Document:

<PAGE>

================================================================================
                                    MORTGAGE
                                       AND
                               SECURITY AGREEMENT

                              Dated: July 19, 2000

                                in the amount of
                                  $2,940,159.79
                             (the "Mortgage Amount")

                                      From

PORT BAY ASSOCIATES, LLC, a New York limited liability company, having an office
at c/o Acadia Realty Trust, 20 Soundview Marketplace, Port Washington,
New York 11050

                                (the "Mortgagor")

                                       To

FLEET BANK, NATIONAL ASSOCIATION, a National Banking Association having an
office at 1133 Avenue of the Americas New York, New York 10036
                                            (the "Mortgagee")

                              LOCATION OF PREMISES
Soundview Marketplace, Port Washington, New York 11050, in the County of Nassau,
State of New York, as more particularly described in the Mortgage

                               TAX MAP DESIGNATION

                 Parcel One             Parcel Two               Parcel Three
State   :        New York               New York                 New York
County  :        Nassau                 Nassau                   Nassau
Town    :        North Hempstead        North Hempstead          North Hempstead
District:        N/A                    N/A                      N/A
Section :        4                      4                        4
Block   :        129                    129                      129
Lots    :        10,14B,14C             12                       1, 15A, 15C

Leasehold Mortgage as to Parcel One and Parcel Two and a Mortgage on the Fee as
to Parcel Three

                       After recording, please return to:

                     BERKMAN, HENOCH, PETERSON & PEDDY, P.C.
                              100 Garden City Plaza
                           Garden City, New York 11530
                          Attn: Miriam R. Milgrom, Esq.

                                       1

<PAGE>

                                  MORTGAGE AND
-
                               SECURITY AGREEMENT

                                     Recital

                  MORTGAGE AND SECURITY AGREEMENT, made as of the 19th day of
July, 2000 (as the same may be amended or otherwise modified from time to time,
this "Mortgage") made by Port Bay Associates, LLC, a limited liability company
organized under the laws of the State of New York (the "Mortgagor"), having an
office at 20 Soundview Marketplace, Port Washington, New York 11050, to Fleet
Bank, National Association, a national banking association (the "Mortgagee"),
having an office at 1133 Avenue of the Americas, New York, New York 10036.

                              W I T N E S S E T H:

                  WHEREAS, the Mortgagor is the lawful owner of a leasehold
estate in the premises described as Parcel One and Parcel Two in Schedule A
hereto under and pursuant to the provisions of the Ground Lease (as hereinafter
defined), and the owner of a fee estate in the premises described as Parcel
Three in Schedule A hereto; and

                  WHEREAS, the Mortgagor is, concurrently herewith, delivering
to the Mortgagee the Mortgagor's note of even date herewith, obligating it to
pay the Mortgage Amount, together with interest thereon at variable rates of
interest and other charges thereunder which note provides for. The note,
together with any extensions, modifications and/or amendments thereof, is
hereinafter referred to as the "Note"; and

                  WHEREAS, the Mortgagor, in order to induce the Mortgagee to
accept the Note and make the loan evidenced thereby, and in order to secure the
payment of the Note, the Mortgagor has duly authorized the execution and
delivery of this Mortgage to the Mortgagee.

                  NOW, THEREFORE, in consideration of the premises and other
good and valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the Mortgagor hereby agrees as follows:

                  The Mortgagor, to secure the payment of the liabilities and
obligations of the Mortgagor to the Mortgagee evidenced by the Note plus
interest thereon, all sums necessary to protect the Mortgagee under this
Mortgage or under the other Loan Documents (as hereinafter defined), all other
sums due and payable under the ADA Guaranty, the Hazardous Material Guaranty,
and the other Loan Documents, any and all sums due and payable pursuant to any
Hedge Agreement, if any, (as such term is defined in SECTION 9.2) and all other
Obligations, does hereby grant, bargain, sell, mortgage, convey, warrant, grant
a lien upon, demise, release, assign, transfer, and set over, with covenants,
unto the Mortgagee:

                  All those certain lots, pieces or parcels of land, described
in EXHIBIT A annexed hereto and made a part hereof, including the premises
identified as Parcel Three in EXHIBIT A

                                        2

<PAGE>

hereto, including all of the air space, easements, rights, privileges, royalties
and appurtenances thereunto belonging or in anywise appertaining, and all of the
estate, right, title, interest, claim or demand whatsoever of the Mortgagor
therein and in the streets, alleys and ways adjacent thereto, either at law or
in equity, in possession or expectancy, now or hereafter acquired; and the
leasehold estate being demised pursuant to the Ground Lease, and as premises
identified in EXHIBIT A hereto as Parcel One and Parcel Two; and including all
of the air space, easements, rights, privileges, royalties and appurtenances
thereunto belonging or in anywise appertaining; and all of the estate, right,
title, interest, claim or demand whatsoever of the Mortgagor therein and in and
to any land lying in the bed of any street, road or avenue, open or proposed, in
front of, or adjoining or adjacent to the premises, to the centerline thereof,
either in law or in possession or expectancy, now or hereafter acquired; and all
of the estate, right, title, interest, claim or demand whatsoever of the
Mortgagor therein and in the streets, alleys and ways adjacent thereto, either
at law or in equity, in possession or expectancy, now or hereafter acquired
(collectively, the "Premises").

                  TOGETHER with all and singular the air rights, reservations
thereunto belonging or in anywise appertaining thereto, including, without
limitation, all off-street parking rights and spaces, if any, and the reversion
and remainder of any or all of the foregoing; and all of the estate, right,
title, interest, claim or demand whatsoever of the Mortgagor therein and in and
to the Premises and/or the improvements thereon, and in and to all strips and
gores, and all alleys adjoining the Premises;

                  TOGETHER with all of the right, title and interest of the
Mortgagor in and to (i) all buildings, vaults, and other improvements and
additions thereto now erected or hereafter constructed or placed upon the
Premises or any part thereof (the "Improvements"); (ii) to the extent permitted
by law, the name or names, if any, as may now or hereafter be used for each
Improvement and the good will associated therewith, as well as the trade names
of the Improvements; and (iii) all machinery, devices, fixtures, apparatus,
interior improvements, appurtenances and equipment of every kind and nature
whatsoever now or hereafter attached to or placed in or upon the Premises or the
Improvements, or any part thereof, or used or procured for use in connection
with the operation of the Premises or any business conducted thereon (except for
fixtures and personal property that are at any time the property of Space
Tenants, as defined in SECTION 1.15, or independent contractors employed at the
Premises), all of the foregoing, except as aforesaid, hereinafter collectively
called "Building Service Equipment";

                  TOGETHER with the estate, right, title and interest of the
Mortgagor, as Tenant, in and to the Ground Lease, (including the leasehold
interest created and granted thereby), the Premises, the leasehold estate
created thereunder and all of the right, title and interest of Mortgagor in and
to the building and equipment on the Premises, including without limitation (a)
all rights of the Mortgagor to exercise any election or option to make any
decision or determination or to give any notice, consent, waiver or approval, or
to take any other action under or in respect of the Ground Lease and (b) all
modifications, extensions, and renewals of the Ground Lease, and all credits,
deposits of the Mortgagor as tenant thereunder, including but not limited to,
the options and rights of the Mortgagor to renew the Ground Lease for any
succeeding term or

                                       3

<PAGE>

terms thereof, and (c) and credits, deposits, options, purchase options,
privileges and rights of the Mortgagor under the Ground Lease, including but not
limited to the right, if any, to renew or extend the Ground Lease for succeeding
term or terms or to acquire fee title to or other interest in all or any portion
of the Premises or the Improvements, and (d) all of the Mortgagor's rights and
remedies at any time arising under or pursuant to Section 365(h) of the
Bankruptcy Code, 11 U.S.C. ss.101 et seq. (the "Bankruptcy Code"), including,
without limitation, all of the Mortgagor's right thereunder to remain in
possession of the Premises and the Improvements;

                  TOGETHER with all the right, title and interest of the
Mortgagor in and to all furniture, furnishings, decorations, chattels and other
personal property now or hereafter in, on or at said Premises (except for trade
fixtures and personal property that are at any time the property of Space
Tenants), all of the foregoing, except as aforesaid, hereinafter collectively
called "Furnishings";

                  TOGETHER with all right, title and interest of the Mortgagor
in and to all insurance or other proceeds for damage done to the Improvements,
Building Service Equipment or Furnishings and all awards heretofore made or
hereafter to be made to or for the account of the Mortgagor for the permanent or
temporary taking by eminent domain of the whole or any part of the Premises, the
Improvements, the Building Service Equipment and the Furnishings or any lesser
estate in, or easement appurtenant to, the Premises (including, without
limitation, any awards for change of grade of streets), all of which proceeds
and awards are hereby assigned to the Mortgagee, subject to the further
provisions of this Mortgage;

                  TOGETHER with all of the rents, issues, benefits and profits
of the Mortgaged Premises (as hereinafter defined), including amounts payable
under all Space Leases now in effect or hereafter entered into covering any part
of the Mortgaged Premises, as well as all rights and interest of the Mortgagor
as landlord thereunder, all of which are hereby assigned to the Mortgagee,
subject, however, to the right of the Mortgagor, as licensee, to receive and use
the same unless and until an Event of Default shall occur;

                  TOGETHER with all of the records and books of account now or
hereafter maintained by the Mortgagor in connection with the operation of the
Mortgaged Premises;

                  TOGETHER with all water, water rights, mineral rights,
ditches, ditch rights, reservoirs and reservoir rights appurtenant to, located
on or used in connection with the Premises or the Improvements, whether existing
now or hereafter acquired; and

                  TOGETHER with all proceeds and products of the foregoing.

All of the foregoing estates, rights, privileges, interests and franchises
hereby granted and released, assigned, transferred, set over and mortgaged, or
intended so to be, being hereinafter collectively referred to as the "Mortgaged
Premises" or "Mortgaged Property". TO HAVE AND TO HOLD the Mortgaged Premises,
and any greater estate therein now or hereafter owned absolutely or in fee by
the Mortgagor, unto the Mortgagee, for the benefit of its successors and
assigns, forever for the uses set forth herein. And furthermore, the Mortgagor
does by these

                                       4

<PAGE>

presents bind itself and its successors and assigns forever to warrant and
defend the Premises described in EXHIBIT A to the Mortgagee, its successors and
assigns, against all claims and demands whatsoever except as mentioned herein.

                                   ARTICLE I.

                               Certain Definitions

                  The Mortgagor and the Mortgagee agree that, unless the context
otherwise specifies or requires, the following terms shall have the meanings
herein specified, such definitions to be applicable equally to the singular and
to the plural forms of such terms.

                  "Acadia" shall mean Acadia Realty Trust, a Maryland real
estate investment trust with offices at 20 Soundview Marketplace, Port
Washington, New York 11050, and its successors and/or assigns.

                  "Accounting Principles" shall mean the accounting principles
utilized in the preparation of the operating statements for the Mortgaged
Premises heretofore delivered to the Mortgagee or income tax basis of
accounting.

                  "Affiliate" - shall mean (a) if with respect to a corporation,
(i) any officer or director thereof and any person or entity who or which is,
directly or indirectly, the legal or beneficial owner of more than ten (10%)
percent of any class of shares or other equity security of such corporation, or
(ii) any person or entity who or which, directly or indirectly, controls or is
controlled by or is under common control with such corporation; (b) if with
respect to a partnership or venture, any (i) general partner, (ii) general
partner of a general partner, (iii) partnership with a common general partner,
(iv) coventurer thereof, or (v) any person, trust, corporation, partnership,
venture or other entity who or which, directly or indirectly, controls or is
controlled by or is under common control with such partnership; and if any
general partner or general partner of a general partner or coventurer is a
corporation, any person or entity which is an Affiliate as defined in clause (a)
above of such corporation; and (c) if with respect to a limited liability
company, (i) any manager thereof and any person or entity who or which is,
directly or indirectly, the legal or beneficial owner of more than ten (10%)
percent of any class of the membership interests of such limited liability
company, or (ii) any person or entity who or which, directly or indirectly,
controls or is controlled by or is under common control with such limited
liability company and if any member which is the legal or beneficial owner of
more than 10% of any class of membership interests is a corporation, any person
or entity which is an Affiliate (as defined in clause (a) above) of such
corporation. "Controls" (including the correlative meanings of "controlled by"
and "under common control with") means effective power, directly or indirectly,
to direct or cause the direction of the management and policies of such person
or entity.

                  "Appraised Value" shall mean the appraised value of the
Mortgaged Premises, as determined by an independent appraiser selected by the
Mortgagee and reasonably acceptable to the Mortgagor. The Mortgagee may require
that such an appraisal be performed at any time.

                                       5

<PAGE>

Appraised Value shall be determined utilizing an appraisal method consistent
with that used in determining the Appraised Value in connection with entering
into the Note and Mortgage. The Mortgagors shall be responsible for the cost of
up to one appraisal per annum if requested by Mortgagee.

                  "Authorized Representative" - shall mean Perry Kamerman,
Arnold Wachsberger, Robert Masters, Maggie Hui or any other person or persons
designated by Mortgagor, in a writing delivered to Mortgagee, as an Authorized
Representative.

                  "Default Rate" shall mean the Involuntary Rate (as such term
is defined in the Note).

                  "Due and payable" when used with reference to the principal
of, or premium or interest on, or when referring to any and all other sums
secured by this Mortgage or any other of the Loan Documents shall mean due and
payable, whether at the monthly or other date of payment or at the date of
maturity specified in the Note, this Mortgage or the other Loan Documents; or by
acceleration or call for payment as provided in the Note, hereunder or in the
other Loan Documents, or, in the case of Impositions, the last day upon which
any charge may be paid without penalty and/or interest.

                  "Events of Default" shall have the meaning assigned to such
term in SECTION 6.1 of this Mortgage.

                  "Full Force and Effect" shall mean, as to any lease, that such
lease shall be in full force and effect, there shall be no material default by
the tenant thereunder or default by the landlord thereunder or other act or
condition or circumstance giving or which may give, without the giving of any
further notice, the tenant or the landlord the right to terminate any lease and,
if requested by the Mortgagor and required by its lease, the tenant shall have
delivered to the Mortgagor an estoppel certificate in form and substance
reasonably satisfactory to the Mortgagee.

                  "GAAP" shall mean Generally Accepted Accounting Principles set
forth in the opinions and pronouncements of the Accounting Principles Board and
the American Institute of certified Public Accountants and statements and
pronouncements of the Financial Accounting Standards Board or such other
statements by such other entity as may be approved by a significant segment of
the accounting profession, which are applicable in the circumstances as of the
date in question, consistently applied within a period and from period to
period, provided, however, that if employment of more than one principle shall
be permissible at such time in respect to a particular accounting matter, "GAAP"
shall refer to the principle which is then employed by Acadia, the Managing
Member or Mortgagor, as the case may be, with the concurrence of the independent
certified public accountants of Debtor.

                  "Governmental Authorities" shall mean all federal, state,
county, municipal and local governments and all departments, commissions,
boards, bureaus and offices thereof, having or claiming jurisdiction over the
Mortgaged Premises or any part thereof.

                                       6

<PAGE>

                  "Ground Lease" or "Lease" means that certain agreement of
lease by and between Soundview Shopping Center, a general partnership having an
office at Soundview Shopping Center, c/o Mr. B.V. Brooks, 542 Westport Avenue,
Norwalk, Connecticut 06851 ("Landlord"), Port Bay Associates, as tenant, dated
as of December 19, 1985, a Memorandum of Lease with respect thereto was recorded
in the Office of the Clerk of County of Nassau February 3, 1986 in Liber 9702 at
Page 404, as amended by that certain First Amendment to Agreement of Lease,
dated as of January 1999 by and between Landlord and Mortgagor(the "First
Amendment").

                  "Guaranty" or "Indemnity" means, individually, jointly,
severally and collectively, (i) that certain loan guaranty dated of even date
hereof by the Indemnitor in favor of Mortgagee, as the same may be extended and
or otherwise modified from time to time (the "Loan Guaranty"), (ii) that certain
hazardous material guaranty and indemnity agreement dated of even date hereof by
the Indemnitor in favor of Mortgagee, as the same may be extended and or
otherwise modified from time to time (the "Hazardous Material Guaranty"), (iii)
that certain ADA guaranty and indemnity agreement dated of even date hereof by
the Indemnitor in favor of Mortgagee, as the same may be extended and or
otherwise modified from time to time (the "ADA Guaranty").

                  "Impositions" shall mean all duties, taxes (other than income
taxes), water and sewer rents, rates and charges, assessments (including, but
not limited to, all assessments for public improvements or benefit), charges for
public utilities, excises, levies, license and permit fees and other charges,
ordinary or extraordinary, whether foreseen or unforeseen, of any kind and
nature whatsoever, which prior to or during the term of this Mortgage will have
been or may be laid, levied, assessed or imposed upon or become due and payable
out of or in respect of, and become a lien on the Premises, the Improvements,
Building Service Equipment, Furnishings or any other property or rights included
in the Mortgaged Premises, or any part thereof or appurtenances thereto, or
which are levied or assessed against the rent and income received by the
Mortgagor from the Space Leases (as defined in SECTION 1.15) by virtue of any
present or future law, order or ordinance of the United States of America or of
any state, county or local government or of any department, office or bureau
thereof or of any other Governmental Authority.

                  "Indemnitor", "Guarantor", "Guarantors" or "Indemnitors" means
individually, jointly, severally and collectively, the Mortgagor and the
Managing Member.

                  "Legal Requirements" shall mean all present and future laws,
ordinances, rules, regulations and requirements of all Governmental Authorities,
and all orders, rules and regulations of any national or local board of fire
underwriters or other body exercising similar functions, foreseen or unforeseen,
ordinary or extraordinary, which may be applicable to the Mortgaged Premises or
any part thereof, or to the sidewalks, alleyways, passageways, curbs and vaults
adjoining the same, or to the use or manner of use of any of the foregoing, or
to the owners, tenants, or occupants thereof, whether or not any such law,
ordinance, order, rule, regulation or requirement shall necessitate structural
changes or improvements or shall interfere with the use or enjoyment of any of
the foregoing, and shall also mean and include all

                                       7

<PAGE>

requirements of the policies of public liability, fire and all other insurance
at any time in force with respect to any of the foregoing.

                  "Loan Documents" means the Demand Note, the Note Modification
Agreement, the Amended and Restated Note, this Mortgage, the Agreement of
Consolidation of Notes and Mortgages and Modification of the Consolidated
Mortgage, the Guaranty, the Security Agreement, the Assignment of Leases and
Rents and all other documents, including, without limitation, collateral
documents, security agreements, UCC financing statements, assignments of leases
and rents, guaranties, indemnities, title insurance, assignments, subordination
agreements, non-disturbance agreements, leases affecting the property encumbered
by the Mortgage, and any other document, mortgage, agreement, assignment or
other instrument executed by Mortgagor and/or Indemnitor, as the case may be, or
any other third party pursuant hereto or thereto or in connection herewith or in
connection with the loan evidenced by the Note and secured by this Mortgage, as
the same may be extended and or otherwise modified from time to time.

                  "Managing Member" shall mean Acadia Realty Limited
Partnership, a Delaware limited partnership having an office at 20 Soundview
Marketplace, Port Washington, New York 11050, and its successors and/or assigns.

                  "Mortgagor" shall mean the Mortgagor herein named, any
subsequent owner or owners of the Mortgaged Premises, and its or their
respective successors and assigns; provided, however, that this definition shall
not be construed to limit the provisions of SECTION 2.8.1 hereof.

                  "Net Operating Income" shall mean, with respect to the
applicable period, the aggregate rental and other receipts (unless excluded
pursuant hereto) of the Mortgaged Premises (actual results with respect to the
preceding six-months and pro forma with respect to the following six-months
during such period less the aggregate amount of all operating expenses of the
Mortgaged Premises during such period, in each case determined in accordance
with the Accounting Principles. For purposes of the determination of Net
Operating Income, operating expenses shall include, without limitation, all real
estate taxes (but not in excess of the pro rata portion of such real estate
taxes applicable to the applicable period covered by the statement), water and
sewer charges, utility charges, insurance premiums (but not in excess of the
amounts applicable to the applicable period covered by the statement), salaries
and benefits of all employees engaged in the operation, maintenance or
management of Mortgaged Premises, all costs of ordinary and necessary
maintenance, cleaning and repair, costs of snow and rubbish removal and security
services. Net Operating Income shall, however, (a) exclude from receipts all
amounts paid to the Mortgagor for tenant alterations in connection with the
leasing of space at the Mortgaged Premises, all amounts payable to the Mortgagor
under leases with Affiliates of the Mortgagor, as tenant, or with Mortgagor, as
tenant (unless the Mortgagee otherwise agrees) and, with respect to any lease
providing for a reduction in the rentals payable under such lease at any time
during the term thereof, base rentals in excess of the lowest base rentals
payable under such lease (other than during any period of rent concessions made
with respect to consecutive monthly periods commencing with the first month of
the term of such lease), and (b) exclude from

                                       8

<PAGE>

expenses payments of principal and interest on the Note, capital expenditures,
leasing commissions, and other expenses payable to the Mortgagee pursuant to the
Note or any of the other Loan Documents. Net Operating Income shall be
determined without regard to extraordinary items of income and of expense. Each
lease, the rental or other income from which was included in the calculations of
Net Operating Income, must in Full Force and Effect as of the date Net Operating
Income is being determined.

                  "Net Worth" shall mean the net worth of Acadia as shown on its
financial statements, and as subsequently determined in accordance with GAAP,
used in Acadia's statements as of March 31, 2000.

                  "Obligations" or "Indebtedness" shall mean (a) the aggregate
unpaid principal amount of, and accrued and unpaid interest on, the Note, plus
(b) any and all indebtedness, obligations and other liabilities of the Mortgagor
to the Mortgagee arising out of or in connection with or otherwise relating to
the Note or any of the Loan Documents, and/or any agreement(s) of the Mortgagor
with the Mortgagee pertaining thereto, including, without limitation, any Hedge
Agreement; in each case whether now or hereafter existing, direct or indirect,
absolute or contingent, joint, several or independent, due or to become due,
liquidated or unliquidated, held or to be held by the Mortgagee and whether
created directly or acquired by assignment or otherwise.

                  "Permitted Encumbrances" shall mean each of the exceptions to
coverage set forth in SCHEDULE B, PART I (other than the so-called standard
exceptions set forth therein as items 1-7, inclusive) of the title policy
insuring the lien of this Mortgage issued by Commonwealth Land Title Insurance
Company of New York and accepted by the Mortgagee with respect to the Premises,
and such other items as the Mortgagee, in its sole discretion, may approve in
writing.

                  "Person" shall mean and include any individual, corporation,
partnership, unincorporated association, trust, governmental agency or authority
or other entity.

                  "Prime Rate" shall have the meaning assigned to such term in
the Note.

                  "Space Lease" shall mean any and all leases, subleases,
licenses, concession agreements or any other form of agreement, however
denominated (written or verbal, now or hereafter in effect), in which the
Mortgagor (or its predecessor in interest as owner of the Mortgaged Premises in
the case of existing Space Leases) now or hereafter grants a possessory interest
in and to, or the right to use and occupy the Mortgaged Premises, or any portion
thereof, and all renewals, extensions, modifications, amendments and other
agreements affecting the same.

                  "Space Tenant" shall mean the tenant or other user or occupant
of part or all of the Mortgaged Premises under any Space Lease.

                  "State" or "New York" shall mean the State of New York.

                                       9

<PAGE>

                                   ARTICLE II.

                      Particular Covenants of the Mortgagor

         The Mortgagor covenants and agrees as follows:

                  2.1. Payment of Obligations. The Mortgagor shall duly and
punctually pay to the Mortgagee, as and when due and payable, the Obligations;
provided, however, that the maximum principal amount which is, or under any
contingency may be, secured hereby is the Mortgage Amount plus protective
advances under SECTION 7.3 and any amounts due under any Hedge Agreement.

                  2.2.     General Representations, Covenants and Warranties

         2.2.1. The Mortgagor represents and warrants that: (a) it has a good
and marketable title to an indefeasible fee estate in Parcel Three and it has a
good and marketable title to a leasehold estate in Parcel One and Parcel Two,
subject to no lien, charge or encumbrance, except for Permitted Encumbrances;
(b) it owns the Building Service Equipment and Furnishings free and clear of all
liens and claims other than in favor of the Mortgagee; (c) this Mortgage is and
will remain a valid and enforceable first lien on the Mortgaged Property subject
only to the exceptions referred to above; (d) the execution and delivery of this
Mortgage and the Note has been duly authorized by the Mortgagor, the Managing
Member and Acadia, the Managing Member's general partner, and that there is no
provision in any document that evidences or establishes the existence of the
Mortgagor, Managing Member or Acadia requiring further consent for such action
by any other entity or person; (e) Mortgagor is a limited liability company duly
formed, validly existing and in good standing under the laws of the State of New
York; Managing Member is a limited partnership duly formed, validly existing and
in good standing under the laws of the State of Delaware, and is in good
standing in the State of New York, and is authorized to conduct business in the
State of New York; and the General Partner is a trust duly formed, validly
existing and in good standing under the laws of the State of Maryland, and is in
good standing in the State of New York, and is authorized to conduct business in
the State of New York; (f) Mortgagor and Indemnitor each has (i) all necessary
licenses, authorizations, registrations, permits and/or approvals and (ii) full
power and authority to own its properties and carry on its business as presently
conducted and the execution and delivery by it of and performance of its
obligations under, this Mortgage, the Note and the other Loan Documents to which
it is a party will not result in the Mortgagor and/or Indemnitor being in
default under any provisions of any document which evidences or establishes the
existence of the Mortgagor and/or the Indemnitor or of any mortgage, credit or
other agreement to which Mortgagor and/or Indemnitor is a party or which affects
the Mortgagor and/or Indemnitor or the Premises, or any part thereof; (g) it
will preserve such title, and forever warrant and defend the same and the Ground
Lease to the Mortgagee, and will forever warrant and defend the validity and
priority of the lien hereof against the claims of all persons and parties
whomsoever; (h) the Mortgagor and Indemnitor each is now able to meet their
respective debts as they mature, the fair market value of their respective
assets exceeds their respective liabilities, and no bankruptcy or

                                       10

<PAGE>

insolvency proceedings are pending or contemplated by or against the Mortgagor
and/or Indemnitor; (i) all reports, statements and other data furnished by the
Mortgagor and/or Indemnitor in connection with the loan evidenced by the Note
are true and correct and complete in all material respects and do not omit to
state any fact or circumstance necessary to make the statements contained
therein not materially misleading; and (j) to the knowledge of Mortgagor, there
are no actions, suits, or proceedings pending against or affecting the Mortgagor
or the Mortgaged Property.

                  2.3.     To Maintain Priority of Lien and Preserve Existence .

               2.3.1. This Mortgage is and will be maintained as a valid first
mortgage lien on the Mortgaged Premises, and the Mortgagor will not, directly or
indirectly, create or suffer or permit to be created, or to stand against the
Mortgaged Premises or any portion thereof, or against the rents, issues and
profits therefrom, and will promptly discharge, any lien or charge prior to or
upon a parity with or junior to the lien of this Mortgage other than the
Permitted Encumbrances; provided, however, that the Mortgagor shall not be
required to pay any Imposition prior to the time it shall become due and payable
subject to the provisions of SECTION 2.4.1 hereof, and nothing herein contained
shall prevent the Mortgagor from contesting the validity of any such Imposition
in accordance with the provisions of SECTION 2.4.4. The Mortgagor will keep and
maintain the Mortgaged Premises, and every part thereof, free from all liens or
lien notices, of Persons supplying labor and/or materials in connection with any
construction, alteration, repair, improvement or replacement of the Improvements
or of the Building Service Equipment and Furnishings. If any such lien shall be
filed against the Mortgaged Premises, or any part thereof, the Mortgagor
promptly (but in any event within thirty (30) days of receiving notice of such
lien) shall discharge the lien of record, by bonding or otherwise. The Mortgagor
shall exhibit to the Mortgagee, upon request, appropriate receipts or other
satisfactory evidence of the payment of the Impositions or any other item which
may, if not paid, give rise to a lien against the Mortgaged Premises.

         2.3.2. The Mortgagor will, so long as it is owner of the Mortgaged
Property or any part thereof, do all things necessary to preserve and keep in
full force and effect its existence, rights and privileges as a limited
liability company under the laws of the state of New York and will comply with
all regulations, rules, ordinances, statutes, orders and decrees of any
governmental authority or court applicable to the Mortgagor or to the Mortgaged
Property or any part thereof.

                  2.4.     To Pay Impositions.

               2.4.1. The Mortgagor will pay or cause to be paid, as and when
due and payable, all Impositions levied upon the Mortgaged Premises or any part
thereof. However, if by law, any Imposition may at the option of the taxpayer be
paid in installments (whether or not interest shall accrue on the unpaid balance
thereof), the Mortgagor shall have the right to exercise such option and to pay
such Imposition, or cause it to be paid (together with any accrued interest on
the unpaid balance) in installments as they fall due and before any fine,
penalty, further interest or cost may be added thereto.

                                       11

<PAGE>

               2.4.2. Upon demand of the Mortgagee in the case of Impositions
and, if an Event of Default shall exists, upon demand of the Mortgagee in the
case of insurance premiums, the Mortgagor shall deposit with the Mortgagee a sum
which bears the same relation to the annual insurance premiums for all insurance
required by the terms hereof and real estate taxes and assessments assessed
against the Mortgaged Premises for the insurance period or tax year then in
effect, as the case may be, as the number of months elapsed as of the date of
such demand since the last preceding installment of said premiums or taxes or
assessments shall have become due and payable bears to twelve (12). For the
purpose of this computation, the month in which such last preceding installment
of premiums or real estate taxes or assessments became due and payable and the
month in which such demand is given shall be included and deemed to have
elapsed. On the first day of the month next succeeding the month in which such
demand is given, and thereafter on the first day of each and every month during
the term of this Mortgage, the Mortgagor shall deposit with the Mortgagee a sum
equal to one-twelfth of such insurance premiums and such taxes and assessments
for the then-current insurance period and tax year, so that as each installment
of such premiums and taxes and assessments shall become due and payable, the
Mortgagor shall have deposited with the Mortgagee a sum sufficient to pay the
same. All such deposits shall be received and held as part of such deposit by
the Mortgagee (all such deposits to be held in an account without interest
thereon) and shall be applied to the payment of each installment of such
premiums and taxes and assessments as they shall become due and payable. The
Mortgagee shall, upon demand, furnish evidence to the Mortgagor of the making of
each such payment. If the amount of such premiums and taxes and assessments has
not been definitely ascertained at the time when any such monthly deposits are
required to be made, the Mortgagor shall make such deposits based upon the
amount of such premiums and taxes and assessments for the preceding year,
subject to adjustment as and when the amount of such premiums and taxes and
assessments are ascertained. If at any time when any installment of such
premiums and such taxes and assessments becomes due and payable the Mortgagor
shall not have deposited a sum sufficient to pay the same, the Mortgagor shall,
within five (5) days after demand, deposit any deficiency with the Mortgagee.
Upon payment in full of the Obligations, any remaining amount on deposit with
the Mortgagee shall be repaid to the Mortgagor or Person lawfully entitled
thereto. If an Event of Default shall occur and be continuing, the Mortgagee
may, at its option, apply all or any portion of the amounts then on deposit with
the Mortgagee pursuant to this SECTION 2.4.2 to payment of the Obligations. The
Mortgagor shall deliver to the Mortgagee all insurance and tax bills promptly
following receipt during any period when such monthly deposits are to be made
with the Mortgagee.

               2.4.3. The Mortgagor will pay all taxes and other governmental
charges (including, without limitation, stamp taxes), except income or franchise
taxes or similar taxes based upon or measured by income, assessed by the United
States government or any state or local governmental authority and imposed on
the Mortgagee by reason of the ownership of this Mortgage or the Note, or the
receipt of the interest or other sums payable thereunder or payable by the
Mortgagor or the Mortgagee upon any increase in the Obligations secured hereby,
or any modification, amendment, extension or consolidation of this Mortgage.
Without limiting the foregoing and subject to the limitations set forth above,
the Mortgagor will also pay the whole of

                                       12

<PAGE>

any tax imposed, directly or indirectly, on this Mortgage or the Note or the
receipt of any portion of the Obligations in lieu of a tax on the Mortgaged
Premises or the Improvements and Building Service Equipment, whether by reason
of (a) the passage after the date of this Mortgage of any law of the State
deducting from the value of real property for the purposes of taxation any lien
thereon; (b) any change in the laws for the taxation of mortgages or debts
secured by mortgages for state or local purposes; (c) a change in the means of
collection of any such tax or otherwise; or (d) any tax, whether or not now
existing, assessed against, or withheld from, interest or other payments made by
the Mortgagor or assessed against the Mortgagee and which are assessed or levied
by the government of any foreign nation or political subdivision thereof,
provided such tax liability shall not result from the ownership of this Mortgage
by a Person not a citizen of, or an entity not formed under the laws of, the
United States or any state. Within a reasonable time after payment of any such
tax or governmental charge, the Mortgagor will deliver to the Mortgagee
satisfactory proof of payment thereof, subject, however, to the right of the
Mortgagor to contest Impositions as hereinafter set forth. If the Mortgagor
shall fail to pay such tax or charge within fifteen (15) days after notice, or
if under applicable law the Mortgagor's payment or agreement to pay the same
shall be unenforceable, the Mortgagee shall have the right to declare all of the
unpaid Obligations and all accrued and unpaid interest thereon due and payable
on a date specified by the Mortgagee, but, in any event, not less than thirty
(30) days after notice to the Mortgagor.

               2.4.4. The Mortgagor shall have the right to contest the amount
or validity, in whole or in part, of any Imposition, or to seek a reduction in
the valuation of the Mortgaged Premises, or any part thereof, as assessed for
real estate or personal property tax purposes by appropriate proceedings
diligently conducted in good faith, but only after payment of such Imposition,
unless such payment would operate as a bar to such contest or materially
adversely interfere with the prosecution thereof, in which event the Mortgagor
may postpone or defer payment of such Imposition (but not the payment of any
monthly deposits pursuant to SECTION 2.4.2 hereof); and upon request by the
Mortgagor, the Mortgagee shall postpone or defer payment of such Imposition;
provided, however, that if at any time the Mortgaged Premises, the Building
Service Equipment, the Furnishings, or any part thereof would, in the
Mortgagee's reasonable judgment, by reason of such postponement or deferment be
in imminent danger of being forfeited or lost, or if the Mortgagee might be
subjected to any civil or criminal liability or other sanction, then the
Mortgagor, on demand, shall immediately pay or cause to be paid the amount so
contested and unpaid, together with all interest and penalties in connection
therewith.

               2.4.5. The certificate, advice or bill of the appropriate
official designated by law to make or issue the same or to receive payment of
any Imposition indicating the nonpayment of such Imposition shall be prima facie
evidence that such Imposition is due and payable but unpaid at the time of the
making or issuance thereof.

                  2.5.     Insurance; Restoration Following Casualty.

               2.5.1. Until the Obligations are paid in full, the Mortgagor
shall at its own expense at all times maintain or cause to be maintained on all
of the Mortgaged Premises (a) comprehensive

                                       13

<PAGE>

general liability insurance, including umbrella liability insurance, covering
all claims for bodily injury, including death, and property damage occurring on,
in or about the Mortgaged Premises in an amount not less than $10,000,000
combined single limit per person and per occurrence for personal injury, bodily
injury and property damage; the policy limits of such insurance, if requested by
the Mortgagee, shall be increased from time to time to reflect what a reasonably
prudent owner or lessee of buildings or improvements similar in type and
locality to the Mortgaged Premises would carry; during any period of substantial
alterations or improvements in, on or to the Mortgaged Premises, the Mortgagor
will cause the comprehensive general liability insurance, including umbrella
liability insurance, endorsed to provide owners' and contractors' protective
liability coverage, including completed operations liability coverage; (b)
physical damage insurance covering the Mortgaged Premises for loss or damages
resulting from the perils of fire, lightning and such other risks and hazards as
are provided under the current standard "Extended Coverage Endorsement" and
vandalism and malicious mischief coverage, for the full replacement value of the
Mortgaged Premises on a stipulated and agreed-amount basis; (c) if the Mortgaged
Premises is in an area identified as a flood hazard area by the Secretary of
Housing and Urban Development, flood insurance, to the extent obtainable, in an
amount equal to the lesser of the full replacement value of the Mortgaged
Premises or the maximum amount available under the Federal flood insurance
program; (d) boiler and machinery insurance covering all boilers, machinery, air
conditioning, pressure vessels, and similar type equipment commonly covered
under a broad-form boiler and machinery policy, in an amount satisfactory to the
Mortgagee; (e) insurance against such other risks of damage, hazards, casualties
and contingencies in such amounts as the Mortgagee shall from time to time
reasonably require, provided that insurance against such other risks, hazards,
casualties or contingencies shall then be commonly carried by prudent owners or
lessees of building or improvements in the locality similar in character,
construction, use and occupancy to the Improvements, Building Service Equipment
and Furnishings on, or constituting a part of, the Mortgaged Premises; and (f)
loss of rents/business interruption coverage in an amount sufficient to pay all
Impositions, insurance premiums, interest and principal installments and all
other amounts due under the Obligations and the normal operating expenses of the
Mortgaged Premises, all for a period of one (1) year. Furthermore, the Mortgagee
reserves the right to require additional insurance and/or higher policy limits
than heretofore specified if such additional insurance and/or higher policy
limits are commercially reasonable for similar properties, which right may be
exercised by written notice to the Mortgagor, and, as soon thereafter as
practicable, but in any event within thirty (30) days of the receipt thereof,
the Mortgagor agrees to obtain insurance coverage complying with such notice.
The proceeds of all such insurance (except the insurance specified in SECTION
2.5.1(a)) shall be paid solely to the Mortgagee and be held, applied or
disbursed by the Mortgagee as provided in SECTIONS 2.5.7 and 2.5.8.

               2.5.2. All insurance required in SECTION 2.5.1 shall be evidenced
by valid and enforceable policies, in form and substance, and issued by and
distributed among insurers of recognized responsibility having a Best's rating
of A or better and a financial size category of Class IX or above, as shall be
required by the Mortgagee from time to time. Such insurers shall be authorized
to do business in the State and in all other respects shall be reasonably
satisfactory

                                       14

<PAGE>

to the Mortgagee. The originals of all such policies, or duplicate copies or
certificates thereof, shall be delivered to the Mortgagee concurrently with the
execution and delivery of this Mortgage. Thereafter, all renewal or replacement
policies, or duplicate copies or certificates thereof, shall be delivered to the
Mortgagee not less than thirty (30) days prior to the expiration date of the
policy or policies to be renewed or replaced, in each case accompanied by
evidence reasonably satisfactory to the Mortgagee that all premiums currently
payable with respect to such policies have been paid in full by or at the
direction of the Mortgagor.

               2.5.3. All such insurance policies shall (a) except for any
liability policy required hereunder, contain a standard noncontributory form of
mortgagee clause (in favor of and entitling the Mortgagee to collect any and all
proceeds payable under such insurance), as well as a standard waiver of
subrogation endorsement, all to be in form and substance reasonably satisfactory
to the Mortgagee; (b) provide that such policies may not be cancelled or amended
without at least thirty (30) days prior written notice to the Mortgagee; and (c)
provide that no act, omission or negligence of the Mortgagor, or its agents,
servants or employees, or of any Space Tenant under any Space Lease, which might
otherwise result in a forfeiture of such insurance or any part thereof, shall in
any way affect the validity or enforceability of such insurance insofar as the
Mortgagee is concerned. The Mortgagor shall not carry separate insurance,
concurrent in kind or form or contributing in the event of loss with any
insurance required under this SECTION 2.5. All losses under such insurance
policies shall be adjusted by the Mortgagor in the case of any single instance
of such damage or destruction not exceeding $300,000, by Mortgagor and Mortgagee
in the case of any such single instance of damage or destruction exceeding such
amount, provided that in no event shall the Mortgagor approve or consent to any
final adjustment in any amount exceeding the amount specified above in this
sentence without obtaining the Mortgagee's prior approval (which approval shall
not be unreasonably withheld) of the amount of such adjustment, and solely by
the Mortgagee in the case when an Event of Default exists and is continuing.

               2.5.4.  Intentionally Deleted.

               2.5.5. If the Mortgagee shall, by any means, acquire the title or
estate of the Mortgagor in or to any portion of the Mortgaged Premises, it shall
thereupon become the sole and absolute owner of all insurance policies to the
extent affecting such portion of the Mortgaged Premises held by, or required
hereunder to be delivered to, the Mortgagee, with the sole right to collect and
retain all unearned premiums thereon; and the Mortgagor shall be entitled only
to a credit in reduction of the then outstanding Obligations in the amount of
the short rate cancellation refund, when and if received by Mortgagee. The
Mortgagor agrees, immediately upon demand, to execute and deliver such
assignments or other authorizations or instruments as may, in the opinion of the
Mortgagee, be necessary or desirable to effectuate any of the provisions of this
SECTION 2.5.5.

               2.5.6. If any of the Improvements, Building Service Equipment or
Furnishings shall be damaged or destroyed, in whole or in part, by fire or other
casualty, the Mortgagor shall give prompt notice thereof to the Mortgagee, and,
without regard to the availability or adequacy of

                                       15

<PAGE>

insurance proceeds, shall promptly following receipt of any insurance proceeds
or the date when any such proceeds are made available to the Mortgagor in
accordance with the terms hereof, commence to restore, replace, rebuild or alter
the same as nearly as possible to the condition, character and value thereof
existing immediately prior to such damage or destruction. Any insurance proceeds
in respect of such damage or destruction, or any Award (as defined in SECTION
3.2) for a partial taking which is not a substantial or total taking, as such
terms are referred to in ARTICLE III hereof, at the option of the Mortgagee, may
either (i) be applied as a prepayment of the Obligations, or (ii) be made
available to pay or reimburse costs incurred for restoration, replacement or
rebuilding necessitated as a result of such damage or destruction, or as a
result of such taking, as the case may be, or (iii) be used for any other
purpose or object deemed appropriate by the Mortgagee in connection with the
Mortgaged Premises, provided, however, that the Mortgagee shall not elect either
option (i) or (iii) above if, and for so long as, (a) no Default and/or Event of
Default has occurred and is continuing or would occur as a result of such
casualty or taking; (b) the balance of the insurance proceeds or such Award
either initially paid to the Mortgagee or deposited with the Depository (as
hereinafter defined) or remaining from time to time, shall be sufficient, in the
Mortgagee's reasonable judgment, to complete the restoration, replacement or
rebuilding, or the Mortgagor shall have deposited such sufficient funds with the
Mortgagee or the Depository; (c) the cost of such restoration, replacement or
rebuilding is equal to or less than 25% of the then aggregate outstanding
principal balance remaining under the Note; and (d) in the Mortgagee's
reasonable judgment, six months after completion of the restoration, there will
be no Default.

               2.5.7. Any such insurance proceeds (other than the proceeds of
the rent insurance policy, which shall be paid as provided in SECTION 2.5.8
below) or Award which are to be applied to restoration, replacement or
rebuilding of the Mortgaged Premises shall, after payment or reimbursement to
the Mortgagee of all reasonable costs and expenses of the Mortgagee in
collecting such proceeds or Award, be applied upon satisfaction of the following
provisions and conditions:

                           (a) If the damage be of such nature as to require the
         Mortgagor to construct a replacement for, or to alter in any material
         or substantial way, the damaged or destroyed items, the Mortgagor
         shall, before commencing any such work, submit copies of the plans and
         specifications therefor to the Mortgagee for the Mortgagee's approval,
         such approval to not be unreasonably withheld or delayed.

                           (b) If after payment or reimbursement to the
         Mortgagee of all costs and expenses of the Mortgagee in collecting such
         insurance proceeds or Award, the aggregate insurance proceeds or Award
         received by reason of any single instance of such damage or destruction
         or condemnation, as the case may be, shall be $300,000 or less such
         insurance proceeds or Award shall be paid to the Mortgagor, which shall
         hold all amounts so received in trust for application first to pay the
         entire cost of restoring, repairing, rebuilding or replacing the
         damaged or destroyed items, before any portion of such proceeds may be
         used or applied for any other purpose. If the aggregate net insurance
         proceeds or Award by reason of any single instance of such damage or

                                       16

<PAGE>

         destruction or condemnation, as the case may be, shall be more than
         $300,000 such sums shall be held and disbursed by Fleet Bank, National
         Association or, if this Mortgage is held by a financial institution, by
         such financial institution or, if this Mortgage is not held by a
         financial institution, by a financial institution selected by the then
         Mortgagee (the holder of such monies, the "Depository") in accordance
         with the following provisions of this SECTION 2.5.7.

                           (c) The Mortgagee shall have received as to each such
         disbursement a certificate of the Mortgagor (i) requesting the payment
         of a specified amount of such insurance or condemnation proceeds; (ii)
         describing in reasonable detail the work and materials applied to the
         restoration, replacement or rebuilding of the damaged, destroyed or
         taken Improvement, or Building Service Equipment and/or Furnishings
         located therein, since the date of the last such certificate; (iii)
         stating that the requested amount does not exceed the cost of such work
         and materials; and (iv) stating that a request for payment for such
         work and materials has not previously been made; accompanied by

                           (d) a certificate of an independent engineer or
         architect designated by the Mortgagor, who shall have been approved in
         writing by the Mortgagee, stating (i) that the work and materials
         described in the accompanying certificate of the Mortgagor were
         satisfactorily performed and furnished and were necessary, appropriate
         or desirable to the restoration, replacement or rebuilding of the
         damaged, destroyed or taken Improvement, or Building Service Equipment
         and/or Furnishings; (ii) that the amount specified in such certificate
         of the Mortgagor does not exceed the reasonable cost of such work and
         materials; and (iii) the additional amount, if any, required to
         complete the restoration, replacement or rebuilding of the damaged,
         destroyed or taken Improvement, Building Service Equipment and/or
         Furnishings; accompanied by

                           (e) evidence reasonably satisfactory to the Mortgagee
         (i) that there exists no filed or recorded lien, or lien notice, or
         encumbrance or charge in respect of all or any part of the Mortgaged
         Premises that is prior to or on a parity with the lien of this
         Mortgage, except as may be permitted in the Permitted Encumbrances;
         (ii) that neither the Mortgaged Premises nor any part thereof is
         subject to any recorded or filed mechanic's, laborer's, materialman's
         or any similar lien, encumbrance or charge; and (iii) that none of the
         Building Service Equipment and Furnishings provided in connection with
         such restoration, replacement or rebuilding is subject to any security
         interest other than in favor of the Mortgagee; then, the Mortgagee
         shall pay to the Mortgagor the amount of such insurance or condemnation
         proceeds requested in such certificate of the Mortgagor or consent to
         the Depository's payment thereof, as the case may be; provided,
         however, that in no event shall the balance of insurance or
         condemnation proceeds held by the Mortgagee and the Depository be
         reduced below the amount specified in such certificate of the
         independent engineer or architect as the amount required to complete
         the restoration, replacement or rebuilding of the damaged, destroyed or
         taken Improvement, Building Service Equipment and/or Furnishings. Each
         such payment, whether made by the Mortgagee or the Depository, shall be
         held by the Mortgagor in trust and shall be used solely for the payment

                                       18

<PAGE>

         of the cost of the work and materials described in the certificate of
         the Mortgagor, or if such cost or any part thereof has theretofore been
         paid by the Mortgagor out of its own funds, then for the reimbursement
         to the Mortgagor of any such cost or part thereof paid by it. Any
         balance of insurance or condemnation proceeds held by the Mortgagee
         after the completion of the restoration, replacement or rebuilding and
         payment of all costs incurred in connection therewith, to be evidenced
         by a certificate to such effect of such independent engineer or
         architect delivered to the Mortgagee, shall, if no Event of Default
         shall have occurred and be continuing, be released to the Mortgagor or
         any other party entitled thereto. Notwithstanding the foregoing, if the
         Mortgagor needs to make deposits with or payments to contractors prior
         to the work being performed, if the Mortgagee is otherwise obligated to
         allow funds to be used to rebuild or restore, the Mortgagee agrees that
         it will not unreasonably withhold or delay the Mortgagor's request that
         such deposits or advances payments be allowed.

               2.5.8. All proceeds of rent insurance payable as a result of the
occurrence of any fire or other casualty which affects the Mortgaged Premises,
or any part thereof, shall be paid to the Mortgagee or, if the Mortgagee is not
a financial institution, the Depository. The Mortgagee or the Depository, as the
case may be, if it shall receive such proceeds, shall hold such proceeds in
trust if permitted under law, and in an account bearing interest (payable to or
for account of the Mortgagor), and shall apply or cause such proceeds (including
any net interest thereon) to be applied to the payment of those items referred
to in SECTION 2.5.1(f) which become, and as they become, due and payable from
and after the date of the occurrence of such damage or loss, until the
completion of the necessary restoration or replacement by the Mortgagor or until
the exhaustion of such proceeds (including any interest thereon), whichever
first occurs. Upon completion of such restoration or replacement, any balance of
such rent insurance proceeds, together with the interest thereon, if any, not
theretofore applied as provided herein, in the hands of the Mortgagee or the
Depository, as the case may be, shall, provided that no Event of Default shall
have occurred and be continuing, be paid to the Mortgagor or any other party
entitled thereto.

               2.5.9. Nothing in this SECTION 2.5 contained shall (i) relieve
the Mortgagor of its duty to repair, restore, rebuild or replace the
Improvements, Building Service Equipment and/or Furnishings following damage or
destruction by fire or other casualty or taking in the event that no Award or an
inadequate Award or that no or inadequate proceeds of insurance are available to
defray the cost of such repairing, restoring, rebuilding or replacement, or (ii)
relieve the Mortgagor of its obligation to pay principal and interest and to
make all other required payments in respect of the Obligations and this Mortgage
subsequent to the occurrence of any fire or other casualty, or taking, except
if, and to the extent that, any proceeds of rent insurance are applied by the
Mortgagee in accordance with SECTION 2.5.8 to such required payments.

               2.5.10. If, while any insurance proceeds or Award is being held
by the Mortgagee or the Depository, an Event of Default shall occur and be
continuing, the Mortgagee shall be entitled to receive and apply all such
insurance proceeds or Award in reduction of the Obligations, in such order and
respective amounts, as the Mortgagee in its sole discretion shall determine.

                                       18

<PAGE>

                  2.6.     To Comply with Laws.

               2.6.1. The Mortgagor, at its own expense, will promptly cure all
violations of law affecting the Mortgaged Premises, or any part thereof, and/or
the use and operation thereof and will promptly comply, or cause to be complied
with, all present and future Legal Requirements. However, the Mortgagor shall
have the right, after prior notice to the Mortgagee, to contest by appropriate
legal proceedings, diligently conducted in good faith, the validity or
application of any Legal Requirement if and so long as the Mortgagor shall
promptly furnish to the Mortgagee a certificate to such effect showing the steps
taken to comply with such provisions, provided that:

                           (a) if by the terms of any such Legal Requirement,
         compliance therewith pending the prosecution of any such proceeding may
         be delayed legally without incurring any lien, charge or liability of
         any kind against the Mortgaged Premises, or any part thereof, and
         without subjecting the Mortgagor or the Mortgagee to any liability,
         civil or criminal, for failure so to comply therewith, the Mortgagor
         may delay compliance therewith until the final determination of any
         such proceeding; and

                           (b) if any lien, charge or civil liability would be
         incurred by reason of any such delay, the Mortgagor nevertheless, on
         the prior written consent of the Mortgagee, such consent not to be
         unreasonably withheld, may contest and delay compliance with the Legal
         Requirement, provided that such delay would not subject the Mortgagee
         to criminal liability and the Mortgagor (i) furnishes to the Mortgagee
         security reasonably satisfactory to the Mortgagee against loss or
         injury by reason of such contest or delay and (ii) prosecutes the
         contest with due diligence.

               2.6.2. Notwithstanding the provisions of SECTION 2.6.1, if any
delay in compliance with any Legal Requirement shall, in the reasonable judgment
of the Mortgagee, place all or any part of the Mortgaged Premises in imminent
danger of being forfeited or lost, the Mortgagor shall, upon notice from the
Mortgagee, immediately comply with such Legal Requirement.

               2.6.3. The Mortgagor will use and permit the use of the Mortgaged
Premises only in accordance with the material requirements of any applicable
licenses and permits issued by Governmental Authorities.

               2.6.4. The Mortgagor will procure, pay for and maintain (or cause
to be procured, paid and maintained) all permits, licenses and other
authorizations required to be procured and maintained by the owners and
operators of the Mortgaged Premises for any then use of all or any part of the
Mortgaged Premises then being made and for the lawful and proper operation and
maintenance thereof.

               2.6.5. If the Mortgagor receives notice from any Governmental
Authority that it is not in compliance with any Legal Requirement, the Mortgagor
will provide the Mortgagee with a copy of such notice promptly.

                                       19

<PAGE>

            2.6.6 Without limiting the provisions of this Article II, Mortgagor
agrees to the indemnification and guaranty provisions set forth in the ADA
Guaranty, the provisions of which are incorporated herein by this reference. The
indemnification and guaranty provisions set forth in the ADA Guaranty shall be a
debt secured by the lien of this Mortgage.

            2.6.7 Without limiting the provisions of this Article II, Mortgagor
agrees to the indemnification and guaranty provisions set forth in the Hazardous
Material Guaranty, the provisions of which are incorporated herein by this
reference. The indemnification and guaranty provisions set forth in the
Hazardous Material Guaranty shall be an obligation secured by the lien of this
Mortgage.

                  2.7.     Limitation on Alterations and Demolition.

               2.7.1. The Mortgagor shall not voluntarily demolish, replace or
alter the Mortgaged Premises, or any part thereof, or voluntarily make any
addition thereto, or voluntarily construct any additional improvements thereon,
or suffer any of the same to occur, whether structural or otherwise
(collectively, "change"), without the prior written consent of the Mortgagee;
provided,

                                       20

<PAGE>

however, that if no Event of Default is continuing and such change involves an
estimated cost of less than $500,000 and is non-structural or if no Event of
Default is continuing and such change is non-structural and is being made to
prepare space for a Space Tenant pursuant to a Space Lease entered into in
accordance with the Note, then, in either of such events, the Mortgagee's
consent shall not be required; provided, further, however, that if any such
change is required by law, the Mortgagor may make such change with the prior
written consent of the Mortgagee, which consent the Mortgagee will not
unreasonably withhold or delay. As a condition to any consent under this SECTION
2.7.1, the Mortgagee may require (a) that plans and specifications for the
proposed work, prepared by a reputable architect reasonably satisfactory to the
Mortgagee, be submitted to the Mortgagee for approval, (b) that the Mortgagor
obtain a payment and performance bond or other security reasonably satisfactory
to the Mortgagee in form and amount reasonably satisfactory to the Mortgagee
from the contractor or subcontractor performing the work unless such work
amounts to less than $500,000 in aggregate total cost and (c) that the
contractor(s) deliver and file, prior to commencing any work, a waiver of
mechanics lien. Notwithstanding the above, the Mortgagee hereby consents to the
Mortgagor's demolition of the Pastibilities building and King Kullen Grocery
Co., Inc. addition. All work performed by or on behalf of the Mortgagor shall be
completed with all reasonable diligence and continuity, in a good and
workmanlike manner, and in compliance with all applicable Legal Requirements.
Unless, and to the extent that, the provisions of SECTION 2.7.2 be applicable,
no Building Service Equipment or Furnishings shall be removed from the Mortgaged
Premises during the course of any such work without prior notification to the
Mortgagee and unless provision is made for return or replacement on or prior to
the completion of the work. The provisions of this SECTION 2.7.1. shall apply to
any change made or required to be made by the Mortgagor in the course of
complying with any other of the provisions of this Mortgage. A duplicate set of
all plans and specifications required to be filed with any Governmental
Authority prior to, or at any time in connection with, any such alteration,
demolition or new construction shall be furnished to the Mortgagee. The
Mortgagor will pay on demand the reasonable expenses incurred by the Mortgagee
in the review of plans and specifications provided for in this Mortgage.

               2.7.2. The Mortgagor shall have the right, at any time and from
time to time, to remove and dispose of any item of Building Service Equipment or
Furnishings which may have become obsolete or unfit for use or which is no
longer useful in the operation of the Improvements, provided that the Mortgagor
promptly replaces such item with other Building Service Equipment or
Furnishings, free of superior title, liens or claims (other than in favor of the
Mortgagee) unless consent of the Mortgagee is first obtained, not necessarily of
the same character but of at least equal quality, value and usefulness in
connection with the operation and maintenance of the Mortgaged Premises,
provided, further, however, no removal of any item of Building Service Equipment
or Furnishings then having a fair market value of $50,000 or more shall be made
without the prior written consent of the Mortgagee, which consent will not be
unreasonably withheld. However, if by reason of technological or other
developments in the operation and maintenance of buildings and other
improvements of the general character of the Improvements or a change in the use
of the Mortgaged Premises or any part thereof, no replacement of the Building
Service Equipment or Furnishings so removed would be necessary or desirable for

                                       21

<PAGE>

the proper operation or maintenance of the Improvements, the Mortgagor shall not
be required to replace the item so removed.

                  2.8.     Limitation on Disposition of the Mortgaged Premises.

               2.8.1. Any sale, assignment, mortgage, pledge or other transfer
or encumbrance of the Mortgaged Premises or any part thereof or any interest
therein or in any of the rents, profits or income generated thereby (in any
case, either beneficially or of record) is herein a "Transfer"; any lease
entered into by the Mortgagor in compliance with PARAGRAPH 11 of the Note is not
a Transfer. Any Transfer is an Event of Default.

               2.8.2. If there shall be a violation of the terms and provisions
of SECTION 2.8.1, whether by the Mortgagor or any other Person, in addition to
all other rights and remedies available to the Mortgagee under this Mortgage,
the Mortgagee shall have the option, by the giving of notice to the Mortgagor,
of declaring the entire unpaid principal balance of the Note, together with all
accrued and unpaid interest and all other sums and charges evidenced thereby,
immediately due and payable. 2.9. Maintenance of Mortgaged Premises; Covenant
Against Waste; Inspection by the Mortgagee. The Mortgagor will not commit or
permit waste on the Mortgaged Premises and, at its expense, will keep and
maintain the Improvements, the Building Service Equipment and Furnishings in its
(or their) present state of repair and condition and, if improved, in such
improved state of repair and condition; provided, that this shall not limit the
Mortgagor's other obligations hereunder, such as compliance with laws. The
Mortgagor shall do or cause to be done all maintenance and make or cause to be
made all repairs as may be required by the landlord under any Space Lease. The
Mortgagor will neither do nor permit to be done anything to the Mortgaged
Premises that may materially impair the value thereof or which may violate any
covenant, condition or restriction affecting the Mortgaged Premises, or any part
thereof, or which would effect any material change therein or in the condition
thereof that would increase the danger of fire or other hazard arising out of
the operation of the Mortgaged Premises. Subject to the rights of Space Tenants,
the Mortgagee, and its representatives and agents, may enter and inspect the
Mortgaged Premises at any time after reasonable notice (which may be oral)
during usual business hours, and the Mortgagor shall, within thirty (30) days
after demand by the Mortgagee (or immediately upon demand in case of emergency),
make such repairs, replacements, renewals or additions, or perform such items of
maintenance, to the Mortgaged Premises as the Mortgagee may reasonably require
in order to cause the Mortgaged Premises to comply with the standards
established in this SECTION 2.9.

                  2.10.    To Furnish Certificates; Other Reporting
Requirements.

               2.10.1. The Mortgagor will, at its own expense, deliver to the
Mortgagee, within fifteen (15) days after request, a written statement executed
by the Mortgagor, in recordable form, setting forth the amount then unpaid upon
the Obligations and secured by this Mortgage and stating whether any offsets or
defenses exist against the Obligations; and, if any such offsets or defenses are
alleged to exist, then the factual basis and amount of such claimed offsets or
defenses.

                                       22

<PAGE>

               2.10.2. The Mortgagor will, if requested by the Mortgagee,
deliver to the Mortgagee a certificate of an officer of the member of the
Mortgagor or of such member's general partner, to the effect that he is familiar
with this Mortgage and the other Loan Documents, has reviewed the affairs of the
Mortgagor, and to the best of his knowledge and belief there exists no Event of
Default and no act or event has occurred or exists which with notice or lapse of
time or both could become such an Event of Default, or if any such incipient
default or Event of Default exists, specifying it and what action the Mortgagor
is taking to cause it to be remedied.

               2.10.3. The Mortgagor further covenants and agrees that it will,
at its own expense, deliver to the Mortgagee as soon as available, and in any
event within ninety (90) days after the end of each fiscal year of the
Mortgagor, an annual balance sheet, a statement of profit and loss, one- year
projections, and a cash-flow statement, prepared in accordance with Accounting
Principles acceptable to the Mortgagee, consistently applied, together with a
schedule of Space Leases. Such statements shall show the income and expenses of
the Mortgagor for such fiscal year, all in reasonable detail, shall be prepared
in accordance with such accounting principles, consistently applied, and shall
state in comparative form the figures at the end of such fiscal year and for the
preceding fiscal year. Such statements shall be certified to be true and correct
by the chief financial officer of the Mortgagor.

               2.10.4. The Mortgagor further covenants and agrees that it will,
at its own expense, deliver to the Mortgagee semi-annually, as soon as
available, and in any event within ninety (90)days after the end of each second
quarter end of the Mortgagor, copies of Mortgagor's financial statements
(inclusive of a detailed balance sheet, income statement and cash flow
statement) prepared internally, in accordance with Accounting Principles, in its
reasonable discretion, and certified to be true and correct by the chief
financial officer of the Mortgagor.

              2.10.5. In addition, the Mortgagor shall furnish to the Mortgagee:
(a) within ninety (90) days after the end of the Mortgagor's fiscal year, and
within forty-five (45) days after the end of each six month period, commencing
with the period ended June 30, 2000, a statement of income and expenses with
respect to the Mortgaged Premises, in such form as may be required by the
Mortgagee; (b) within ninety (90) days after the end of the Mortgagor's fiscal
year, statements of financial condition of the Mortgagor in such form as may be
required by the Mortgagee; (c) within one hundred and fifty (150) days after the
end of the Mortgagor's fiscal year, the Mortgagor's federal and state tax
filings; and (d) such interim unaudited financial statements and other
information as the Mortgagee may reasonably require.

              2.10.6.  The Mortgagor shall furnish to the Mortgagee, within
ten (10) days after the same are filed, copies of each Form 10-K of Acadia and
Form 10-Q of Acadia filed with the Securities and Exchange Commission;

              2.10.7.  The Mortgagor shall furnish to Mortgagee, upon request by
Mortgagee, but in any event not more frequently than quarterly, a complete rent
roll listing tenants, unit numbers, square feet occupied and leased, rents,
delinquencies, vacancies, other income received and expenses.

                                       23

<PAGE>

              2.10.8.  The Mortgagor further covenants and agrees that it will,
at its own expense, promptly upon receipt by Mortgagor, deliver to
Mortgagee copies of all reports of the Key Tenants' gross revenue from sales
merchandise during the preceding fiscal year which are delivered by the
applicable Key Tenant in accordance with the provisions of the applicable Key
Tenant's lease. "Key Tenants" shall mean, collectively, King Kullen Grocery Co.,
Inc., West Marine Products, Inc., Genovese Drug Stores, Inc., and Pergament Home
Centers, Inc; with "Key Tenant" meaning each, every and any one of the Key
Tenants.

                  2.11. After-Acquired Property. All right, title and interest
of the Mortgagor in and to all improvements, betterments, renewals, substitutes
and replacements of, and all additions and appurtenances to, the Mortgaged
Premises hereafter acquired, constructed, assembled or placed by the Mortgagor
on the Mortgaged Premises, immediately upon such acquisition, construction,
assembly or placement, as the case may be, and in each such case without any
further mortgage, conveyance or assignment or other act of 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
in the granting clauses of this Mortgage; and at any time and from time to time
the Mortgagor, on demand, will execute, acknowledge and deliver to the Mortgagee
any and all such further assurances, mortgages, conveyances or assignments as
the Mortgagee may reasonably require to further evidence, confirm and perfect
the provisions of this SECTION 2.11.

                  2.12. Further Assurances. The Mortgagor shall, at its sole
cost and without expense to the Mortgagee, on demand, do, execute, acknowledge
and deliver all and every such further acts, deeds, conveyances, mortgages,
assignments, notices of assignment, transfers and assurances as the Mortgagee
shall from time to time reasonably require for better assuring, conveying,
assigning, transferring and confirming unto the Mortgagee the property and
rights hereby mortgaged or assigned or intended now or hereafter so to be, or
which the Mortgagor may be or may hereafter become bound to convey, mortgage or
assign to the Mortgagee, or for carrying out the intention or facilitating the
performance of the terms of this Mortgage, or for filing, registering or
recording this Mortgage.

                  2.13. Recorded Instruments. The Mortgagor will promptly
perform and observe, or cause to be performed and observed, all of the terms,
covenants and conditions of all instruments of record affecting the Mortgaged
Premises (other than non-consensual encumbrances hereafter affecting the
Mortgaged Premises, the validity or enforceability of which the Mortgagor is
contesting in accordance with this Mortgage) where non-compliance therewith
affects the security of this Mortgage or imposes any duty or obligation upon the
Mortgagor or any Space Tenant. The Mortgagor shall do or cause to be done all
things reasonably required to preserve intact and unimpaired and to renew any
and all rights-of-way, easements, grants, appurtenances, privileges, licenses,
franchises and other interests and rights in favor of or constituting any
portion of the Mortgaged Premises. The Mortgagor will not, without the prior
written consent of the Mortgagee, initiate, join in or consent to any private
restrictive covenant or other public or private restriction as to the use of all
or any portion of the Mortgaged Premises. The Mortgagor will, however, comply
with all lawful restrictive covenants and zoning ordinances and other public or
private restrictions affecting all or any portion of the Mortgaged Premises.

                                       24

<PAGE>

                   2.14. Leasing Standards. Notwithstanding anything to the
contrary contained herein or in the other Loan Documents, the Mortgagor
covenants and agrees that no Space Lease will be consummated without the prior
written approval thereof by the Mortgagee unless such Space Lease (i) is
prepared and executed on Mortgagor's standard lease form submitted to and
approved, in writing, by the Mortgagee, with such approval not to be
unreasonably withheld or delayed, and the Mortgagee's approval of immaterial
changes to the form approved by the Mortgagee shall not be required; and (ii)
(x) provides for terms and conditions, including as to rentals and other
economic terms and the creditworthiness of the tenant, which are approved by
Mortgagee, with such approval not to be unreasonably withheld or delayed, or (y)
is of less than 10,000 leaseable square feet and is on commercially reasonable
terms and conditions, including as to rentals and other economic terms and
creditworthiness of the tenant. Notwithstanding the foregoing, if a Default
and/or Event of Default shall be continuing, the Mortgagor will not enter into
Space Leases without the Mortgagee's prior written approval thereof, which
approval the Mortgagee may withhold in its sole discretion.

                   2.15. Intentionally Deleted Prior to Execution..

                   2.16. Late Charges. If the entire amount of any required
principal and/or interest under the Note is not paid in full within ten (10)
days after the same is due, Mortgagor shall pay to the Mortgagee a late fee
equal to five (5%) percent of the required payment, and such charge shall be
deemed to be part of the Indebtedness and therefore secured by the lien of this
Mortgage.

                   2.16. Trust Funds The Mortgagor, in compliance with Section
13 of the Lien Law, will receive the advances secured by this Mortgage 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 improvement and will apply the same first to
the payment of the cost of improvement before using any part of the total of the
same for any other purposes. The Mortgagor agrees that it shall indemnify and
hold the Mortgagee harmless against any loss or liability, cost or expense,
including, without limitation, any judgments, attorneys' fees, costs of appeal
bonds and printing costs arising out of or relating to any proceeding instituted
by any claimant alleging priority over the lien of this Mortgage, and/or by any
claimant alleging a violation by the Mortgagor or the Mortgagee of any section
of Article 3-A of the Lien Law of the State of New York.

                  2.17.    The Ground Lease

              2.17.1. The Mortgagor shall: (i) pay all rents, additional
rents and other sums required to be paid by the Mortgagor as lessee under and
pursuant to the provisions of the Ground Lease, (ii) diligently perform and
observe all of the terms, covenants and conditions of the Ground Lease on the
part of the Mortgagor, as lessee thereunder, to be performed and observed,
unless such performance or observance shall be waived or not required in writing
by the lessor under the Ground Lease, to the end that all things shall be done
which are necessary to keep unimpaired the rights of the Mortgagor, as lessee,
under the Ground Lease, (iii) promptly

                                       25

<PAGE>

notify the Mortgagee in writing of any default by the Mortgagor under the Ground
Lease in the performance or observance of any of the terms, covenants or
conditions on the part of, respectively, the Mortgagor to be performed or
observed under the Ground Lease, (iv) promptly notify the Mortgagee of the
giving of any notice by the lessor under the Ground Lease to the Mortgagor
(other than notices customarily sent on a regular basis) and of any notice
noting or claiming any default by the Mortgagor in the performance or observance
of any of the terms, covenants or conditions of the Ground Lease on the part of
the Mortgagor, as lessee thereunder, to be performed or observed and deliver to
the Mortgagee a true copy of each such notice (v) promptly notify the Mortgagee
in writing of any request made by either party to the Ground Lease, as the case
may be, for arbitration proceedings pursuant to the Ground Lease and of the
institution of any arbitration proceedings, as well as of all proceedings
thereunder, and promptly deliver to the Mortgagee a copy of the determination of
the arbitrators in each such arbitration proceeding, it being acknowledged and
agreed that the Mortgagee shall have the right to participate in such
arbitration proceedings in association with the Mortgagor or on its own behalf
as an interested party, and (vi) furnish to the Mortgagee, within ten (10) days
after demand, proof of payment of all items which are required to be paid by the
Mortgagor pursuant to the Ground Lease.

              2.17.2. The Mortgagor, shall not without the prior written consent
of the Mortgagee, surrender the leasehold estate created by the Ground Lease or
terminate or cancel the Ground Lease or modify, change, supplement, alter or
amend the Ground Lease, or consent to a modification change, supplement
alteration or amendment to the Ground Lease, in any material respect, either
orally or in writing, and the Mortgagor hereby assigns to the Mortgagee, as
further security for the payment of the Indebtedness and for the performance and
observance of the terms, covenants and conditions of this Mortgage, all of the
rights, privileges and prerogatives of the Mortgagor, as lessee under the Ground
Lease, to surrender the leasehold estate created by the Ground Lease or to
terminate, cancel, modify, change, supplement, alter or amend the Ground Lease,
and any such surrender of the leasehold estate created by the Ground Lease or
termination, cancellation, modification, change, supplement, alteration or
amendment of the Ground Lease without the prior written consent of the Mortgagee
shall be void and of no force and effect. The Mortgagee will not unreasonably
withhold or delay its consent to a modification, change, supplement, alteration
or amendment to the same.

              2.17.3. Supplementing the provisions of subparagraph (b) above,
it is understood and agreed that the Mortgagor shall not, without the
Mortgagee's prior written consent, elect to treat the Ground Lease as terminated
under Section 365(h)(1)(A)(i) of the Bankruptcy Code. Any such election made
without the Mortgagee's prior written consent shall be void. The Mortgagor
hereby unconditionally assigns, transfers and set over to the Mortgagee all of
the Mortgagor's claims and rights to the payment of damages arising under the
Bankruptcy Code from any rejection by the lessor under the Ground Lease. The
Mortgagee shall have the right to proceed in its own name on behalf of the
Mortgagor in respect of any claim, suit, action or proceeding relating to the
rejection of the Ground Lease, including, without limitation, the right to file
and prosecute, to the exclusion of the Mortgagor, any proofs of claim,

                                       26

<PAGE>

complaints, motions, applications, notices and other documents, in any case in
respect of such lessor under the Bankruptcy Code. This assignment constitutes a
present, irrevocable and unconditional assignment of the foregoing claims,
rights and remedies, and shall continue in effect until all of the Indebtedness
secured by the Mortgage shall have been satisfied and discharged in full. Any
amounts received by the Mortgagee as damages arising out of the rejection of the
Ground Lease as aforesaid shall be applied first to all costs and expenses of
the Mortgagee (including, without limitation, attorneys' fees) incurred in
connection with the exercise of any of its rights or remedies under this
Paragraph and then shall be applied against the Indebtedness in such order,
priority and proportion as the Mortgagee shall determine. If any action, motion
or notice shall be commenced or filed in respect of the Mortgagor, as lessee
under the Ground Lease, or all or any portion of the Mortgaged Property in
connection with any case under the Bankruptcy Code, the Mortgagor shall give the
Mortgagee prompt written notice thereof. Other than during the existence of an
Event of Default, the Mortgagor may commence any action, suit, proceeding or
case, or file any application or make any motion, in respect of the Ground Lease
in any such case under the Bankruptcy Code without the prior written consent of
the Mortgagor but will not settle or compromise any of the foregoing without the
consent of the Mortgagee, which consent will not be unreasonably withheld or
delayed by Mortgagee. During the existence of an Event of Default, the Mortgagor
shall not commence any action, suit, proceeding or case, or file any application
or make any motion, in respect of the Ground Lease in any such case under the
Bankruptcy Code without the prior written consent of the Mortgagee, and the
Mortgagee, during the existence of an Event of Default, may proceed in its own
name, in connection with any such litigation. The Mortgagor shall, immediately
after obtaining knowledge thereof, notify the Mortgagee and its counsel, by
telecopy or by hand of any filing by or against the lessor under the Ground
Lease of a petition under the Bankruptcy Code. The Mortgagor shall thereafter
forthwith give written notice of such filing to the Mortgagee, setting forth the
date of such filing, the court in which the petition was filed and the relief
sought therein. The Mortgagor shall promptly deliver to the Mortgagee, following
receipt, any and all notices, summonses, pleadings, applications and other
written documents received by the Mortgagor in connection with any such petition
and any proceedings relating thereto.

               2.17.4. If the Mortgagor shall default in the performance or
observance of any term, covenant or condition of the Ground Lease on the part of
the Mortgagor, as lessee thereunder, to be performed or observed, then, without
limiting the generality of the other provisions of this Mortgage, and without
waiving or releasing the Mortgagor from any of its obligations hereunder, the
Mortgagee shall have the right, but shall be under no obligation, to pay any
sums and to perform any act or take any action as may be appropriate to cause
all of the terms, covenants and conditions of the Ground Lease on the part of
the Mortgagor, as lessee thereunder, to be performed or observed to be promptly
performed or observed on behalf of the Mortgagor, to the end that the rights of
the Mortgagor in, to and under the Ground Lease shall be kept unimpaired and
free from default. If the Mortgagee shall make any payment or perform any act or
take action in accordance with the preceding sentence, the Mortgagee will notify
the Mortgagor of the making of any such payment, the performance of any such
act, or the taking of any such action. All sums so paid by the Mortgagee and all
costs and expenses incurred by the

                                       27

<PAGE>

Mortgagee in connection with the performance of any such act shall be paid by
the Mortgagor to the Mortgagee upon demand with interest, from the date so
advanced by Mortgagee until thirty (30) days after demand by the Mortgagee to
the Mortgagor, at the Interest Rate set forth in the Note and thereafter at the
Involuntary Rate, and the same shall be deemed to be secured by this Mortgage
and shall be a lien on the Mortgaged Property prior to any right, title to,
interest in or claim upon the Mortgaged Property attaching subsequent to the
lien of this Mortgage. In any such event, subject to the rights, if any, of
lessees and other occupants under the Ground Lease, the Mortgagee and any person
designated by the Mortgagee shall have, and are hereby granted, the right to
enter upon the Mortgaged Property at any time and from time to time for the
purpose of taking any such action. If the lessor under the Ground Lease shall
deliver to the Mortgagee a copy of any notice of default sent by said lessor to
the Mortgagor, as lessee under the Ground Lease, such notice shall constitute
full protection to the Mortgagee for any action taken or omitted to be taken by
the Mortgagee, in good faith, in reliance thereon.

         2.17.5. Mortgagor hereby delegates irrevocably, coupled with an
interest, to Mortgagee the authority to exercise any and all of Mortgagor's
rights under the Ground Lease, including, but not limited to, the right of the
Mortgagee to participate (to the exclusion of Mortgagor) in any proceeding,
arbitration or settlement involving condemnation or eminent domain affecting
Mortgagor's leasehold interest in the Mortgaged Property. However, Mortgagee
agrees not to exercise such power, except during the existence of an Event of
Default and/or upon acceleration of the Indebtedness pursuant to the terms of
this Mortgage.

         2.17.6. The generality of the provisions of this Paragraph relating to
the Ground Lease shall not be limited by other provisions of this Mortgage or
any other agreement between the Mortgagee and the Mortgagor, setting forth
particular obligations of the Mortgagor which are also required of the Mortgagor
as tenant under the Ground Lease.

         2.17.7. Should there be a conflict between the terms of the Mortgage or
any other Loan Document on the one hand, and the terms of the Ground Lease, on
the other, the terms of the Mortgage shall prevail and control.

         2.17.8. In accordance with the provisions of Section 10.02 of the
Ground Lease, the Mortgagee and Mortgagor agree to be bound by the following
provisions:

         (a) This Mortgage is executed upon the condition that no purchaser at
         any foreclosure sale shall acquire any right, title or interest in or
         to the Lease hereby mortgaged, unless the said purchaser, or the
         person, firm or corporation to whom or to which such purchaser's right
         has been assigned, shall, in the instrument transferring to such
         purchaser or assignee the Tenant's interest under the said Lease,
         assume and agree to perform all of the terms, covenants and conditions
         of said Lease to be observed or performed on the part of the Tenant
         subsequent to the date of the assumption agreement, and moreover, that
         no further or additional mortgage or assignment or said Lease shall be
         made, except subject to the provisions contained in Articles 9 and 10
         of said Lease, and that a duplicate original of said assumption

                                       28

<PAGE>

         agreement, in form reasonably satisfactory to Landlord's counsel and
         duly executed and acknowledged by such purchaser or such assignee, is
         delivered to Landlord immediately after the consummation of such sale,
         or, in any event, prior to taking possession of the premises.

         (b) This Mortgage and all rights of the Mortgagee hereunder are,
         without the necessity for the execution of any further documents,
         subject and subordinate to any Fee Mortgages now or hereafter made, as
         said terms are defined in the Lease hereby mortgaged, provided that
         Tenant and leasehold Mortgagee shall receive a non-disturbance
         agreement from the Fee Mortgagee in recordable form and reasonably
         satisfactory to the Leasehold Mortgagee. Subject to the receipt of such
         a non-disturbance agreement, the holder of this mortgage agrees from
         time to time upon request and without charge, to execute, acknowledge
         and deliver any instruments requested by the Landlord under the Lease
         hereby mortgaged to evidence the foregoing subordination.

                                  ARTICLE III.

                                  Condemnation

                  3.1. Notice of Taking. The Mortgagor shall promptly notify the
Mortgagee if the Mortgagor receives notice of the institution of any proceeding
or negotiations for the taking of the Mortgaged Premises, or any part thereof,
whether for permanent or temporary use and occupancy in condemnation or by the
exercise of the power of eminent domain or by agreement of interested parties in
lieu of such condemnation (all the foregoing called a "taking"); shall keep the
Mortgagee currently advised, in detail, as to the status of such proceedings or
negotiations and will promptly give to the Mortgagee copies of all notices,
pleadings, judgments, determinations and other papers received or delivered by
the Mortgagor in connection with any such proceedings. The Mortgagee shall have
the right to appear and participate in such proceedings and may be represented
by counsel. The Mortgagor will not, without the Mortgagee's consent, enter into
any agreement for the taking of the Mortgaged Premises, or any part thereof,
with anyone authorized to acquire the Mortgaged Premises by eminent domain or in
condemnation.

                  3.2. Condemnation Award. If the Mortgaged Premises shall be
the subject of a taking the Mortgagee shall be entitled to and shall receive the
total of such portion of all awards made that shall be allowed to the Mortgagor
with respect to all the right, title and interest of the Mortgagor in and to the
Mortgaged Premises (the award made in any total, partial or temporary taking is
herein called the "Award"), provided that the obligations of the Mortgagor to
perform the terms, covenants and conditions of this Mortgage, if any, affected
by such taking shall continue unimpaired until the actual vesting of title in
such proceeding and the actual receipt by the Mortgagee of Mortgagor's share of
the entire Award resulting from such taking.

                                       29

<PAGE>

                  3.3. Application of Award. The Mortgagee shall have the option
of treating a total taking or a substantial taking (as hereinafter defined) as
an Event of Default and of accelerating the entire Obligations, in which event
it shall apply the Mortgagor's entire Award in reduction of such Obligations
(including principal, interest and other sums secured hereby, in such order as
the Mortgagee may determine) and shall turn over any balance remaining, if any,
to the Mortgagor; or if the Mortgagee shall not so elect to accelerate the
Obligations and apply the Award thereto, then the total Award shall, regardless
of amount, be deposited with the Mortgagee or with the Depository, the Mortgagor
hereby agreeing to elect that such proceeds be held and disbursed by the
Depository in accordance with SECTIONS 2.5.6, 2.5.7, 2.5.8, 2.5.9 and 2.5.10
hereof for restoration required to be made by the Mortgagor. If there be a
partial taking, the net proceeds of the Award shall be deposited with the
Mortgagee and applied by the Mortgagee in accordance with the provisions of
SECTIONS 2.5.6, 2.5.7, 2.5.9 and 2.5.10. Any Award remaining after the
completion of such restoration, replacement or rebuilding shall be applied in
reduction of the Obligations (including principal, interest and other sums
secured hereby) in such order as the Mortgagee shall determine. A partial taking
is substantial only if it materially decreases the fair market value of the
Mortgaged Premises and the remainder of the Mortgaged Premises cannot be
restored to an economically viable whole.

                  3.4. Temporary Taking. If any Award payable to the Mortgagor
on account of a taking for temporary use or occupancy is made in a lump sum or
is payable other than in equal monthly installments, the Mortgagor shall pay
over such Award to the Depository and such Award shall be applied to
installments of Impositions and of principal and interest and all other charges
secured by this Mortgage or due in respect of the Obligations or the other Loan
Documents as and when the same become due and payable. Any unapplied portion of
such Award held by the Depository when such taking ceases or expires (if no
Event of Default has then occurred and is continuing), or after the Obligations
shall have been paid in full, shall be paid to the Mortgagor or to any other
party entitled thereto.

                  3.5. The Mortgagor's Obligation to Restore. If proceeds of the
Award are made available to the Mortgagor for restoration, replacement or
rebuilding pursuant hereto, the Mortgagor shall be obligated promptly to
restore, replace, rebuild or alter any Improvements or Building Service
Equipment affected by a taking so as to restore the Mortgaged Premises to an
economically viable whole, all without regard to the adequacy of the proceeds of
an Award, if any, made available to the Mortgagor.

                                       30

<PAGE>

                                   ARTICLE IV.

                       Assignment of Space Leases, Profits
                   and Other Income as Further Security, Etc.

                  4.1. Assignment of Space Leases, Rents, Issues and Profits.
The Mortgagor hereby absolutely assigns and sets over unto the Mortgagee all
Space Leases, if any, now or hereafter entered into with respect to all or any
part of the Mortgaged Premises, and all renewals, extensions, subleases or
assignments thereof, and all other occupancy agreements (written or oral), by
concession, license or otherwise, together with all of the rents, income,
receipts, revenues, issues and profits arising therefrom (the "Collateral").
This assignment is intended by the Mortgagor and the Mortgagee to create, and
shall be construed to create, an absolute assignment of all Space Leases, rents,
issues and profits, subject only to the terms and conditions of this Mortgage.

                  4.2.     The Mortgagor's Covenants Regarding Space Leases.

               4.2.1. Without the prior consent and approval of the Mortgagee in
each instance, the Mortgagor will not (a) assign, pledge, hypothecate or
otherwise encumber any of the Space Leases or the rents, income, issue and
profits of the Mortgaged Premises; or (b) enter into any Space Leases affecting
the Mortgaged Premises or any part thereof, unless such Space Lease is expressly
subordinate to the lien of this Mortgage and to any consolidation, extension,
renewal, recasting or refinancing hereof and the Space Lease provides, in
substance, that in the event of enforcement by the Mortgagee of the remedies
provided for by law or by this Mortgage, each Space Tenant shall, at the option
of the Mortgagee, attorn to any person succeeding to the interest of the
Mortgagor as a result of such enforcement and shall recognize such successor in
interest as landlord (or sublandlord, as the case may be) under such Space Lease
without change in the terms or other provisions thereof; provided, however, that
such successor shall not be bound by any payment of rent or additional rent for
more than one (1) month in advance or any amendment or modification of any such
Space Lease made without the Mortgagee's written consent; or (c) enter into any
Space Leases except in accordance with the provisions of the Note.

               4.2.2.  The Mortgagor further represents, warrants, covenants and
agrees that:

                           (a) To the best of its knowledge, each Space Lease is
         (or, when executed, will be) a valid and legally enforceable obligation
         of the parties thereto, in full force and effect.

                           (b) With respect to each Space Lease and the Space
         Tenant security deposits thereunder, any and/or all of such security
         deposits shall be held as required by the Space Lease but in no event
         in a manner other than that required by law.

                           (c) The Mortgagor shall, at its sole cost and
         expense, keep, observe, perform and discharge, duly and punctually, all
         and singular the material obligations, terms, covenants, conditions,
         representations and warranties of each Space Lease on the part of the
         Mortgagor to be kept, observed, performed and discharged.

                                       31

<PAGE>

                           (d) (i) Except as herein in this clause (i) expressly
         provided, the Mortgagor shall, at its sole cost and expense, maintain
         the Space Leases in full force and effect; the Mortgagor will not waive
         its rights under or materially modify, change, supplement, alter or
         amend ("Change"), nor shall the Mortgagor surrender (whether partial or
         total), terminate, cancel or subordinate, any of the Space Leases, and
         any such attempted Change, surrender, termination, cancellation or
         subordination shall be void, unless, in each case, the prior written
         consent thereto of the Mortgagee shall have been obtained.
         Notwithstanding the foregoing, the Mortgagor may terminate or cancel
         any Space Lease as a result of a material default by the tenant under
         such Space Lease if (w) such termination is being effected in the
         ordinary course of the Mortgagor's business, (x) no Event of Default
         then exists and (y) such termination or cancellation would not
         materially and adversely affect the value of the Space Leases as
         collateral security for the Obligations. A material Change shall
         include but not be limited to any material Change in the amount or time
         of payment of the rent or additional rent, the length of term or square
         footage of the premises under any Space Lease or any other Change which
         would materially adversely affect the Mortgagor's rights under the
         Space Lease, or would affect the Mortgagee's rights under the Space
         Lease or the value of the Space Lease as collateral security for the
         Obligations.

                                    (ii)    The Mortgagor shall, at its sole
         cost and expense, enforce the Space Leases in accordance with their
         terms; and shall appear in and defend any action or proceeding arising
         to which it is a party under or in any manner connected with any of
         the Space Leases.

                           (e) The Mortgagor shall deliver to the Mortgagee a
         copy of each notice of default sent or received by it relating in any
         way to any Space Lease promptly upon, but in any event within five (5)
         business days after, its sending or receipt thereof.

                  4.3.     The Mortgagor's Rights and Powers.

               4.3.1. The Mortgagor hereby irrevocably, in the name of the
Mortgagor or otherwise, authorizes and empowers the Mortgagee, and absolutely
assigns and transfers unto the Mortgagee, and constitutes and appoints the
Mortgagee its true and lawful attorney-in-fact, coupled with an interest and as
its agent, irrevocably, with full power of substitution for it and in its name,
but solely for the following purposes: (i) to exercise and enforce every right,
power, remedy, authority, option and privilege of the Mortgagor under the Space
Leases, and as such attorney-in-fact, the Mortgagee may subordinate, terminate,
cancel or modify the Space Leases, accept the surrender of the Space Leases,
give any notice, take any action resulting in such subordination, termination,
cancellation, modification or surrender, give any authorization, furnish any
information, make any demands, execute any instruments and take any and all
other action on behalf of and in the name of the Mortgagor which in the opinion
of the Mortgagee may be necessary or appropriate to be given, furnished, made,

                                       32

<PAGE>

exercised or taken by the Mortgagor under the Space Leases in order to comply
therewith, to perform the conditions thereof or to prevent or remedy any default
by the Mortgagor thereunder or to enforce any of the Mortgagor's rights and
remedies thereunder, and (ii) to ask, require, demand, receive and collect and
give acquittances for the Income (as hereinafter defined), and on nonpayment
thereof to sue for, recover and receive the same, and on payment thereof to give
sufficient releases, receipts, discharges and acquittances thereof; to endorse
any checks or other instruments or orders in connection therewith and to file
any claims or take any action or institute any proceedings which the Mortgagee
may deem to be necessary or advisable; provided, however, that the power
provided for in this sentence may not be exercised by the Mortgagee unless an
Event of Default shall have occurred and be continuing. "Income" shall mean all
deposits, rents, issues, profits, revenues, royalties, and other revenue
producing arrangements, whether written or oral, and all monetary benefits of,
and/or derived from, and/or sums payable under and by virtue of the Space Leases
and/or the Premises.

               4.3.2. So long as there shall not have occurred and then be
continuing any Event of Default and until such right of Mortgagor is terminated
by the Mortgagee as in SECTION 4.3.3 provided, the Mortgagee will not exercise
its rights pursuant to SECTION 4.3.1, and the Mortgagor shall have the right
(but limited as hereinafter provided) to exercise all of its rights under the
Space Leases, provided that the Mortgagor shall at all times comply with,
observe and perform, in the exercise of such right, all of the provisions of
this Mortgage and the other Loan Documents applicable to the Space Leases;
provided, further, that no action shall be taken or failed to be taken by the
Mortgagor which would impair the Collateral or any other collateral security for
the Obligations provided for in the Loan Documents.

               4.3.3. The Mortgagee, upon the occurrence and during the
continuance of an Event of Default, at its option and upon written notice to the
Mortgagor, shall have the right to terminate the right of the Mortgagor to
exercise its rights under the Space Leases, and, thereupon, in addition, the
Mortgagee, at any time thereafter, at its option, shall have the complete right,
power and authority hereunder to exercise and enforce all rights, powers,
remedies, authority, options and privileges of the Mortgagor under the Space
Leases in the name of the Mortgagor or the Mortgagee, to enforce all obligations
of the other parties to the Space Leases and to exercise and enforce all of its
rights and remedies hereunder and under law not exercisable prior to an Event of
Default.

               4.3.4. The Mortgagor does hereby direct each and all of the Space
Tenants under the Space Leases and all contractual obligors of the Mortgagor to
pay any Income to the Mortgagee upon demand for payment thereof by the Mortgagee
without further inquiry. It is understood and agreed, however, that no such
demand shall be made unless an Event of Default shall have occurred and be
continuing. No such Space Tenant or obligor shall be obliged to account to the
Mortgagor for any amounts paid to the Mortgagee by reason of any payment made to
the Mortgagee pursuant to such demand and, upon any such payment to the
Mortgagee, shall be pro tanto released from their obligations to the Mortgagor.
Each Space Tenant shall be permitted to rely on any communication from the
Mortgagee pursuant hereto, and under no circumstances shall such Space Tenant be
obligated to the Mortgagor for any payments made to the Mortgagee hereunder.
Until such demand is made, the Mortgagor is authorized to collect or enforce or
continue collecting or enforcing such Income in accordance with the provisions
of this Mortgage.

                                       33

<PAGE>

               4.3.5. The Mortgagee shall not have any duty as to the collection
or protection of the Collateral or any income thereon or payments with respect
thereto, or as to the preservation of any rights pertaining thereto beyond the
safe custody of any thereof actually in its possession. In no instance shall the
Mortgagee be responsible to lessees for payment of interest upon, or return of,
any lease security deposits, except as provided by law or as provided in the
leases and then only if and to the extent that such deposits are received by the
Mortgagee. The Mortgagor hereby waives notice of acceptance hereof and, except
as otherwise specifically provided herein or required by provision of law which
may not be waived, hereby waives any and all notices or demands with respect to
any exercise by the Mortgagee of any rights or powers which it may have or to
which it may be entitled with respect to the Collateral.

               4.3.6. The Mortgagor hereby irrevocably constitutes and appoints
the Mortgagee as the true and lawful attorney-in-fact of the Mortgagor, which
appointment is coupled with an interest, with full power of substitution, to
proceed from time to time in the Mortgagor's name in any statutory or
non-statutory proceeding affecting the Mortgagor or any Collateral, and the
Mortgagee or its nominee may (i) execute and file proof claim for the full
amount of any Collateral and vote such claims for the full amount thereof (A)
for or against any proposal or resolution, (B) for a trustee or trustees or for
a receiver or receivers or for a committee of creditors and/or (C) for the
acceptance or rejection of any proposed arrangement, plan of reorganization,
composition or extension, and the Mortgagee or its nominee may receive any
payment or distribution and give acquittance therefor and may exchange or
release Collateral; (ii) endorse any draft or other instrument for the payment
of money, execute releases and negotiate and enter into settlements; and (iii)
execute all such other documents or instruments as may be necessary or expedient
to be executed by the Mortgagor for any of the purposes of this Mortgage;
provided, however, that the power provided for in this sentence may be exercised
by the Mortgagee only while an Event of Default is continuing. The Mortgagee
shall have no duty to exercise any of the aforesaid rights, privileges or
options and shall not be responsible for any failure to do so or delay in so
doing.

                  4.4.     Remedies and Entry Upon Default.

               4.4.1. So long as no Event of Default shall have occurred and be
continuing, the Mortgagor shall have the right to collect (but not more than one
(1) month in advance) and retain all of the rents, gross receipts and other
payments, if any, from the Space Leases and from the Mortgaged Premises
generally, and the Mortgagee agrees that customary initial rent payments,
security deposits and reimbursements by a Space Tenant to the Mortgagor on
account of alterations made by the Mortgagor for the benefit of the Space Tenant
are permissible advance payments by the Space Tenant.

               4.4.2.  Upon any Event of Default, the Mortgagee may, but shall
not be obligated to:

                           (a) terminate the rights of the Mortgagor referred to
         in SECTION 4.3 hereof and exercise all of the powers, rights and
         remedies provided for in SECTION 4.3 hereof, including those to be
         exercised only from and after an Event of Default;

                                       34

<PAGE>

                           (b) at any time and from time to time, without notice
         to, or assent by, the Mortgagor or any other Person, but without
         affecting any of the Obligations, in the name of the Mortgagor or in
         the name of the Mortgagee, notify the account debtors and obligors on
         any or all of the Space Leases to make payment and performance directly
         to the Mortgagee, and demand, collect, receive, compound and give
         acquittance for the Space Leases or any part thereof; extend the time
         of payment and performance of, compromise or settle for cash, credit or
         otherwise, upon any terms and conditions, any of the Space Leases;
         endorse to the order of the Mortgagee checks, drafts or other orders or
         instruments for the payment of moneys payable to the Mortgagor which
         shall be issued in respect of any of the Space Leases; file any claims,
         commence, maintain or discontinue any actions, suits or other
         proceedings deemed by the Mortgagee necessary or advisable for the
         purpose of collecting upon or enforcing any of the Space Leases; and
         execute any instrument and do all other things deemed necessary and
         proper by the Mortgagee to protect and preserve and realize upon the
         Space Leases and/or the other rights contemplated hereby and the
         Mortgagor hereby irrevocably constitutes and appoints the Mortgagee as
         such Mortgagor's lawful attorney-in-fact, coupled with an interest, and
         its agent for the foregoing purposes;

                           (c) demand, collect, sue for, attach, levy, recover,
         receive, compromise and adjust, and make, execute and deliver receipts
         and releases for all Income that may then be or may thereafter become
         due, owing or payable with respect to the Premises or any part or parts
         thereof from any present or future lessees, tenants, subtenants or
         occupants thereof or from any present or future contract obligors;
         and/or

                           (d) pay, in such order as the Mortgagee in its sole
         discretion shall determine, from and out of the Income collected in
         connection with the Premises and/or the Collateral or any part or parts
         thereof or from or out of any other funds (less the expense of
         collection, including attorneys' fees and disbursements), any taxes,
         assessments, water rates, sewer rates, or other government or other
         charges levied, assessed or imposed against the Premises or any part or
         part thereof, and also any and all other charges, costs and expenses
         which the Mortgagee deems necessary or advisable to pay in respect of
         the management or operation of the Premises, including, without
         limitation, the costs of insurance policies, repairs and alterations,
         commissions for renting the Premises or any part or parts thereof,
         legal expenses in enforcing claims, preparing papers or procuring any
         other services that may be required and any amounts payable under or
         pursuant to any Lease. All amounts so paid and expended shall be
         payable on demand, together with interest at the Default Rate from the
         date incurred until paid, and be deemed to be included within the

                                       35

<PAGE>

         Obligations and secured by this Mortgage. The provisions of SECTION
         4.2.2 and the rights given to the Mortgagee hereby shall inure to the
         benefit of the Mortgagee even though the Mortgagee does not enter and
         take possession of the Premises. Any balance remaining after the
         Obligations shall have been paid in full shall be turned over to the
         Mortgagor or such other Person as may lawfully be entitled thereto.
         Neither the entry upon and taking possession of the Mortgaged Premises,
         nor the collection and application of the rents, gross receipts or
         other charges thereof, nor any other action taken by the Mortgagee in
         connection therewith, shall cure or waive any default hereunder or
         waive or modify any notice thereof or notice of acceleration of the
         Obligations theretofore given by the Mortgagee.

               4.4.3. If an Event of Default shall have occurred and be
continuing and the Mortgagee shall have entered upon the Mortgaged Premises as
provided in SECTION 6.2.2 hereof, a notice in writing by the Mortgagee to the
Space Tenants under the Space Leases advising them that the Mortgagor has
defaulted hereunder and requesting that all future payments of rent, additional
rent or other charges under the Space Leases be made to the Mortgagee (or its
agent) shall be construed as conclusive authority to such Space Tenants that
such payments are to be made to the Mortgagee (or its agent). Each Space Tenant
shall be fully protected in making such payments to the Mortgagee (or its agent)
and be given full credit against its obligations under the applicable Space
Lease to the extent of payments made to the Mortgagee (or its agent) pursuant to
any such notice; and the Mortgagor hereby irrevocably constitutes and appoints
the Mortgagee the attorney-in-fact and agent of the Mortgagor, coupled with an
interest, for the purpose of endorsing the consent of the Mortgagor on any such
notice.

                  4.5.     No Obligation of Mortgagee.

               4.5.1. The Mortgagee shall not be obligated to perform or
discharge any obligation of the Mortgagor as a result of the collateral
assignment hereby effected, and the Mortgagor hereby agrees to indemnify and
hold the Mortgagee harmless from and against any and all liability, loss or
damage which the Mortgagee may incur by reason of any act of the Mortgagee under
this Mortgage, other than as a result of the Mortgagee's willful misconduct or
gross negligence. Should the Mortgagee incur any such liability, loss or damage
by reason of this Mortgage and which is covered by the foregoing indemnity, or
in defense against any such claims or demands, or perform any acts or covenants
on the part of Mortgagor to be performed under the Space Leases, or pay for the
account of the Mortgagor any and all sums, costs and expenses for the discharge
of taxes, assessments, water rents or other liens against the Collateral (as
hereinafter defined) or any part thereof, or on account of insurance premiums or
repairs, and also any amounts and expenses necessary to perform any covenants
and conditions to be performed on the part of the Mortgagor under the Space
Leases, the amount thereof, including costs, expenses and attorneys' fees,
together with interest thereon at the Default Rate from the date such expenses
were paid by the Mortgagee to the date of payment to the Mortgagee by the
Mortgagor, shall be included in the Obligations secured by this Mortgage, and
the Mortgagor shall reimburse the Mortgagee therefor upon demand.

               4.5.2. The acceptance by the Mortgagee of this Mortgage, with all
the rights, powers, privileges and authority so created, shall not at any time
or in any event obligate the Mortgagee to appear in or defend any action or
proceeding relating to the Collateral, or to take any action hereunder or
thereunder, or to expend any money or incur any expenses or perform or discharge
any obligation, duty or liability under the Collateral.

                                       36

<PAGE>

                                   ARTICLE V.

                Security Agreement Under Uniform Commercial Code

                  5.1. The Mortgagor intends that this Mortgage shall constitute
a security agreement within the meaning of the Uniform Commercial Code of the
State (the "Code") with respect to all of the Mortgagor's right, title and
interest in and to the Building Service Equipment and Furnishings as are
considered or as shall be determined to be personal property or "fixtures" (as
defined in the Code) and all books, records, licenses and certificates of the
Mortgagor or relating to the Mortgaged Premises, together with all replacements
thereof, substitutions therefor or additions thereto (said property being
sometimes hereinafter in this ARTICLE V referred to as the "Personal Property
Collateral"), and that a security interest shall attach thereto for the benefit
of the Mortgagee to secure the Obligations and all other sums and charges which
may become due hereunder, thereunder or under any of the other Loan Documents.
The Mortgagor hereby authorizes the Mortgagee to file financing and continuation
statements with respect to the Personal Property Collateral without the
signature of the Mortgagor, if permitted by the Code as adopted by the State. In
any event the Mortgagor covenants to execute such financing and continuation
statements as the Mortgagee may reasonably request. If an Event of Default shall
occur and be continuing, the Mortgagee, pursuant to the appropriate provisions
of the Code, shall have the option of proceeding as to both real and personal
property in accordance with its rights and remedies in respect of real property
under this Mortgage and the law of the State, in which event the default
provisions of the Code shall not apply. The Mortgagor agrees that, in the event
the Mortgagee shall elect to proceed with respect to the Personal Property
Collateral separately from the real property, unless a greater period shall then
be mandated by the Code, five (5) days notice of the sale of the Personal
Property Collateral shall be reasonable notice. The expenses of retaking,
holding, preparing for sale and selling incurred by the Mortgagee shall be
assessed against the Mortgagor and shall include, but not be limited to, the
reasonable legal expenses incurred by Mortgagee. The Mortgagor agrees that it
will not remove or permit to be removed from the Mortgaged Premises any of the
Personal Property Collateral without the prior written consent of the Mortgagee
except as set forth in SECTION 2.7.2. All replacements, renewals and additions
to the Personal Property Collateral shall be and become immediately subject to
the security interest of this Mortgage and the provisions of this ARTICLE V. The
Mortgagor warrants and represents that all Personal Property Collateral now is
free and clear of all liens, encumbrances or security interests other than the
Permitted Encumbrances, and that all replacements of the Personal Property
Collateral, substitutions therefor or additions thereto, unless the Mortgagee
otherwise consents, will be, free and clear of liens, encumbrances or security
interests of others.

                                       37

<PAGE>

                                   ARTICLE VI.

                         Events of Default and Remedies

                  6.1.     Events of Default.  Mortgagee shall be entitled to
exercise any and all of the remedies provided in SECTION 6.2 and in the other
Loan Documents upon the happening of an Event of Default. The term "Event of
Default", wherever used in the Mortgage, shall mean any one or more of the
following events:

                            (a)     failure of Mortgagor (x) to pay, for a
period of ten (10) days after the same becomes due (i) any installment of
interest and/or principal under this Note, or (ii) any other payment required
hereunder or under any of the other Loan Documents or under any supplement,
modification or extension hereof or thereof, or (y) to pay the final principal
balance of the Note when due, whether upon the stated maturity date set forth
therein, upon acceleration of such principal sum or otherwise, together with
accrued and unpaid interest thereon; or

                            (b)     if any of Mortgagor's representations or
warranties contained herein or in any of the Loan Documents shall be untrue or
incorrect in any material respect at the time made, or if any such warranty or
representation intended to be a continuing one shall become untrue or incorrect
in any material respect and Mortgagor shall fail to remedy such situation within
thirty (30) days after notice from Mortgagee, unless such situation cannot be
remedied in such period and provided further that the Mortgagor shall commence
compliance with such situation and shall continue to diligently prosecute such
compliance, then such cure period shall be extended for an additional sixty (60)
day period, or such other period of time as the Mortgagee may agree in writing
(or immediately upon notice in case of emergency); or

                            (c)     if Mortgagor shall commence a voluntary case
concerning itself under Title 11 of the United States Code entitled "Bankruptcy"
as now or hereafter in effect, or any successor thereto (the "Bankruptcy Code");
or an involuntary case is commenced against Mortgagor and the petition is not
controverted within thirty (30) days, or is not dismissed within ninety (90)
days, after commencement of the case; or a custodian (as defined in the
Bankruptcy Code) is appointed for, or takes charge of, all or any substantial
part of the property of Mortgagor; or Mortgagor commences any other proceeding
under any reorganization, arrangement, adjustment of debt, relief of debtors,
dissolution, insolvency or liquidation or similar law of any jurisdiction
whether now or hereafter in effect relating to Mortgagor or there is commenced
against Mortgagor any such proceeding which remains undismissed for a period of
ninety (90) days; or Mortgagor is adjudicated insolvent or bankrupt; or any
order of relief of other order approving any such case or proceeding is entered;
or Mortgagor suffers any appointment of any custodian or the like for it or any
substantial part of its property to continue undischarged or unstayed for a
period of ninety (90) days; or Mortgagor makes a general assignment for the
benefit of creditors; or Mortgagor shall fail to pay, or shall state that it is
unable to pay, or shall be unable to pay, its debts generally as they become
due; or Mortgagor shall call a meeting of its creditors with a view to arranging
a composition or adjustment of its debts; or

                                       38

<PAGE>

                            (d)     if any of the events enumerated in clause
(c) of this SECTION shall happen to Acadia; or

                            (e)     if any execution, warrant, attachment,
garnishment or other similar processes shall be levied or filed against the
Mortgaged Premises or any part thereof, or against Mortgagor which involve
claims aggregating more than $100,000 and such processes shall not be stayed,
vacated or discharged, such as by bonding, within ninety (90) days after the
same shall have been levied or filed; or

                            (f)     if Mortgagor shall fail to perform or
observe, or cause to be performed or observed the provisions contained in
SECTION 2.18. herein, within the time periods set forth therein, with time being
of the essence; or

                            (g)     except as otherwise provided in PARAGRAPH
(f) directly hereinabove, if Mortgagor shall fail to perform or observe, or
cause to be performed or observed, any other term, obligation, covenant,
condition or agreement contained in the Note, this Mortgage or in any of the
other Loan Documents, or in any assignment of leases and rents or in any other
instrument executed concurrently herewith by Mortgagor and/or Guarantor or
supplemental hereto, pertaining to the debt evidenced by this Note or the
security therefor, or under any supplement, modification or extension of any of
the foregoing, on its part to be performed and such failure shall have continued
for a period of thirty (30) days after notice thereof; provided, however, if
such default shall not have been occasioned by any willful act of Mortgagor, and
if such default cannot with due diligence be cured within such thirty (30) days
period, the time within which to cure the same shall be extended for such period
as may be necessary to cure the same with due diligence if Mortgagor commences
within such thirty (30) days and proceeds diligently to cure the same; or

                            (h)     if there should occur a default which is not
cured within the applicable grace or cure period, if any, under any mortgage or
deed of trust of all or part of the Mortgaged Premises (as such term is defined
in the Mortgage), including a mortgage or deed of trust held by Mortgagee,
regardless of whether any such other mortgage or deed of trust is superior,
subordinate, or collateral to the Mortgage; it being further agreed by Mortgagor
that an Event of Default shall constitute an "Event of Default" under any such
other mortgage or deed of trust held by Mortgagee; provided, however, that this
provision shall not be construed as Mortgagee's consent to any such mortgage or
deed of trust; or

                            (i)     if any "Event of Default" (as such term is
defined in any Loan Document) shall occur; or

                            (j)     if there shall be an acceleration upon
default of any other loan made by or held by Mortgagee to a borrower controlled
by Acadia; or

                            (k)     if any Guarantor defaults under or attempts
to withdraw, cancel or disclaim liability under any Indemnity pursuant to the
terms therein; or

                                       39

<PAGE>

                            (l)     if the Mortgagor shall default in the
observance or performance of any term, covenant or condition of the Ground Lease
on the part of the Mortgagor, as lessee thereunder, to be observed or performed
beyond any applicable notice and cure periods under the Ground Lease; or

                            (m)     if the leasehold estate created by the
Ground Lease shall be surrendered, in whole or in material part, or if the Lease
shall be terminated or canceled for any reason or under any circumstance
whatsoever, or if any of the terms, covenants or conditions of the Ground Lease
shall in any manner be materially modified, changed, supplemented, altered or
amended without the consent of the Mortgagee, which consent shall not be
unreasonably withheld.

                  6.2.     Remedies. If an Event of Default shall occur and be
continuing, the Mortgagee, at its option, may:

               6.2.1. by notice to the Mortgagor, declare the entire principal
amount of the Note then outstanding and all accrued and unpaid interest thereon
and all other Obligations of the Mortgagor to the Mortgagee to be immediately
due and payable, and upon such declaration such principal and interest and all
other Obligations of the Mortgagor to the Mortgagee shall become and be
immediately due and payable, anything in the Note or in this Mortgage or in any
of the other Loan Documents to the contrary notwithstanding.

               6.2.2. after commencement of such proceedings as may be required
by any applicable law, either in person, or by its agents or attorneys, or by a
court-appointed receiver, enter into and upon all or any part of the Mortgaged
Premises and exclude the Mortgagor, its agents and employees from possession;
and while in possession, use, operate, manage, control, and conduct the business
of, the Mortgaged Premises in such manner and to such extent as the Mortgagee
shall, in its reasonable discretion, determine to be appropriate, either itself
or by its employees, agents, attorneys or the receiver; and maintain and restore
the Mortgaged Premises and make all necessary or proper repairs, replacements,
alterations, and improvements as the Mortgagee, in its reasonable discretion,
determines to be advisable; and, without limiting the Mortgagee's rights under
SECTION 4.4.2, the Mortgagee (whether or not it shall have taken possession of
the Premises or obtained a receiver for the Mortgaged Premises) shall be
entitled to collect and receive all earnings, revenues, rents, issues, profits
and income of the Mortgaged Premises. After first deducting the amount of
expenses incurred in connection with the operation of the Mortgaged Premises,
including advances for maintenance, repairs, alterations, improvements, taxes,
assessments, insurance and other prior or current charges in respect of the
Mortgaged Premises or any part thereof, as well as compensation for the services
of the Mortgagee and for all attorneys, agents, consultants and other persons
engaged by it to render services in connection with the Mortgaged Premises, the
Mortgagee shall apply the balance of said moneys to the payment of the
Obligations. Any remaining moneys shall be remitted to the Mortgagor or to such
other person as lawfully may be entitled thereto. Any and all amounts advanced
by the Mortgagee as authorized, or contemplated, by this SECTION 6.2.2 shall
bear interest from the date advanced at the Default Rate and, together with such
interest, shall be added to the Obligations secured by this Mortgage, and shall
be payable by Mortgagor on demand.

                                       40

<PAGE>

               6.2.3.  with or without entry, either itself or by its agents or
attorneys:

                           (a) foreclose this Mortgage in accordance with the
         laws of the State and the provisions hereof, for all of the Obligations
         or for any portion thereof or any other sums secured hereby which are
         then due and payable, subject to the continuing lien of this Mortgage
         for the balance of the Obligations not then due; or

                           (b) take such steps to protect and enforce its rights
         whether by action, suit or proceeding in equity or at law for the
         specific performance of any covenant, condition or agreement in the
         Note or in this Mortgage, or in aid of the execution of any power
         herein granted, or for any foreclosure hereunder, or for the
         enforcement of any other appropriate legal or equitable remedy or
         otherwise as the Mortgagee shall elect, including bringing any
         appropriate action or proceeding to foreclose this Mortgage and any
         other documents securing the Note and to sell, as an entirety or in
         separate lots or parcels, the Mortgaged Property under the power of
         sale hereinafter provided or the judgment or decree of a court or
         courts of competent jurisdiction; and (c) to pursue any other remedy
         available to it. The Mortgagee shall take action either by such
         proceedings or by the exercise of its power with respect to entry
         and/or taking possession, or both, as the Mortgagee may determine; and

               6.2.4. exercise any or all of its rights and remedies under the
Loan Documents in such order of priority as the Mortgagee shall determine in its
sole discretion. The Mortgagee may proceed in any such action to final judgment
and execution thereon for all sums due under SECTION 6.2.1, together with
interest on such sums at the Default Rate. Interest at the Default Rate shall be
due on any judgment obtained by the Mortgagee from the date of judgment until
actual payment is made of the full amount of the judgment by the Sheriff or
otherwise.

                  6.3.     Foreclosure; No Marshalling of Assets; Appointment of
Receiver.

               6.3.1. In case of a foreclosure sale, all of the Mortgaged
Premises, at the option of Mortgagee, in its sole discretion, may be sold in one
or more parcels even though the proceeds of such sale exceed or may exceed the
Obligations. The Mortgagee shall not be required to exercise any rights under
this Mortgage before proceeding against any other security, shall not be
required to proceed against other security before proceeding under this
Mortgage, and shall not be precluded from proceeding against any or all of any
security held by the Mortgagee for any or all of the Obligations in any order or
at the same time.

               6.3.2. The Mortgagee, in any action to foreclose this Mortgage,
shall be entitled, without notice and without regard to the adequacy of any
security for the Obligations or the solvency of any Person liable for the
payment thereof, to the appointment of a receiver of the rents and profits of
the Mortgaged Premises.

                                       41

<PAGE>

               6.3.3. The Mortgagor agrees, to the full extent that it may
lawfully do so, that in any foreclosure or other action brought by the Mortgagee
to enforce this Mortgage, it will not at any time insist upon or plead or in any
way take advantage of any appraisement, valuation, stay, marshalling of assets,
extension, redemption or moratorium law now or hereafter in force and effect so
as to prevent, hinder, delay or otherwise affect the enforcement of the
provisions of this Mortgage or any rights or remedies the Mortgagee may have
hereunder or by law.

               6.3.4. If the Mortgagee shall elect to accelerate the Obligations
following the occurrence of an Event of Default, the Mortgagor, within five (5)
days after demand, will pay to the Mortgagee, or any receiver appointed in
connection with the foreclosure of this Mortgage, any and all amounts then held
as security deposits under all Space Leases; and the Mortgagee or such receiver
shall be deemed to indemnify the Mortgagor against all claims of tenants in
respect of the security deposits so paid following such demand.

               6.3.5. If an Event of Default shall occur and be continuing, in
addition to all other rights of the Mortgagee provided in this Mortgage or by
law, the Mortgagor shall, on demand, surrender possession of the Mortgaged
Premises to the Mortgagee; the Mortgagor consents that the Mortgagee may
exercise any or all of the rights specified in SECTION 6.2.2; and the Mortgagor
irrevocably appoints the Mortgagee its attorney-in-fact, coupled with an
interest, for such purposes. If the Mortgagor is then an occupant of all or any
portion of the Mortgaged Premises, it agrees to surrender possession of that
part of the Mortgaged Premises which it occupies to the Mortgagee immediately
upon demand if an Event of Default shall have occurred and be continuing. If the
Mortgagor remains in possession despite such demand, such possession shall, at
the Mortgagee's election, be as tenant of the Mortgagee; and the Mortgagor
agrees to pay monthly in advance to the Mortgagee such rent for the premises so
occupied as the Mortgagee may demand, and in default of so doing, the Mortgagor
may also be dispossessed by summary proceedings or otherwise. If a receiver of
the rents and profits of the Mortgaged Premises shall be appointed, the
covenants of this SECTION 6.3.5 may be enforced by the receiver.

                  6.4.     Legal Expenses of Mortgagee.

               6.4.1. The Mortgagor will pay to the Mortgagee, on demand, all
costs, charges and expenses (including, without limitation, reasonable
attorneys' fees and disbursements) incurred or paid at any time by the Mortgagee
(i) in connection with any action or proceeding to foreclose this Mortgage or to
recover or collect all, or any portion of the Obligations; and (ii) in
connection with any modification or amendment or assignment of this Mortgage or
the other Loan Documents, together with interest on each such payment made by
the Mortgagee at the Default Rate from the date of the Mortgagee's demand for
such payment to the date of reimbursement by Mortgagor.

               6.4.2. If any action or proceeding be commenced in which the
Mortgagee is made a party, or in which it becomes necessary to defend or uphold
the lien of this Mortgage, all reasonable sums paid by the Mortgagee for the
expense of any litigation to prosecute or defend the title, rights and lien
created by this Mortgage (including, without limitation, reasonable attorneys'
fees) shall be paid by the Mortgagor, together with interest thereon at the
Default Rate from the date of the Mortgagee's demand for such payment to the
date of reimbursement by Mortgagor.

                                       42

<PAGE>

                  6.5.     Remedies Cumulative; No Waiver; Etc.

               6.5.1. No remedy in this Mortgage conferred upon or reserved to
the Mortgagee is intended to be exclusive of any other remedy or remedies, and
each and every such remedy shall be cumulative, and shall be in addition to
every other remedy given hereunder or now or hereafter existing at law or in
equity. No delay or omission by the Mortgagee in exercising any right or power
arising upon any Event of Default shall impair any such right or power, or shall
be construed to be a waiver of or acquiescence in any such Event of Default; and
every power and remedy given by this Mortgage to the Mortgagee may be exercised
from time to time as often as the Mortgagee may determine it is appropriate to
do so.

               6.5.2. A waiver in one or more instances of compliance with any
of the terms, covenants, conditions or provisions of this Mortgage or of the
other Loan Documents shall apply to the particular instance or instances and at
the particular time or times only, and no such waiver shall be deemed a
continuing waiver. In any event, no waiver shall be effective, or be asserted by
the Mortgagor as having been made, unless set forth in a writing signed by the
Mortgagee.

               6.5.3. The Mortgagor waives and renounces all homestead and
similar exemption rights with respect to the Mortgaged Premises provided for by
the Constitution and laws of the United States and of the State as against the
collection of the Loan Documents, or any part thereof.

                  6.6. No Merger. It is the intention of the parties to this
Mortgage that if the Mortgagee shall at any time hereafter acquire title to all
or any portion of the Mortgaged Premises, then, and until the Obligations have
been paid in full, the interest of the Mortgagee hereunder and the lien of this
Mortgage shall not merge or become merged in or with the estate and interest of
the Mortgagee as the holder and owner of title to all or any portion of the
Mortgaged Premises and that, until such payment, the estate of the Mortgagee in
the Mortgaged Premises and the lien of this Mortgage and the interest of the
Mortgagee hereunder shall continue in full force and effect to the same extent
as if the Mortgagee had not acquired title to all or any portion of the
Mortgaged Premises.

                  6.7.     Foreclosure of Mortgage by Power of Sale.

                  Mortgagee may, either with or without entry of taking
possession of the Mortgaged Property as provided in this Mortgage or otherwise,
personally or by its agents or attorneys, and without prejudice to the right to
bring an action for foreclosure of this Mortgage, sell the Mortgaged Property or
any part thereof pursuant to any procedures provide by applicable law,
including, without limitation, the procedures set forth in Article 14 of the New
York Real Property Actions and Proceedings Law (and any amendments or substitute
statutes in regard thereto), and all estate, right, title, interest, claim and
demand therein, and right of redemption thereof, at one or more sales as an
entity or in parcels, and at such time and place upon such terms and after such
notice thereof as may be required or permitted by applicable law.

                                       43

<PAGE>

                  All Notices hereunder or under any applicable law pertaining
hereto (including, without limitation, Article 14 of the New York Real Property
Actions and Proceeding Law) shall be in writing and shall be deemed sufficiently
given or served for all purposes when delivered (1) by personal service or
courier service, and shall be deemed given on the date when signed for or, if
refused, when refused by the person designated as an agent for receipt of
service, (ii) by facsimile transmission, and shall be deemed given when printed
confirmation of completion of transmission is generated by the sender's
facsimile transmission instrument, or (iii) by United States certified mail,
return receipt requested, postage prepaid, and shall be deemed given two (2)
days after being sent, to any party hereto at the following address: 20
Soundview Marketplace, Port Washington, New York 11050 or such other address of
which a party shall have notified the party giving such notice in writing as
aforesaid. For purposes hereof, notices may be given by the parties hereto or by
their attorneys identified herein.

                  6.8.     Purchase by Mortgagee.

                  Without limiting any other provision contained herein, upon
any such foreclosure sale, the Mortgagee may bid for and purchase the Mortgaged
Property and, upon compliance with the terms of sale, may hold, retain and
possess and dispose of such property in its own absolute right without further
accountability.

                  6.9.     Application of Indebtedness Toward Purchase Price

                  Without limiting any other provision contained herein, upon
any such foreclosure sale, the Mortgagee may, if permitted by law, and after
allowing for costs and expenses of the sale, compensation and other charges, in
paying the purchase price, apply any portion or all of the indebtedness and
other sums due to the Mortgagee under the Note, this Mortgage or any other
instrument securing the Note, in lieu of cash, to the amount which shall, upon
distribution of the net proceeds of such sale, be payable thereon.

                  6.10.    Waiver of Appraisement, Valuation, Stay, Execution
and Redemption Laws

                      Without limiting any other provision contained herein, the
Mortgagor agrees, to the full extent permitted by law that in case of a default
on its part hereunder, neither the Mortgagor nor anyone claiming through or
under it shall or will set up, claim or seek to take advantage of any
appraisement, valuation, stay, extension or redemption laws now or hereafter in
force, in order to prevent or hinder the enforcement or foreclosure of this
Mortgage or the absolute sale of the Mortgaged Property or the final and
absolute putting into possession thereof, immediately after such sale, of the
purchasers thereat, and the Mortgagor for itself and all who may at any time
claim through or under it, hereby waives, to the full extent that may be
lawfully so do, the benefit of all such laws, and any and all right to have the
assets comprising the Mortgaged Property marshalled upon any foreclosure of the
lien hereof and agrees that the Mortgagee or any court having jurisdiction to
foreclose such lien may sell the Mortgaged Property in part or as an entirety.
Mortgagor agrees that neither it nor any guarantor will assert a defense in any
action to recover a deficiency judgment following a foreclosure that the sales
price realized at the sale was less than the fair market value.

                                       44

<PAGE>

                  6.11.    Receiver

                  Without limiting any other provision contained herein, if an
Event of Default shall have occurred, the Mortgagee, to the extent permitted by
law and without regard to the value, adequacy or sufficiency of the security for
the indebtedness and other sums secured hereby, shall be entitled as a matter of
right if it so elects to the appointment of a receiver to enter upon and take
possession of the Mortgaged Property and to collect all rents, income and other
benefits thereof and apply the same as the court may direct. The expenses,
including receiver's fees, reasonable attorneys' fees, costs and reasonable
agent's compensation, incurred pursuant to the powers herein contained shall be
secured by this Mortgage. The right to enter and take possession of and to
manage and operate the Mortgaged Property and to collect all rents, income and
other benefits thereof, whether by a receiver or otherwise, shall be cumulative
to any other right or remedy hereunder of afforded by law or in equity and may
be exercised concurrently therewith or independently therewith or independently
thereof. The Mortgagee shall be liable to account only for such rents, income
and other benefits actually received by the Mortgagee, whether received pursuant
to this paragraph or paragraph 3.03. Notwithstanding the appointment of any
receiver or other custodian, the Mortgagee shall be entitled as pledged to the
possession and control of any cash, deposits, or instruments at the time held
by, or payable or deliverable under the terms of this Mortgage to, the
Mortgagee.

                  6.12.    Suits to Protect the Mortgaged Property

                  Without limiting any other provision contained herein, the
Mortgagee shall have the power and authority to institute and maintain any suits
and proceedings as the Mortgagee may deem advisable in its judgment (a) to
prevent any impairment of the Mortgaged Property by any acts which may be
unlawful or any violation of this Mortgage, (b) to preserve or protect its
interest in the Mortgaged Property, and (c) to restrain the enforcement of or
compliance with any legislation or other governmental enactment, rule or order
might impair the security hereunder or be prejudicial to the Mortgagee's
interest.

                  6.13. Proofs of Claim

                  Without limiting any other provision contained herein, in case
of any receivership, insolvency, bankruptcy, reorganization, arrangement,
adjustment, composition or other judicial proceedings affecting the Mortgagor or
any guarantor, co-maker or endorser of any of the Mortgagor's obligations, its
creditors or its property, the Mortgagee, to the extent permitted by law, shall
be entitled to file such proofs of claim and other documents as may be necessary
or advisable in order to have its claims allowed in such proceedings for the
entire amount due and payable by the Mortgagor under the Note, this Mortgage and
any other instrument securing the Note, at the date of the institution of such
proceedings, and for any additional amounts which may become due and payable by
the Mortgagor after such date.

                                       45

<PAGE>

                  6.14. Delay or Omission No Waiver

                  No delay or omission of Mortgagee or of any holder of the Note
to exercise any right, power or remedy accruing upon any Event of Default shall
exhaust or impair any such right, power or remedy or shall be construed to waive
any such Event of Default or to constitute acquiescence therein. Every right,
power and remedy given to the Mortgagee may be exercised from time to time and
as often as may be deemed expedient by the Mortgagee.

                  6.15. No Waiver of One Default to Affect Another

                  No waiver of any Event of Default hereunder shall extend to or
affect any subsequent or any other Event of Default then existing, or impair any
rights, powers or remedies consequent thereon. If the Mortgagee (a) grants
forbearance or an extension of time for the payment of any sums secured hereby;
(b) takes other or additional security for the payment thereof; (c) waives or
does not exercise any right granted in the Note, this Mortgage or any instrument
securing the Note; (d) releases any part of the Mortgaged Property from the lien
of this Mortgage or any other instrument securing the Note; (e) consents to the
filing of any map, plat or replat of the Land; (f) consents to the granting of
any easement on the Land; or (g) makes or consents to any agreement changing the
terms of this Mortgage or subordinating the lien or any charge hereof, then,
except as otherwise provided by an instrument executed by the Mortgagee, no such
act or omission shall release, discharge, modify, change or affect the original
liability under the Note, this Mortgage or otherwise of the Mortgagor or any
subsequent purchaser of the Mortgaged Property or any part thereof or any maker,
co-signer, endorser, surety or guarantor. No such act or omission shall preclude
the Mortgagee from exercising any right, power or privilege herein granted or
intended to be granted in case of any Event of Default then existing or of any
subsequent Event of Default nor, except as otherwise expressly provided in an
instrument executed by the Mortgagee, shall the lien of this Mortgage be altered
thereby, except to the extent of releases as described in subparagraph (d) above
of this paragraph 3.12. In the event of the sale or transfer by operation of law
or otherwise of all or any part of the Mortgaged Property, the Mortgagee,
without notice to any person, firm or corporation, is hereby authorized and
empowered to deal with any such vendee or transferee with reference to the
Mortgaged Property or the indebtedness secured hereby, or with reference to any
of the terms or conditions hereof, as fully and to the same extent as it might
deal with the original parties hereto and without in any way releasing or
discharging any of the liabilities or undertakings hereunder.

                                       46

<PAGE>

                  6.16. Discontinuance of Proceedings; Position of Parties
Restored

                  If the Mortgagee shall have proceeded to enforce any right or
remedy under the Mortgage by foreclosure, entry or otherwise and such
proceedings shall have resulted in a final determination adverse to the
Mortgagee, then and in every such case the Mortgagor and the Mortgagee shall be
restored to their former positions and rights hereunder, and all rights, powers
and remedies of the Mortgagee shall continue as if no such proceedings had
occurred or had been taken.

                  6.17.    Remedies Cumulative

                  No right, power or remedy conferred upon or reserved to the
Mortgagee by the Note, this Mortgage or any other instrument securing the Note
is exclusive of any other right, power or remedy, but each such right, power and
remedy shall be cumulative and concurrent and shall be in addition to any other
right, power and remedy given hereunder or under the Note or any other
instrument securing the Note, or now or hereafter existing as law, in equity or
by statute.

                  6.18.    Defeasance

                  If Mortgagor shall pay or cause to be paid the principal of
and premium, if any, and interest on the Note, in accordance with the terms
thereof, and if the Mortgagor shall pay or cause to be paid all sums payable
hereunder by the Mortgagor and shall comply with all terms, conditions and
requirements hereof, then this Mortgage shall be null and void and of no further
force and effect and shall be released by the Mortgagee upon the written request
and at the expense of the Mortgagor.

                  6.19.    Interest After Default

         Upon default or after maturity or after judgment has been rendered on
the Note, Mortgagor's right to select pricing options shall cease and the unpaid
principal of all advances shall, at the option of the Mortgagee, bear interest
at the Involuntary Rate.

                  6.20.    Construction of Mortgagee Rights

                  All covenants hereof shall be construed as affording to the
Mortgagee rights additional to and not exclusive of the rights conferred under
the provisions of Section 254 and 273 of the Real Property Law of the State of
New York.

                                       47

<PAGE>

                                  ARTICLE VII.

                        Provisions of General Application

                  7.1.     Modifications.  No change, amendment, termination,
modification or cancellation of this Mortgage, or of any part hereof, shall be
valid unless set forth in a writing signed by the Mortgagor and the Mortgagee,
except that only the Mortgagee need sign any satisfaction of this Mortgage.

                  7.2.     Notices. All notices, demands, requests, consents,
approvals or other communications (each, a "Notice") given or required to be
given hereunder shall be deemed given or furnished hereunder when addressed to
the party intended to receive the same, at the address of such party set forth
below:

Mortgagee: Fleet Bank, National Association, 1133 Avenue of the Americas, New
York, New York 10036, Attention: Denise Smyth, Vice President,

Mortgagor: Port Bay Associates, LLC, c/o Acadia Realty Trust, 20 Soundview
Marketplace, Port Washington, New York 11050, Attention: Robert Masters, Esq.

Each such Notice shall be effective (i) if delivered by hand, at the time of
delivery to the address specified herein below or (ii) if given by first-class
certified or first-class registered mail, return receipt requested postage
prepaid, on the fourth Business Day (as "Business Day" is defined in the Note)
following the time of mailing in the manner aforesaid, or (iii) on the Business
Day immediately following the delivery of such notice to an overnight delivery
service.

Any party may change the address to which any such notice, report, demand or
other instrument is to be delivered or mailed, by furnishing written notice of
such change to the other parties, but no such notice of change shall be
effective unless and until received by such other parties.

                  7.3.     The Mortgagee's Rights to Perform the Mortgagor's
Covenants. If the Mortgagor shall fail to pay or cause payment to be paid to the
Mortgagee in accordance with the terms of the Loan Documents, or to perform or
observe any other term, covenant, condition or obligation required to be
performed or observed by the Mortgagor under this Mortgage or the other Loan
Documents, without limiting any other provision of this Mortgage, and without
waiving or releasing the Mortgagor from any obligation or default hereunder,
after giving any notice to the Mortgagor required hereunder and after the
passage of any applicable cure periods (or without such notice in the event of
an emergency), the Mortgagee (or any receiver of the Mortgaged Premises) shall
have the right, but not the obligation, to make any such payment, or to perform
any other act or take any appropriate action, including, without limitation,
entry on the Mortgaged Premises and performance of work thereat, as it, in its
sole discretion, may deem necessary to cause such other term, covenant,
condition or obligation to be promptly performed or observed on behalf of the
Mortgagor or to protect the security of this Mortgage. All amounts advanced by,
or on behalf of, the Mortgagee in exercising its rights under this SECTION 7.3
(including, but not limited to, legal expenses and disbursements incurred in
connection therewith), together with interest thereon at the Default Rate from
the date of the Mortgagee's demand upon the Mortgagor for reimbursement of such
sums until reimbursement by the Mortgagor, shall be payable by the Mortgagor to
the Mortgagee upon demand and shall be secured by this Mortgage.

                                       48

<PAGE>

                  7.4.     Additional Sums Payable by the Mortgagor. All sums
which, by the terms of this Mortgage or any of the other Loan Documents are
payable by the Mortgagor to the Mortgagee shall, together with the interest
thereon provided for herein or in the Note or such other Loan Documents, be
added to and deemed part of the Obligations secured by the lien of this Mortgage
whether or not the provision which obligates the Mortgagor to make any such
payment to the Mortgagee specifically so states.

                  7.5.     Captions.  The captions used in this Mortgage are
inserted only as a matter of convenience and for reference, and in no way
define, limit, enlarge or describe the scope or intent of this Mortgage or in
any other way affect this Mortgage or the construction of any provision hereof.

                  7.6.     Successors and Assigns. The covenants and agreements
contained in this Mortgage shall run with the land and bind the Mortgagor, the
heirs, legatees, legal representatives, successors and assigns of the Mortgagor
and of each Person constituting the Mortgagor and all subsequent owners,
encumbrancers and Space Tenants of the Mortgaged Premises, or any part thereof;
and shall inure to the benefit of the Mortgagee, its successors and assigns and
all subsequent beneficial owners of this Mortgage.

                  7.7.     Gender and Number.  Wherever the context of this
Mortgage so requires, the neuter gender includes the masculine and/or feminine
gender and the singular number includes the plural.

                  7.8.     Severability. If any one or more of the provisions
contained in this Mortgage shall for any reason be held to be invalid, illegal,
or unenforceable in any respect, such invalidity, illegality or unenforceability
shall not affect any other provisions of this Mortgage; and this Mortgage shall,
in such event, be construed as if such invalid, illegal or unenforceable
provision had never been included.

                  7.9.     Usury. Anything in this Mortgage or the other Loan
Documents to the contrary notwithstanding, the Mortgagee shall never be entitled
to receive, collect or apply as interest on the principal amount of the
Obligations secured hereby any amount in excess of the maximum rate of interest
permitted to be charged by applicable law. In the event the Mortgagee ever
receives, collects or applies as interest any such excess, the amount which
would be excessive interest shall be applied to the reduction of the principal
amount of said Obligations; and if said principal amount shall have been paid in
full, shall be remitted to the Mortgagor. In determining whether or not the
interest paid or payable in any specific instance shall exceed the highest
lawful rate, the Mortgagor and the Mortgagee shall to the maximum extent
permitted by applicable law (i) characterize any non-principal payment as an
expense, fee or premium rather than as interest, (ii) exclude voluntary
prepayments and the effects thereof and (iii) "spread" the total amount of
interest throughout the entire contemplated terms of the obligations so that the
interest rate is uniform throughout the entire said term.

                  7.10.    Subrogation. Should the proceeds of the loan made by
the Mortgagee to the Mortgagor and evidenced by the Note be used directly or
indirectly to discharge, or satisfy, in whole or in part, any prior lien or
encumbrance upon the Mortgaged Premises or any part thereof, then the Mortgagee
shall be subrogated to such other lien or encumbrance and to any additional
security held by the holder thereof and shall have the benefit of the priority
thereof.

                                       49

<PAGE>

                  7.11.    Controlling Law.  This Mortgage shall be governed by,
and construed and enforced in accordance with, the laws of the State of
New York.

                  7.12.    Entire Agreement.  This Mortgage, together with the
other Loan and Loan Documents, embodies the entire agreement and understanding
between the parties relating to the subject matter hereof.

                  7.13.    Jurisdiction. Any legal action or proceeding with
respect to the Note or any of the Loan Documents may be brought in the courts of
the States of New York or if the requisites of jurisdiction obtain, of the
United States of America for the Southern or Eastern District of New York and,
by execution and delivery hereof, the Mortgagor hereby accepts for itself and in
respect of its property, generally and unconditionally, the jurisdiction of the
aforesaid courts. Nothing herein, however, shall affect the right of the
Mortgagee to commence legal proceedings or otherwise proceed against the
Mortgagor in any other jurisdiction. The Mortgagor hereby waives any claim that
New York or any such District is an inconvenient forum and any claim against the
Mortgagee for consequential, special or punitive damages respecting the Loan
Documents.

                  7.14.    Reappraisal or Subsequent Environmental Reports of
Mortgaged Premises

                  At intervals in Mortgagee's sole discretion, the Mortgagee may
order a reappraisal or an environmental assessment of the Mortgaged Property by
an independent appraiser or environmental firm, as applicable, of its selection,
or by an employee of the Mortgagee, and Mortgagor agrees to allow access to the
Mortgaged Property to such independent appraiser, environmental firm, or
employee of the Mortgagee, and in the case of an independent appraiser or
environmental firm, to pay to the Mortgagee, within thirty (30) days of billing,
such appraiser's or environmental firm's, as applicable, reasonable fee and
expenses. However, notwithstanding the above, Mortgagor shall be responsible for
paying the cost of up to one appraisal per annum if more than one appraisal per
annum is required by the Mortgagee

                  7.15.    Agent for Service of Process

                  The Mortgagor agrees to submit to personal jurisdiction in the
State of New York in any action or proceeding arising out of this Mortgage and
in furtherance of such agreement designates CT Corporation System, 111 8th
Avenue, 13th Floor, New York, New York 10011 as the agent for service of process
in any such action or proceeding.

                  7.16.    Consent of Mortgagee

                  Except as may be specifically provided for herein, whenever
the consent or approval of the Mortgagee is required, the decision whether to
consent or approve shall be in the sole and absolute discretion of the
Mortgagee.

                                       50

<PAGE>

                  7.17.    Construction of Loan Document

                    This Mortgage, the Note and all other documents executed and
delivered in connection herewith or therewith shall be given a fair and
reasonable construction in accordance with the intention of the parties as
expressed herein and therein and without regard for any rule of law requiring
construction against the party who prepares such instruments.

                                  ARTICLE VIII.

                             Intentionally Deleted.

                                   ARTICLE IX.

                              Particular Provisions

         The foregoing ARTICLES of this Mortgage are subject to the following
further provisions, if any, set forth in this ARTICLE IX.

                  9.1.     The phrase "if an Event of Default has occurred and
is continuing" or the like contained herein, in the Note or in any other
Security Document is not intended to mean, and shall not be construed, by
implication or otherwise, to mean that Mortgagor or any other Person shall have
a right to cure an Event of Default following acceleration by Mortgagee, and the
only right Mortgagor or any other Person shall have upon the occurrence of any
Event of Default and Mortgagee's election to accelerate repayment of the
Obligations is to tender payment in full of the Obligations unless Mortgagee, in
its sole discretion, agrees in writing to waive such Event of Default.

                  9.2.     Interest Rate Protection Agreement. This Mortgage
shall secure the payment of all amounts that may be due and payable pursuant to
the terms of any interest rate swap, cap or other interest rate protection
agreement (collectively, the "Hedge Agreement") now or hereafter entered into
between the Mortgagor and the Mortgagee or their respective designees,
including, without limitation, the obligation of the Mortgagor to make payments
thereunder and to pay any amounts of which may become due upon a termination
thereof. All such payments with respect to such Hedge Agreement shall be deemed
to be additional interest under the Note. The additional interest shall be
secured by this Mortgage (even if the principal balance has been paid in full)
and the Mortgagor shall not be entitled to a satisfaction, termination or
release of this Mortgage, and the lien and conveyance created by this Mortgage
shall continue, if and so long as any additional interest under the Note payable
by the Mortgagor remains outstanding and unpaid. A copy of the Hedge Agreement,
if any, is on file with the Mortgagor.

                  9.3.     Mortgagor Acknowledgment.  The Mortgagor hereby
acknowledges that it has received a complete copy of this Mortgage without
charge.

                                       51

<PAGE>

                  9.4.     Set-Off

                  Mortgagor represents, warrants and covenants that there are no
offsets, counterclaims or defenses against the Indebtedness, the Mortgage or the
Note and that Mortgagor and the undersigned has full power, authority and legal
right to execute this Mortgage and to keep and observe all of the terms of this
Mortgage on Mortgagor's part to be observed or performed.

                    Mortgagor hereby grants to Mortgagee a lien, security
interest and right of setoff as security for all liabilities and obligations to
Mortgagee, whether now existing or hereafter arising, upon and against all
deposits, credits, collateral and property, now or hereafter in the possession,
custody, safekeeping or control of Mortgagee or any entity under the control of
FleetBoston Financial Corporation or in transit to any of them. At any time
after an Event of Default, without demand or notice, Mortgagee may set off the
same or any part thereof and apply the same to any liability or obligation of
Mortgagor regardless of the adequacy of any other collateral securing the Loan.
ANY AND ALL RIGHTS TO REQUIRE MORTGAGEE TO EXERCISE ITS RIGHTS OR REMEDIES WITH
RESPECT TO ANY OTHER COLLATERAL WHICH SECURES THE LOAN, PRIOR TO EXERCISING ITS
RIGHT OF SETOFF WITH RESPECT TO SUCH DEPOSITS, CREDITS OR OTHER PROPERTY OF THE
MORTGAGOR ARE HEREBY KNOWINGLY, VOLUNTARILY AND IRREVOCABLY WAIVED.

                  9.5.     Re-execution of Documents

         Upon receipt of an affidavit of an officer of the Mortgagee as to the
loss, theft, destruction or mutilation of the Note or any other security
document which is not of public record, and, in the case of any such loss,
theft, destruction or mutilation, upon surrender of such Note or other security
document, Mortgagor will issue, in lieu thereof, a replacement Note or other
security document in the same principal amount thereof and otherwise of like
tenor.

                  9.6.     Right to Prepay

          Provided that the Mortgagor is not in default of any of the covenants,
conditions, or agreements contained in this Mortgage, the Note or any other loan
document delivered in connection thereto, the Mortgagor may prepay the Loan, in
whole or in part, in accordance with, and subject to, the prepayment provisions
set forth in Paragraph 10 of the Note, which Paragraph 10 includes provisions
for payment of a yield maintenance premium under certain circumstances. The
provisions of Paragraph 10 of the Note is incorporated herein by this reference,
and shall be deemed an obligation secured by the lien of this Mortgage.

                  9.7.     WAIVER OF JURY TRIAL

                  MORTGAGOR AND MORTGAGEE MUTUALLY HEREBY KNOWINGLY, VOLUNTARILY
AND INTENTIONALLY WAIVE THE RIGHT TO A TRIAL BY JURY IN RESPECT OF ANY CLAIM
BASED HEREON, ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS MORTGAGE OR ANY
OTHER LOAN DOCUMENTS CONTEMPLATED TO BE EXECUTED IN CONNECTION HEREWITH OR ANY
COURSE OF CONDUCT, COURSE OF DEALINGS, STATEMENTS (WHETHER VERBAL OR WRITTEN) OR
ACTIONS OF ANY PARTY. THIS WAIVER CONSTITUTES A MATERIAL INDUCEMENT FOR
MORTGAGEE TO ACCEPT THIS MORTGAGE AND MAKE THE LOAN. ACCEPTANCE OF THIS MORTGAGE
BY THE MORTGAGEE SHALL BE DEEMED TO CONSTITUTE A WAIVER BY THE MORTGAGEE OF THE
RIGHT TO TRIAL BY JURY IN THE EVENT OF ANY LITIGATION IN RESPECT OF WHICH THE
MORTGAGOR HAS WAIVED THE RIGHT TO TRIAL BY JURY HEREUNDER.

                                       52

<PAGE>

                  9.8.     Multiple Security

                  If (a) the Premises shall consist of one or more parcels,
whether or not contiguous and whether or not located in the same county, or (b)
in addition to this Mortgage, the Mortgagee shall now or hereafter hold one or
more additional mortgages, liens or other security (directly or indirectly) for
the Indebtedness upon other property in the State in which the Premises are
located, then to the fullest extent permitted by law, the Mortgagee may, at its
election, commence or consolidate in a single foreclosure action all foreclosure
proceedings against all such collateral securing the Indebtedness (including the
Mortgaged Property), which action may be brought or consolidated in the courts
of any county in which any of such collateral is located. The Mortgagor
acknowledges that the right to maintain a consolidated foreclosure action is a
specific inducement to the Mortgagee to extend the Indebtedness, and the
Mortgagor expressly and irrevocably waives any objections to the commencement or
consolidation of the foreclosure proceedings in a single action and any
objections to the laying of venue or based on the grounds of forum non
conveniens which it may now or hereafter have.

                  9.9.     NON-RESIDENTIAL PROPERTY

                  This Mortgage does not cover real property principally
improved by one or more structures containing in the aggregate six (6) or less
residential dwelling units having their own separate cooking facilities.

                  9.10.    Limited Recourse.

                  Mortgagee expressly agrees that the extent of liability of the
Mortgagor for any sums due or obligations to perform under the Note (except for
the indemnities and/or guarantees delivered to Mortgagee by the Mortgagor and/or
the other Indemnitor dated as of this date in connection with the loan evidenced
by the Note, and secured, in part, by this Mortgage) is limited to the
Mortgagor's estate, right, title and interest in, to and under the Mortgaged
Property, the Mortgagor's right, title and interest to the leases and all
interest of undersigned thereto (the "Leases"), as described in this Mortgage
and/or any other document evidencing or securing the Note, as the same may be
amended from time to time (individually, herein referred to as the "Instrument"
or "Loan Document" and collectively, either as "Instruments" or "Loan
Documents") and the assignment of leases in rents dated of even date hereof by
the Mortgagor in favor of Mortgagee, as the same may be amended from time to
time (the "Assignment"), Mortgagee agreeing not to look personally to the
Mortgagor or to the other Indemnitor or to any principals, trustees members,

                                       53

<PAGE>

partners, shareholders, officers, directors, employees or agents of the
Mortgagor (collectively, the "Affiliates") but to look solely to the Mortgaged
Property, the Leases and the Collateral and no other assets of the Mortgagor,
Indemnitor or the Affiliates for payment of any of such sums; provided that the
foregoing shall not (i) constitute a waiver of any obligation evidenced by the
Note, this Mortgage, the Assignment and/or any other Instrument, (ii) limit the
right of the holder of the Note, this Mortgage, the Assignment, and/or any other
Instrument to name the Mortgagor as a party defendant in any action or suit for
judicial or non-judicial foreclosure and sale under the Note, the Mortgage, the
Assignment and/or any other Instrument in any action or proceeding hereunder so
long as no judgment in the nature of a deficiency judgment or any other personal
or money judgment shall be asked for or taken against the Mortgagor or the
Affiliates, (iii) affect in any way the validity of any guaranty or indemnity
from the Mortgagor, the other Indemnitors and/or any other person of all or any
of the obligations evidenced and secured by the Note and/or the any of the other
Instruments, or the rights of the Mortgagee in connection with such guaranties
and/or indemnities to look to the property and assets of the Mortgagor, the
other Indemnitor, any guarantor, and/or any Affiliates, but only to the extent
provided in such guaranty and/or indemnity, as the case may be (iv) release or
impair the Note or the lien of the Mortgage, the Assignment, and/or other
Instrument, (v) prevent or in any way hinder the Mortgagee from exercising or
constitute a defense, an affirmative defense, a counterclaim or other basis for
relief in respect of the exercise of, any other remedy against the Mortgaged
Property, the Leases and/or the Collateral and/or the Mortgage, Assignment,
Instrument and/or any other instrument securing the Note including the other
loan documents executed and delivered to the Mortgagee in connection with the
transactions contemplated herein or as prescribed by law or in equity in case of
default, except that Mortgagee shall in no event seek any deficiency or other
personal or money judgment against the Mortgagor or any Affiliates except to the
extent provided for in such guarantees and/or indemnities, (vi) prevent or in
any way hinder the Mortgagee from exercising, or constitute a defense, an
affirmative defense, a counterclaim or other basis for relief in respect of the
exercise of, its remedies in respect of any deposits, insurance proceeds,
condemnation awards or other monies or other collateral or letters of credit
securing the Note, or (vii) be applicable to the responsible Person in the event
of and to the extent of fraud, misappropriation of funds or other property, or
intentional damage to any of the Mortgaged Premises or any other collateral
securing this Note or any part thereof intentionally inflicted in bad faith by
Mortgagor or any partner, principal, shareholder, officer, director, agent or
employee of Maker or any partner or principal of any of the foregoing or (viii)
be applicable to the liability arising in respect of hazardous materials or ADA
compliance.

                  Nothing herein shall be deemed to be a waiver of any right
which the Mortgagee may have under Section 506(a), 506(b), 1111(b) or any other
provision of the Bankruptcy Reform Act of 1978 or any successor thereto or
similar provisions under applicable state law to file a claim for the full
amount of the debt owing to the Mortgagee by the Mortgagor or to require that
all of the Mortgaged Property shall continue to secure all of the indebtedness
owing to the Mortgagee in accordance with the Note, this Mortgage, and the other
Loan Documents.

                                       54

<PAGE>

         THIS MORTGAGE IS GIVEN ON THE CONDITION that if the Mortgagor, its
successors or assigns, shall well and truly pay the Note according to its tenor
and shall pay all other sums due under the Loan Documents and any Hedge
Agreement, and shall duly perform every covenant, term, condition and agreement
of the Mortgagor in this Mortgage and in the Note and other Loan Documents
contained and pay all of the other Obligations, then this Mortgage shall be
void; otherwise it shall remain in full force and effect.

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

                                    MORTGAGOR:

                                    Port Bay Associates, LLC

                                    By: Acadia Realty Limited Partnership,
                                        its Managing Member

                                    By: Acadia Realty Trust, its General Partner

                                    By:   ______________________
                                          Robert Masters
                                          Senior Vice President

STATE OF NEW YORK                   )
                                    ) SS:
COUNTY OF NASSAU                    )

On the 19th day of July, 2000 before me, the undersigned a Notary Public in and
for said State, personally appeared Robert Masters, 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

                                       55<PAGE>

                              AMENDED AND RESTATED
                                 PROMISSORY NOTE
<TABLE>
<CAPTION>
                                                                                DEFINED TERMS
------------------------------------------------------------------------------------------------------------------------
<S>                                                           <C>
Execution Date: As of October 13, 2000                        City and State of Signing: Philadelphia, Pennsylvania
------------------------------------------------------------------------------------------------------------------------
Loan Amount: Twenty Five Million Two Hundred Thousand         Interest Rate:
Dollars ($25,200,000)                                         8.13% per annum
------------------------------------------------------------------------------------------------------------------------
Borrower: ACADIA REALTY LIMITED PARTNERSHIP, a Delaware limited
partnership (formerly known as Mark Centers
Limited Partnership)
------------------------------------------------------------------------------------------------------------------------
Borrower's Address: 20 Soundview Marketplace, Port Washington, New York 11050
------------------------------------------------------------------------------------------------------------------------
Holder: METROPOLITAN LIFE INSURANCE COMPANY, A NEW YORK
CORPORATION
------------------------------------------------------------------------------------------------------------------------
Holder's Address: Metropolitan Life Insurance Company
200 Park Avenue 12th Floor
New York, New York 10166
Attention: Senior Vice-President,
And
Metropolitan Life Insurance Company
One Madison Avenue
New York, New York 10010-3690
Attention: Vice President and Investment Counsel
Law Department, Real Estate Investments
------------------------------------------------------------------------------------------------------------------------
Maturity Date: November 1, 2010                               Advance Date: The date funds are disbursed to Borrower.
------------------------------------------------------------------------------------------------------------------------
Interest Only Period: The period from the Advance Date and    Principal and Interest Installment Date: The first day
ending on the last day of the month in which the Advance      of the second calendar month following the Advance Date.
Date occurs.
------------------------------------------------------------------------------------------------------------------------
Monthly Installment: Equal monthly installments of principal  Permitted Prepayment Period: During the 90 day period
and interest at the Interest Rate each in the amount of       prior to the Maturity Date, Borrower may prepay the Loan
$196,672.85                                                   without a Prepayment Fee on 30 days prior written notice.
                                                              In addition, commencing on the first day of the 61st month
                                                              following the Advance Date, Borrower may prepay either
The Monthly Installment is based upon an amortization         the entire Loan, or 35.31746 percent of the Loan (being the
period of 25 years.                                           portion attributable to the East End Center as described
                                                              in Section 10.07(b) of the Mortgage), or 64.68253 percent
                                                              of the Loan (being the portion attributable to Crescent
                                                              Street as described in Section 10.07(b) of the Mortgage),
                                                              with a Prepayment Fee on 60 days prior written notice.
------------------------------------------------------------------------------------------------------------------------
Liable Party: Acadia Realty Trust, a publicly-traded Maryland real estate investment
trust.
Address or Liable Party: 20 Soundview Marketplace, Port Washington, New York
11050
------------------------------------------------------------------------------------------------------------------------
Late Charge: An amount equal to four cents ($.04) for each dollar that is overdue.
Default Rate: An annual rate equal to the Interest Rate plus four percent (4%).
------------------------------------------------------------------------------------------------------------------------
Note: This Amended and Restated Promissory Note.
Mortgage: Amended and Restated Mortgage, Security Agreement, and Fixture Filing
dated as of the Execution Date granted by Borrower to Holder, securing this Loan
and the Other Loan.
Loan Documents: This Note, the Mortgage, any other documents related to this
Note and/or the Mortgage and/or the Other Loan, that certain Capital Expense
Escrow Agreement between Borrower and Holder dated as of the Execution Date, and
all renewals, amendments, modifications, restatements and extensions of these
documents.
Other Loan: That certain loan in the amount of $10,800,000 from Holder to
Borrower evidenced by an Amended and Restated Promissory Note of even date, and
all other documents related thereto.
Guaranty: Guaranty dated as of the Execution Date and executed by Liable Party.
Indemnity Agreement: Unsecured Indemnity Agreement dated as of the Execution
Date and executed by Borrower and Liable Party in favor of Holder. The Indemnity
Agreement and Guaranty are not Loan Documents and shall survive repayment of the
Loan or other termination of the Loan Documents.
------------------------------------------------------------------------------------------------------------------------
</TABLE>

                                      -1-

<PAGE>

         FOR VALUE RECEIVED, Borrower promises to pay to the order of Holder, at
Holder's Address or such other place as Holder may from time to time designate,
the Loan Amount with interest payable in the manner described below, in money of
the United States of America that at the time of payment shall be legal tender
for payment of all obligations.

         This Note is amending and restating and consolidating into this one
Note in their entirety two notes (the "Original Two Notes") given to Holder by
Marvin Slomowitz as follows: (a) Mortgage Note dated November 14, 1988, in the
original principal amount of $14,200,000, and secured by a mortgage on property
located at the intersection of Route 115 and Route 309 and Mundy Street, Wilkes
Barre Township, Luzerne County, Pennsylvania (the "East End Center Property");
(b) Mortgage Note dated November 14, 1988, in the original principal amount of
$12,000,000 and secured by a mortgage on property on Crescent Street, Brockton,
Massachusetts (the "Crescent Property"); both Original Two Notes were in 1993
assumed by Mark Centers Limited Partnership, a Delaware limited partnership, and
both Original Two Notes were amended (as so amended, the "Two Notes") by Note
and Mortgage Modification Agreements dated May 28, 1993, and respectively
recorded in the office for the Recorder of Deeds of Luzerne County, Pennsylvania
in Mortgage Book 1859 at Page 334, and in the Plymouth County Registry of Deeds,
Massachusetts, in Book 11958 at Page 98. The East End Center Property and the
Crescent Property both are owned by Borrower, and Borrower and Holder have
agreed to amend and restate and consolidate in their entirety (and Lender shall
be deemed to do so by acceptance hereof) by this Note the Two Notes and loans
(as well as three other notes into one note, as reflected by the Other Loan),
all of which will be secured by the Mortgage instead of by separate mortgages on
each property. This Note shall not be construed as a novation of the Two Notes,
except that the aggregate principal balance of the Two Notes has been reduced
from $26,200,000 to $25,200,000.

         Capitalized terms that are not defined in this Note shall have the
meanings set forth in the Mortgage.

                  1 . Payment of Principal and Interest. Principal and interest
under this Note shall be payable as follows:

                      (a) Interest on the funded portion of the Loan Amount
shall accrue from the Advance Date at the Interest Rate and shall be paid on the
first day of the first calendar month following the Advance Date;

                      (b) Commencing on the Principal and Interest Installment
Date and on the first day of each calendar month thereafter, to and including
the first day of the calendar month immediately preceding the Maturity Date,
Borrower shall pay the Monthly Installment; and

                      (c) On the Maturity Date, a final payment in the aggregate
amount of the unpaid principal sum evidenced by this Note, all accrued and
unpaid interest, and all other sums evidenced by this Note or secured by the
Mortgage and/or any other Loan Documents as well as any future advances under
the Mortgage that may be made to or on behalf of Borrower by Holder following
the Advance Date (collectively, the "Secured Indebtedness"), shall become
immediately payable in full.

         Borrower acknowledges and agrees that a substantial portion of the
original Loan Amount shall be outstanding and due on the Maturity Date.

         Interest shall be calculated on the basis of a thirty (30) day month
and a three hundred sixty (360) day year, except that (i) if the Advance Date
occurs on a date other than the first day of a calendar month, interest payable
for the period commencing on the Advance Date and ending on the last day of the
month in which the Advance Date occurs shall be calculated on the basis of the
actual number of days elapsed over a 365 day or 366 day year, as applicable, and
(ii) if the Maturity Date occurs on a date other than the last day of the month,
interest payable for the period commencing on the first day of the month in
which the Maturity Date occurs and ending on the Maturity Date shall be
calculated on the basis of the actual number of days elapsed over a 365 day or
366 day year, as applicable.

                                       -2-

<PAGE>

                  2. Application of Payments. At the election of Holder, and to
the extent permitted by law, 0 payments shall be applied in the order selected
by Holder to any expenses, prepayment fees, late charges, escrow deposits and
other sums due and payable under the Loan Documents, and to unpaid interest at
the Interest Rate or at the Default Rate, as applicable. The balance of any
payments shall be applied to reduce the then unpaid Loan Amount.

                  3. Security. The covenants of the Mortgage are incorporated
by reference into this Note. This Note shall evidence, and the Mortgage shall
secure, the Secured Indebtedness.

                  4. Late Charge. If any payment of interest, any payment of a
Monthly Installment or any payment of a required escrow deposit is not paid
within 7 days of the due date, Holder shall have the option to charge Borrower
the Late Charge. The Late Charge is for the purpose of defraying the expenses
incurred in connection with handling and processing delinquent payments and is
payable in addition to any other remedy Holder may have. Unpaid Late Charges
shall become part of the Secured Indebtedness and shall be added to any
subsequent payments due under the Loan Documents.

                  5. Acceleration Upon Default . At the option of Holder, if
Borrower fails to pay any sum specified in this Note within 7 days of the due
date, or if an Event of Default occurs, the Secured Indebtedness, and all other
sums evidenced and/or secured by the Loan Documents, including without
limitation any applicable prepayment fees (collectively, the "Accelerated Loan
Amount"), shall become immediately due and payable.

UPON THE OCCURRENCE OF AN EVENT OF DEFAULT, BORROWER HEREBY AUTHORIZES AND
EMPOWERS ANY ATTORNEY OR THE PROTHONOTARY OR CLERK OF ANY COURT IN THE
COMMONWEALTH OF PENNSYLVANIA OR ELSEWHERE, TO APPEAR AT ANY TIME FOR BORROWER IN
ANY ACTION BROUGHT AGAINST BORROWER ON THIS NOTE AT THE SUIT OF HOLDER, WITH OR
WITHOUT DECLARATION FILED, AS OF ANY TERM, AND THEREIN TO CONFESS OR ENTER
JUDGMENT AGAINST BORROWER FOR THE ENTIRE ACCELERATED LOAN AMOUNT, TOGETHER WITH
COSTS OF SUIT AND ATTORNEYS' COMMISSION OF ONE (1 %) PERCENT OF THE ACCELERATED
LOAN AMOUNT FOR COLLECTION; AND IN SO DOING, THIS NOTE OR A COPY THEREOF
VERIFIED BY AFFIDAVIT SHALL BE A SUFFICIENT WARRANT.

                  6. Interest Upon Default. The Accelerated Loan Amount shall
bear interest at the Default Rate which shall never exceed the maximum rate of
interest permitted to be contracted for under the laws of the Commonwealth of
Pennsylvania. The Default Rate shall commence upon the occurrence of an Event of
Default and shall continue until payment is received in full, including the
period from judgment until actual payment.

                  7. Limitation on Interest. The agreements made by Borrower
with respect to this Note and the other Loan Documents are expressly limited so
that in no event shall the amount of interest received, charged or contracted
for by Holder exceed the highest lawful amount of interest permissible under the
laws applicable to the Loan. If at any time performance of any provision of this
Note or the other Loan Documents results in the highest lawful rate of interest
permissible under applicable laws being exceeded, then the amount of interest
received, charged or contracted for by Holder shall automatically and without
further action by any party be deemed to have been reduced to the highest lawful
amount of interest then permissible under applicable laws. If Holder shall ever
receive, charge or contract for, as interest, an amount which is unlawful, at
Holder's election, the amount of unlawful interest shall be refunded to Borrower
(if actually paid) or applied to reduce the then unpaid Loan Amount. To the
fullest extent permitted by applicable laws, any amounts contracted for, charged
or received under the Loan Documents included for the purpose of determining
whether the Interest Rate would exceed the highest lawful rate shall be
calculated by allocating and spreading such interest to and over the full stated
term of this Note.

                                      -3-

<PAGE>

                  8. Prepayment. Borrower shall not have the right to prepay all
or any portion of the Loan Amount at any time during the term of this Note
except as expressly set forth in the Defined Terms or the Mortgage. If Borrower
provides notice of its intention to prepay, the Accelerated Loan Amount shall
become due and payable on the date specified in the prepayment notice.

                  9. Prepayment Fee. (a) Any tender of payment by Borrower or
any other person or entity of the Secured Indebtedness, other than as expressly
provided in the Loan Documents, shall constitute a prohibited prepayment. If a
prepayment of all or any part of the Secured Indebtedness is made following (i)
an Event of Default and an acceleration of the Maturity Date, or (ii) in
connection with a purchase of the Property or a repayment of the Secured
Indebtedness at any time before, during or after, a judicial or non-judicial
foreclosure or sale of the Property, then to compensate Holder for the loss of
the investment, Borrower shall pay an amount equal to the Prepayment Fee (as
hereinafter defined).

                     (b) The "Prepayment Fee" shall be the greater of (A) the
present value of all remaining payments of principal and interest including the
outstanding principal due on the Maturity Date, discounted at the rate which,
when compounded monthly, is equivalent to the Treasury Rate compounded semi
annually, and (y) is the amount of the principal then outstanding, or (B) one
percent (1 %) of the amount of the principal being prepaid.

                     (c) The "Treasury Rate" shall be the annualized yield on
securities issued by the United States Treasury having a maturity equal to the
remaining stated term of this Note, as quoted in the Federal Reserve Statistical
Release 1H. 15 (519)] under the heading "U.S. Government Securities - Treasury
Constant Maturities" for the date on which prepayment is being made. If this
rate is not available as of the date of prepayment, the Treasury Rate shall be
determined by interpolating between the yield on securities of the next longer
and next shorter maturity. If the Treasury Rate is no longer published, Holder
shall select a comparable rate. Holder will, upon request, provide an estimate
of the amount of the Prepayment Fee two weeks before the date of the scheduled
prepayment.

                     (d) In the event of a permitted prepayment during the
Permitted Prepayment Period which is less than the entire principal balance of
the Note, for the purposes of determining the Prepayment Fee, the outstanding
principal shall be equal to the applicable percentage of principal being
prepaid.

                  10. Waiver of Right to Prepay Note Without Prepayment Fe .
Borrower acknowledges that Holder has relied upon the anticipated investment
return under this Note in entering into transactions with, and in making
commitments to, third parties and that the tender of any prohibited prepayment,
shall, to the extent permitted by law, include the Prepayment Fee. Borrower
agrees that the Prepayment Fee represents the reasonable estimate of Holder and
Borrower of a fair average compensation for the loss that may be sustained by
Holder as a result of a prohibited prepayment of this Note and it shall bi paid
without prejudice to the right of Holder to collect any other amounts provided
to be paid under the Loan Documents.

BORROWER EXPRESSLY (A) WAIVES ANY RIGHTS IT MAY HAVE UNDER APPLICABLE
PENNSYLVANIA LAW TO PREPAY THIS NOTE, IN WHOLE OR IN PART, WITHOUT FEE OR
PENALTY, UPON ACCELERATION OF THE MATURITY DATE OF THIS NOTE, AND (B) AGREES
THAT IF, FOR ANY REASON, A PREPAYMENT OF THIS NOTE IS MADE, UPON OR FOLLOWING
ANY ACCELERATION OF THE MATURITY DATE OF THIS NOTE BY HOLDER ON ACCOUNT OF ANY
DEFAULT BY BORROWER UNDER ANY LOAN DOCUMENT, INCLUDING BUT NOT LIMITED TO ANY
TRANSFER, FURTHER ENCUMBRANCE OR DISPOSITION WHICH IS PROHIBITED OR RESTRICTED
BY THE MORTGAGE, THEN BORROWER SHALL BE OBLIGATED TO PAY CONCURRENTLY THE
PREPAYMENT FEE SPECIFIED IN SECTION 9. BY EXECUTING THIS NOTE, BORROWER AGREES
THAT HOLDER'S AGREEMENT TO MAKE THE LOAN AT THE INTEREST RATE AND FOR THE TERM
SET FORTH IN THIS NOTE CONSTITUTES ADEQUATE CONSIDERATION FOR THIS WAIVER AND
AGREEMENT.

                                      -4-

<PAGE>

                  11. Liabili1y of Borrower. Upon the occurrence of an Event of
Default, except as provided in this Section 11, Holder will look solely to the
Property and the security under the Loan Documents for the repayment of the Loan
and will not enforce a deficiency judgment against Borrower. However, nothing
contained in this section shall limit the rights of Holder to proceed against
Borrower and the general partners of Borrower and/or the Liable Party, if any,
(i) to enforce any Leases entered into by Borrower or its affiliates as tenant,
guarantees, or other agreements entered into by Borrower in a capacity other
than as borrower or any policies of insurance; (ii) to recover damages for
fraud, material misrepresentation, material breach of warranty or waste; (iii)
to recover any Condemnation Proceeds or Insurance Proceeds or other similar
funds which have been misapplied by Borrower or which, under the terms of the
Loan Documents, should have been paid to Holder; (iv) to recover any tenant
security deposits, tenant letter of credit or other deposits or fees paid to
Borrower that are part of the collateral for the Loan or prepaid rents for a
period of more than 30 days which have not been delivered to Holder; (v) to
recover Rents and Profits received by Borrower after the first day of the month
in which an Event of Default occurs and prior to the date Holder acquires title
to the Property which have not been applied to the Loan or in accordance with
the Loan Documents to operating and maintenance expenses of the Property; (vi)
to recover damages, costs and expenses arising from, or in connection with
Article VI of the Mortgage pertaining to hazardous materials or the Indemnity
Agreement; (vii) to recover all amounts expended and reasonable expenses of
Holder in connection with the exercise of the rights and remedies under the Loan
Documents and/or the foreclosure of the Mortgage; (viii) to recover damages
arising from Borrower's failure to comply with Section 8.01 of the Mortgage
pertaining to ERISA; and/or (ix) to the extent Holder does not require deposits
on account of Impositions and/or Premiums, to the extent that any obligations
for which the Impositions and/or Premiums deposit was not paid by Borrower.

                  The limitation of liability set forth in this Section 11 shall
not apply and the Loan shall be fully recourse in the event (a) of a violation
of either Section 10.01 or Section 10.02 or Section 10.05 or Section 10.06 of
the Mortgage, or (b) that prior to the repayment of the Secured Indebtedness,
(i) Borrower commences a voluntary bankruptcy or insolvency proceeding, or (ii)
an involuntary bankruptcy or insolvency proceeding is commenced against Borrower
and is not dismissed within 90 days of filing, or (iii) Borrower or any general
partner of Borrower, or any person or entity related to or affiliated with
Borrower or any general partner in Borrower, takes any action that challenges,
interferes with, or delays the exercise of Lender's rights or remedies available
under the Loan Documents, at law or in equity. In addition, this agreement shall
not waive any rights which Holder would have under any provisions of the U.S.
Bankruptcy Code to file a claim for the full amount of the Secured Indebtedness
or to require that the Property shall continue to secure all of the Secured
Indebtedness.

                  12. Waiver by Borrower. Borrower and others who may become
liable for the payment of all or any part of this Note, and each of them, waive
diligence, demand, presentment for payment, notice of nonpayment, protest,
notice of dishonor and notice of protest, notice of intent to accelerate and
notice of acceleration and specifically consent to and waive notice of any
amendments, modifications, renewals or extensions of this Note, including the
granting of extension of time for payment, whether made to or in favor of
Borrower or any other person or persons.

                  13. Exercise of Rights. No single or partial exercise by
Holder, or delay or omission in the exercise by Holder, of any right or remedy
under the Loan Documents shall waive or limit the exercise of any such right or
remedy. Holder shall at all times have the right to proceed against any portion
of or interest in the Property in the manner that Holder may deem appropriate,
without waiving any other rights or remedies. The release of any party under
this Note shall not operate to release any other party which is liable under
this Note and/or under the other Loan Documents or under the Indemnity
Agreement.

                  14. Fees and Expense. If Borrower defaults under this Note,
Borrower shall be personally liable for and shall pay to Holder, in addition to
the sums stated above, the costs and expenses of enforcement and collection,
including a reasonable sum as an attorney's fee. This obligation is not limited
by Section 11.

                                       -5-

<PAGE>

                  15. No Amendment. This Note may not be modified or amended
except in a writing executed by Borrower and Holder. No waivers shall be
effective unless they are set forth in writing signed by the party which is
waiving a right. This Note and the other Loan Documents are the final expression
of the lending relationship between Borrower.

                  16. Governing Law. This Note is to be construed and enforced
in accordance with the laws of the Commonwealth of Pennsylvania.

                  17. Construction. The words "Borrower" and "Holder" shall be
deemed to include their respective heirs, representatives, successors and
assigns, and shall denote the singular and/or plural, and the masculine and/or
feminine, and natural and/or artificial persons, as appropriate. The provisions
of this Note shall remain in full force and effect notwithstanding any changes
in the shareholders, partners or members of Borrower. If more than one party is
Borrower, the obligations of each party shall be joint and several. The captions
in this Note are inserted only for convenience of reference and do not expand,
limit or define the scope or intent of any section of this Note.

                  18. Notices. All notices, demands, requests and consents
permitted or required under this Note shall be given in the manner prescribed in
the Mortgage.

                  19. Time of the Essence. Time shall be of the essence with
respect to all of Borrower's obligations under this Note.

                  20. Severability. If any provision of this Note should be held
unenforceable or void, then that provision shall be deemed separable from the
remaining provisions and shall not affect the validity of this Note, except that
if that provision relates to the payment of any monetary sum, then Holder may,
at its option, declare the Secured Indebtedness (together with the Prepayment
Fee) immediately due and payable.

                  IN WITNESS WHEREOF, Borrower has executed this Note as of the
Execution Date.

                  ACADIA REALTY LIMITED PARTNERSHIP, a
                  Delaware limited partnership

                           By ACADIA REALTY TRUST, a
                           Maryland real estate investment trust,
                           its general partner
                                    By:
                                         Robert Masters, Senior Vice President

                                       -6-

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00022-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00022-of-00352.parquet"}]]