning specified in Section 2 hereof.

        "Net Proceeds" has the meaning specified in Section 5(f)(iii) hereof.

        "Obligations" has the meaning specified in Section 3 hereof.

        "Permitted Encumbrances" has the meaning specified in Section 4(d)(i)
hereof.

        "Real Property" has the meaning specified in Section 2 hereof.

        SECTION 2. Grant of Lien. As collateral security for all of the
Obligations (as such term is defined in Section 3 hereof), the Mortgagor hereby
mortgages, grants, bargains, sells, warrants, conveys, aliens, remises,
releases, assigns, sets over and confirms to the Mortgagee, and the successors
and assigns of the Mortgagee, and grants to the Mortgagee, and the successors
and assigns of the Mortgagee, a continuing security interest in, the following,
to have and to hold until the Obligations are satisfied in full:

        (a) all of Mortgagor's right, title and interest in and to the real
property described in Exhibit A attached hereto (the "Real Property");

        (b) all of the buildings and improvements now or hereafter located on
the Real Property (the "Improvements");

        (c) all of the Mortgagor's right, title and interest in and to the
following, wherever located and whether now or hereafter existing and whether
now owned or hereafter acquired (together with the Real Property and the
Improvements, the "Mortgaged Property"):

                (i) all of the streets and roads abutting the Real Property to
        the center lines thereof, and strips and gores within or adjoining the
        Real Property, the air space above the Real Property and the right to
        use such air space, all rights of ingress and egress by motor vehicles
        to parking facilities on or within the Real Property, all easements now
        or hereafter affecting the Real Property, all royalties and other rights
        appertaining to the use and enjoyment of the Real Property, including,
        without limitation, alley, drainage, crop, timber, agricultural,
        horticultural, mineral, water, oil and gas rights;

                (ii) all fixtures, machinery, equipment and other tangible
        personal property and all parts thereof and all appurtenances, additions
        and accessions thereto and substitutions or replacements thereof; all
        building materials and supplies now or hereafter

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        attached to, contained in or used in connection with, the Real Property
        or the Improvements or placed on any part thereof and whether or not
        attached thereto, including, without limitation, all screens, awnings,
        shades, blinds, curtains, draperies, carpets, rugs, furniture and
        furnishings, heating, lighting, plumbing, ventilating, air conditioning,
        refrigerating, incinerator and compacting and elevator plants, stoves,
        ranges, security systems, vacuum cleaning systems, call systems,
        sprinkler systems and other fire prevention and extinguishing apparatus
        and materials, motors, pipes, appliances and fittings (any and all such
        fixtures and other personal property being hereinafter referred to as
        the "Building Equipment"), together with the benefits of all deposits
        and payments now or hereafter made with respect thereto by the
        Mortgagor;

                (iii) all leases, lettings and licenses of the Real Property,
        the Improvements or the other property described in this Section 2,
        including, without limitation, cash and securities deposited thereunder,
        all rents, issues and profits payable thereunder or otherwise derived
        therefrom, together with the right to receive and collect such rents,
        issues and profits and the right to enforce, whether by action at law or
        in equity or otherwise, and all provisions and agreements in respect
        thereof, together with all rights now or hereafter existing in and to
        all agreements and other documents now or hereafter existing and
        evidencing or otherwise relating to any of the foregoing;

                (iv) all unearned premiums accruing under insurance policies and
        all proceeds of the voluntary or involuntary conversion of any of the
        Real Property, the Improvements or the other property described in this
        Section 2 into cash or liquidated claims, including, without limitation,
        proceeds of hazard and title insurance and all awards and compensation
        made with respect to any of the Real Property, the Improvements or the
        other property described in this Section 2, by any governmental
        authority or other regulatory body for the taking by eminent domain,
        condemnation or otherwise, including, without limitation, awards for any
        change of grade of streets;

                (v) any right to appear in and defend, in the name and on behalf
        of the Mortgagor, any action or proceeding brought with respect to the
        Real Property, the Improvements or the other property described in this
        Section 2 or to commence any action or proceeding to protect the
        interest of the Mortgagee in any of such property; and

                (vi) all extensions, improvements, betterments, renewals,
        substitutions and replacements of and all additions and appurtenances to
        any of the Real Property, the Improvements or the other property
        described in this Section 2 hereafter acquired by or released to the
        Mortgagor or constructed, assembled or placed by the Mortgagor on any of
        the Real Property, the Improvements or the other property described in
        this Section 2, and all conversions of the security constituted thereby
        which, immediately upon such acquisition, release, construction,
        assembling, placement or conversion (and in each such case without any
        further mortgage, conveyance, assignment or other act by the Mortgagor),
        shall become subject to the Lien of this Mortgage as fully and
        completely, and with the same effect, as though now owned by the
        Mortgagor and specifically described herein.

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        SECTION 3. Security for Obligations. The mortgage Lien created hereby in
the Mortgaged Property constitutes continuing collateral security for all of the
following obligations, whether now existing or hereafter incurred (the
"Obligations"):

        (a) the prompt payment by the Borrowers, as when due and payable
(whether by scheduled maturity, required prepayment, acceleration, demand or
otherwise), of all amounts now or hereafter owing in respect of the Loan,
whether for principal, interest, fees, expenses or otherwise, (b) the payment of
any expenses (including reasonable counsel fees and expenses) incurred by the
Mortgagee in enforcing its rights under the Financing Agreement and the other
Loan Documents with respect to the Loan, and (c) the performance by the
Borrowers of all of their obligations under the Financing Agreement and other
Loan Documents with respect to the Loan.

        (b) the prompt payment by the Mortgagor, as and when due and payable, of
all amounts from time to time owing by it in respect of this Mortgage and the
prompt payment by the Borrowers, as and when due and payable, of all amounts
from time to time owing by them in respect to the Obligations pursuant to the
Financing Agreement and the other Loan Documents (collectively, the
"Indebtedness").

        (c) Any and all renewals, modifications, consolidations, replacements
and extensions of any of the foregoing, provided, however, that the maximum
principal amount of all indebtedness secured hereby at any one time shall not
exceed the total sum of $2,000,000, together with interest thereon, attorneys'
fees and costs; and

        (d) the due performance and observance by the Mortgagor and the other
Borrowers of all of their other obligations from time to time existing in
respect of this Mortgage and the Obligations pursuant to the Financing Agreement
and the other Loan Documents, including any Obligations existing subsequent to
an Event of Default.

        SECTION 4. Representations and Warranties. The Mortgagor represents and
warrants as follows:

        (a) The Mortgagor (i) is a corporation duly organized, validly existing
and in good standing under the laws of the State of Delaware as set forth on the
first page hereof, (ii) has all requisite power and authority, and has taken all
necessary corporate action, to authorize, execute, deliver and perform this
Mortgage and to encumber the Mortgaged Property pursuant hereto, and (iii) is
duly qualified to do business and is in good standing under the laws of the
state in which the Mortgaged Property is located.

        (b) The execution, delivery and performance by the Mortgagor of this
Mortgage in accordance with its terms do not and will not (i) require any
Governmental Approval or any consent or approval of the stockholders of the
Mortgagor or any other Person that has not been obtained, (ii) violate or
conflict with, result in a breach of, or constitute a default under, (A) any
contract binding on or affecting the Mortgagor or any of its properties or (B)
any Applicable Law, or (iii) result in or require the creation of any security
interest or other Lien upon or with respect to any of its properties.

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        (c) This Mortgage is a legal, valid and binding obligation of the
Mortgagor, enforceable against the Mortgagor in accordance with its terms.

        (d) (i) The Mortgagor has good, marketable and insurable fee simple
title to the Mortgaged Property, subject only to those items affecting title to
the Mortgaged Property as are set forth in the Mortgagee's title insurance
policy or the marked title insurance commitment delivered to the Mortgagee as of
the date hereof and insuring the Lien of this Mortgage (the "Permitted
Encumbrances"), (ii) except as may be permitted by the Financing Agreement, the
Mortgagor is and will be at all times the owner of the Building Equipment, free
and clear of any security interest or other Lien, except for the Permitted
Encumbrances, (iii) this Mortgage is and will remain a valid and enforceable
first Lien on the Mortgaged Property, and (iv) the Mortgagor will preserve such
title, and will warrant and defend the validity and priority of the Lien created
hereby against the claims of all Persons.

        (e) The Mortgaged Property is not located in an area identified as an
area having special flood hazards pursuant to the terms of the National Flood
Insurance Act of 1968, as amended, or the Flood Disaster Protection Act of 1973,
as amended.

        (f) (i) The Mortgagor has all Governmental Approvals necessary for the
lawful ownership and operation by the Mortgagor of the Mortgaged Property as an
industrial facility (including, without limitation, where applicable, a
Permanent Certificate of Occupancy and Board of Fire Underwriters Certificate
(or local equivalent) for those portions of the Improvements which have been
completed, and building permits and all required environmental permits for those
portions of the Improvements to be constructed or under construction), and the
Mortgaged Property as so owned and operated by the Mortgagor is in compliance
with Applicable Law, including, without limitation, all applicable zoning and
building codes, ordinances and regulations. No condition exists or event has
occurred which, in itself or with the giving of notice or the lapse of time or
both, would result in the suspension, revocation, impairment, forfeiture or
nonrenewal of any such Governmental Approval, and there is no claim that any
thereof is not in full force and effect; (ii) the present or contemplated use or
occupancy of the Mortgaged Property does not conflict with or violate any such
Governmental Approval; (iii) any Improvements hereafter constructed on the Real
Property shall be in compliance with all Applicable Law, including, without
limitation, all applicable zoning and building codes, ordinances and
regulations, and shall lie wholly within the boundaries of the Real Property;
(iv) any Improvements located on the Real Property which are buildings shall at
all time be independent and self-contained operating units; and (v) the Real
Property shall at all times be a separate tax lot.

        (g) The exercise by the Mortgagee of any of its rights and remedies
hereunder will not violate or conflict with, or result in a breach of, or
constitute a default under, any contract binding on or affecting the Mortgagor
or any of its properties or any Applicable Law, and will not result in or
require the creation of any security interest or other Lien upon or with respect
to any of its properties.

        (h) No Governmental Approval is required for (i) the due execution,
delivery and performance by the Mortgagor of this Mortgage, (ii) the grant by
the Mortgagor, or the

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perfection, of the Lien purported to be created hereby in the Mortgaged
Property, or (iii) the exercise by the Mortgagee of any of its rights and
remedies hereunder, except for the recording of this Mortgage in the Office of
the County Clerk of Washington County and the filing under the UCC of financing
statements in the Office of the Secretary of State of the State of New York.

        SECTION 5. Covenants of the Mortgagor. So long as any of the Obligations
shall remain outstanding, unless the Mortgagee shall otherwise consent in
writing:

        (a) Payment of Indebtedness. The Mortgagor and the other Borrowers shall
punctually pay the Indebtedness in the manner specified in the Financing
Agreement, without offset, counterclaim or defense of any nature whatsoever, and
shall perform all other obligations specified in the Financing Agreement and the
other Loan Documents.

        (b) Further Assurances. The Mortgagor will at its expense, at any time
and from time to time, promptly execute, acknowledge and deliver all such
further deeds, conveyances, mortgages, assignments, estoppel certificates,
notices of assignment, transfers, assurances, instruments and documents and take
all such further action as may be necessary or desirable or that the Mortgagee
may request in order to (i) perfect and protect the rights intended to be
granted to the Mortgagee hereby; (ii) enable the Mortgagee to exercise and
enforce its rights and remedies hereunder in respect of the Mortgaged Property;
or (iii) otherwise effect the purposes of this Mortgage, including, without
limitation, furnishing to the Mortgagee from time to time statements and
schedules further identifying and describing the Mortgaged Property and such
other information in connection with the Mortgaged Property as the Mortgagee may
request, all in reasonable detail.

        (c) Maintenance of the Mortgaged Property. The Mortgagor will maintain
the Mortgaged Property in good repair, comply with the requirements of any
governmental authority or regulatory body claiming jurisdiction over the
Mortgaged Property within the lesser of 30 days after an order containing such
requirement has been issued by any such authority or body or the time required
pursuant to the terms of such order and will permit the Mortgagee, at any
reasonable time and from time to time, to enter upon and inspect the Mortgaged
Property without prior notice. The Mortgagor will not, without the prior written
consent of the Mortgagee, threaten, commit, permit or suffer to occur any waste,
material alteration, demolition or removal of any of the Mortgaged Property;
provided, however, that fixtures and articles of personal property may be
removed to the extent and in the manner provided in the Financing Agreement. The
Mortgagor will promptly notify the Mortgagee of any loss or damage to the
Mortgaged Property in excess of $10,000.00.

        (d) Maintenance of Existence. The Mortgagor will preserve and maintain
its existence and all of its franchises, licenses, rights and privileges and
will become or remain duly qualified and in good standing in each jurisdiction
in which the character of the properties owned or leased by it or in the nature
of its businesses requires such qualification, and will comply with all
Applicable Laws.

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        (e) Insurance.

            (i) The Mortgagor will keep the Improvements and the Building
Equipment, insured, for the full replacement cost thereof, against any loss by
fire, lightning, windstorm, hail, explosion, aircraft, smoke damage, vehicle
damage, earthquakes, elevator collision, and other risks from time to time
included under "extended coverage" policies, in such amounts as Mortgagee may
require, but in any event in amounts sufficient to prevent Mortgagee from
becoming a co-insurer under such policies. In addition, Mortgagor will maintain
(ii) combined single limit bodily injury and property damages insurance against
any loss, liability, or damages on, about, or relating to the Mortgaged
Property, in an amount of not less than $3,000,000.00; (iii) business rental
insurance covering annual receipts for a 12 month period for the Mortgaged
Property; and (iv) insurance for such other risks as Mortgagee may require.
Replacement costs, at Mortgagee's option, may be redetermined by an insurance
appraiser, satisfactory to Mortgagee, not more frequently than once every 12
months at Mortgagor's cost.

            (ii) All such policies of insurance shall be in such form, with such
companies, and in such amounts as may be reasonably satisfactory to Mortgagee.
All insurance required herein shall be written by companies which have a Best's
rating of A for capital and X for financial stability. All hazard insurance and
such other insurance as Mortgagee shall specify, shall contain a Form 438BFU
(NS) mortgagee endorsement, or an equivalent endorsement satisfactory to
Mortgagee, showing Mortgagee as sole loss payee thereof, and shall contain a
waiver of warranties. Every policy of insurance referred to in this Section 5
shall contain an agreement by the insurer that it will not cancel such policy
except after 30 days prior written notice to Mortgagee and that any loss payable
thereunder shall be payable notwithstanding any act or negligence of Mortgagor
or the Mortgagee, which might, absent such agreement, result in a forfeiture of
all or a part of such insurance payment and notwithstanding (i) occupancy or use
of the Mortgaged Property for purposes more hazardous than permitted by the
terms of such policy, (ii) any foreclosure or other action or proceeding taken
by Mortgagee pursuant to this Mortgage upon the happening of an Event of
Default, or (iii) any change in title or ownership of the Mortgaged Property.
Mortgagor shall deliver to Mortgagee certified copies of such policies of
insurance and evidence of the payment of all premiums therefor.

            (iii) Original policies or certificates thereof satisfactory to
Mortgagee evidencing such insurance shall be delivered to Mortgagee at least 30
days prior to the expiration of the existing or preceding policies. Mortgagor
shall give Mortgagee prompt notice of any loss covered by such insurance, and
Mortgagee shall have the right to adjust any loss. Mortgagee shall have the
exclusive right to adjust all losses payable under any such insurance policies
without any liability to Mortgagor whatsoever in respect of such adjustments.
Any monies received as payment for any loss under any insurance policy including
the insurance policies mentioned above, shall be paid over to Mortgagee to be
applied or disbursed as provided in the Financing Agreement.

            (iv) Mortgagee shall not take out separate insurance concurrent in
form or contributing in the event of loss with that required to be maintained
under this Section 5, unless Mortgagee is included thereon as named insured with
the loss payable to Mortgagee under a standard 438BFU (NS) Mortgagee
endorsement, or its local equivalent. Mortgagor immediately

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shall notify Mortgagee whenever such separate insurance is taken out, specifying
the insurer thereunder and full particulars as to the policies evidencing the
same, and originals of such policies immediately shall be provided to Mortgagee.

            (v) The Mortgagor will keep the Improvements and Building Equipment
located on any of the Mortgaged Property insured against loss by flood if such
Mortgaged Property is located in an area identified as an area having special
flood hazards and in which flood insurance has been made available under the
National Flood Insurance Act of 1968, as amended, or the Flood Disaster
Protection Act of 1973, as amended (or any successor acts thereto), in an amount
at least equal to the Indebtedness or the maximum limit of coverage available
with respect to the Improvements and Building Equipment under such Act,
whichever is less, and with a company or companies approved by the Mortgagee.

            (vi) Without limiting the generality of Section 6(b) hereof, the
Mortgagor shall not adjust or compromise any claims under any insurance referred
to in this Section 5(e) without the prior written consent of Mortgagee in each
instance, and Mortgagor shall execute any proofs of loss, receipts, vouchers and
releases in connection with such claims from time to time as shall be requested
by Mortgagee.

        (f) Insurance Proceeds; Restoration of Mortgaged Property.

                (i) The proceeds of insurance paid in respect of any of the
        Mortgaged Property will be paid over to the Mortgagee to be applied as
        hereinafter provided, and any proceeds of insurance policies coming into
        the possession of the Mortgagee shall not be deemed trust funds and the
        Mortgagee shall be entitled to dispose of such proceeds as hereinafter
        provided. Without limiting the generality of Sections 8(a) and 8(b)
        hereof, the Mortgagee may deduct from such insurance proceeds any
        expenses, including, without limitation, attorneys' fees and
        disbursements (to the extent permitted by law), incurred by it in
        connection with obtaining such proceeds. The Mortgagee shall have the
        option, in its sole discretion, to apply any insurance proceeds as
        specified in Section 7(d) hereof or to allow all or a portion of such
        proceeds to be used for the restoration of the Mortgaged Property.

                (ii) If any of the Mortgaged Property shall be damaged or
        destroyed by fire or other casualty, the Mortgagor will give prompt
        notice thereof to the Mortgagee, and will promptly commence and
        diligently continue to perform the repair and restoration of such
        Mortgaged Property (hereinafter called the "Work") so as to restore such
        Mortgaged Property in full compliance with all legal requirements and so
        that such Mortgaged Property shall be at least equal in value and
        general utility to its value and general utility prior to such damage or
        destruction, and if the Work to be done is structural or if the cost of
        the Work, as estimated by the Mortgagee, shall exceed $100,000 (the
        "Major Work"), the Mortgagor will, prior to the commencement of the
        Major Work, furnish to the Mortgagee for its approval: (A) complete
        plans and specifications for the Major Work, with satisfactory evidence
        of the approval thereof (1) by all governmental authorities or other
        regulatory bodies whose approval is required and (2) by an architect
        satisfactory to the Mortgagee (the "Architect"), accompanied by the

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        Architect's signed estimate, bearing the Architect's seal, of the cost
        of completing the Major Work; (B) certified or photostatic copies of all
        permits and authorizations required in connection with the Major Work;
        and (C) a guaranty of the payment for and completion of the Major Work,
        which guaranty shall be in form and substance and made by a guarantor
        satisfactory to the Mortgagee, and in an amount not less than the
        Architect's estimate of the cost of completing the Major Work, less the
        amount of any insurance proceeds then held by the Mortgagee for
        application to the cost of the Major Work. Upon receipt of the
        Mortgagee's approval, the Mortgagor will perform the Major Work
        diligently and in good faith in accordance with the plans and
        specifications approved by the Mortgagee.

                (iii) If the Mortgagee shall determine to apply any insurance
        proceeds to the Work, the net insurance proceeds available after
        deduction of the Mortgagee's cost of recovering and paying out such
        proceeds, including, without limitation, attorneys' fees and costs
        allocable to inspecting the Work and the plans and specifications
        therefor (the "Net Proceeds") shall be applied by the Mortgagee (x) in
        the case of Work determined by the Mortgagee not to be Major Work, to
        the Mortgagor upon completion of the Work and (y) in the case of Major
        Work, at the Mortgagee's option from time to time, to the Mortgagor
        and/or directly to the contractor, subcontractors, materialmen,
        laborers, engineers, architects and other Persons rendering services or
        materials as said Major Work progresses. All such payments shall be
        subject to the following conditions:

                      (A) If the Work to be done is Major Work, the Architect
shall be in charge of the Work;

                      (B) Each request for payment shall be made on not less
than seven days' prior notice to the Mortgagee and shall be accompanied by a
certificate of the Architect (if an architect is required to be retained
pursuant to subsection (ii) of this Section 5(f)), otherwise by a certificate of
an authorized officer of the Mortgagor, stating that (1) all completed Work has
been done in compliance with the approved plans and specifications, if any, and
in accordance with Applicable Law, (2) the sum requested is justly required to
reimburse the Mortgagor for payments by the Mortgagor to, or is justly due to,
the contractor, subcontractors, materialmen, laborers, engineers, architects or
other Persons rendering services or materials for the Work (giving a brief
description of such services and materials), and, when added to any sums
previously paid out for Work by the Mortgagee, does not exceed the value of the
Work performed to the date of such certificate, and (3) the amount of such
insurance proceeds remaining in the hands of the Mortgagee will be sufficient to
pay for completion of the Work (including, in such reasonable detail as the
Mortgagee may require, an estimate of the cost of such completion);

                      (C) Each request for payment shall be accompanied by (1)
Lien waivers satisfactory to the Mortgagee covering any part of the Work
previously paid for and (2) a search prepared by a title company or licensed
abstractor, or other evidence satisfactory to the Mortgagee, that there has not
been filed with respect to the Mortgaged Property any mechanic's or other Lien
or any instrument for the retention of title in respect of any part of the Work
which is not discharged of record and that there are no encumbrances affecting
any of the Mortgaged

                                       10
<PAGE>   12

Property other than the Permitted Encumbrances and such other encumbrances as
the Mortgagee shall have approved in writing, together with updates of, and
endorsements to, any title insurance policies required by the Mortgagee
increasing coverage by the amount advanced and without title exceptions not
previously approved by the Mortgagee;

                      (D) No lease affecting the Mortgaged Property immediately
prior to the applicable damage or destruction shall have been cancelled, and no
such lease shall contain any still exercisable right to cancel, due to such
damage or destruction;

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

                      (F) Any request for payment after completion of the Work
shall be accompanied by a copy of all Governmental Approvals required for the
lawful occupancy of the Mortgaged Property;

                      (G) The Work and the Improvements can be completed on or
before such date as the Mortgagee shall determine; and

                      (H) The Mortgagor, prior to the commencement of the Work,
shall have deposited with the Mortgagee the amount, if any, by which the sum of
(i) the cost of the Work and (ii) the other costs which will be incurred during
the period of restoration, including, without limitation, interest on the
Indebtedness (in the case of both (i) and (ii) above, as determined by the
Mortgagee in its sole discretion) exceeds the Net Proceeds, and shall continue
to maintain such deposit (as recomputed by the Mortgagee from time to time as
the Work progresses).

                        (iv) Upon completion of the Work and payment in full
            therefor, or upon failure on the part of the Mortgagor promptly to
            commence or diligently to continue the Work, or at any time upon
            request by the Mortgagor, the Mortgagee may apply the amount of any
            insurance proceeds then or thereafter in the hands of the Mortgagee
            as specified in Section 7(d) hereof; provided, however, that nothing
            herein shall prevent the Mortgagee from applying at any time any of
            such insurance proceeds to cure any Event of Default.

                        (v) If (A) in the case of Major Work, (1) within 120
            days after the occurrence of the damage or destruction to the
            Mortgaged Property requiring such Major Work, the Mortgagor shall
            not have submitted to the Mortgagee and received the Mortgagee's
            approval of plans and specifications for such Major Work (approved
            by the Architect and by all governmental authorities or other
            regulatory bodies whose approval is required), or (2) after such
            plans and specifications are approved by the Mortgagee, the
            Architect and all such governmental authorities or other regulatory
            bodies, the Mortgagor shall fail promptly to commence such Major
            Work, or thereafter shall fail diligently to continue such Major
            Work or shall be delinquent in the payment to mechanics, materialmen
            or others in connection with such Major Work, or (B) in the case of
            Work determined by the Mortgagee not to be Major Work, the Mortgagor
            shall fail promptly to

                                       11
<PAGE>   13

            perform such Work, then, in addition to all other rights set forth
            herein, and after giving the Mortgagor 10 days' notice of the
            nonfulfillment of any of the foregoing conditions, the Mortgagee may
            perform or cause to be performed such repair and restoration, and
            upon 24 hours' notice to the Mortgagor, the Mortgagee may enter upon
            the Mortgaged Property to the extent necessary for any of the
            foregoing purposes, and the Mortgagor hereby waives any claim
            arising out of anything done pursuant hereto, and the Mortgagee may,
            at its option, apply insurance proceeds (without the need by the
            Mortgagee to fulfill any other requirements of this Mortgage) to
            cover all amounts expended in connection with the performance of
            such Work, and any excess costs shall be paid by the Mortgagor to
            the Mortgagee upon demand.

        (g) Taxes and Other Charges; Tax Credits Waived. The Mortgagor will pay
and discharge when due all Taxes of every kind and nature, water rates, sewer
rents and assessments, levies, permit, inspection and license fees and all other
charges imposed upon or assessed against any of the Mortgaged Property or
arising in respect of the occupancy, use or possession thereof and all lawful
claims and demands of mechanics, materialmen, laborers and other Persons which,
if unpaid, might result in, or permit the creation of, a Lien on any of the
Mortgaged Property, except to the extent (i)(A) the validity of any of the
foregoing is being contested in good faith by proper proceedings which stay (1)
the imposition of any penalty, fine or Lien resulting from the nonpayment of any
thereof, the collection thereof or other realization thereon, and (2) the sale
of the Lien thereof and the sale or forfeiture of any of the Mortgaged Property,
and (B) adequate reserves with respect thereto in an amount determined by the
Mortgagee have been set aside with the Mortgagee for the payment thereof or (ii)
the Mortgagor, shall, in the case of any such claims or demands of mechanics,
materialmen, laborers and others, bond or discharge any Lien on the Mortgaged
Property arising from any such obligation; provided, however, that if at any
time payment of any obligation imposed upon the Mortgagor by this subsection (f)
shall become necessary to prevent the delivery of a tax deed conveying any of
the Mortgaged Property or the sale of the tax Lien therefor because of
nonpayment, or to prevent the sale or forfeiture of any of the Mortgaged
Property because of nonpayment or to protect the Lien of this Mortgage, then the
Mortgagor shall pay the same in sufficient time to prevent the delivery of such
tax deed or the sale of such Lien or the sale or forfeiture of the Mortgaged
Property or to protect the Lien of this Mortgage, as the case may be. Unless the
Mortgagor is making monthly deposits with the Mortgagee in accordance with
Section 5(k), the Mortgagor will exhibit to the Mortgagee within 10 days after
the same shall have become due, validated receipts showing the payment of all
such Taxes, water rates, sewer rents, assessments, levies, fees and other
charges which may be or become a Lien on any of the Mortgaged Property.

        (h) Payment of Other Expenses. The Mortgagor will pay when due all (i)
premiums for insurance required to be maintained by the Mortgagor on the
Mortgaged Property pursuant to the terms hereof, (ii) title insurance premiums
relating to the insurance to be maintained on the Mortgaged Property in
connection with this Mortgage, (iii) other costs and expenses required to be
paid for the maintenance or protection of, or on account of, the Lien of this
Mortgage or any other collateral assigned, pledged, mortgaged or otherwise
hypothecated to the Mortgagee by the Mortgagor as security for the Obligations,
or in connection with the execution and delivery of this Mortgage, and (iv)
payments and charges on all Liens and all ground and other leases which may
affect or attach to any of the Mortgaged Property. Without

                                       12
<PAGE>   14

limiting the generality of Section 5(b) hereof, upon default of the Mortgagor in
the performance of any of its obligations under the preceding sentence, the
Mortgagee shall have the right, but not the obligation, to cure such default in
the name and on behalf of the Mortgagor.

        (i) Condemnation Awards. The Mortgagor, immediately upon obtaining
knowledge, by receipt of service of process or otherwise, of the institution of
any proceedings for the condemnation of any of the Mortgaged Property, will
notify the Mortgagee of the pendency of such proceedings. The Mortgagor will
file and prosecute its claim(s) for any award or payment in good faith and with
diligence. The Mortgagee may participate in any such proceedings and the
Mortgagor from time to time will deliver to the Mortgagee all instruments
requested by it to permit such participation. The Mortgagor shall not settle any
action or proceeding or agree to accept any award or payment without the prior
written consent of the Mortgagee. The Mortgagor will cause all awards and
compensation payable to the Mortgagor as a result of any such condemnation or
other taking (or purchase in lieu thereof) to be paid over promptly to the
Mortgagee. Without limiting the generality of Section 5(b) hereof, the
Mortgagor, upon request by the Mortgagee, shall make, execute and deliver any
and all instruments requested for the purpose of confirming the assignment of
the aforesaid awards and compensation to the Mortgagee free and clear of any
Liens other than the Permitted Encumbrances. The Mortgagee shall not be limited
to the interest paid on the proceeds of any award or compensation, but shall be
entitled to the payment by the Mortgagor of interest at the highest rate
specified in the Financing Agreement for interest on the principal of the Loan
or such other rate as shall be fixed by Applicable Law. The Mortgagee shall
apply all such proceeds, in its discretion, as specified in Section 7(d) hereof
or to the restoration of the Mortgaged Property. In no event shall the Mortgagee
be required to satisfy or discharge this Mortgage until the Obligations are
fully paid, and the Mortgagee shall not be required to release from the Lien of
this Mortgage any portion of the Real Property so taken until the Mortgagee
receives the award or payment for the portion so taken. The application of such
award or payment toward payment of the Obligations shall not be deemed a waiver
by the Mortgagee of its right to receive payment of the balance of the
Obligations in accordance with the provisions of the Loan Documents. The
Mortgagee shall have the right, but not the obligation, to question the amount
of the award or payment, and the Mortgagee may accept the same without prejudice
to any rights that the Mortgagee may have to question such amount.
Notwithstanding any taking by condemnation or eminent domain, closing of, or
alteration of the grade of, any street or other injury to or decrease in value
of the Real Property by any public or quasi-public authority or corporation, the
unpaid principal portion of the Obligations shall continue to bear interest at
the rate payable pursuant to the applicable Loan Documents until the applicable
award or payment shall have been actually received by the Mortgagee, and any
reduction in the Obligations resulting from the application by the Mortgagee of
any such award or payment shall be deemed to take effect only on the date of
such receipt.

        (j) Mortgage Taxes. The Mortgagor will pay all Taxes and registration
and recording fees imposed upon the Mortgagee (other than income, franchise and
doing business Taxes) by reason of its ownership of this Mortgage or any
mortgage supplemental hereto or any other Loan Document, or any security
instrument with respect to any fixture or personal property of the Mortgagor,
and shall pay all stamp and other Taxes required to be paid on any promissory
note executed by the Mortgagor.

                                       13
<PAGE>   15

        (k) Tax and Insurance Deposits. The Mortgagee, at its option, to be
exercised by 10 days' written notice to the Mortgagor, may require that the
Mortgagor deposit with the Mortgagee, (i) monthly, one-twelfth of the annual
charges for any ground or other rent, insurance premiums, real estate
assessments or other Taxes or water, sewer and other charges which might become
a Lien on any of the Mortgaged Property, and (ii) such additional sums which,
together with the aforementioned monthly installments, will be sufficient to
make each of the aforementioned payments at least 30 days prior to the date such
payments are due, and the Mortgagor, if so required, will make such deposits.
Should such charges not be ascertainable at the time any deposit is required to
be made with the Mortgagee, the deposit shall be made on the basis of an
estimate made by the Mortgagee in its sole discretion, and when the charges are
fixed for the then current year, the Mortgagor will deposit any deficiency with
the Mortgagee. All funds so deposited with the Mortgagee shall be held by it,
but not in escrow, and, except to the extent required by Applicable Law, without
interest, and, provided that no Event of Default or an event which, with the
giving of notice or the lapse of time or both, would constitute an Event of
Default shall have occurred, shall be applied by the Mortgagee in payment of the
charges aforementioned when and as payable, to the extent the Mortgagee shall
have such funds on hand. Should an Event of Default or such other event occur,
the funds deposited with the Mortgagee as aforementioned, shall be applied, in
the sole discretion of the Mortgagee, to pay the charges for which such funds
have been deposited or as specified in Section 7(d) hereof, but no such
application shall be deemed to have been made by operation of law or otherwise
until actually made by the Mortgagee as herein provided, nor shall any
application be deemed to affect any right or remedy of the Mortgagee hereunder
or under Applicable Law. If deposits are being made with the Mortgagee, the
Mortgagor will furnish the Mortgagee with bills for the charges for which such
deposits are made and such other documents necessary for the payment of such
charges at least 15 days prior to the date on which such charges first become
payable. Upon any assignment of this Mortgage, the Mortgagee will have the right
to pay over the balance of such deposits in its possession to the assignee, and
upon the making of such payment the Mortgagee will be completely released from
all liability with respect to such deposits and the Mortgagor will look solely
to the assignee with respect thereto.

        (l) Restrictive Covenants. Without the prior written consent of the
Mortgagee, the Mortgagor will not, except as otherwise provided in the Financing
Agreement, (i) execute any conditional bill of sale, chattel mortgage or other
security instruments covering any Building Equipment or purchase any Building
Equipment so that the ownership of the same will not vest unconditionally in the
Mortgagor free from any Liens upon delivery to the Mortgaged Property, (ii)
sell, transfer, grant, convey or assign any interest in any of the Mortgaged
Property, or (iii) further mortgage, encumber, alienate, hypothecate, or
otherwise grant a security interest in or other Lien on or any other interest on
any of the Mortgaged Property.

        (m) Estoppel Certificates. The Mortgagor will, not later than five days
after request therefor by the Mortgagee, furnish to the Mortgagee a written
statement, duly acknowledged, setting forth the amount due on this Mortgage, the
terms of payment and maturity date of the Indebtedness, the date to which
interest has been paid on the Indebtedness, whether any offsets or defenses
exist against the Indebtedness or any Guaranty thereof and (if any are alleged
to exist) a detailed description thereof.

                                       14
<PAGE>   16

        (n) Rents and Leases.

                (i) The Mortgagor will not: (A) execute or permit to exist any
        lease of any of the Mortgaged Property except for occupancy by the
        lessee pursuant to a written lease in form and substance, and with a
        lessee, satisfactory to the Mortgagee, (B) modify or amend any lease or
        sublease affecting the Mortgaged Property, (C) discount any rents or
        collect the same for a period of more than one month in advance, (D)
        cancel or terminate any lease affecting the Mortgaged Property or accept
        surrender of the property demised under any such lease except upon the
        default of the tenant thereunder, or (E) further assign the leases and
        rents affecting the Mortgaged Property.

                (ii) The Mortgagor will, upon demand, deliver to the Mortgagee
        an executed counterpart of each lease or other document relating to any
        of the Mortgaged Property. The Mortgagor will fully and promptly perform
        all of its obligations under any and all of such leases, and will
        enforce the performance and observance of each and every obligation to
        be performed or observed by the lessee under each such lease. The
        Mortgagee will not be bound to perform any of the covenants, conditions
        or provisions contained in any such lease or other document or otherwise
        have any obligation (including, without limitation, any liability under
        the covenant or requirement of quiet enjoyment contained in any lease or
        Applicable Law, in the event that any tenant shall have been joined as a
        party defendant in any action to foreclose this Mortgage and shall have
        been barred and foreclosed thereby of all right, title and interest and
        equity of redemption in the Mortgaged Property). At the option of the
        Mortgagee, each lease, and all rights of the tenant thereunder, shall be
        subject and subordinate to this Mortgage, and to each and every advance
        made or hereafter made hereunder, and to all renewals, additions,
        supplements, modifications, consolidations, spreaders, replacements and
        extensions of this Mortgage. The Mortgagor will give prompt notice to
        the Mortgagee of (a) any notice received by the Mortgagor of any default
        by the lessor under any lease, (b) the commencement of any action or
        proceeding by any tenant, the purpose of which shall be the cancellation
        of any lease or a reduction or abatement of the rent payable thereunder,
        (c) any notice of default given by the Mortgagor to the tenant under any
        lease, or (d) the interposition by any tenant of any defense or
        counterclaim in any action or proceeding brought by the Mortgagor
        against any tenant.

                (iii) The Mortgagor hereby grants to the Mortgagee the right (A)
        to enter upon and take possession of the Mortgaged Property for the
        purpose of collecting the rents, issues and profits assigned to the
        Mortgagee hereunder (the execution of this Mortgage constituting and
        evidencing the irrevocable consent of the Mortgagor to such entry and
        possession, whether or not foreclosure has been instituted and without
        applying for a receiver), (B) to dispossess by the usual summary
        proceedings any tenant defaulting in the payment thereof to the
        Mortgagee, (C) to let any of the Mortgaged Property, and (D) to apply
        such rents, issues and profits as specified in Section 7(d) hereof.
        Until an Event of Default or an event which, with the giving of notice
        or the lapse of time or both, would constitute an Event of Default shall
        have occurred and be continuing, the Mortgagor shall be entitled to
        receive said rents, issues and profits; provided, however, that the
        Mortgagor will hold said rents, issues and profits in trust for the
        benefit of the

                                       15
<PAGE>   17

        Mortgagee hereunder; and provided, further, that the Mortgagee shall
        have the right, at any time upon the occurrence of an Event of Default
        or such other event, and upon notice to the Mortgagor of its intention
        to do so served personally upon or sent by registered or certified mail
        to the record owner of the Mortgaged Property, to notify any tenant or
        other obligors of such rents, issues and profits and to direct such
        tenants or obligors to make payment of all such amounts due or to become
        due to the Mortgagor directly to the Mortgagee and, upon such
        notification and at the expense of the Mortgagor and to the extent
        permitted by law, to enforce collection of any of such rents, issues and
        profits and to adjust, settle or compromise the amount or payment
        thereof, in the same manner and to the same extent as the Mortgagor
        might have done. After receipt by the Mortgagor of the notice from the
        Mortgagee referred to in the second proviso to the immediately preceding
        sentence, all amounts and proceeds (including instruments) received by
        the Mortgagor in respect of such rents, issues and profits shall be
        received in trust for the benefit of the Mortgagee hereunder, shall be
        segregated from other funds of the Mortgagor and shall be forthwith paid
        over to the Mortgagee in the same form as so received (with any
        necessary endorsement) to be held as cash collateral and either (1)
        released to the Mortgagor so long as no Event of Default shall have
        occurred and be continuing or (2) if any Event of Default shall have
        occurred and be continuing, applied as specified in Section 7(d) hereof.

                (iv) All lease securities of tenants of the Mortgaged Property
        shall be treated as trust funds and shall not be commingled with any
        other funds of the Mortgagor and said lease securities shall be
        deposited in a segregated tenants' security account to be maintained by
        the Mortgagor. Within 10 days after request by the Mortgagee, the
        Mortgagor shall furnish to the Mortgagee satisfactory evidence of
        compliance with this clause (iv), together with a statement of all lease
        securities deposited by the tenants and copies of all leases not
        theretofore delivered to the Mortgagee, certified by the Mortgagor.

                (v) Reference is made to Section 291-f of the Real Property Law
        of the State of New York to establish for the Mortgagee the rights and
        benefits provided therein.

        (o) Compliance With Permitted Encumbrances. The Mortgagor will comply
with the covenants made by it or any predecessor in title in any instrument or
document constituting a Permitted Encumbrance and will not suffer or permit to
exist any default to occur thereunder. The Mortgagor will, at its expense,
promptly deliver to the Mortgagee a copy of each notice or other communication
received by it by which any holder of any Permitted Encumbrance purports to
exercise any of its rights or affect any of its obligations with respect
thereto, together with a copy of any reply by the Mortgagor thereto.

        (p) New York Lien Law Requirements. The Mortgagor will receive any
advances secured hereby, and will hold the right to receive such advances, as a
trust fund to be applied first for the purpose of paying the cost of the
improvement and will apply the same first to payment of the cost of the
improvement before using any part of the total of such advances for any other
purpose. The covenants of this subsection (p) are made subject to and in
compliance with the trust fund provisions of Section 13 of the Lien Law of the
State of New York.

                                       16
<PAGE>   18

        (r) Management. The Mortgagor shall cause the Real Property and the
Improvements to be managed at all times by a manager satisfactory to the
Mortgagee and pursuant to a management agreement in form and substance
satisfactory to the Mortgagee.

        (s) Environmental Provisions.

                (A) The Mortgagor represents, warrants and covenants to the
        Mortgagee as follows: (i) the Mortgaged Property will not and, to the
        best of the Mortgagor's knowledge, do not, contain any Hazardous
        Materials except in compliance with all applicable Hazardous Materials
        Law; and (ii) (I) the Mortgaged Property and any buildings now or
        hereafter located thereon are not now being used, nor have ever been
        used, and will not, while the Mortgagor or any affiliate thereof is the
        owner or lessee of the Mortgaged Property or any portion thereof, be
        used, for any activities involving, directly or indirectly, the use,
        handling, generation, treatment, storage, transportation, removal,
        remediation, release or disposal of any Hazardous Materials, and (II) to
        the best knowledge of the Mortgagor after due inquiry, there has never
        been any discharge of any Hazardous Materials (1) upon or at the
        Mortgaged Property, without regard to the source or origin of such
        discharge, or (2) from the Mortgaged Property into or onto any lands,
        surface waters or ground waters or air space adjacent to or in the
        vicinity of the Mortgaged Property; and (iii) neither the Mortgaged
        Property nor the Mortgagor are subject to any existing or pending
        proceeding, investigation or inquiry by any Governmental Authority or
        any sanction or remedial obligation imposed under any applicable
        Hazardous Materials Law, and no such proceeding, investigation, inquiry,
        sanction or remedial obligation has been threatened by any such
        Governmental Authority.

                (B) The Mortgagor shall comply with any and all Hazardous
        Materials Law, shall pay immediately when due the costs of removal of
        any such Hazardous Material if required by any Hazardous Materials Law
        and shall keep the Mortgaged Property free of any lien imposed pursuant
        to such Hazardous Materials Law. The Mortgagor covenants that the
        Mortgaged Property and any buildings now or hereafter located thereon,
        will not, while the Mortgagor is the owner or operator of all or a
        portion thereof, be used in violation of any Hazardous Materials Law. In
        the event the Mortgagor fails to comply with this section, after notice
        to the Mortgagor and the expiration of the earlier of (i) applicable
        cure period hereunder, or (ii) the cure period permitted under the
        applicable Hazardous Materials Law, the Mortgagee may declare this
        Mortgage to be in default and/or remove, or cause the removal of, the
        Hazardous Materials and the cost of such removal shall be paid by the
        Mortgagor as additional interest hereunder and secured hereby.

        SECTION 6. Additional Provisions Concerning the Mortgaged Property.

        (a) To the extent permitted by Applicable Law, this Mortgage shall be
deemed to be a security agreement and a fixture filing, as such terms are
defined under the UCC, and the Mortgagor hereby authorizes the Mortgagee to
file, without the signature of the Mortgagor

                                       17
<PAGE>   19

where permitted by law, one or more financing or continuation statements, and
amendments thereto, relating to the Mortgaged Property.

        (b) The Mortgagor hereby irrevocably appoints the Mortgagee the
Mortgagor's attorney-in-fact and proxy, with full authority in the place and
stead of the Mortgagor and in the name of the Mortgagor or otherwise, from time
to time in the Mortgagee's discretion, to take any action and to execute,
acknowledge and deliver any document or instrument which the Mortgagee may deem
necessary or advisable to accomplish the purposes of this Mortgage, including,
without limitation, (i) to obtain, adjust and compromise claims for any
insurance required to be paid to the Mortgagee pursuant to Section 5(f) hereof,
(ii) to collect any awards or other compensation required to be paid to the
Mortgagee pursuant to Section 5(i) hereof as a result of any condemnation or
other taking (or purchase in lieu thereof), and to give proper receipts and
acquittances therefor, (iii) to ask, demand, collect, sue for, recover,
compound, receive and give acquittance and receipts for moneys due and to become
due under or in respect of any of the Mortgaged Property, including, without
limitation, all rents, issues and profits, (iv) to receive, indorse, and collect
any drafts or other instruments, documents and chattel paper in connection with
clauses (i), (ii) or (iii) above, (v) to convey, assign, transfer and deliver
the Mortgaged Property pursuant to the terms hereof, and (vi) to file any claims
or take any action or institute any proceedings which the Mortgagee may deem
necessary or desirable for the collection of any of the Mortgaged Property or
otherwise to enforce the rights of the Mortgagee with respect to any of the
Mortgaged Property, and this power, being coupled with an interest, shall be
irrevocable so long as this Mortgage remains in effect.

        (c) If the Mortgagor fails to perform any agreement contained herein,
the Mortgagee may itself perform, or cause performance of, such agreement or
obligation, and the expenses of the Mortgagee incurred in connection therewith,
together with interest thereon, shall be payable by the Mortgagor pursuant to
Section 8 hereof.

        (d) The powers conferred on the Mortgagee hereunder are solely to
protect its interest in the Mortgaged Property and shall not impose any duty
upon it to exercise any such powers. Except for the safe custody of any of the
Mortgaged Property in its possession and the accounting for moneys actually
received by it hereunder, the Mortgagee shall have no duty as to the Mortgaged
Property or as to the taking of any necessary steps to preserve rights against
prior parties or any other rights pertaining to the Mortgaged Property.

        (e) THE MORTGAGOR HEREBY WAIVES TRIAL BY JURY AND ALL RIGHT TO HAVE THE
MORTGAGED PROPERTY MARSHALLED UPON ANY FORECLOSURE HEREOF. The Mortgagor further
agrees that it will not at any time (i) claim or demand or be entitled to any
credit against the Obligations for so much of the Taxes assessed against any of
the Mortgaged Property as is equal to the tax rate applied to the amount due on
this Mortgage or any part thereof, and no deductions shall otherwise be made or
claimed from the taxable value of any of the Mortgaged Property by reason of
this Mortgage or the Obligations secured hereby; (ii) insist upon, or plead, or
in any manner whatever claim or take any benefit or advantage of any stay or
extension or moratorium law, or any exemption from execution or sale of any of
the Mortgaged Property, which may affect the covenants and terms of performance
of this Mortgage; (iii) claim, take or insist upon any benefit or advantage of
any law providing for

                                       18
<PAGE>   20

the valuation or appraisal of any of the Mortgaged Property prior to any sale(s)
thereof made pursuant to the terms hereof, or pursuant to the decree, judgment
or order of any court of competent jurisdiction, or hinder, delay or impede the
execution of any power herein granted or delegated to the Mortgagee, but will
permit the execution of every power as though no such law had been enacted; or
(iv) after any such sale(s), claim or exercise any statutory right to redeem any
of the property so sold, and the Mortgagor hereby waives any such statutory
right. Upon the occurrence and during the continuance of any Event of Default or
immediately upon the commencement of any action, suit or other legal proceedings
by the Mortgagee to obtain judgment for any of the Obligations, or of any other
nature in aid of the enforcement of this Mortgage or any other Loan Document,
the Mortgagor will (A) waive the issuance and service of process and enter its
voluntary appearance in such action, suit or proceeding, and (B) if required by
the Mortgagee, consent to the appointment of a custodian, receiver, liquidator
or trustee of the Mortgagor or of any of its property (it being agreed by the
Mortgagor that Mortgagee shall have the right to such appointment whether or not
the Mortgagor shall consent thereto), and notwithstanding the appointment of any
such custodian, receiver, liquidator or trustee, the Mortgagee shall have the
right, but not the obligation, to retain possession and control of all of the
Mortgaged Property.

        (f) No recovery of any judgment by the Mortgagee and no levy of an
execution under any judgment upon any of the Mortgaged Property or any other
property of the Mortgagor shall in any way affect the Lien of this Mortgage or
any rights or remedies of the Mortgagee hereunder.

        (g) In the event that the Mortgaged Property is sold and the Mortgagee
enters into an agreement with the then owner of the Mortgaged Property extending
the time of payment of any of the Obligations, or otherwise modifying the terms
hereof, the Mortgagor shall continue to be liable for the Obligations according
to the tenor of any such agreement unless expressly released and discharged in
writing by the Mortgagee.

        (h) The Mortgagee shall have the right to appear in and defend any
action or proceeding, in the name and on behalf of the Mortgagor which the
Mortgagee, in its discretion, feels may adversely affect the Mortgaged Property
or this Mortgage. The Mortgagee shall also have the right to institute any
action or proceeding which the Mortgagee, in its discretion, feels should be
brought to protect its interest in the Mortgaged Property or its rights
hereunder.

        (i) Notwithstanding anything to the contrary contained in this Mortgage,
the assignment, pledge and mortgaging of all insurance policies, unearned
premiums thereon, eminent domain awards and all proceeds of any thereof and the
right to apply any thereof in accordance with the terms of this Mortgage shall
survive any foreclosure of this Mortgage or any sale of any of the Mortgaged
Property pursuant to the power of sale.

        (j) The Mortgagor acknowledges that it has received a true copy of this
Mortgage and the other Loan Documents in existence as of the date hereof.

        (k) All of the agreements contained herein may be enforced by a receiver
of any of the Mortgaged Property.

                                       19
<PAGE>   21

        SECTION 7. Events of Default; Remedies. Without limiting the generality
of Section 1 hereof, any event or condition which constitutes an Event of
Default under the Financing Agreement or any other Loan Documents shall
constitute an "Event of Default" under this Mortgage. If any Event of Default
shall have occurred and be continuing:

        (a) The Mortgagee may exercise in respect of the Mortgaged Property, in
addition to other rights and remedies provided for herein or otherwise available
to it, all of the rights and remedies of a secured party on default under the
UCC (whether or not the UCC applies to the Mortgaged Property), and also may
without notice or demand, as it deems advisable to protect and enforce its
rights against the Mortgagor and in and to the Mortgaged Property, take the
following actions, each of which may be pursued concurrently or otherwise, at
such time and in such order as the Mortgagee, in its sole discretion, may
determine, without impairing or otherwise affecting the other rights and
remedies of the Mortgagee: (i) declare the entire unpaid Indebtedness to be
immediately due and payable, and exercise all other rights it may have under any
Loan Document; (ii) enter into or upon the Mortgaged Property, either personally
or by its agents or nominees and dispossess the Mortgagor and its agents and
servants therefrom and thereupon the Mortgagee may (A) use, operate, manage,
control, insure, maintain, repair, restore and otherwise deal with all of the
Mortgaged Property and conduct business thereat; (B) complete any construction
on the Mortgaged Property in such manner and form as the Mortgagee, in its sole
discretion, deems advisable; (C) make alterations, additions, renewals,
replacements and improvements to or on the Mortgaged Property; and (D) exercise
all rights and powers of the Mortgagor with respect to the Mortgaged Property,
whether in the name of the Mortgagor or otherwise, including, without
limitation, the right to make, cancel, enforce or modify leases, obtain and
evict tenants, and demand, sue for, collect and receive all earnings, revenues,
rents, issues, profits and other income of the Mortgaged Property; (iii)
institute proceedings for the complete foreclosure of this Mortgage, in which
case the Mortgaged Property may be sold for cash, on credit or for future
delivery, in one or more parcels; (iv) with or without entry and, to the extent
permitted and pursuant to the procedures provided by applicable law, institute
proceedings for the partial foreclosure of this Mortgage for the Obligations
then due and payable, subject to the Lien of this Mortgage continuing unimpaired
and without loss of priority so as to secure the balance of the Obligations; (v)
sell any of the Mortgaged Property and all estate, claim, demand, right, title
and interest of the Mortgagor therein and rights and equities of redemption and
statutory rights of redemption thereof, pursuant to the power of sale or
otherwise, at one or more sales, in one or more parcels, at such times and
places, upon such terms and after such notice thereof as may be required or
permitted by law, and in the event of a sale, by foreclosure or otherwise, of
less than all of the Mortgaged Property, this Mortgage shall continue as a Lien
on the remaining portion of the Mortgaged Property; (vi) institute an action,
suit or proceeding in equity for the specific performance of any agreement
contained herein or in any other Loan Document to which the Mortgagor is a
party; (vii) recover judgment on any such other Loan Document either before,
during or after or in lieu of any proceedings for the enforcement of this
Mortgage; and (viii) apply for and obtain the appointment of a custodian,
trustee, receiver, liquidator or conservator of the Mortgaged Property, without
regard for the adequacy of the security for the Obligations and without regard
for the solvency of the Mortgagor or any Guarantor of the Obligations or any
other Person.

                                       20
<PAGE>   22

        (b) The Mortgagee shall not be obligated to make any sale of any of the
Mortgaged Property regardless of notice of sale having been given. The Mortgagee
may adjourn any public or private sale from time to time by announcement at the
time and place fixed therefor, and, except as otherwise provided by Applicable
Law, such sale may without further notice be made at the time and place to which
it was so adjourned. In any sale made by virtue of this Mortgage (whether made
under the power of sale herein granted or by virtue of judicial proceedings or
of a judgment or decree of foreclosure and sale), the Mortgagee may bid for and
acquire any of the Mortgaged Property and in lieu of paying cash therefor may
make settlement for the purchase price by crediting upon the Indebtedness the
net sale price after deducting therefrom the expenses of the sale and any other
sums payable pursuant to Section 8 hereof. The Mortgagee shall not be required
to take possession of any of the Mortgaged Property prior to the sale thereof or
to deliver possession of the Mortgaged Property to the purchaser at such sale.
Any such sale made by virtue of this Mortgage shall operate to divest all of the
estate, right, title, interest, claim and demand whatsoever, whether at law or
in equity, of the Mortgagor in and to the properties and rights so sold, and
shall be a perpetual bar both at law and in equity against the Mortgagor and
against any Persons claiming the same, or any part thereof, either from, through
or under the Mortgagor.

        (c) If the Mortgagor is the occupant of any of the Mortgaged Property,
it will immediately surrender possession of the space so occupied to the
Mortgagee, and if the Mortgagor is permitted to remain in possession, the
possession shall be as a month-to-month tenant of the Mortgagee and, on demand,
the Mortgagor will pay to the Mortgagee monthly, in advance, a reasonable rental
for the space so occupied and in default thereof the Mortgagor may be
dispossessed by the usual summary proceedings.

        (d) Any cash held by the Mortgagee as part of the Mortgaged Property and
all cash proceeds received by the Mortgagee in respect of any sale of,
collection from, or other realization upon, all or any part of the Mortgaged
Property may, in the discretion of the Mortgagee, be held by the Mortgagee as
collateral for, and/or then or at any time thereafter applied (after payment of
any amounts payable to the Mortgagee pursuant to Section 8 hereof) in whole or
in part by the Mortgagee against, all or any part of the Obligations in such
order as the Mortgagee shall elect. Any surplus of such cash or cash proceeds
held by the Mortgagee and remaining after payment in full of all of the
Obligations shall be paid over to the Mortgagor or to such Person as may be
lawfully entitled to receive such surplus.

        (e) In the event that the proceeds of any such sale, collection or
realization are insufficient to pay all amounts to which the Mortgagee is
legally entitled, the Mortgagor shall be liable for the deficiency, together
with interest thereon at the highest rate specified in the Financing Agreement
for interest on overdue principal or such other rate as shall be fixed by
Applicable Law, together with the costs of collection and the reasonable fees of
any attorneys employed by the Mortgagee to collect such deficiency.

        (f) If, at any time prior to foreclosure sale, the Mortgagor or any
other Person tenders payment of the amount necessary to satisfy the Obligations,
the same shall be deemed to be a voluntary prepayment, in which case such
payment must include the premium required under any applicable prepayment
provisions contained in the Loan Documents, if any. This provision

                                       21
<PAGE>   23

shall be of no force or effect if at the time that such tender of payment is
made, the Mortgagor has the right under this Mortgage or any Loan Documents to
prepay the Indebtedness without penalty or premium.

        (g) Mortgagee shall have the right, without limiting any other rights or
remedies Mortgagee may have hereunder or at law, to sell the Mortgaged Property
pursuant to Article 14 of the New York Property Actions and Proceedings Law, as
the same may be amended from time to time.

        SECTION 8. Indemnity and Expenses.

        (a) The Mortgagor agrees to indemnify the Mortgagee from and against any
and all claims, losses and liabilities growing out of or resulting from this
Mortgage (including, without limitation, the defense or enforcement of the Lien
of this Mortgage) or otherwise relating to any proceeding alleging a violation
by the Mortgagor or the Mortgagee of any law, except claims, losses or
liabilities resulting solely and directly from the Mortgagee's gross negligence
or willful misconduct.

        (b) The Mortgagor will upon demand pay to the Mortgagee the amount of
any and all costs and expenses, including the fees and disbursements of the
Mortgagee's counsel and of any experts and agents, which the Mortgagee may incur
in connection with (i) the administration of this Mortgage, (ii) the custody,
preservation, use, operation or management of, or the sale of, collection from,
or other realization upon, any of the Mortgaged Property, (iii) the exercise or
enforcement of any of the rights of the Mortgagee hereunder, or (iv) the failure
by the Mortgagor to perform or observe any of the provisions hereof, together
with interest thereon, to the extent permitted by Applicable Law, at the default
rate specified in Section 2.04(c) of the Financing Agreement, from the time such
payments are made by the Mortgagee to the date of reimbursement by the
Mortgagor. All such costs and expenses, together with interest thereon, shall be
added to and included in the Obligations and shall be secured by this Mortgage.

        (c) Notwithstanding any notice or grace period contained herein or in
any other Loan Document and in addition to any other payments required hereunder
or in any other Loan Document, in the event any payment provided for herein
shall become overdue for a period in excess of 10 days, the Mortgagor will pay
on demand a late charge of four cents ($.04) for each dollar so overdue for the
purpose of defraying the expenses incident to handling such delinquent payment.

        SECTION 9. Notices, Etc. Except as otherwise set forth herein, all
notices and other communications under this Mortgage shall (a) be in writing
(which shall include communications by telecopy) and (b) be (i) sent by
registered or certified mail, postage prepaid, return receipt requested, or by
telecopier, or (ii) delivered by hand, (c) be given, at the following respective
addresses and telecopier or telephone numbers and to the attention of the
following Persons:

        (i) if the Mortgagor, to it at:

                                       22
<PAGE>   24

        Decora, Incorporated
        c/o Decora Industries, Inc.
        1 Mill Street
        Fort Edward, New York  12828-1727
        Attention:  Chief Financial Officer

        Telephone:   (518) 747-6255
        Telecopier:  (518) 747-5089

        with a copy to:

        Miller & Holguin
        1801 Century Park East
        Suite 700
        Los Angeles, California 90067
        Attention:  Howard J. Unterberger, Esq.
        Telephone:  310-556-1990
        Telecopier: 310-557-2205

        (ii) if to the Mortgagee, to it at:

        Ableco Finance LLC
        450 Park Avenue
        28th Floor
        New York, New York  10022
        Attention:  Kevin P. Genda
        Telephone:  (212) 891-2100
        Telecopier: (212) 759-5305

        with a copy to

        c/o Schulte Roth & Zabel LLP
        900 Third Avenue
        New York, New York  10022
        Attention:  Frederic L. Ragucci, Esq.
        Telephone:  (212) 756-2000
        Telecopier: (212) 593-5595

or as to any such Person at such other address as such Person may hereafter
specify in a written notice to each such other Person complying as to delivery
with the terms of this Section 9 and specifically captioned "Notice of Change of
Address", and (d) be effective or deemed delivered or furnished (i) if given by
mail, three (3) days after such communication is deposited in the mail,
addressed as above provided, (ii) if given by telecopier, when such
communication is transmitted to the appropriate number determined as above
provided in this Section 9 and the appropriate answer-back is received or
receipt is otherwise acknowledged, and (iii) if given by hand delivery,

                                       23
<PAGE>   25

when left at the address of the addressee addressed as above provided, except
that materials furnished to the Mortgagee shall not be deemed furnished until
received.

        SECTION 10. Miscellaneous.

        (a) Any term, covenant, agreement or condition of this Mortgage may be
amended or waived, and any departure therefrom may be consented to, if, but only
if, such amendment, waiver or consent is in writing and signed by the Mortgagee
and, in the case of any amendment, the Mortgagor. Unless otherwise specified in
such waiver or consent, a waiver or consent given hereunder shall be effective
only in the specific instance and for the specific purpose for which given.

        (b) The rights and remedies of the Mortgagee, hereunder or under any
other Loan Document shall be cumulative and not exclusive of any rights or
remedies which the Mortgagee would otherwise have, whether in law or equity, and
no failure or delay by the Mortgagee in exercising any right shall operate as a
waiver thereof, nor shall any single or partial exercise of any power or right
preclude its other or further exercise or the exercise of any other power or
right. The rights and remedies of the Mortgagee provided herein or in any other
Loan Document against any Person are not conditional or contingent upon any
attempt by the Mortgagee to exercise any of its rights and remedies under any
other Loan Document against such party or against any other Person.

        (c) Any provision of this Mortgage which is prohibited or unenforceable
in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent
of such prohibition or unenforceability without invalidating the remaining
provisions hereof or thereof or affecting the validity or enforceability of such
provision in any other jurisdiction. To the extent permitted by Applicable Law,
the Mortgagor hereby waives any provision or law which renders any provision
hereof prohibited or unenforceable in any respect.

        (d) This Mortgage shall create a continuing Lien in the Mortgaged
Property and shall (i) remain in full force and effect until the payment in full
or release of the Obligations, and (ii) be binding on the Mortgagor and its
successors and assigns and shall inure, together with all rights and remedies of
the Mortgagee hereunder, to the benefit of the Mortgagee and its successors,
transferees and assigns. Without limiting the generality of clause (ii) of the
immediately preceding sentence, the Mortgagee may from time to time assign to
one or more other Persons all or any part of or otherwise grant participations
to one or more other Persons in all or any part of the Loans and the Notes, and
the Mortgagee may assign or otherwise transfer any of its rights hereunder or
under any other Loan Document to any other such Person, and the holder of any
such assignment or participation, if the assignment or participation agreement
so provides, shall, with respect to its assignment or participation, be entitled
to all of the rights and benefits of the Mortgagee hereunder or under the other
Loan Documents. The Mortgagee may, in connection with any such assignment or
participation or proposed assignment or participation, disclose any non-public
information relating to the Mortgagor furnished by or on behalf of the Mortgagor
or any of its Affiliates to the Mortgagee. None of the rights or obligations of
the Mortgagor hereunder or any interest of the Mortgagor herein may be assigned
or otherwise transferred without the prior written consent of the Mortgagee, and
no such attempted assignment

                                       24
<PAGE>   26

or transfer of any such obligation shall relieve the Persons therefrom unless
the Mortgagee shall have consented to such release in writing specifically
referring to the obligations from which the Mortgagor is to be released.

        (e) For the purpose of this Mortgage, the term "Mortgagor" shall be
deemed to refer to any subsequent owner of any of the Mortgaged Property and any
successor, executor, legal representative or assign thereof. If there is more
than one Mortgagor hereunder, all of their undertakings hereunder shall be
deemed joint and several.

        (f) Upon the satisfaction in full of the Obligations, (i) this Agreement
and the Lien created hereby shall terminate and all rights to the Collateral
Check defined term. shall revert to the Mortgagor, and (ii) the Mortgagee will,
upon the Mortgagor's request and at the Mortgagor's expense, (A) return to the
Mortgagor such of the Collateral as shall not have been sold or otherwise
disposed of or applied pursuant to the terms hereof, and (B) execute and deliver
to the Mortgagor such documents as the Mortgagor shall reasonably request to
evidence such termination.

        (g) In the event of the passage after the date of this Mortgage of any
law of any governmental authority having jurisdiction hereof or of the Mortgaged
Property, deducting from the value of land for the purpose of taxation,
affecting any Lien thereon or changing in any way the laws for the taxation of
deeds of trust or mortgages or debts secured by deeds of trust or mortgages for
Federal, state or local purposes, or the manner of the collection of any such
Taxes, so as to affect this Mortgage, the Mortgagor shall promptly pay to the
Mortgagee, on demand, all Taxes, costs and charges for which the Mortgagee is or
may be liable as a result thereof; provided, however, that if said payment shall
be prohibited by law, render any of the Obligations usurious or subject the
Mortgagee to any penalty or forfeiture, then and in such event the Indebtedness
shall, at the option of the Mortgagee, be immediately due and payable.

        (h) This Mortgage and the other Loan Documents to which the Mortgagor is
a party embody the entire agreement between the Mortgagor and the Mortgagee
relating to the subject matter hereof and supersede all prior agreements,
representations and understandings, if any, relating to the subject matter
hereof.

        (i) Section headings are included for convenience of reference only and
shall not constitute a part of this Mortgage for any other purpose.

        (j) The information set forth on the cover hereof is incorporated
herein.

        (k) This Mortgagee shall be governed by and construed in accordance with
the law of the State of New York.

        (l) Mortgagor represents that this Mortgage does not encumber property
principally improved or to be improved by one or more structures containing in
the aggregate not more than six (6) residential dwelling units.

        (m) Pursuant to Section 13 of the lien law of the State of New York,
Mortgagor shall receive the advances secured hereby and shall hold the right to
receive such

                                       25
<PAGE>   27

advances as a trust fund to be applied first for the purpose of paying the cost
of any improvement on the Mortgaged Property and shall apply such advances first
to the payment of the cost of any such improvements on the Mortgaged Property
before using any part of the total of the same for any other purpose. Mortgagor
will indemnify and hold harmless Mortgagee from and against any loss, cost,
expense or liability, including, without limitation, any judgments, attorneys'
fees and expenses, costs of appeal bonds and printing costs, arising out of or
relating to any proceeding instituted by any claimant alleging a violation by
Mortgagor or Mortgagee of any applicable lien law, including, without
limitation, the Lien Law of the State of New York.

        (n) Except as otherwise expressly provided herein, Mortgagee shall have
all of the rights against lessees of the Secured Property as set forth in
Section 291(f) of the Real Property Law of the State of New York.

        (o) In the event of any conflict between this Mortgage and the Financing
Agreement, the Financing Agreement shall control, except where and to the extent
this Mortgage expressly provides that this Mortgage controls.

        (p) The covenants and conditions contained herein, other than those
included in the New York Statutory Short Form of Mortgage, shall be construed as
affording to Mortgagee rights additional to, and not exclusive of, the rights
conferred under the provisions of Section 254 of the Real Property Law of the
State of New York.

        (q) The monies paid to amortize the Loans (as defined in the Loan
Agreement) shall be applied first to repay that portion of the Indebtedness not
secured by the Mortgaged Property.

        (r) This Mortgage and that certain Mortgage, Security Agreement and
Assignment of Leases and Rents, of even date herewith, between Mortgagor and
Mortgagee, securing the original principal amount of $2,225,000, are intended to
be recorded simultaneously and each is intended to, and shall, have equal
priority of lien with the other.

                                       26
<PAGE>   28

        IN WITNESS WHEREOF, the Mortgagor has caused this Mortgage to be
executed and delivered by its officer thereunto duly authorized, as of the date
of the acknowledgment herein below taken, to be effective as of the date first
written above.

                                              DECORA, INCORPORATED

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

                                       27

<PAGE>   29

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

On the 2nd day of May, 2000 before me, the undersigned, personally appeared
Robert L. MacDonald 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, or the
person upon behalf of which the individual acted, executed the instrument.

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

<PAGE>   30

                                    Exhibit A

                                Legal Description<PAGE>   1
                                                                   EXHIBIT 10.77

                        ENVIRONMENTAL INDEMNITY AGREEMENT

            ENVIRONMENTAL INDEMNITY AGREEMENT, dated as of May 2, 2000 by
DECORA, INCORPORATED, a Delaware corporation ("Decora"), with its chief
executive office at One Mill Street, Fort Edward, New York 12828-1727 and DECORA
INDUSTRIES, INC., a Delaware corporation ("Parent"), with its chief executive
office at One Mill Street, Fort Edward, New York 12828-1727 (Decora and Parenta
sometimes being hereinafter referred to each individually as an "Indemnitor" and
collectively as the "Indemnitors"), in favor of ABLECO FINANCE LLC, a Delaware
limited liability company, with its chief executive office located at 450 Park
Avenue, 28th Floor, New York, New York 10022 ("Indemnitee"), individually and as
collateral agent (in such capacity, the "Collateral Agent") for the lenders
which are now or are hereafter party to the Financing Agreement (as defined
below).

                              W I T N E S S E T H:

            WHEREAS, Decora is the owner and operator of certain real property,
together with the buildings and improvements located thereon, more particularly
described on Exhibit A attached hereto (collectively, the "Premises");

            WHEREAS, the Indemnitors have requested that the Lenders (as
hereinafter defined) make loans in an aggregate amount not to exceed $27,000,000
pursuant to and in accordance with a Financing Agreement, dated as of May 2,
2000, among the Indemnitors, the Lenders, the Collateral Agent and The CIT
Group/Business Credit, Inc., as administrative agent for the Lenders (as the
same may be amended from time to time, the "Financing Agreement") to be secured,
among other things, by a mortgage on the Premises;

            WHEREAS, the Indemnitors will derive substantial benefit from the
consummation of the transactions contemplated under the Financing Agreement;

            WHEREAS, the Lenders have required, as a condition to the execution
and delivery by the Lenders of the Financing Agreement and the other documents
to be executed and delivered in connection with or pursuant to the Financing
Agreement, including, without limitation, the Mortgage and other Loan Documents
and the consummation of the transactions contemplated under the Financing
Agreement, that the Indemnitors execute and deliver this Indemnity Agreement
with respect to the Premises and the Properties (as defined below); and

            WHEREAS, the Indemnitors wish to execute and deliver this Indemnity
Agreement, to induce the Lenders to execute and deliver the Financing Agreement
and the other Loan Documents and to consummate the transactions contemplated
under the Financing Agreement.

            NOW, THEREFORE, in consideration of the foregoing, the mutual
agreements hereinafter set forth, and other valuable consideration, the receipt
and sufficiency of which are hereby acknowledged, the Indemnitors hereby agree
as follows:

<PAGE>   2

SECTION 1. Defined Terms.

            (a) Each capitalized term used and not separately defined herein
shall have the meaning ascribed to such term in the Financing Agreement.

            (b) The following terms when used herein shall have the following
meanings when used herein:

            "Collateral" shall have the meaning assigned to that term in Section
1.01 of the Financing Agreement.

            "Default Rate" means the rate at which the Obligations accrue
interest as set forth in Section 2.04(c) of the Financing Agreement.

            "Environmental Action" means any complaint, summons, citation,
notice, directive, order, claim, litigation, investigation, proceeding,
judgment, letter or other communication from any Governmental Authority, or any
third party involving (i) a Hazardous Discharge (x) from or onto any of the
Properties or (y) from or onto any facilities which received Hazardous Materials
from any Indemnitor and/or any of the Affiliates or (ii) any violation of any
Hazardous Materials Laws at any of the Properties.

            "Environmental Liabilities and Costs" means any monetary
obligations, losses, liabilities (including strict liability), damages, punitive
damages, consequential damages, treble damages, costs and expenses (including
all reasonable out-of-pocket fees, disbursements and expenses of counsel,
out-of-pocket expert and consulting fees and out-of-pocket costs for
environmental site assessments, remedial investigation and feasibility studies),
fines, penalties, sanctions and interest incurred as a result of any
Environmental Action filed by any Governmental Authority or any third party
which relate to any violations of Hazardous Materials Laws, Remedial Actions,
Releases or threatened Releases of Hazardous Materials from or onto any property
presently or formerly owned by Indemnitors or predecessors in interest, or any
facility which received Hazardous Materials generated by Indemnitors or
predecessors in interest

            "Environmental Lien" means any lien, security interest, charge or
other encumbrance for Environmental Liabilities and Costs incurred by a
Governmental Authority.

            "Governmental Authority" means the United States of America, any
State thereof, any political subdivision of either of them, any agency,
department, commission, board, bureau or instrumentality of any of them, or any
quasi-public agency established by any of the foregoing including, without
limitation, any insurance rating organization or board of fire underwriters
which exercises jurisdiction over the Properties.

            "Hazardous Materials" shall mean (a) substances that are defined or
listed in, or otherwise classified pursuant to, any applicable laws or
regulations as "hazardous substances," "hazardous materials," "hazardous
wastes," "toxic substances," or any other formulation intended to define, list,
or classify substances by reason of deleterious properties such as ignitability,
corrosivity, reactivity, carcinogenicity, reproductive toxicity, or "EP
toxicity", (b) oil, petroleum, or petroleum derived substances, natural gas,
natural gas liquids, synthetic gas,

                                       2
<PAGE>   3

drilling fluids, produced waters, and other wastes associated with the
exploration, development, or production of crude oil, natural gas, or geothermal
resources, (c) any flammable substances or explosives or any radioactive
materials and (d) asbestos in any form or electrical equipment that contains any
oil or dielectric fluid containing levels of polychlorinated biphenyls in excess
of 50 parts per million.

            "Hazardous Materials Law" includes the Comprehensive Environmental
Response, Compensation and Liability Act ("CERCLA"), 42 U.S.C. 9601 et seq., as
amended; the Resource Conservation and Recovery Act ("RCRA"), 42 U.S.C. 6901 et
seq., as amended; the Clean Air Act ("CAA"), 42 U.S.C. 7401 et seq., as amended;
the Clean Water Act ("CWA"), 33 U.S.C. 1251 et seq., as amended; the
Occupational Safety and Health Act ("OSHA"), 29 U.S.C. 655 et seq., and any
other applicable federal, state, local or municipal laws, statutes, regulations,
rules or ordinances imposing liability or establishing standards of conduct for
protection of the environment.

            "Lenders" shall have the meaning ascribed to such term in the
Financing Agreement.

            "Properties" shall mean, collectively, the Premises and any other
real properties (including all buildings located thereon) previously or
hereafter owned, leased or operated, from time to time, by the Indemnitors or
predecessors in interest.

            "Release" means any spilling, leaking, pumping, emitting, emptying,
discharging, injecting, escaping, leaching, dumping, or disposing (including the
abandonment or discarding of barrels, containers or other closed receptacles
containing Hazardous Materials) of Hazardous Materials into the environment in
violation of Hazardous Materials Laws.

            "Remedial Action" means all actions taken to clean up, remove,
remediate, contain, treat, monitor, assess, evaluate or in any other way address
Hazardous Materials in the indoor or outdoor environment; prevent or minimize a
Release or threatened Release of Hazardous Materials so they do not migrate or
endanger or threaten to endanger public health or welfare or the indoor or
outdoor environment; perform pre-remedial studies and investigations and
post-remedial operation and maintenance activities; or any other actions
authorized by 42 U.S.C. 9601.

SECTION 2. Representations; Warranties; Covenants; and Indemnities.

            (a) Representations and Warranties. Indemnitors hereby represent and
warrant to the Indemnitee as follows:

                (i) except as disclosed on Schedule "A" hereto, (A) the
Indemnitors have obtained all required permits, approvals, authorizations and
licensees which are necessary for their operations, and all such permits,
approvals, authorizations and licenses are in full effect and the Indemnitors
are in compliance with all terms and conditions of such permits, approvals,
authorizations and licenses, (B) none of the Properties are now being used, nor
have ever been

                                       3
<PAGE>   4

used, for any activities involving, directly or indirectly, the use, handling,
generation, treatment, storage, transportation, release or disposal of any
Hazardous Materials except in full compliance with Hazardous Materials Laws, (C)
the Properties of the Indemnitors are in compliance with all Hazardous Materials
Laws, (D) there has been no Release at any of the Properties nor at any disposal
or treatment facility which received Hazardous Materials generated by the
Indemnitors or any predecessors in interest or title, (E) no Environmental
Actions have been asserted against the Indemnitors or any predecessors in
interest or title nor do the Indemnitors have knowledge or notice of any
threatened or pending Environmental Action against the Indemnitors or any
predecessors in interest or title, (F) no Environmental Actions have been
asserted against any facilities that may have received Hazardous Materials
generated by the Indemnitors or any predecessors in interest or title.

                (ii) none of the Properties is subject to any existing, pending
or threatened Environmental Action.

            (b) Covenants Relating to the Properties. The Indemnitors hereby
covenant and agree as follows:

                (i) that the Indemnitors shall (A) comply with the requirements
of all Hazardous Materials Laws that apply to the Properties from time to time
and provide to the Collateral Agent all documentation in connection with such
compliance that the Collateral Agent may reasonably request; and not cause or
permit the Collateral or any of the Properties to be used for any activities
involving, directly or indirectly, the use, generation, treatment, storage,
release or disposal of any Hazardous Materials except in full compliance with
Hazardous Materials Laws, (B) pay immediately when due the costs required to
comply with any Hazardous Materials Laws, and (C) keep all of the Properties
free of any Environmental Lien imposed pursuant to any Hazardous Materials Law
from time to time.

                (ii) that the Indemnitors shall not install or permit to be
installed on any of the Properties any asbestos-containing materials ("ACM") and
shall promptly abate, encapsulate or remove any ACM existing at any of the
Properties which is or becomes damaged or friable, at the Indemnitors' sole cost
and expense.

                (iii) that the Indemnitors shall give the Collateral Agent and
its agents and employees access to each of the Properties to monitor the
Indemnitors' compliance with their obligations under this Indemnity Agreement.

                (iv) that if the Indemnitors shall fail to comply with their
obligations under this Indemnity Agreement, the Financing Agreement or any of
the other Loan Documents relating to any Hazardous Materials or the curing of
any violation of any Hazardous Materials Law prior to the expiration of the cure
period permitted under Hazardous Materials Law, the Collateral Agent shall have
the right, but not the obligation, to take Remedial Actions which the Collateral
Agent, in its absolute discretion, deems to be necessary to comply with the
Hazardous Materials Law and to protect the value of its Collateral, and the
costs thereof shall be added to the obligations of the Indemnitors under this
Indemnity Agreement.

                                       4
<PAGE>   5

            (c) Indemnities. The Indemnitors shall defend (with counsel
acceptable to the Lenders) and save harmless the Collateral Agent and the
Lenders from and against any and all claims, demands, penalties, fines,
liabilities (including strict liability), settlements, damages, costs,
disbursements or expenses (including, without limitation, all costs of
attorneys' and consultants' fees and expenses, investigation and laboratory
fees, court costs and litigation expenses) and Environmental Liabilities and
Costs (collectively, the "Indemnified Matters") which may, at any time or from
time to time, be imposed upon, incurred by or asserted or awarded against the
Collateral Agent and the Lenders, by reason of, or arising from or out of:

                (i) the presence or Release of any Hazardous Materials at, on,
in, above, under or affecting all or any portion of the Properties, without
regard to the source or origin of such Release or the ownership of the
Properties at the time of the violation or Release of such Hazardous Materials;

                (ii) any Release or threatened Release from any disposal
facility which may have received Hazardous Materials generated by the
Indemnitors;

                (iii) the breach of any representation or warranty made by the
Indemnitors in Section 2(a) hereof or the breach of any covenant made by the
Indemnitors in Section 2(b) hereof;

                (iv) the commencement of any Environmental Action or existence
of violation of Hazardous Materials Laws at any of the Properties;

                (v) any acts or omissions of the Indemnitors in connection with
the performance of any Remedial Action at any of the Properties;

                (vi) the Collateral Agent's or the Lenders' enforcement (or
attempted enforcement) of any of the provisions of this Indemnity Agreement or
the assertion by the Indemnitors of any defense to its obligations hereunder;

                (vii) any personal injury (including wrongful death) or property
damage (real or personal) arising out of or related to exposure to Hazardous
Materials used, handled, generated, transported or deposited by the Indemnitors
(or any predecessors in interest or title).

            Without limiting the generality of the foregoing, the scope of the
indemnification provided to the Collateral Agent and the Lenders by this
Indemnity Agreement shall extend to and include any diminution in the value of
any of the Mortgages or other Loan Documents, as security for any or all of the
Obligations, which is caused by any of the events described in clauses (i)-(vi)
above and which is attributable to (A) a related loss of lien priority with
respect to any of the Mortgages or other Loan Documents, (B) a related decline
in the then current fair market value of any of the Properties, (C) a related
impairment of the Collateral Agent's and the Lenders' practical ability to
realize upon its rights under any or all of the Mortgages or other Loan
Documents, or (D) any other loss of value with respect to the Mortgages or other
Loan Documents which is caused, directly or indirectly, by any of the events
described in clauses (i)-(vi) above.

SECTION 3. Indemnitors' Obligations Unconditional.

                                       5
<PAGE>   6

            (a) The Indemnitors hereby agree that their obligations under this
Indemnity Agreement will be paid strictly in accordance with the terms of this
Indemnity Agreement, regardless of any law, regulation or order now or hereafter
in effect in any jurisdiction affecting any of such terms or the Loan Documents
or affecting any of the rights of the Lenders with respect thereto. The
obligations of the Indemnitors under this Indemnity Agreement shall be absolute
and unconditional irrespective of: (i) the validity, regularity or
enforceability of the Loan Documents or any other instrument or document
executed or delivered in connection therewith; (ii) any alteration, amendment,
modification, release, termination or cancellation of any Loan Document, or any
change in the time, manner or place of payment of, or in any other term in
respect of, all or any of the obligations of the Indemnitors contained in any
Loan Document; (iii) any extension of the maturity of the Obligations or any
waiver of, or consent to any departure from, any provision contained in any Loan
Document; (iv) any exchange, addition, subordination or release of, or
nonperfection of any lien on or security interest in, any collateral for the
Obligations; (v) any alteration, modification, amendment, release, termination
or cancellation of, or waiver of or consent to any departure from, any other
indemnity or guaranty given in connection with the Obligations; (vi) any
negligence by the Collateral Agent or the Lenders in the administration or
enforcement of the obligations under the Loan Documents or hereunder or any
delay in enforcing such obligations or in realizing on any collateral for such
obligations; (vii) any failure by the Collateral Agent or the Lenders to advise
the Indemnitors of adverse changes in the financial condition of the
Indemnitors, the Properties or any matters relating to the Obligations; (viii)
any sale, transfer, grant, conveyance or assignment of the Indemnitors' interest
in any of the Properties or any part thereof; (ix) any other circumstance which
might otherwise constitute a defense (legal, equitable or otherwise) available
to, or a discharge of, the Indemnitors or any other guarantor or indemnitor with
respect to the Obligations or any or all of the obligations under this Indemnity
Agreement; (x) the Collateral Agent, any of the Lenders or any affiliate thereof
at any time or in any manner participating in the management or control of,
taking possession of (whether personally, by agent or by appointment of a
receiver), or taking title to, any of the Properties or any portion thereof,
whether by foreclosure, deed in lieu of foreclosure, sale under power of sale
pursuant to the Loan Documents or otherwise; or (xi) any change, between the
date hereof and the date on which all of the obligations hereunder are paid in
full, in any laws with respect to Hazardous Materials, the effect of which may
be to make a lender or mortgagee liable in respect of any of such obligations,
notwithstanding the fact that no event, circumstance or condition of the nature
described in clause (x) above ever occurred. The Indemnitors agree that any
exculpatory language contained in any of the Loan Documents shall in no event
apply to this Indemnity Agreement, and will not prevent the Collateral Agent or
the Lenders from proceeding against the Indemnitors to enforce this Indemnity
Agreement in accordance with the terms of this Indemnity Agreement.

            (b) This Indemnity Agreement is a continuing indemnity and shall
remain in full force and effect until the satisfaction in full of all of the
obligations of the Indemnitors hereunder notwithstanding the payment in full of
the Obligations or the release or other extinguishment of any or all of the
Mortgages and/or other Loan Documents and/or any other security for the
Obligations.

                                       6
<PAGE>   7

            (c) Notwithstanding the payment in full of all of the obligations
hereunder and the payment (or performance) in full of all of the Obligations
under the Loan Documents, this Indemnity Agreement shall not terminate if any of
the following shall have occurred:

                (i) the Collateral Agent, any of the Lenders or any affiliate
thereof has at any time or in any manner participated in the management or
control of, taken possession of (whether personally, by agent or by appointment
of a receiver), or taken title to, any or all of the Properties or any portion
thereof, whether by foreclosure, deed in lieu of foreclosure, sale under power
of sale pursuant to the Loan Documents or otherwise; or

                (ii) there has been a change, between the date hereof and the
date on which all of the obligations hereunder are paid in full, in any laws,
the effect of which may be to make a lender or mortgagee liable in respect of
any of such obligations, notwithstanding the fact that no event, circumstance or
condition of the nature described in clause (i) above ever occurred.

SECTION 4. WAIVER.

THE INDEMNITORS HEREBY WAIVE (I) PROMPTNESS AND DILIGENCE; (II) NOTICE OF
ACCEPTANCE AND NOTICE OF THE INCURRENCE OF ANY OBLIGATION BY THE INDEMNITORS;
(III) NOTICE OF ANY ACTIONS TAKEN BY THE AGENT, THE LENDERS, THE INDEMNITORS OR
ANY INTERESTED PARTY UNDER ANY LOAN DOCUMENT OR ANY OTHER AGREEMENT OR
INSTRUMENT RELATING THERETO; AND (IV) ALL OTHER NOTICES, DEMANDS AND PROTESTS,
AND ALL OTHER FORMALITIES OF EVERY KIND IN CONNECTION WITH THE ENFORCEMENT OF
THE OBLIGATIONS OF THE INDEMNITORS HEREUNDER THE OMISSION OF OR DELAY IN WHICH,
BUT FOR THE PROVISIONS OF THIS SECTION 4, MIGHT CONSTITUTE GROUNDS FOR RELIEVING
THE INDEMNITORS OF THEIR OBLIGATIONS HEREUNDER; (V) THE RIGHT TO A TRIAL BY JURY
OF ANY DISPUTE ARISING UNDER, OR RELATING TO, THIS INDEMNITY AGREEMENT OR THE
LOAN DOCUMENTS; (VI) ANY REQUIREMENT THAT THE AGENT OR THE LENDERS PROTECT,
SECURE, PERFECT OR INSURE ANY SECURITY INTEREST OR LIEN IN OR ON ANY PROPERTY
SUBJECT THERETO OR THE INDEMNITY OR EXHAUST ANY RIGHT OR TAKE ANY ACTION AGAINST
THE BORROWER OR THE INDEMNITORS OR ANY OTHER PERSON OR ANY COLLATERAL AS A
PRE-CONDITION TO THE AGENT'S OR THE LENDERS' RIGHT TO ENFORCE THIS INDEMNITY
AGREEMENT IN ACCORDANCE WITH ITS TERMS. WITHOUT LIMITING THE GENERALITY OF THE
FOREGOING, THE INDEMNITORS HEREBY WAIVE ANY DEFENSE WHICH MAY ARISE BY REASON OF
(A) THE FAILURE OF THE AGENT OR THE LENDERS TO FILE OR ENFORCE ANY CLAIM AGAINST
THE ESTATE (IN BANKRUPTCY OR ANY OTHER PROCEEDINGS) OF ANY PERSON OR PERSONS, OR
(B) ANY DEFENSE BASED UPON AN ELECTION OF REMEDIES BY THE AGENT OR THE LENDERS.
THE INDEMNITORS SHALL ALSO WAIVE ANY RIGHTS OR DEFENSES THEY MAY HAVE UNDER
COMMON LAW OR HAZARDOUS MATERIALS LAW FOR

                                       7
<PAGE>   8

LIABILITY ARISING OUT OF A RELEASE OR PRESENCE OF HAZARDOUS MATERIALS ON THE
PROPERTIES.

SECTION 5. Subrogation.

            Nothing herein contained is intended or shall be construed to give
to the Indemnitors any right of subrogation in or under the Notes or any other
Loan Documents or any right to participate in any way therein or in the right,
title or interest of the Collateral Agent and the Lenders in or to all or any
portion of any of the Properties, any improvements on any of the Properties or
any other property relating to the Obligations, notwithstanding any payments
made by the Indemnitors under this Indemnity Agreement, all such rights of
subrogation and participation being hereby expressly and irrevocably waived and
released by the Indemnitors.

SECTION 6. Notices; Etc.

            All notices, demands, offers, elections or other communications
required or permitted hereunder shall be in writing and shall be personally
delivered, delivered by overnight courier, or mailed by registered or certified
mail, postage prepaid, with return receipt requested and addressed to the party
at its address set forth below, or sent by facsimile at the facsimile numbers
set forth below (with confirmation by first-class mail) including in all cases,
with charges prepaid:

               If to the Indemnitors, to:   Decora Industries, Inc.
                                            One Mill Street
                                            Fort Edward, New York  12828-1727
                                            Attention:  Chief Financial Officer
                                            Telephone:  518-747-6255
                                            Telecopier:  518-747-5089

               with a copy to               ____________________________________
                                            ____________________________________
                                            ____________________________________
                                            Attn:
                                            Fax No.

               If to Indemnitee:            Ableco Financing LLC
                                            450 Park Avenue
                                            New York, New York 10022
                                            Attn:  Eric F. Miller
                                            Fax No. (212) 758-5305

                                       8
<PAGE>   9

               with copies to:              Schulte Roth & Zabel LLP
                                            900 Third Avenue
                                            New York, New York 10022
                                            Attn:  Frederic L. Ragucci, Esq.
                                            Fax No. 212-593-5955

or at such other address or facsimile number, as from time to time, shall be
supplied by a party to the others by like notice. The Lenders and the Collateral
Agent may rely, and shall be fully protected in relying, on any notice
purportedly made by or on behalf of the Indemnitors and the Lenders and the
Collateral Agent shall have no duty to verify the identity or authority of any
Person giving such notice. The preceding sentence shall apply to all notices
whether or not in a manner authorized or required by this Indemnity Agreement.
Any properly given notice shall be effective when received.

SECTION 7. Miscellaneous.

            (a) The Indemnitors shall make any payment required to be made
hereunder in lawful money of the United States of America and in same day funds
to the Collateral Agent at its address specified in Section 6 hereof.

            (b) In the event that any amount payable hereunder by the
Indemnitors to the Collateral Agent or the Lenders is not paid when due, the
Indemnitors shall pay interest on such amount at an annual rate equal to the
Default Rate until such time as such amount, together with any accrued interest
thereon, shall have been paid in full to the Collateral Agent and the Lenders.

            (c) Subject to the provisions of the Financing Agreement, no
provision of this Indemnity Agreement may be waived, changed, amended, modified
or discharged without an agreement in writing and signed by the Indemnitors and
the Collateral Agent, and no waiver of, or consent to, any departure by the
Indemnitors from any provision of this Indemnity Agreement shall be effective
unless it is in writing and signed by the Collateral Agent, and then such waiver
or consent shall be effective only in the specific instance and for the specific
purpose for which given and, notwithstanding anything contained to the contrary
herein, all such waivers and modifications may be given or withheld in the sole
judgment of the Collateral Agent. Without limiting the foregoing, the
Indemnitors hereby irrevocably waive any right to claim that any provision of
this Indemnity Agreement, including the provisions set forth in this subsection,
have been waived orally or by the acts or omissions of the Collateral Agent or
the Lenders.

            (d) The Collateral Agent or the Lenders may take or release other
security for the payment of the Obligations, may release any party primarily or
secondarily liable therefor and may apply any other security held by it to the
reduction or satisfaction of the Obligations without prejudice to any of its
rights under this Indemnity Agreement.

            (e) No failure on the part of the Collateral Agent or the Lenders to
exercise, and no delay in exercising, any right hereunder or under any other
Loan Document shall operate as a waiver thereof, nor shall any single or partial
exercise of any right preclude any other or further exercise thereof or the
exercise of any other right. The rights and remedies of the

                                       9
<PAGE>   10

Collateral Agent and the Lenders provided herein and in the Loan Documents are
cumulative and are in addition to, and not exclusive of, any rights or remedies
provided by law. The rights of the Collateral Agent and the Lenders under any
Loan Document against any party thereto are not conditional or contingent upon
any attempt by the Collateral Agent or the Lenders to exercise any of its rights
under any other Loan Document against such party or against any other person or
collateral.

            (f) Any provision of this Indemnity Agreement which is prohibited or
unenforceable in any jurisdiction or prohibited or unenforceable as to any
Person shall, as to such jurisdiction or Person, be ineffective to the extent of
such prohibition or unenforceability without invalidating the remaining
provisions hereof or affecting the validity or enforceability of such provisions
in any other jurisdiction or as to any other Person.

            (g) This Indemnity Agreement shall (i) be binding upon the
Indemnitors and their successors and assigns, and (ii) inure, together with all
rights and remedies of the Lenders hereunder, to the benefit of the Collateral
Agent and the Lenders, their respective directors, officers, employees and
agents, and their respective successors and assigns, and to any other Person(s)
who acquires any of the Properties (or any portion thereof) at a foreclosure
sale or otherwise through the exercise of the Collateral Agent's or the Lenders'
rights and remedies under the Loan Documents. Without limiting the generality of
clause (ii) of the immediately preceding sentence, but subject to the provisions
of the Financing Agreement, the Collateral Agent and the Lenders may assign or
otherwise transfer all or any portion of their rights and obligations under this
Indemnity Agreement to any other Person, and such other Person shall thereupon
become vested with all of the rights and obligations in respect thereof granted
to the Collateral Agent and the Lenders herein or otherwise. None of the rights
or obligations of the Indemnitors hereunder may be assigned or otherwise
transferred without the prior written consent of the Lenders.

            (h) The Indemnitors hereby irrevocably and unconditionally (i)
submit for themselves and their property in any legal action or proceeding
relating to this Indemnity Agreement, or for recognition and enforcement of any
judgment in respect hereof, to the exclusive general jurisdiction of the courts
of the State of New York, the courts of the United States of America for the
Southern District of New York, and appellate courts thereof, (ii) consent that
any such action or proceeding may be brought in such courts and waive any
objection that they may now or hereafter have to the venue of any such action or
proceeding in any such court including, without limitation, any objection that
such action or proceeding was brought in an inconvenient court and agree not to
plead or claim the same, (iii) agree not to commence any legal action or
proceeding relating to this Indemnity Agreement in any jurisdiction other than
those set forth in clause (i) above, (iv) agree to service of any and all
process in any such action or proceeding to the address set forth in Section 6
hereof, (v) agree that nothing herein shall affect the right to effect service
of process in any other manner permitted by law or shall limit the right to sue
in any other jurisdiction and (vi) agree that a final judgment in any such
action or proceeding shall be conclusive and may be enforced in other
jurisdictions by suit on the judgment or in any other manner provided by law.

            (i) The Indemnitors acknowledge and agree that their obligations
under this Indemnity Agreement are in addition to any and all legal liabilities,
obligations and responsibilities

                                       10
<PAGE>   11

(under common law, statute, rule, regulation or order) imposed
on them, by any applicable Hazardous Materials Law.

            (j) The title of this document and the captions used herein are
inserted only as a matter of convenience and for reference and shall in no way
define, limit or describe the scope or the intent of this Indemnity Agreement or
any of the provisions hereof.

            (k) This Indemnity Agreement shall be governed by, and construed and
interpreted in accordance with, the laws of the State of New York applicable to
contracts made and to be performed in the State of New York without regard to
conflict of law principles of such State.

            (l) This Indemnity Agreement may be executed in any number of
counterparts and by the different parties hereto on separate counterparts each
of which, when so executed, shall be deemed an original, but all such
counterparts shall constitute but one and the same instrument.

                  [Remainder of page intentionally left blank]

                                       11
<PAGE>   12

            IN WITNESS WHEREOF, the Indemnitors have duly executed this
Indemnity Agreement as of the date first written above.

                                            Indemnitors

                                            DECORA, INCORPORATED,
                                            a Delaware corporation

                                            By:_________________________________
                                                   Name:
                                                   Title:

                                            DECORA INDUSTRIES, INC.,
                                            a Delaware corporation

                                            By:_________________________________
                                                   Name:
                                                   Title:

<PAGE>   13

                                   SCHEDULE A

                  Exceptions to Representations and Warranties

None.

<PAGE>   14

                                    EXHIBIT A

                                Legal Description

                    [Exhibit commences on the following page]

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