Document:

Form of Mortgage

                              MORTGAGE, SECURITY AGREEMENT, ASSIGNMENT OF LEASES

                              

AND RENTS AND FINANCING
STATEMENT 

                              

                              
STOCKERYALE, INC. 

                              

                              
to 

                              

                              
LAURUS MASTER FUND, LTD. 

                              

                              
(Hampshire Road and
Garabedian Drive, 

                              

                              
Salem, New Hampshire and
Methuen, Massachusetts) 

        THIS
INSTRUMENT CONSTITUTES A FIXTURE FINANCING STATEMENT UNDER THE UNIFORM COMMERCIAL CODE
COVERING THE ITEMS AND TYPES OF COLLATERAL DESCRIBED HEREIN. THE NAMES OF THE DEBTOR AND
THE SECURED PARTY, THE MAILING ADDRESS OF THE SECURED PARTY FROM WHICH INFORMATION
CONCERNING THE SECURITY INTEREST MAY BE OBTAINED, THE MAILING ADDRESS OF THE DEBTOR AND A
STATEMENT INDICATING THE TYPES, OR DESCRIBING THE ITEMS, OF COLLATERAL ARE AS DESCRIBED
BELOW, IN COMPLIANCE WITH THE REQUIREMENTS OF ARTICLE 9 OF THE UNIFORM COMMERCIAL CODE. 

        UNDER
THE TERMS AND PROVISIONS OF THE NOTE WHICH THIS INSTRUMENT SECURES AND UNDER THE TERMS AND
PROVISIONS OF ANY FUTURE OR FURTHER ADVANCES SECURED HEREBY, THE INTEREST RATE PAYABLE
THEREUNDER MAY BE VARIABLE. THE PURPOSE OF THIS PARAGRAPH IS TO PROVIDE RECORD NOTICE OF
THE RIGHT OF MORTGAGEE, ITS SUCCESSORS AND ASSIGNS, TO INCREASE OR DECREASE THE INTEREST
RATE ON ANY INDEBTEDNESS SECURED HEREBY WHERE THE TERMS AND PROVISIONS OF SUCH
INDEBTEDNESS PROVIDE FOR A VARIABLE INTEREST RATE. 

THIS MORTGAGE, SECURITY AGREEMENT,
ASSIGNMENT OF LEASES AND RENTS AND FINANCING STATEMENT (hereinafter referred to as this
“Mortgage”) is made and entered into by StockerYale, Inc., a
Massachusetts corporation, with an address of 32 Hampshire Road, Salem, New Hampshire
03079, as debtor and mortgagor (hereinafter referred to as “Mortgagor”) to
Laurus Master Fund, Ltd., a Cayman Islands company with an address c/o M&C
Corporate Services, Limited, P.O. Box 309, G.T., Ugland House, South Church Street,
Georgetown Grand Cayman, Cayman Islands, as secured party and mortgagee (hereinafter,
referred to as “Mortgagee”). 

                              

                              
WITNESSETH: 

        That
for and in consideration of One and no/100 dollars ($1.00) and other good and valuable
consideration, the receipt and sufficiency whereof are hereby acknowledged by Mortgagor,
and in order to secure the Secured Obligations (as hereinafter defined), Mortgagor does
hereby give, grant, bargain, sell, transfer, assign, mortgage and convey unto Mortgagee,
and its successors and assigns, with MORTGAGE COVENANTS and upon the STATUTORY CONDITIONS
AND WITH THE STATUTORY POWER OF SALE (as such terms are defined under the laws of the
jurisdictions where the Mortgaged Property is located), all of the following described
property (hereinafter collectively referred to as the “Mortgaged Property”): 

               	(a) 	       

                     Those certain tracts and parcels of land located at Hampshire Road and
                    Garabedian Drive, Salem, New Hampshire and Methuen, Massachusetts,
                    as more particularly described in Exhibit A attached hereto and by this
                    reference made a part hereof, together with all right, title and interest of
                    Mortgagor, including any after-acquired title or reversion, in and to the common
                    areas, rights-of-ways, streets and alleys adjacent thereto, and all easements,
                    rights-of-way, licenses, operating agreements, strips and gores of land, vaults,
                    roads, streets, ways, alleys, passages, sewers, sewer rights, waters, water
                    courses, water rights and powers, oil, gas and other minerals, flowers, shrubs,
                    crops, trees, timber and other emblements now or hereafter located on, servicing
                    or benefiting the land or under or above same, and all estates, rights, titles,
                    interests, privileges, liberties, tenements, hereditaments, easements and
                    appurtenances whatsoever, in any way belonging, relating to or appertaining to
                    said tract or parcel of land or any part thereof, or which hereafter shall in
                    any way belong, relate or be appurtenant thereto, whether now owned or hereafter
                    acquired by Mortgagor and the reversion and reversions, remainder and
                    remainders, and all the estate, right, title, interest, property, possession,
                    claim and demand whatsoever at law, as well as in equity, of Mortgagor of, in
                    and to the same (hereinafter referred to as the “Real Estate”); and 

                              
                    

                              
               	(b) 	       

                     All buildings, structures, parking areas, landscaping, and other improvements
                    of every nature now or hereafter situated, erected or placed on the Real Estate
                    (hereinafter referred to as the “Improvements”), and all materials
                    intended for construction, reconstruction, alteration and repairs of the
                    Improvements now or hereafter erected, all of which materials shall be deemed to
                    be included within the Improvements immediately upon the delivery thereof to the
                    Real Estate; and 

                              
                    

                              
               	(c) 	       

                     All fixtures, goods to become fixtures, machinery, equipment, furniture,
                    inventory, building supplies, appliances and other articles of personal property
                    (hereinafter collectively referred to as the “Personal Property”),
                    including, but not limited to, all gas and electric fixtures, radiators,
                    heaters, furnaces, engines and machinery, boilers, ranges, ovens, elevators and
                    motors, bathtubs, sinks, commodes, basins, pipes, faucets and other plumbing,
                    heating and air conditioning equipment, mirrors, refrigerating plant,
                    refrigerators, iceboxes, dishwashers, carpeting, floor coverings, furniture,
                    light fixtures, signs, lawn equipment, water heaters, and cooking apparatus and
                    appurtenances, and all other fixtures and equipment now or hereafter owned by
                    Mortgagor and located in, on or about, or used or intended to be used with or in
                    connection with the use, operation, or enjoyment of the Real Estate or the
                    Improvements, whether installed in such a way as to become a part thereof or
                    not, including all extensions, additions, improvements, betterments, renewals
                    and replacements of any of the foregoing and all the right, title and interest
                    of Mortgagor in and to any of the foregoing now owned or hereafter acquired by
                    Mortgagor, all of which are hereby declared and shall be deemed to be fixtures
                    and accessions to the freehold and a part of the Improvements as between the
                    parties hereto and all persons claiming by, through or under them; and 

                              
                    

                              
               	(d) 	       

                     All right, title and interest of Mortgagor in and to all policies of insurance,
                    licenses, franchises, permits and all applications filed in connection
                    therewith, service contracts, maintenance contracts, property management
                    agreements, equipment leases, tradenames, trademarks, service marks, logos,
                    goodwill, accounts, chattel paper and general intangibles as defined in the
                    Uniform Commercial Code, which in any way now or hereafter belong, relate or
                    appertain to the Real Estate, the Improvements or the Personal Property or any
                    part thereof now owned or hereafter acquired by Mortgagor, including, without
                    limitation, all condemnation payments, insurance proceeds and escrow funds and
                    all other property of Mortgagor deposited with Mortgagee or held by Mortgagee
                    (hereinafter referred to as the “Intangible Property”), and 

                              
                    

                              
               	(e) 	       

                     All leases, subleases, licenses, franchises, concessions or grants of other
                    possessory interests, tenancies, and any other agreements affecting the use,
                    possession or occupancy of the Real Estate, Improvements or Personal Property or
                    any part thereof (including, without limitation, guest rooms, restaurants, bars,
                    conference and meeting rooms, and banquet halls and other public facilities),
                    whether now or hereafter existing or entered into (including, without
                    limitation, any use or occupancy arrangements created pursuant to Section 365(d)
                    of the Bankruptcy Code or otherwise in connection with the commencement or
                    continuance of any bankruptcy, reorganization, arrangement, insolvency,
                    dissolution, receivership or similar proceedings, or any assignment for the
                    benefit of creditors, in respect of any tenant or occupant of any portion of the
                    Real Estate) and all amendments, modifications, supplements, extensions or
                    renewals thereof, whether now or hereafter existing and all amendments,
                    modifications, supplements, extensions or renewals thereof, together with the
                    right to enforce, whether at law or in equity or by any other means, all terms,
                    covenants and provisions of the foregoing (collectively the “Leases”). 

                              
                    

                              
               	(f) 	       

                     All rents, issues, profits, royalties (including all oil and gas or other
                    hydrocarbon substances), earnings, receipts, revenues, accounts, account
                    receivable, security deposits and other deposits (subject to the prior right of
                    the tenants making such deposits) and income, including, without limitation,
                    fixed, additional and percentage rents, and all operating expense
                    reimbursements, reimbursements for increases in taxes, sums paid by tenants to
                    Mortgagor to reimburse Mortgagor for amounts originally paid or to be paid by
                    Mortgagor or Mortgagor’s agents or affiliates for which such tenants were
                    liable, as, for example, tenant improvements costs in excess of any work letter,
                    lease takeover costs, moving expenses and tax and operating expense
                    pass-throughs for which a tenant is solely liable, parking, maintenance, common
                    area, tax, insurance, utility and service charges and contributions, proceeds of
                    sale of electricity, gas, heating, air-conditioning and other utilities and
                    services, deficiency rents and liquidated damages, and other benefits now or
                    hereafter derived from any portion of the Real Estate or otherwise due and
                    payable or to become due and payable as a result of any ownership, use,
                    possession, occupancy or operation thereof and/or services rendered, goods
                    provided and business conducted in connection therewith (including any payments
                    received pursuant to Section 502(b) of the Bankruptcy Code or otherwise in
                    arrangement, insolvency, dissolution, receivership or similar proceedings, or
                    any assignment for the benefit of creditors, in respect of any tenant or other
                    occupants of any portion of the Real Estate and all claims as a creditor in
                    connection with any of the foregoing), all claims under any and all lease
                    guaranties, letters of credit and any other credit support given by any
                    guarantor in connection with any of the Leases or leasing commissions payable to
                    Mortgagor and all cash or security deposits, advance rentals, and all deposits
                    or payments of a similar nature relating thereto, now or hereafter, including
                    during any period of redemption, derived from the Real Estate or any portion
                    thereof and all proceeds from the cancellation, surrender, sale or other
                    disposition of the Leases (collectively the “Rents”). 

                              
                    

                              
               	(g) 	       

                     All the right, title, interest of Mortgagor in and to all plans and
                    specifications relating to the Improvements on the Real Estate (hereinafter
                    collectively referred to as the “Plans”); and 

                              
                    

                              
               	(h) 	       

                     All judgments, awards of damages and settlements hereafter made as a result or
                    in lieu of any taking of the Real Estate Improvements or any interest therein or
                    part thereof under the power of eminent domain, or for any damage (whether
                    caused by such taking or otherwise) to the Real Estate, or the improvements
                    thereon or any part thereof, including any award for change of grade of streets;
                    and 

                              
                    

                              
               	(i) 	       

                     All the right, title, interest of Mortgagor in and to the environmental
                    indemnification provisions inuring to the benefit of Mortgagor (and its lenders)
                    under that certain Purchase and Sale Agreement dated August 28, 1995 by and
                    between John Hancock Mutual Life Insurance Company as seller and Mortgagor as
                    buyer pertaining to the acquisition by Mortgagor of the Real Estate and
                    Improvements as the same may have been amended; and 

                              
                    

                              
               	(j) 	       

                     All proceeds, products, substitutions and accessions of the foregoing of every
                    type. 

                              
                    

                              
        TO
HAVE AND TO HOLD the Mortgaged Property and all parts, rights, members and appurtenances
thereof, to the use, benefit and behoove of Mortgagee and the successors and assigns of
Mortgagee, in fee simple forever; and Mortgagor covenants that Mortgagor is lawfully
seized and possessed of the Mortgaged Property and holds marketable fee simple absolute
title to the same and has good right to convey the Mortgaged Property and that the
conveyances in this Mortgage are subject to only those matters (hereinafter referred to as
the “Permitted Encumbrances”) expressly set forth in Exhibit B attached
hereto and by this reference made a part hereof. Except for the Permitted Encumbrances,
Mortgagor does warrant and will forever defend the title to the Mortgaged Property against
the claims of all persons whomsoever. 

        This
Mortgage is intended to constitute: (i) a mortgage deed and (ii) a security agreement and
FINANCING STATEMENT under the Uniform Commercial Code. This Mortgage is also intended to
operate and be construed as an absolute present assignment of the Leases and Rents,
Mortgagor hereby agreeing that Mortgagee is entitled to receive the Rents, issues and
profits of the Mortgaged Property prior to an Event of Default and without entering upon
or taking possession of the Real Estate. 

        PROVIDED
NEVERTHELESS, that if Mortgagor, its successors or assigns pays and performs or causes to
be paid and performed the following described indebtedness and obligations (hereinafter
all collectively referred to as the “Secured Obligations”), then this Mortgage
shall be void, otherwise this Mortgage shall remain in full force: 

         (a)       
          The debt and other obligations of Mortgagor to Mortgagee under that certain
          Secured Convertible Note of even date herewith in the amount of Five Hundred
          Thousand Dollars ($500,000.00) (as the same may be amended, extended, restated
          or substituted from time to time, the “Note”); 

         (b)       
          The full and prompt payment and performance by Mortgagor of all of the
          provisions, agreements, covenants and obligations of the Mortgagor contained in
          this Mortgage, in the Securities Purchase Agreement by and between Mortgagor and
          Mortgagee of even date herewith (as the same may be amended, extended, restated
          or substituted from time to time, “Purchase Agreement”), in any
          promissory note issued pursuant to the Purchase Agreement, in the Common Stock
          Purchase Warrant from Mortgagor to Mortgagee of even date herewith, in the
          Registration Rights Agreement between Mortgagor and Mortgagee of even date
          herewith, and in all other agreements, documents or instruments now or hereafter
          evidencing, securing or otherwise relating to the obligations evidenced by the
          Note and Purchase Agreement (the Note, this Mortgage, the Purchase Agreement and
          such other promissory notes, agreements, documents and instruments, together
          with any and all renewals, amendments, extensions and modifications thereof, are
          hereinafter collectively referred to as the “Transaction Documents”), 

         (c)       
          The accuracy of all of the representations and warranties of Mortgagor contained
          herein, in the Purchase Agreement and in the other Transaction Documents; 

         (d)       
          Any and all additional advances made by Mortgagee to preserve and protect the
          Improvements or to protect or preserve the Mortgaged Property or the security
          interest created hereby on the Mortgaged Property, or for taxes, assessments or
          insurance premiums as hereinafter provided or for performance of any of
          Mortgagor’s obligations hereunder or under the other Transaction Documents
          or for any other purpose provided herein or in the other Transaction Documents
          (whether or not the original Mortgagor remains the owner of the Mortgaged
          Property at the time of such advances); and 

         (e)       
          Any and all other indebtedness, however incurred, which may now or hereafter be
          due and owing from Mortgagor to Mortgagee, as maker, guarantor or surety, now
          existing or hereafter coming into existence, however and whenever incurred or
          evidenced, whether expressed or implied, direct or indirect absolute or
          contingent, or due or to become due, and all renewals, modifications,
          consolidations and extensions thereof. 

        This
Mortgage is, in addition, upon the STATUTORY CONDITIONS OF THE LAWS OF NEW HAMPSHIRE AND
MASSACHUSETTS, upon the breach of which Mortgagee shall have the STATUTORY POWERS OF SALE
UNDER THE LAWS OF NEW HAMPSHIRE AND MASSACHUSETTS, which are hereby incorporated herein by
reference. 

        Mortgagor
hereby further covenants and agrees with Mortgagee as follows: 

         1.       
          Payment and Performance of Secured Obligations. Mortgagor
          shall promptly pay the Secured Obligations when due, and fully and promptly
          perform all of the provisions, agreements, covenants and obligations of the
          Secured Obligations. 

         2.       
          Funds for Impositions. At Mortgagee’s request,
          Mortgagor shall pay into an account established with Mortgagee, on the days that
          monthly installments of interest are payable under the Note, until the Note is
          paid in full, a sum (hereinafter referred to as the “Funds”) equal to
          one-twelfth (1/12) of the following items (hereinafter collectively referred to
          as the “Impositions”): (a) real estate taxes, ad valorem taxes,
          personal property taxes, assessments, betterments, and all governmental charges
          of every name and restriction which may be levied on the Mortgaged Property, and
          (b) the yearly premium installments for the insurance covering the Mortgaged
          Property and required by Mortgagee pursuant to Paragraph 4 hereof. The
          Impositions shall be estimated initially and from time to time by Mortgagee on
          the basis of assessments and bills and estimates thereof. The Funds shall be
          held by Mortgagee, free of interest and free of any liens or claims on the part
          of creditors of Mortgagor and as part of the security for the Secured
          Obligations. The Funds shall not be, nor be deemed to be, trust funds but may be
          commingled with the general funds of Mortgagee. The Funds are pledged as
          additional security for the Secured Obligations, and may be applied, at
          Mortgagee’s option and without notice to Mortgagor, to the payment of the
          Secured Obligations upon any Event of Default hereunder. If at any time the
          amount of the Funds held by Mortgagee shall be less than the amount deemed
          necessary by Mortgagee to pay Impositions as such become due, Mortgagor shall
          pay to Mortgagee any amount necessary to make up the deficiency within five (5)
          days after notice from Mortgagee to Mortgagor requesting payment thereof. Upon
          payment in full of the Secured Obligations, Mortgagee shall promptly refund to
          Mortgagor any Funds held by Mortgagee. 

         3.       
          Impositions, Liens and Charges. Mortgagor shall pay all
          Impositions and other charges, if any, attributable to the Mortgaged Property,
          as and when due, unless, pursuant to Paragraph 2 above, Mortgagee has requested
          that they be paid monthly, in which case, they shall be paid in accordance with
          Paragraph 2. Mortgagor shall furnish to Mortgagee all bills and notices of
          amounts due under this Paragraph 3 as soon as received. Mortgagor shall promptly
          discharge (by bonding, payment or otherwise) any lien filed against the
          Mortgaged Property and will keep and maintain the Mortgaged Property free from
          the claims of all persons supplying labor or materials to the Mortgaged
          Property. 

         4.       
          Insurance. 

         (a)       
          Mortgagor, at its expense, shall procure and maintain for the benefit of
          Mortgagor and Mortgagee, insurance policies issued by such insurance companies,
          in such amounts, in such form and substance, and with such coverages,
          endorsements, deductibles, and expiration dates as are acceptable to Mortgagee,
          providing the following types of insurance covering the Mortgaged Property: 

         (i)       
          “Direct Loss” Property insurance (including broad form flood, broad
          form earthquake and comprehensive boiler and machinery coverages) on the
          Improvements and Personal Property in an amount not less than one hundred
          percent (100%) of the full replacement cost of the Improvements and the Personal
          Property determined annually by an insurer or qualified appraiser selected and
          paid for by Mortgagor and acceptable to Mortgagee, with deductibles not to
          exceed $25,000 for any one occurrence, with a replacement cost coverage
          endorsement, an agreed amount endorsement, and, if requested by Mortgagee, a
          contingent liability from operation of building laws endorsement, a demolition
          cost endorsement and an increased cost of construction endorsement in such
          amounts as Mortgagee may require. Full replacement cost as used herein means the
          cost of replacing the Improvements (exclusive of the cost of the land,
          excavations, foundations and footings below the lowest basement floor) and the
          Personal Property without deduction for physical depreciation thereof; 

         (ii)       
          During the course of any construction, the insurance required by clause (i)
          above shall be written on a builders risk, completed value, non-reporting form,
          meeting all of the terms required by clause (i) above, covering the total value
          of work performed, materials, equipment, machinery and supplies furnished,
          existing structures, and temporary structures being erected on or near the Real
          Estate, including coverage against collapse and damage during transit or while
          being stored off-site, and containing a soft costs (including loss of rents)
          coverage endorsement and a permission to occupy endorsement; 

         (iii)       
          Flood insurance if at any time the Improvements are located in any federally
          designated “special hazard area” (including any area having special
          flood, mud slide and/or flood-related erosion hazards, and shown on a Flood
          Hazard Boundary Map or a Flood Insurance Rate Map), in an amount equal to the
          full replacement cost or the maximum amount then available under the New
          Hampshire and Massachusetts Flood Insurance Programs; 

         (iv)       
          To the extent applicable, rent loss insurance in an amount sufficient to recover
          at least (1) the total estimated gross receipts from all sources of income for
          the Real Estate, including, without limitation, rental income, for a twelve
          month period, plus (2) Impositions for a twelve month period to the extent not
          included in (1) above; 

         (v)       
          Commercial general liability insurance against claims for personal injury (to
          include, without limitation, bodily injury and personal and advertising injury)
          and property damage liability, all on an occurrence basis, if available, with
          such coverages as Mortgagee may request (including, without limitation,
          contractual liability coverage, completed operations coverage for a period of
          two (2) years following completion of construction of any Improvements on the
          Real Estate, and coverages equivalent to an ISO broad form endorsement), with a
          general aggregate limit of not less than $ 1,000,000, a completed operations
          aggregate limit of not less than $1,000,000, and a combined single “per
          occurrence” limit of not less than $1,000,000 for bodily injury, Real
          Estate damage and medical payments; 

         (vi)       
          During the course of construction or repair of any Improvements on the Real
          Estate, owner’s contingent or protective liability insurance covering
          claims not covered by or under the terms or provisions of the insurance required
          by clause (v) above; 

         (vii)       
          Employers liability insurance; 

         (viii)       
          Umbrella liability insurance with limits of not less than ONE MILLION DOLLARS
          ($1,000,000) to be in excess of the limits of the insurance required by clauses
          (v), (vi) and (vii) above, with coverage at least as broad as the primary
          coverages of the insurance required by clauses (v), (vi) and (vii) above, with
          any excess liability insurance to be at least as broad as the coverages of the
          lead umbrella policy. All such policies shall be endorsed to provide defense
          coverage obligations; 

         (ix)       
          Workmen’s compensation insurance for all employees of Mortgagor engaged on
          or with respect to the Real Estate or Improvements; and 

         (x)       
          Such other insurance in such form and in such amounts as may from time to time
          be required by Mortgagee against other insurable hazards and casualties which at
          the time are commonly insured against in the case of properties of similar
          character and location to the Real Estate and the Improvements. 

        Mortgagor
shall pay all premiums on insurance policies in the manner provided under Paragraph 3
hereof. The insurance policies provided for in clauses (v), (vi) and above shall name
Mortgagee as an additional insured and shall contain a cross liability/severability
endorsement. The insurance policies provided for in clauses (i), (ii), (iii) and (iv)
above shall name Mortgagee as mortgagee and loss payee, shall be first payable in case of
loss to Mortgagee, and shall contain mortgage clauses and lender’s loss payable
endorsements in form and substance acceptable to Mortgagee. Mortgagor shall deliver
duplicate originals or certified copies of all such policies to Mortgagee, and Mortgagor
shall promptly furnish to Mortgagee all renewal notices and all receipts of paid premiums.
At least thirty (30) days prior to the expiration date of the policies, Mortgagor shall
deliver to Mortgagee duplicate originals or certified copies of renewal policies in form
satisfactory to Mortgagee. 

         (b)       
          All policies of insurance required by this Mortgage shall contain clauses or
          endorsements to the effect that (i) no act or omission of either Mortgagor or
          anyone acting for Mortgagor (including, without limitation, any representations
          made by Mortgagor in the procurement of such insurance), which might otherwise
          result in a forfeiture of such insurance or any part thereof, no occupancy or
          use of the Mortgaged Property for purposes more hazardous than permitted by the
          terms of the policy, and no foreclosure or any other change in title to the
          Mortgaged Property or any part thereof, shall affect the validity or
          enforceability of such insurance insofar as Mortgagee is concerned, (ii) the
          insurer waives any right of setoff, counterclaim, subrogation, or any deduction
          in respect of any liability of Mortgagor and Mortgagee, (iii) such insurance is
          primary and without right of contribution from any other insurance which may be
          available, (iv) such policies shall not be modified, canceled or terminated
          without the insurer thereunder giving at least thirty (30) days prior written
          notice to Mortgagee by certified or registered mail, and (v) that Mortgagee
          shall not be liable for any premiums thereon or subject to any assessments
          thereunder, and shall in all events be in amounts sufficient to avoid any
          coinsurance liability. 

         (c)       
          With the prior consent of Mortgagee not to be unreasonably withheld, the
          insurance required by this Mortgage may be effected through a blanket policy or
          policies covering additional locations and property of Mortgagor not included in
          the Mortgaged Property, provided that such blanket policy or policies comply
          with all of the terms and provisions of this Paragraph and contain endorsements
          or clauses assuring that any claim recovery will not be less than that which a
          separate policy would provide, including, without limitation, a priority claim
          endorsement in the case of Real Estate insurance and an aggregate limits of
          insurance per location endorsement in the case of liability insurance. 

         (d)       
          All policies of insurance required by this Mortgage shall be issued by companies
          licensed to do business in the state where the policy is issued and also in the
          states where the Real Estate is located and having a rating in Best’s Key
          Rating Guide of at least “A” and a financial size category of at least
          “VIII”. 

         (e)       
          Mortgagor shall not carry separate insurance, concurrent in kind or form or
          contributing in the event of loss, with any insurance required under this
          Mortgage unless such insurance complies with the terms and provisions of this
          Paragraph. 

         (f)       
          In the event of any loss or damage to the Mortgaged Property, Mortgagor shall
          give immediate written notice to the insurance carrier and Mortgagee. Mortgagor
          hereby irrevocably authorizes and empowers Mortgagee, at Mortgagee’s option
          and in Mortgagee’s sole discretion, as attorney in fact for Mortgagor, to
          make proof of such loss, to adjust and compromise any claim under insurance
          policies, to appear in and prosecute any action arising from such insurance
          policies, to collect and receive insurance proceeds, and to deduct therefrom
          Mortgagee’s expenses incurred in the collection of such proceeds. If
          Mortgagor is not then in default under this Mortgage, Mortgagee will agree to
          the use of insurance proceeds for reconstruction or repair of the Mortgaged
          Property, under Mortgagee’s usual construction loan procedures, with
          Mortgagor providing any necessary equity injection required in the judgment of
          Mortgagee to assure proper completion of such repair or restoration. Otherwise,
          Mortgagee is authorized to apply the balance of such proceeds to the payment of
          the Secured Obligations whether or not then due, in which case any prepayment
          premiums or fees in the nature thereof, (including by way of example, the result
          of applying Applicable Percentage to the amount being repaid as set forth in the
          Note) will be due as provided for under the Note. If Mortgagee shall require, or
          if Mortgagor desires to proceed with (and is not otherwise in default), the
          reconstruction or repair of the Mortgaged Property, Mortgagee shall, as they
          become due during the course of reconstruction or repair of the Mortgaged
          Property, reimburse Mortgagor, in accordance with such terms and conditions as
          Mortgagee may prescribe, for the costs of reconstruction or repair of the
          Mortgaged Property, and upon completion of such reconstruction or repair, shall
          apply any excess to the payment of the Secured Obligations. If under Paragraph
          21 hereof the Mortgaged Property is sold or the Mortgaged Property is acquired
          by Mortgagee, all right, title and interest of Mortgagor in and to any insurance
          policies and unearned premiums thereon and in and to the proceeds thereof
          resulting from loss or damage to the Mortgaged Property prior to the sale or
          acquisition shall pass to Mortgagee or any other successor in interest to
          Mortgagor or purchaser or grantor of the Mortgaged Property but receipt of any
          insurance proceeds and any disposition of the same by Mortgagee shall not
          constitute a waiver of any rights of Mortgagee, statutory or otherwise, and
          specifically shall not constitute a waiver of the right of foreclosure by
          Mortgagee in the Event of Default or failure of performance by Mortgagor of any
          of the Secured Obligations. 

         5.       
          Preservation and Maintenance. Mortgagor (a) shall not
          permit or commit waste, impairment, or deterioration of the Mortgaged Property
          or abandon the Mortgaged Property, (b) shall restore or repair promptly and in a
          good and workmanlike manner all or any part of the Mortgaged Property in the
          event of any damage, injury or loss thereto, to the equivalent of its condition
          prior to such damage, injury or loss, or such other condition as Mortgagee may
          approve in writing, (c) shall keep the Mortgaged Property, including the
          Improvements and the Personal Property, in good order, repair and tenantable
          condition and shall replace fixtures, equipment, machinery and appliances on the
          Mortgaged Property when necessary to keep such items in good order, repair, and
          tenantable condition, and (d) shall comply with all laws, ordinances,
          regulations and requirements of any governmental body applicable to the
          Mortgaged Property. Mortgagor covenants and agrees to give Mortgagee prompt
          notice of any non-compliance with such laws, ordinances, regulations or
          requirements and of any notice of non-compliance therewith which it receives or
          any threatened or pending proceedings in respect thereto or with respect to the
          Mortgaged Property. Neither Mortgagor nor any tenant or other person shall
          remove, demolish or alter any Improvements now existing or hereafter erected on
          the Mortgaged Property or any Personal Property in or on the Mortgaged Property
          except when incident to the replacement of Personal Property with items of like
          kind. Mortgagor further covenants and agrees that, without the prior written
          consent of Mortgagee, herein, no part of the Mortgaged Property shall be
          declared, or become the subject of, a condominium under the New Hampshire or
          Massachusetts Condominium Acts, as they may be amended or supplemented, or
          become the subject of any covenants or restrictions, or any planned unit
          development, or any other type of development that would control or restrict the
          uses to which the Real Estate and Improvements may be put or the scheme or
          arrangement or its development or the design, location or character of its
          buildings or improvements, or which would impose Obligations or assessments of
          any type upon any owners or tenants of the Mortgaged Property, or upon any other
          parties who may use or enjoy the Mortgaged Property. 

         6.       
          Transfers. Mortgagor will not, directly or indirectly,
          voluntarily or involuntarily, without the prior written consent of Mortgagee in
          each instance: (a) sell, convey, assign, transfer, lease, option, mortgage,
          pledge, hypothecate or dispose of the Mortgaged Property, or any part thereof or
          interest therein, except as expressly permitted by the terms of this Mortgage;
          or (b) create or suffer to be created or to exist any lien, encumbrance,
          security interest, mortgage, pledge, restriction, attachment or other charge of
          any kind upon the Mortgaged Property, or any part thereof or interest therein,
          except for Permitted Encumbrances. 

         7.       
          Hazardous Materials Warranties and Indemnification. 

         (a)       
          Definitions. The following definitions shall apply for purposes of this
          Paragraph 7: 

         (i)       
          “Environmental Law” shall mean any federal, state or local statute,
          regulation or ordinance or any judicial or administrative decree or decision,
          whether now existing or hereinafter enacted, promulgated or issued, with respect
          to any drinking water, groundwater, wetlands, landfills, open dumps, storage
          tanks, solid waste, waste water, storm water run-off, waste emissions, wells,
          toxic pollutants or hazardous wastes or materials, including, but not limited
          to, petroleum and petroleum products, asbestos and asbestos containing
          materials, polychlorinated biphenyls, lead, radon, radioactive materials,
          flammables and explosives. Without limiting the generality of the foregoing, the
          term “Environmental Law” shall encompass each of the following
          statutes, and regulations promulgated thereunder, and amendments and successors
          to such statutes and regulations, as may be enacted and promulgated from time to
          time: (i) the Comprehensive Environmental Response, Compensation and Liability
          Act of 1980 (codified in scattered sections of 26 U.S.C.; 33 U.S.C.; 42 U.S.C.
          and 42 U.S.C. s. 9601 et seq.); (ii) the Resource Conservation and
          Recovery Act of 1976 (42 U.S.C. s. 6901 et seq.); (iii) the
          Hazardous Substances Transportation Act (49 U.S.C. s. 1801 et
          seq.); (iv) the Toxic Substances Control Act (15 U.S.C. s. 2061 et
          seq.); (v) the Clean Water Act (33 U.S.C. s. 1251 et seq.);
          (vi) the Clean Air Act 42 U.S.C. s. 7401 et seq.); (vii) the Safe
          Drinking Water Act (21 U.S.C. s. 349; 42 U.S.C. s. 201 and s. 300f et
          seq.); (viii) The National Environmental Policy Act of 1969 (42 U.S.C. s.
          4321); (ix) the Superfund Amendment and Reauthorization Act of 1986 (codified in
          scattered sections of 10 U.S.C., 29 U.S.C., 33 U.S.C. and 42 U.S.C.); (x) Title
          III of the Superfund Amendment and Reauthorization Act (40 U.S.C. s. 1101
          et seq.). 

         (ii)       
          “Hazardous Substances” shall mean each and every element, compound,
          chemical mixture, contaminant, pollutant, material, waste or other substance
          which is defined, determined or identified as hazardous or toxic or is otherwise
          regulated under any Environmental Law and includes but is not limited to any and
          all substances (whether solid, liquid or gas) defined, listed, or otherwise
          classified as pollutants, hazardous wastes, hazardous substances, hazardous
          materials, extremely hazardous wastes, or words of similar meaning or regulatory
          effect under any present or future Environmental Law or that may have a negative
          impact on human health or the environment, including but not limited to
          petroleum and petroleum products, asbestos and asbestos-containing materials,
          polychlorinated biphenyls, lead, radon, radioactive materials, flammables and
          explosives. 

         (iii)       
          “Remediation” includes but is not limited to any response,
          remediation, removal, or corrective action; any activity to clean up, detoxify,
          decontaminate, contain or otherwise remediate any Hazardous Substance; any
          actions to prevent, cure or mitigate any Release of any Hazardous Substance; any
          action to comply with any Environmental Law or with any permits issued pursuant
          thereto; any inspection, investigation, study, monitoring, assessment, audit,
          sampling and testing, laboratory or other analysis, or evaluation relating to
          any Hazardous Substances or to any thing referred to herein. 

         (iv)       
          “Release” shall mean any spilling, leaking, pumping, pouring,
          emitting, emptying, discharging, injecting, storing, escaping, leaching,
          dumping, or discarding, burying, abandoning, or disposing into the environment. 

         (v)       
          “Threat of Release” shall mean a substantial likelihood of a Release
          which requires action to prevent or mitigate damage to the environment which may
          result from such Release. 

         (b)       
          Environmental Representations and Warranties. Mortgagor hereby represents
          and warrants to Mortgagee that, to the best of Mortgagor’s knowledge, after
          due inquiry and investigation: (a) the Mortgaged Property is not now in direct
          or indirect violation of any Environmental Law; (b) the Mortgaged Property is
          not subject to any private or governmental lien or active judicial or
          administrative notice of action relating to any Hazardous Substance other than
          the notice recorded at Book 3396, Page 741, which Mortgagor does not believe
          will have a material adverse effect on the Mortgaged Property; (c) no property
          adjoining the Mortgaged Property is being used for the disposal, storage,
          treatment, processing or other handling of Hazardous Substances and there is no
          threat of any Hazardous Substances migrating to the Mortgaged Property except as
          those disclosed in writing to Mortgagee and which comply with applicable
          Environmental Laws; and (vi) Mortgagor has truthfully and fully provided to
          Mortgagee, in writing, any and all information relating to conditions in, on,
          under or from the Mortgaged Property that is known to Mortgagor and that is
          contained in files and records of Mortgagor, including but not limited to any
          reports relating to Hazardous Substances in on, under or from the Mortgaged
          Property and/or to the environmental condition of the Mortgaged Property. 

         (c)       
          Environmental Covenants. Mortgagor covenants and agrees that: (a) all
          uses and operations on or of the Mortgaged Property, whether by Mortgagor or any
          other person over which Mortgagor has control, shall be in compliance with all
          Environmental Laws and permits that may have been issued pursuant thereto; (b)
          Mortgagor shall not permit the Release of Hazardous Substances by Mortgagor or
          any other person over which Mortgagor has control in, on, under or from the
          Mortgaged Property; (c) Mortgagor shall not permit any Hazardous Substances in,
          on, or under the Mortgaged Property, except those that are both (i) in
          compliance with all Environmental Laws and with permits that may have been
          issued pursuant thereto and (ii) fully disclosed to Mortgagee in writing; (d)
          Mortgagor shall keep the Mortgaged Property free and clear of all liens and
          other encumbrances imposed pursuant to any Environmental Law, whether due to any
          act or omission of Mortgagor or any other person or entity (the
          “Environmental Liens”); (e) Mortgagor shall, at its sole cost and
          expense, perform any environmental site assessment or other investigation of
          environmental conditions in connection with the Mortgaged Property, pursuant to
          any reasonable written request of Mortgagee made in the event that Mortgagee has
          a good faith reason to believe that an environmental hazard exists on the
          Mortgaged Property (including but not limited to sampling, testing and analysis
          of soil, water, air, building materials and other materials and substances
          whether solid, liquid or gas), and share with Mortgagee the reports and other
          results thereof, and the Mortgagee shall be entitled to rely on such reports and
          other results thereof; (g) Mortgagor shall, at its sole cost and expense, comply
          with all reasonable written requests of Mortgagee made in the event that
          Mortgagee has a good faith reason to believe that an environmental hazard exists
          on the Mortgaged Property in order to (i) reasonably effectuate Remediation of
          any Release of any Hazardous Substances in, on, under or from the Mortgaged
          Property; (ii) comply with any Environmental Law; (iii) comply with any
          directive from any governmental authority; and (iv) take any other reasonable
          action necessary or appropriate for protection of human health or the
          environment; (h) Mortgagor shall not do or allow any tenant or other user of the
          Mortgaged Property to do any act that materially increases the dangers to human
          health or the environment, poses an unreasonable risk of harm to any person or
          entity (whether on or off the Mortgaged Property), impairs or may impair the
          value of the Mortgaged Property, is contrary to any requirement of any insurer,
          constitutes a public or private nuisance, constitutes waste, or violates any
          covenant, condition, agreement or easement applicable to the Mortgaged Property;
          and (i) Mortgagor shall immediately notify Mortgagee in writing of (A) any
          presence of Releases or Threat of Release of Hazardous Substances in, on, under,
          from or migrating towards the Mortgaged Property; (B) any non-compliance with
          any Environmental Laws related in any way to the Mortgaged Property; (C) any
          actual or potential Environmental Lien; (D) any required or proposed Remediation
          of environmental conditions relating the Mortgaged Property; and (E) any written
          or oral notice or other communication of which Mortgagor becomes aware from any
          source whatsoever (including but not limited to a governmental entity) relating
          in any way to the Mortgaged Property and Hazardous Substances or Remediation
          thereof, possible liability of any Person pursuant to any Environmental Law
          relating to the Mortgaged Property, other environmental conditions in connection
          with the Mortgaged Property, or any actual or potential administrative or
          judicial proceedings in connection with anything referred to in this Agreement. 

         (d)       
          Indemnification. Irrespective of any knowledge Mortgagee has with respect
          to the compliance of the Mortgaged Property with Environmental Laws or the
          existence of any Hazardous Wastes on the Mortgaged Property and irrespective of
          the cause of the existence of any Hazardous Waste on the Mortgaged Property or
          violation of Environmental Laws thereof (unless the sole cause is the actions of
          Mortgagee in possession of the Mortgaged Property), Mortgagor covenants and
          agrees, at its sole cost and expense to protect, defend, indemnify, release and
          hold Mortgagee harmless from and against any and all losses imposed upon or
          incurred by or asserted against any Mortgagee and directly or indirectly arising
          out of or in any way relating to any one or more of the following: (a) any
          presence of any Hazardous Substances in, on, above, or under the Mortgaged
          Property whether the same occurred after or before the date hereof and including
          any Hazardous Substances know to be present on the date of execution hereof by
          Mortgagee; (b) any activity by Mortgagor, any prior owner or operator of the
          Mortgaged Property, any person or entity affiliated with Mortgagor or such prior
          owner or operator, and any tenant or other user of the Mortgaged Property in
          connection with any actual, proposed or threatened use, treatment, storage,
          holding, existence, disposal or other Release, generation, production,
          manufacturing. processing, refining, control, management, abatement, removal,
          handling, transfer or transportation to or from the Mortgaged Property of any
          Hazardous Substances at any time located in, under, on or above the Mortgaged
          Property; (c) any activity by Mortgagor or any prior owner or operator of the
          Mortgaged Property, any person or entity affiliated with Mortgagor or such prior
          owner or operator, and any tenant or other user of the Mortgaged Property in
          connection with any actual or proposed Remediation of any Hazardous Substances
          at any time located in, under, on or above the Mortgaged Property, whether or
          not such Remediation is voluntary or pursuant to court or administrative order,
          including (but not limited to) any removal, remedial or corrective action; (d)
          any actual or threatened noncompliance or violations of any Environmental Laws
          (or permits issued pursuant to any Environmental Law) in connection with the
          Mortgaged Property or operations thereon, including but not limited to any
          failure by Mortgagor or any prior owner or operator, any person or entity
          affiliated with Mortgagor or such prior owner or operator, and any tenant or
          other user of the Mortgaged Property to comply with any order of any
          governmental authority in connection with any Environmental Laws; (e) the
          imposition, recording or filing or the threatened imposition, recording or
          filing of any Environmental Lien encumbering the Mortgaged Property; (f) any
          administrative processes or proceedings or judicial proceedings in any way
          connected with any matter addressed in this Agreement; (g) any actual or
          threatened injury to, destruction of or loss of natural resources in any way
          connected with the Mortgaged Property, including (but not limited to) costs to
          investigate and assess such injury, destruction or loss; (h) any acts of
          Mortgagor or any prior owner or operator, any person or entity affiliated with
          Mortgagor or such prior owner or operator, and any tenant or other user of the
          Mortgaged Property in arranging for disposal or treatment, or arranging with a
          transporter for transport for disposal or treatment, of Hazardous Substances at
          any facility or incineration vessel containing such or similar hazardous
          substances; (i) any acts of Mortgagor or any prior owner or operator, any person
          or entity affiliated with any Mortgagor or such prior owner or operator, and any
          tenant or other user of the Mortgaged Property in accepting any Hazardous
          Substances for transport to disposal or treatment facilities, incineration
          vessels or sites from which there is a Release, or a Threat of Release of any
          Hazardous Substance which causes the incurrence of costs for Remediation; and
          (j) any personal injury, wrongful death, or property or other damage arising
          under any statutory or common law or tort law theory, including (but not limited
          to) damages assessed for private or public nuisance or for the conducting of an
          abnormally dangerous activity on or near the Mortgaged Property. 

         (e)       
          Notice to Mortgagee. If Mortgagor receives any notice or obtains
          knowledge of (i) any potential or known Release or Threat of Release of any
          Hazardous Materials at or from the Real Estate, notification of which must be
          given to any governmental agency under any Environmental Law, or notification of
          which has, in fact, been given to any governmental agency, or (ii) any
          complaint, order, citation or notice with regard to air emissions, water
          discharges, or any other environmental health or safety matter affecting
          Mortgagor or the Real Estate (an “Environmental Complaint”) from any
          person or entity (including, without limitation, the Environmental Protection
          Agency), then Mortgagor shall immediately notify Mortgagee orally and in writing
          of said Release or Threat of Release or Environmental Complaint. Upon such
          notification, Mortgagee may, at its election without regard to whether an Event
          of Default has occurred, obtain one or more environmental assessments of the
          Real Estate prepared by a geohydrologist, an independent engineer or other
          qualified consultant or expert approved by the Mortgagee which evaluates or
          confirms (i) whether any Hazardous Materials are present in the soil or water at
          or adjacent to the Real Estate, and (ii) whether the use and operation of the
          Real Estate comply with all Environmental Laws. Environmental assessments may
          include detailed visual inspections of the Real Estate, including, without
          limitation, any and all storage areas, storage tanks, drains, dry wells and
          leaching areas, and the taking of soil samples, surface water samples and ground
          water samples, as well as such other investigations or analyses as are necessary
          or appropriate for a complete determination of the compliance of the Real Estate
          and the use and operation thereof with all applicable Environmental Laws. All
          such environmental assessments shall be at the cost and expense of the
          Mortgagor. 

         (f)       
          Survival, Assignability, and Transferability 

         (i)       
          The warranties, representations and indemnity set forth in subparagraphs (b),
          (c), (d) and (e) of this Paragraph shall survive the payment and performance of
          the Secured Obligations and any exercise by Mortgagee of any remedies under this
          Mortgage, including without limitation, the power of sale, or any other remedy
          in the nature of foreclosure, and shall not merge with any deed given by
          Mortgagor to Mortgagee in lieu of foreclosure or any deed under a power of sale. 

         (ii)       
          It is agreed and intended by Mortgagor and Mortgagee that the warranties,
          representations, and indemnity set forth above in subparagraphs (b), (c) (d) and
          (e) of this Paragraph 7 may be assigned or otherwise transferred by Mortgagee to
          its successors and assigns and to any subsequent purchasers of all or any
          portion of the Real Estate by, through or under Mortgagee, without notice to
          Mortgagor and without any further consent of Mortgagor. To the extent consent or
          any such assignment or transfer is required by law, advance consent to any such
          assignment or transfer is hereby given by Mortgagor in order to maximize the
          extent and effect of the warranties, representations, and indemnity given
          hereby. 

         8.       
          Use of Mortgaged Property. Unless required by applicable
          law or unless Mortgagee has otherwise agreed in writing, Mortgagor shall not
          allow changes in the nature of the occupancy or use for which the Mortgaged
          Property was intended at the time this Mortgage was executed. Mortgagor shall
          not initiate or acquiesce in a change in the zoning classification of the
          Mortgaged Property or subject the Mortgaged Property to restrictive or negative
          covenants without Mortgagee’s written consent. Mortgagor shall comply with,
          observe and perform all zoning and other laws affecting the Mortgaged Property,
          all restrictive covenants affecting the Mortgaged Property, and all licenses and
          permits affecting the Mortgaged Property. 

         9.       
          Protection of Mortgagee’s Security. If Mortgagor fails
          to perform the covenants and agreements contained in this Mortgage, or if any
          action or proceeding is commenced which affects the Mortgaged Property or title
          thereto or the interest of Mortgagee therein, including, but not limited to,
          eminent domain, insolvency, code enforcement or arrangements or proceedings
          involving a bankrupt or decedent, then Mortgagee at Mortgagee’s option may
          make such appearances, disburse such sums and take such action as Mortgagee
          deems necessary to protect Mortgagee’s interest, including, but not limited
          to, disbursement of attorneys’ fees, payment, contest or compromise of any
          lien or security interest which is prior to the lien or security interest of
          this Mortgage, and entry upon the Mortgaged Property to make repairs. At its
          option, and without limitation, Mortgagee may pay any Impositions, or provide
          for the maintenance and preservation of the Mortgaged Property. Any amounts
          disbursed by Mortgagee pursuant to this Paragraph 9, with interest thereon,
          shall become a portion of the Secured Obligations. Unless Mortgagor and
          Mortgagee agree to other terms of payment, such amounts shall be payable upon
          demand from Mortgagee to Mortgagor requesting payment thereof and shall bear
          interest from the date of disbursement at the default interest rate stated in
          the Note unless collection from Mortgagor of interest at such rate would be
          contrary to applicable law, in which event such amounts shall bear interest at
          the highest rate which may be collected from Mortgagor under applicable law.
          Mortgagor shall have the right to prepay such amounts in whole or in part at any
          time without penalty or premium. Nothing contained in this Paragraph 9 shall
          require Mortgagee to incur any expense or do any act. 

         10.       
          Inspection. Mortgagee may, at Mortgagor’s expense,
          make or cause to be made reasonable entries upon and inspections of the
          Mortgaged Property during normal business hours, or at any other time when
          necessary to protect or preserve the Mortgaged Property. 

         11.       
          Books and Records. 

         (a)       
          Mortgagor shall keep and maintain at all times at Mortgagor’s address
          stated in this Mortgage, or such other place as Mortgagee may approve in
          writing, complete, proper and accurate records and books of account in which
          full, true and correct entries shall be made in accordance with generally
          accepted accounting principles reflecting the results of the operation of the
          Mortgaged Property, and copies of all written contracts, leases and other
          instruments which affect the Mortgaged Property. Such records, books of account,
          contracts, leases and other instruments shall be subject to examination,
          inspection and copying by Mortgagee at any reasonable time by Mortgagee and at
          Mortgagor’s expense. 

         (b)       
          Upon request of Mortgagee in writing, Mortgagor shall promptly provide Mortgagee
          with all documents reasonably requested by Mortgagee prepared in the form and
          the manner called for in such request and as may reasonably relate to the
          Mortgaged Property or the use, maintenance, operation or condition thereof, or
          the financial condition of Mortgagor or any party obligated on the Note or under
          any guaranty, including, without limitation, all leases or leasehold interests
          granted to or by Mortgagor, rent rolls and tenant lists, rent and damage deposit
          ledgers, operating statements, profit and loss statements and balance sheets,
          personal financial statements of Mortgagor or income tax returns (including
          quarterly returns), any or all of which documents shall be audited or certified
          as true and accurate by a certified public accountant, if requested by
          Mortgagee, and shall cover such period or periods as may be specified by
          Mortgagee. 

         12.       
          Condemnation. If all or substantially all of the Mortgaged
          Property shall be damaged or taken through condemnation (which term, when used
          in this Mortgage, shall include any damage or taking by any governmental
          authority, quasi-governmental authority, any party having the power of
          condemnation, or any transfer by private sale in lieu thereof), either
          temporarily or permanently, then the entire Secured Obligations shall, at the
          option of Mortgagee, become immediately due and payable. Mortgagor authorizes
          Mortgagee, at Mortgagee’s option, as attorney in fact for Mortgagor, to
          commence, appear in and prosecute, in Mortgagee’s or Mortgagor’s name,
          any action or proceeding relating to any condemnation or other taking of the
          Mortgaged Property and to settle or compromise any claim in connection with such
          condemnation or other taking. The proceeds of any award or claim for damages,
          direct or consequential, in connection with any condemnation, or other taking of
          the Mortgaged Property, or part thereof, or for conveyances in lieu of
          condemnation, are hereby assigned and shall be paid to Mortgagee. Mortgagor
          authorizes Mortgagee to apply such awards, proceeds or damages, after the
          deduction of Mortgagee’s expenses incurred in the collection of such
          amounts, and at Mortgagee’s option, to restoration or repair of the
          Mortgaged Property or to payment of the Secured Obligations, whether or not then
          due, with the balance, if any, to Mortgagor. Mortgagor agrees to execute such
          further assignment of any awards, proceeds, damages or claims arising in
          connection with such condemnation or injury that Mortgagee may require. For the
          purposes of this Paragraph, “substantially all of the Mortgaged
          Property” shall mean a taking of or damage to less than the entire
          Mortgaged Property through condemnation, which in the good faith judgment of
          Mortgagee, renders the Mortgaged Property remaining after such taking or damage
          unsuitable for restoration for the use intended to be made of the Mortgaged
          Property or substantially the same value, condition, character or general
          utility as the then use which existed on the Mortgaged Property before such
          condemnation. Any taking or damage of less than substantially all of the
          Mortgaged Property is a “partial taking”. 

        If
Mortgagor is not then otherwise in default of the Secured Obligations, then Mortgagee
agrees to release the proceeds of a partial taking, under its usual construction loan
disbursement procedures, with Mortgagor providing any necessary equity injection required
in the judgment of Mortgagee to assure proper completion of such repair or restoration. 

        Mortgagor
shall promptly provide Mortgagee copies of all notices received by Mortgagor with respect
to any condemnation. 

         13.       
          Mortgagor and Lien Not Released. From time to time, without
          affecting the obligation of Mortgagor or Mortgagor’s successors or assigns
          to pay the Secured Obligations and to observe the covenants of Mortgagor
          contained in this Mortgage and the other Transaction Documents, and without
          affecting the guaranty of any person, corporation, partnership or other entity
          for payment or performance of the Secured Obligations, and without affecting the
          lien or priority of lien of this Mortgage on the Mortgaged Property, Mortgagee
          may, at Mortgagee’s option, without giving notice to or obtaining the
          consent of Mortgagor, Mortgagor’s successors or assigns or of any
          guarantor, and without liability on Mortgagee’s part, grant extensions or
          postponements of the time for payment of the Secured Obligations or any part
          thereof, release anyone liable on any of the Secured Obligations, accept a
          renewal note or notes therefor, release from this Mortgage any part of the
          Mortgaged Property, take or release other or additional security, reconvey any
          part of the Mortgaged Property, consent to any map or plat or subdivision of the
          Mortgaged Property, consent to the granting of any easement, join in any
          extension or subordination agreement and agree in writing with Mortgagor to
          modify the rate of interest or terms and time of payment or period of
          amortization of the Note or change the amount of the monthly installments
          payable thereunder. Mortgagor shall pay Mortgagee a reasonable service charge,
          together with such title insurance premiums and attorneys’ fees as may be
          incurred, at Mortgagee’s option, for any such action if taken at
          Mortgagor’s request. 

         14.       
          Forbearance Not Waiver. Any forbearance by Mortgagee in
          exercising any right or remedy hereunder, or otherwise afforded by applicable
          law, shall not be a waiver of or preclude the exercise of any right or remedy
          hereunder. The procurement of insurance or the payment of taxes or other liens
          or charges by Mortgagee shall not be a waiver of Mortgagee’s right to
          accelerate the maturity of the Secured Obligations. Mortgagee’s receipt of
          any awards, proceeds or damages under Paragraphs 4 and 12 hereof shall not
          operate to cure or waive Mortgagor’s default in payment of the Secured
          Obligations. 

         15.       
          Estoppel Certificate. Mortgagor shall, within ten (10) days
          of a written request from Mortgagee, furnish Mortgagee with a written statement,
          duly acknowledged, setting forth the amount of the Secured Obligations and any
          right of set-off, counterclaim or other defense which may exist or be claimed by
          Mortgagor against the Secured Obligations and the obligations of Mortgagor under
          this Mortgage. 

         16.       
          Security Agreement. Insofar as any item of property
          included in the Mortgaged Property which is or might be deemed to be
          “personal property” is concerned, this Mortgage is hereby made and
          declared to be a security agreement and fixture financing statement, granting a
          security interest in and to each and every item of such property included in the
          Mortgaged Property (hereinafter collectively referred to as the
          “Collateral”), in compliance with the provisions of the Uniform
          Commercial Code. The remedies for any violation of the covenants, terms and
          conditions of the security agreement herein contained shall be (i) as prescribed
          herein, or (ii) as prescribed by general law, or (iii) as prescribed by the
          specific statutory consequences now or hereafter enacted and specified in the
          Uniform Commercial Code, all at Mortgagee’s sole election. Mortgagor and
          Mortgagee agree that the filing of such financing statement(s) in the records
          normally having to do with personal property shall never be construed as in any
          wise derogating from or impairing this declaration and hereby stated intention
          of Mortgagor and Mortgagee that everything used in connection with the
          production of income from the Mortgaged Property and/or adapted for use therein
          and/or which is described or reflected in this Mortgage, is, and at all times
          and for all purposes and in all proceedings both legal or equitable shall be,
          regarded as part of the Real Estate irrespective of whether (i) any such item is
          physically attached to the Real Estate or the Improvements, (ii) serial numbers
          are used for the better identification of certain items capable of being thus
          identified in a recital contained herein, or (iii) any such item is referred to
          or reflected in any such financing statement(s) so filed at any time. Similarly,
          the mention in any such financing statement(s) of the rights in and to the
          proceeds of any hazard insurance policy, or any award in eminent domain
          proceedings for a taking or for loss of value, or Mortgagor’s interest as
          lessor in any present or future lease or rights to income growing out of the use
          and/or occupancy of the Mortgaged Property, whether pursuant to lease or
          otherwise, shall never be construed as in any wise altering any of the rights of
          Mortgagee as determined by this instrument or impugning the priority of
          Mortgagee’s lien granted hereby or by any other recorded document, but such
          mention in such financing statement(s) is declared to be for the protection of
          Mortgagee in the event any court shall at any time hold, with respect to any
          such matter, that notice of Mortgagee’s priority of interest, to be
          effective against a particular class of persons, must be filed in the records of
          the Uniform Commercial Code kept with the Secretary of State of the
          Debtor’s location. Mortgagor warrants that (i) Mortgagor’s (that is,
          “Debtor’s”) name, identity or organizational structure and
          residence or place of creation are as set forth in the first paragraph of this
          Agreement; and (iii) the location of all collateral constituting fixtures is
          upon the Real Estate. Mortgagor covenants and agrees that Mortgagor will not
          change its name, identity or organizational structure. The information contained
          in this Paragraph 16 is provided in order that this Mortgage shall comply with
          the requirements of the Uniform Commercial Code, for instruments to be filed as
          financing statements. The names of the “Debtor” and the “Secured
          Party”, the identity or organizational structure and residence or place of
          creation of “Debtor”, and the mailing address of the “Secured
          Party” from which information concerning the security interest may be
          obtained, and the mailing address of “Debtor”, are as set forth in the
          first paragraph of this Mortgage, and a statement indicating the types, or
          describing the items, of collateral is set forth in this Mortgage. 

         17.       
          Leases and Rents. 

         (a)       
          As part of the consideration for the Secured Obligations, Mortgagor hereby
          absolutely and unconditionally assigns and transfers to Mortgagee all of
          Mortgagor’s right, title and interest in and to the Leases and the Rents,
          including those now due, past due or to become due by virtue of any Lease for
          the occupancy or use of all or any part of the Real Estate. Mortgagor hereby
          authorizes Mortgagee or Mortgagee’s agents to collect the Rents and hereby
          directs such tenants, lessees and licensees of the Real Estate to pay the Rents
          to Mortgagee or Mortgagee’s agents; provided, however, that prior to
          written notice given by Mortgagee to Mortgagor of any Event of Default by
          Mortgagor, Mortgagor shall collect and receive the Rents as trustee for the
          benefit of Mortgagee, to apply the Rents so collected to the Secured
          Obligations, to the extent then due, with the balance, so long as no Event of
          Default has occurred, to the account of Mortgagor. Mortgagor agrees that each
          and every tenant, lessee and licensee of the Real Estate shall pay, and hereby
          irrevocably authorizes and directs each and every tenant, lessee and licensee of
          the Real Estate to pay, the Rents to Mortgagee or Mortgagee’s agents on
          Mortgagee’s written demand therefor without any obligation on the part of
          said tenant, lessee or licensee to inquire as to the existence of an Event of
          Default and notwithstanding any notice or claim of Mortgagor to the contrary,
          and Mortgagor agrees that Mortgagor shall have no right or claim against said
          tenant, lessee or licensee for or by reason of any Rents paid to Mortgagee
          following receipt of such written demand. 

         (b)       
          Mortgagor hereby covenants that Mortgagor has not executed any prior assignment
          of the Leases or the Rents, that Mortgagor has not performed, and will not
          perform, any acts or has not executed, and will not execute, any instruments
          which would prevent Mortgagee from exercising the rights as holder of the Leases
          and Rents under this Mortgage, and that at the time of execution of this
          Mortgage, there has been no anticipation or prepayment of any of the Rents for
          more than one (1) month prior to the due dates of such Rents. Mortgagor further
          covenants that Mortgagor will not hereafter collect or accept payment of any
          Rents more than one (1) month prior to the due dates of such Rents. 

         (c)       
          Mortgagor agrees that neither the foregoing assignment of Leases and Rents nor
          the exercise of any of Mortgagee’s rights and remedies under Paragraph 21
          hereof shall be deemed to make Mortgagee a mortgagee-in-possession or otherwise
          responsible or liable in any manner with respect to the Leases, the Real Estate
          or the use, occupancy, enjoyment or operation of all or any portion thereof,
          unless and until Mortgagee, in person or by agent, assumes actual possession
          thereof. Nor shall the appointment of any receiver for the Real Estate by any
          court at the request of Mortgagee or by agreement with Mortgagor, or the
          entering into possession of any part of the Real Estate by such receiver, be
          deemed to make Mortgagee a mortgagee-in-possession or otherwise responsible or
          liable in any manner with respect to the Leases, the Real Estate or the use,
          occupancy, enjoyment or operation of all or any portion thereof. 

         (d)       
          If Mortgagee or a court-appointed receiver enters upon, takes possession of and
          maintains control of the Real Estate pursuant to this Mortgage, all Rents
          thereafter collected shall be applied first to the costs of taking control of
          and managing the Real Estate and collecting the Rents, including, but not
          limited to, reasonable attorneys’ fees actually incurred, receiver’s
          fees, premiums on receiver’s bonds, costs of repairs to the Real Estate,
          premiums on insurance policies, Impositions and other charges on the Real
          Estate, and the costs of discharging any obligation or liability of Mortgagor as
          landlord, lessor or licensor of the Real Estate and then to the Secured
          Obligations. Mortgagee or the receiver shall have access to the books and
          records used in the operation and maintenance of the Real Estate and shall be
          liable to account only for those Rents actually received. Mortgagee shall not be
          liable to Mortgagor, anyone claiming under or through Mortgagor or anyone having
          an interest in the Real Estate by reason of anything done or left undone by
          Mortgagee. If the Rents are not sufficient to meet the costs of taking control
          of and managing the Real Estate and collecting the Rents, any monies expended by
          Mortgagee for such purposes shall become a portion of the Secured Obligations.
          Unless Mortgagee and Mortgagor agree in writing to other terms of payment, such
          amounts shall be payable upon notice from Mortgagee to Mortgagor requesting
          payment thereof and shall bear interest from the date of disbursement at the
          default rate stated in the Note unless payment of interest at such rate would be
          contrary to applicable law, in which event such amounts shall bear interest at
          the highest rate which may be collected from Mortgagor under applicable law. The
          entering upon and taking possession of and maintaining of control of the Real
          Estate by Mortgagee or the receiver and the application of Rents as provided
          herein shall not cure or waive any Event of Default or invalidate any other
          right or remedy of Mortgagee hereunder. 

         (e)       
          Mortgagor will not enter into any Lease of all or any portion of the Real Estate
          unless such Lease shall be upon a form of lease previously approved by
          Mortgagee; provided however that after any Event of Default shall have occurred
          hereunder and until such time as such Event of Default has either been cured
          with a written consent of Mortgagee or the Event of Default has been waived in
          writing by Mortgagee, Mortgagor will not enter into any Lease of all or any
          portion of the Real Estate or amend, supplement or otherwise modify, or
          terminate or cancel, or accept the surrender of, or consent to the assignment or
          subletting of, or grant any concessions to or waive the performance of any
          obligations of any tenant, lessee or licensee under, any now existing or future
          Lease of the Real Estate, without the prior written consent of Mortgagee.
          Mortgagor, at Mortgagee’s request, shall furnish Mortgagee with executed
          copies of all Leases hereafter made of all or any part of the Real Estate, and
          all Leases now or hereafter entered into will be in form and substance subject
          to the approval of Mortgagee. Upon Mortgagee’s request, Mortgagor shall
          make a separate and distinct assignment to Mortgagee, as additional security, of
          all Leases hereafter made of all or any part of the Real Estate. 

         (f)       
          Upon or at any time after the occurrence of an Event of Default, Mortgagee shall
          have the right to proceed in its own name or in the name of Mortgagor in respect
          of any claim, suit, action or proceeding relating to the rejection of any Lease,
          including, without limitation, the right to file and prosecute, to the exclusion
          of Mortgagor, any proofs of claim, complaints, motions, applications, notices
          and other documents, in any case in respect of the lessee under such Lease under
          the Bankruptcy Code. 

         (g)       
          If there shall be filed by or against Mortgagor a petition under the Bankruptcy
          Code, and Mortgagor, as lessor under any Lease, shall determine to reject such
          Lease pursuant to Section 365(a) of the Bankruptcy Code, then Mortgagor shall
          give Mortgagee not less than ten (10) days’ prior notice of the date on
          which Mortgagor shall apply to the bankruptcy court for authority to reject the
          Lease. Mortgagee shall have the right, but not the obligation, to serve upon
          Mortgagor within such ten-day period a notice stating that (i) Mortgagee demands
          that Mortgagor assume and assign the Lease to Mortgagee pursuant to Section 365
          of the Bankruptcy Code and (ii) Mortgagee covenants to cure or provide adequate
          assurance of future performance under the Lease. If Mortgagee serves upon
          Mortgagor the notice described in the preceding sentence, Mortgagor shall not
          seek to reject the Lease and shall comply with the demand provided for in clause
          (i) of the receding sentence within thirty (30) days after the notice shall have
          been given, subject to the performance by Mortgagee of the covenant provided for
          in clause (ii) of the preceding sentence. 

         (h)       
          Nothing in this Mortgage shall be construed to impose upon Mortgagee any
          obligation or responsibility of Mortgagor, to any Lessee under any of the Leases
          or to any other third party, for the control, care, management or repair of the
          Real Estate, the performance of any of the landlord’s obligations under the
          Leases, or for any dangerous or defective condition on the Real Estate. 

         (i)       
          Mortgagor shall defend, indemnify and hold Mortgagee harmless from and against
          all obligations, liabilities, losses, costs, expenses, civil fines, penalties or
          damages (including attorneys fees) which Mortgagee may incur by reason of this
          Mortgage or in connection with any of the Leases or with regard to the Real
          Estate prior to such time as Mortgagee takes physical possession of and manages
          and operates the Real Estate after an Event of Default. Mortgagor shall defend
          Mortgagee against any such claim or litigation involving Mortgagee for the same.
          Should Mortgagee incur such obligation, liability, loss, cost, expense, civil
          fine, penalty or damage, Mortgagor shall reimburse Mortgagee upon demand. Any
          amount owed Mortgagee under this provision shall bear interest at the highest
          applicable interest rate payable under the Note. 

         (j)       
          It is understood and agreed that neither the assignment of the Leases as to
          Mortgagee nor the exercise by Mortgagee of any of its rights or remedies under
          this Mortgage shall be deemed to make Mortgagee a
          “Mortgagee-in-Possession” or otherwise responsible or liable in any
          manner with respect to the Real Estate or the use, occupancy, enjoyment or
          operation of all or any portion thereof, unless and until Mortgagee, in person
          or agent, assumes actual possession thereof, nor shall appointment of a receiver
          by any court at the request of Mortgagee or by agreement with Mortgagor or the
          entering into possession of the Real Estate or any part thereof by such receiver
          be deemed to make Mortgagee a “Mortgagee-in-Possession” or otherwise
          responsible or liable in any manner with respect to the Real Estate or the use,
          occupancy, enjoyment or operation of all or any portion thereof. 

         18.       
          Remedies Cumulative. All remedies provided in this Mortgage
          are distinct and cumulative to any other right or remedy under this Mortgage or
          under the other Transaction Documents or afforded by law or equity, and may be
          exercised concurrently, independently or successively. 

         19.       
          Taxation of Mortgages. In the event of the enactment of any
          law deducting from the value of the Mortgaged Property any mortgage lien
          thereon, or imposing upon Mortgagee the payment of all or part of the taxes,
          charges or assessments previously paid by Mortgagor pursuant to this Mortgage,
          or changing the law relating to the taxation of mortgages or debts secured by
          mortgages or Mortgagee’s interest in the Mortgaged Property so as to impose
          new incidents of tax on Mortgagee, then Mortgagor shall pay such taxes or
          assessments or shall reimburse Mortgagee therefor; provided that, however, if in
          the opinion of counsel to Mortgagee, such payment cannot lawfully be made by
          Mortgagor, and such change in the law cannot be remedied and lawful payment made
          by Mortgagor to the reasonable satisfaction of Mortgagee within thirty (30) days
          following notice to Mortgagor by Mortgagee of the occurrence of such change,
          then Mortgagee may, at Mortgagee’s option, declare the Secured Obligations
          to be immediately due and payable and invoke any remedies permitted by Paragraph
          21 of this Mortgage. 

         20.       
          Events of Default and Acceleration. The term “Event of
          Default”, wherever used in this Mortgage, shall mean any one or more of the
          following conditions or events: 

         (a)       
          Failure by Mortgagor to pay as and when due and payable any interest on or
          principal of or other sum payable under or failure to perform any obligation of
          Mortgagor under the Note not cured in accordance with the terms thereof or any
          other Event of Default as defined under the Note; or 

         (b)       
          Failure by Mortgagor to pay as and when due and payable any sums to be paid by
          Mortgagor under this Mortgage (including, but not limited to, any payment of
          Funds) and continuance of such failure for a period of ten (10) days after
          written notice thereof from Mortgagee; or 

         (c)       
          Failure by Mortgagor to duly observe or perform any term, covenant, condition or
          agreement contained in Paragraphs 6 or 7 of this Mortgage. With respect to
          Mortgagor’s obligations to comply with all applicable Environmental Laws,
          including either or both the clean-up and removal of Hazardous Materials present
          on the Mortgaged Property, Mortgagor shall have at thirty (30) days to achieve
          such full compliance after written notice from Mortgagee requiring such
          compliance, and if Mortgagor shall commence and diligently pursue to full
          compliance in accordance with the terms of Paragraph 7, Mortgagor shall have
          such additional time as Mortgagee, in its sole judgment, shall allow Mortgagor
          for such compliance, provided however, Mortgagee may in its sole judgment,
          declare an Event of Default to exist by written notice thereof to Mortgagor at
          any time after the expiration of such thirty (30) day period if such full
          compliance with all applicable Environmental Laws shall not have been so
          achieved at the time of such notice, or 

         (d)       
          Failure by Mortgagor to duly observe or perform any term, covenant, condition or
          agreement contained in this Mortgage (other than the obligations to make
          payments referred to in subparagraph (b) above and continuance of such failure
          for a period of thirty (30) days after written notice thereof from Mortgagee; or 

         (e)       
          Failure by Mortgagor or any guarantor to duly observe or perform any other
          material term, covenant, condition or agreement contained in the Purchase
          Agreement or any of the other Transaction Documents not cured in accordance with
          the terms thereof; or 

         (f)       
          Without the prior written consent of Mortgagee, any merger, dissolution or
          termination of existence of Mortgagor as a corporation; or 

         (g)       
          Failure by Mortgagor or any guarantor or obligor to duly observe and perform any
          term, covenant, condition or agreement contained in any document evidencing any
          obligation of such person to Mortgagee, whether as maker or guarantor or surety,
          now existing or hereafter arising, which is not cured in accordance with the
          terms thereof, including, without limitation, the obligations under the
          promissory note and other documents executed on or about February ____, 2004; 

         (h)       
          any Event of Default as defined under any Transaction Document; 

         (i)       
          any breach of the Statutory Conditions of New Hampshire or Massachusetts; or 

         (j)       
          Any representation or warranty of Mortgagor or any guarantor contained in this
          Mortgage or the other Transaction Documents shall prove to have been false or
          incorrect in any material respect upon the date when made; or 

         (k)       
          The filing by Mortgagor or any guarantor or obligor of the Secured Obligations
          of a voluntary petition in bankruptcy under Title 11 of the United States Code,
          or the issuing of an order for relief against Mortgagor, Mortgagor or any
          guarantor or obligor in any involuntary petition in bankruptcy under Title 11 of
          the United States Code, or the filing by Mortgagor or any guarantor or obligor
          of any petition or answer seeking or acquiescing in any reorganization,
          arrangement, composition, readjustment, liquidation, dissolution or similar
          relief for itself under any present or future federal, state or other law or
          regulation relating to bankruptcy, insolvency or, other relief for debtors,
          Mortgagor’s or any guarantor’s or obligor seeking or consenting to or
          acquiescing in the appointment of any custodian, trustee, receiver, conservator
          or liquidator of Mortgagor or such guarantor or obligor, respectively, or of all
          or any substantial part of its respective Real Estate, or the making by
          Mortgagor or any guarantor or obligor of any assignment for the benefit of
          creditors, or Mortgagor’s or any guarantor’s or obligor’s failure
          generally to pay its debts, as such debts become due, or Mortgagor’s or any
          guarantor’s or obligor’s giving of notice to any governmental
          authority or body of insolvency or pending insolvency or suspension of
          operations; or 

         (l)       
          The entry by a court of competent jurisdiction of any order, judgment or decree
          approving a petition filed against Mortgagor or any guarantor or obligor of the
          Secured Obligations seeking any reorganization, arrangement, composition,
          readjustment, liquidation, dissolution or similar relief under any present or
          future federal, state or other law or regulation relating to bankruptcy,
          insolvency or other relief for debtors, or appointing any custodian, trustee,
          receiver, conservator or liquidator of all or any substantial part of
          Mortgagor’s or any guarantor’s or obligor’s Real Estate; or 

         (m)       
          Such a change in the condition or affairs (financial or otherwise) of the
          Mortgagor or of any obligor, endorser, guarantor or surety under or for any of
          the Secured Obligations, or decline in the value of the Mortgaged Property as,
          in the opinion of the Mortgagee, materially impairs the Mortgagee’s
          security or increases its risk or if the Mortgagee in good faith deems itself
          insecure; or 

         (n)       
          Default after the expiration of any applicable cure period in the prompt
          payment, performance or observance of any material term, provision, condition,
          covenant, warranty or representation set forth in any mortgage, liens, lease or
          encumbrance affecting the Mortgaged Property, whether or not such mortgage,
          lien, lease or encumbrance is senior or junior to this Mortgage, and whether or
          not such mortgage, lien, lease or encumbrance has been consented to by
          Mortgagee, provided, however, that nothing herein shall be deemed to be a
          consent by Mortgagee, including, without limitation, the mortgage in the amount
          of Five Hundred Thousand Dollars ($500,000.00) from Mortgagor to Smithfield
          Fiduciary LLC of near or even date herewith and subordinate hereto, implied or
          otherwise, to the granting of any mortgage, lien or encumbrance on the Premises;
          or 

        If
an Event of Default shall have occurred, Mortgagee may, at Mortgagee’s option, by
notice to Mortgagor declare the entire Secured Obligations to be immediately due and
payable, whereupon the same shall become immediately due and payable, and without
presentment, protest, demand or other notice of any kind, all of which are hereby
expressly waived by Mortgagor. No omission on the part of Mortgagee to exercise such
option when entitled to do so shall be construed as a waiver of such right. 

                              

                              
      21.
Rights and Remedies. 

         (a)       
          Power of sale and other Remedies. Upon the occurrence of any Event of
          Default, and whether or not Mortgagee shall have accelerated the maturity of the
          Secured Obligations pursuant to Paragraph 20 hereof, Mortgagee, at its option,
          may take the following actions or any one or more of them from time to time: 

         (i)       
          Declare any one or more of the Secured Obligations immediately due and payable; 

         (ii)       
          Cease advancing money or extending credit to or for the benefit of the Mortgagor
          under any agreement, whether or not secured hereby; 

         (iii)       
          Foreclose this Mortgage under any legal method of foreclosure in existence at
          the time or now existing, or under any other applicable law, including, without
          limitation, the Statutory Powers of Sale of the States in which the Real
          Estate is located, which are incorporated herein by reference, and if the
          Mortgaged Property consists of multiple parcels or units, to foreclose against
          the entire Mortgaged Property or such portions thereof in such order and at such
          times as Mortgagee may determine all in its discretion, and the deferral or
          delay in foreclosure against any portion of the Mortgaged Property shall not
          impair the right of Mortgagee to subsequently foreclose; 

         (iv)       
          either with or without entering upon or taking possession of the Mortgaged
          Property, demand, collect and receive any or all Rents; 

         (v)       
          take possession of all or any part of the Collateral, and for such purpose
          Mortgagee may, so far as Mortgagor can give authority, enter upon any premises
          on which the Collateral or any part thereof may be situated and remove the same; 

         (vi)       
          either with or without taking possession of the Collateral, sell, lease or
          otherwise dispose of the Collateral in its then condition or following such
          preparation as Mortgagee deems advisable; 

         (vii)       
          either with or without entering upon or taking possession of the Mortgaged
          Property, and without assuming any obligations of Mortgagor thereunder, exercise
          the rights of Mortgagor under, use or benefit from, any of the Plans, Leases or
          Intangible Real Estate; 

         (viii)       
          in person, by agent or by court-appointed receiver, enter upon, take possession
          of, and maintain full control of the Mortgaged Property in order to perform all
          acts necessary or appropriate to complete the Improvements and to maintain and
          operate the Mortgaged Property, including, but not limited to, the execution,
          cancellation or modification of Leases, the making of repairs to the Mortgaged
          Property and the execution or termination of contracts providing for the
          improvement, management or maintenance of the Mortgaged Property, all on such
          terms as Mortgagee, in its sole discretion, deems proper or appropriate; 

         (ix)       
          proceed by a suit or suits in law or in equity or by other appropriate
          proceeding against Mortgagor or any other party liable to enforce payment of the
          Secured Obligations or the performance of any term, covenant, condition or
          agreement of this Mortgage or any of the other Transaction Documents, or any
          other right, and to pursue any other remedy available to it, all as Mortgagee
          shall determine most effectual for such purposes; 

         (x)       
          institute and maintain such suits and proceedings as Mortgagee may deem
          expedient to prevent any impairment of the Mortgaged Property by any acts which
          may be unlawful or in violation of this Mortgage, to preserve or protects its
          interest in the Mortgaged Property and the Rents, and to restrain the
          enforcement of or compliance with any legislation or other governmental
          enactment, rule or order that would impair the security hereunder or be
          prejudicial to the interest of Mortgagee. Mortgagor recognizes that in the Event
          of Default, no remedy of law will provide adequate relief to Mortgagee, and
          therefore Mortgagor agrees that Mortgagee shall be entitled to temporary and
          permanent injunctive relief to cure any such Default without the necessity of
          proving actual damages; 

         (xi)       
          apply all or any portion of the Mortgaged Property, or the proceeds thereof,
          towards (but not necessarily in complete satisfaction of) the Secured
          Obligations in any order chosen by Mortgagee, without being deemed to have
          waived any Event of Default; 

         (xii)       
          foreclose any and all rights of Mortgagor in and to the Mortgaged Property,
          whether by sale, entry or in any other manner provided for hereunder or under
          the laws of the State where the Real Estate is located whether now existing or
          as hereafter arising and apply the proceeds thereof to the Secured Obligations
          in any order chosen by Mortgagee; 

         (xiii)       
          in the case of any receivership, insolvency, bankruptcy, reorganization,
          arrangement, adjustment, composition or other proceedings affecting Mortgagor or
          the creditors or Real Estate of Mortgagor, 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 the claims of Mortgagee allowed in
          such proceedings for the entire amount of the Secured Obligations at the date of
          the institution of such proceedings and for any additional portion of the
          Secured Obligations accruing after such date; 

         (xiv)       
          exercise any other right or remedy of a mortgagee or secured party under the
          laws of the States where the Mortgaged Property or Mortgagor is located; and 

         (xv)       
          set-off against any and all deposits, accounts, certificate of deposit balances,
          claims, or other sums at any time credited by or due from Mortgagee to Mortgagor
          and against all other Real Estate of Mortgagor in the possession of Mortgagee or
          under its control. 

         (xvi)       
          in the event that the Mortgagee seeks to enforce its rights and remedies
          hereunder, the Mortgagor shall fully cooperate with the Mortgagee in any
          foreclosure of the Mortgaged Property scheduled by the Mortgagee, including
          without limitation; (i) providing the Mortgagee with any information concerning
          the Mortgaged Property reasonably requested by the Mortgagee, such as rental
          income information, taxes, water assessment charges and any maintenance costs
          associated with the Mortgaged Property; (ii) arranging with the Mortgagee two
          (2) preview dates, each three hours in length, prior to the dates of any
          foreclosure sale; and (iii) granting the Mortgagee unlimited access to the
          Mortgaged Property on the date of the foreclosure sale for one hour before and
          one hour after the foreclosure sale. In addition, the Mortgagee shall, without
          waiving its right to enjoin a foreclosure under applicable law, under no
          circumstances and in no event in any way interfere with, any foreclosure sale of
          the Mortgaged Property scheduled by the Mortgagee. 

         (b)       
          Receiver. If an Event of Default shall have occurred, Mortgagee, upon
          application to a court of competent jurisdiction, shall be entitled as a matter
          of strict right, without notice and without regard to the occupancy or value of
          any security for the Secured Obligations or the solvency of any party bound for
          its payment, to the appointment of a receiver to take possession of and to
          operate the Mortgaged Property and to collect and apply the Rents. The receiver
          shall have all of the rights and powers permitted under the laws of the State
          where the Real Estate is located or otherwise existing. Mortgagor will pay to
          Mortgagee upon demand, all expenses, including receiver’s fees,
          attorneys’ fees, costs and agent’s compensation, incurred pursuant to
          such appointment and all such expenses shall be a portion of the Secured
          Obligations. 

         (c)       
          Sale or Other Disposition of Mortgaged Property. Any sale or other
          disposition of Collateral may be at public or private sale, to the extent such
          private sale is authorized under the provisions of the Uniform Commercial Code,
          upon such terms and in such manner as Mortgagee deems advisable. Mortgagee may
          conduct any such sale or other disposition of the Mortgaged Property upon the
          Real Estate, in which event Mortgagee shall not be liable for any rent or charge
          for such use of the Real Estate. Mortgagee may purchase the Mortgaged Property,
          or any portion of it, at any sale held under this Paragraph. With respect to any
          Collateral to be sold pursuant to the Uniform Commercial Code, Mortgagee shall
          give Mortgagor at least seven (7) days written notice of the date, time, and
          place of any proposed public sale, or such additional notice as may be required
          under the laws of the State where the Mortgaged Property is located, and of the
          date after which any private sale or other disposition may be made. Mortgagee
          may sell any of the Collateral as part of the Real Estate comprising the
          Mortgaged Property, or any portion or unit thereof, at the foreclosure sale or
          sales conducted pursuant hereto. If the provisions of the Uniform Commercial
          Code are applicable to any part of the Collateral which is to be sold in
          combination with or as part of the Real Estate comprising the Mortgaged
          Property, or any part thereof, at one or more foreclosure sales, any notice
          required under such provisions shall be fully satisfied by the notice given in
          execution of any method of foreclosure, including without limitation, the
          STATUTORY POWER OF SALE with respect to the Real Estate or any part thereof.
          Mortgagor waives any right to require the marshaling of any of its assets in
          connection with any disposition conducted pursuant hereto. In the event all or
          part of the Mortgaged Property is included at any foreclosure sale conducted
          pursuant hereto, a single total price for the Mortgaged Property, or such part
          thereof as is sold, may be accepted by Mortgagee with no obligation to
          distinguish between the application of such proceeds amongst the Real Estate
          comprising the Mortgaged Property. The obligations of Mortgagor to pay such
          amounts shall be included in the Secured Obligations of Mortgagor to Mortgagee
          and shall accrue interest at the default rate of interest set forth in the Note.
          Mortgagor agrees that all rights and remedies of Mortgagee as to the Personal
          Real Estate and as to the Mortgaged Property, and all rights and interests
          appurtenant thereto, shall be cumulative and may be exercised together or
          separately without waiver by Mortgagee of any other of its rights or remedies.
          Mortgagor further agrees that any sale or other disposition by Mortgagee of any
          of the Personal Property and any rights and interests therein or appurtenant
          thereto, or any part thereof, may be conducted either separately from or
          together with any foreclosure, sale or other disposition of the Mortgaged
          Property, or any rights or interests therein or appurtenant thereto, or any part
          thereof, all as the Mortgagee may in its sole discretion elect. 

         (d)       
          Collection of Rents. In connection with the exercise by Mortgagee of the
          rights and remedies provided for in subparagraph (a)(ii) of this Paragraph- 

         (i)       
          Mortgagee may notify any purchaser, tenant, lessee or licensee of the Mortgaged
          Property, either in the name of Mortgagee or Mortgagor, to make payment of Rents
          directly to Mortgagee or Mortgagee’s agents, may advise any person of
          Mortgagee’s interest in and to the Rents, and may collect directly from
          such purchaser, tenants, lessees and licensees all amounts due on account of the
          Rents; 

         (ii)       
          At Mortgagee’s request, Mortgagor will provide written notification to any
          or all purchaser, tenants, lessees and licensees of the Mortgaged Property
          concerning Mortgagee’s interest in the Rents and will request that such
          purchaser, tenants, lessees and licensees forward payment thereof directly to
          Mortgagee; 

         (iii)       
          Mortgagor shall hold any proceeds and collections of any of the Rents in trust
          for Mortgagee and shall not commingle such proceeds or collections with any
          other funds of Mortgagor; and 

         (iv)       
          Mortgagor shall deliver all such proceeds to Mortgagee immediately upon the
          receipt thereof by Mortgagor in the identical form received, but duly endorsed
          or assigned on behalf of Mortgagor to Mortgagee. 

         (e)       
          Use and Occupation of Mortgaged Property. In connection with the exercise
          of Mortgagee’s rights under Subparagraph (a)(vi) of this Paragraph,
          Mortgagee may enter upon, occupy, and use all or any part of the Mortgaged
          Property and may exclude Mortgagor from the Real Estate and the Improvements or
          portion thereof as may have been so entered upon, occupied, or used. Mortgagee
          shall not be required to remove any Personal Property from the Real Estate and
          the improvements upon Mortgagee’s taking possession thereof, and may render
          any Personal Property unusable to Mortgagor. In the event Mortgagee manages the
          Real Estate and the Improvements, Mortgagor shall pay to Mortgagee on demand a
          reasonable fee for the management thereof in addition to the Secured
          Obligations. Further, Mortgagee may make such alterations, renovations, repairs,
          and replacements to the Improvements, as Mortgagee, in its sole discretion,
          deems proper or appropriate. The obligation of Mortgagor to pay such amounts and
          all expenses incurred by Mortgagee in the exercise of its rights hereunder shall
          be included in the Secured Obligations and shall accrue interest at the default
          rate of interest stated in the Note. 

         (f)       
          Partial Sales. Mortgagor agrees that in case Mortgagee, in the exercise
          of the power of sale contained herein or in the exercise of any other rights
          hereunder given, elects to sell in parts or parcels, said sales may be held from
          time to time and that the power shall not be exhausted until all of the
          Mortgaged Property not previously sold shall have been sold, notwithstanding
          that the proceeds of such sales exceed, or may exceed, the Secured Obligations. 

         (g)       
          Assembly of Collateral. Upon the occurrence of any Event of Default,
          Mortgagee may require Mortgagor to assemble the Collateral and make it available
          to Mortgagee, at Mortgagor’s sole risk and expense, at a place or places to
          be designated by Mortgagee which are reasonably convenient to both Mortgagee and
          Mortgagor. 

         (h)       
          Actions by Mortgagee. Upon the occurrence of any Event of Default that
          continues beyond any applicable grace or cure period, Mortgagor hereby
          irrevocably constitutes and appoints Mortgagee or any receiver appointed in
          accordance with this Mortgage to be Mortgagor’s true and lawful attorney in
          fact to take any action with respect to the Mortgaged Property to preserve,
          protect, or realize upon Mortgagee’s interest therein, each at the sole
          risk, cost and expense of Mortgagor, but for the sole benefit of Mortgagee. The
          rights and powers granted by the within appointment include, but are not limited
          to, the right and power to (i) prosecute, defend, compromise, settle, or release
          any action relating to the Mortgaged Property; (ii) endorse the name of
          Mortgagor upon any and all checks or other items constituting Rents; (iii) sign
          and endorse the name of Mortgagor on, and to receive as secured party, any of
          the Collateral; (iv) file or record on behalf of Mortgagor any financing or
          other statement in order to perfect or protect Mortgagee’s security
          interest; (v) enter into leases or subleases, purchase and sale agreements,
          deeds and other instruments of conveyance relative to all or a portion of the
          Real Estate or the Improvements, (vi) enter into any contracts or agreements
          relative to, and to take all action deemed necessary in connection with, any
          Improvements on the Real Estate; (vii) manage, operate, maintain, or repair the
          Real Estate with, any Improvements on the Real Estate, and the Improvements and
          (viii) exercise the rights of Mortgagor under any Plans, Leases, or Intangible
          Personal Real Estate. Such receiver or Mortgagee shall not be obligated to
          perform any of such acts or to exercise any of such powers, but if it so elects
          so to perform or exercise, it shall not be accountable for more than it actually
          receives as a result of such exercise of power, and shall not be responsible to
          Mortgagor except for willful misconduct or gross negligence. All powers
          conferred by this Mortgage, being coupled with an interest, shall be irrevocable
          until terminated by a written instrument executed by a duly authorized officer
          of Mortgagee or until payment of this Mortgage as shall entitle the Mortgagor to
          a discharge of record of the lien hereof, whichever shall first occur. 

         22.       
          Notices. Except as otherwise specified in this Mortgage,
          any and all notices, demands, elections or requests provided for or permitted to
          be given pursuant to this Mortgage (hereinafter in this Paragraph 22 referred to
          as “Notice”) shall be in writing and shall be deemed to have been
          properly given or served by personal delivery or by sending same by overnight
          courier or by depositing same in the United States Mail, postpaid and registered
          or certified, return receipt requested, and addressed to the addresses set forth
          on page one hereof. Each Notice shall be effective upon being personally
          delivered or upon being sent by overnight courier or upon being deposited in the
          United States Mail as aforesaid. However, the time period in which a response to
          such Notice must be given or any action taken with respect thereto, if any,
          shall commence to run from the date of receipt if personally delivered or sent
          by overnight courier, or, if so deposited in the United States Mail, the earlier
          of three (3) business days following such deposit and the date of receipt as
          disclosed on the return receipt. Rejection or other refusal to accept or the
          inability to deliver because of changed address for which no Notice was given
          shall be deemed to be receipt of the Notice sent. By giving at least thirty (30)
          days prior Notice thereof, Mortgagor or Mortgagee shall have the right from time
          to time and at any time during the term of this Mortgage to change their
          respective addresses and each shall have the right to specify as its address any
          other address within the United States of America. 

         23.       
          Successors and Assigns Bound; Captions. The covenants and
          agreements herein contained shall bind, and the rights hereunder shall inure to,
          the respective successors and assigns of Mortgagee and Mortgagor, subject to the
          provisions of Paragraph 6 hereof. The captions and headings of the paragraphs of
          this Mortgage are for convenience only and are not to be used to interpret or
          define the provisions hereof. 

         24.       
          Governing Law; Severability. The Mortgaged Property is
          located both within New Hampshire and Massachusetts. This Mortgage is to be
          governed by the laws of New Hampshire except that, the laws of Massachusetts
          shall govern Mortgagee’s remedies for the portion of the Mortgaged Property
          located in Massachusetts. In the event that any provision or clause of this
          Mortgage conflicts with applicable law, such conflict shall not affect other
          provisions of this Mortgage which can be given effect without the conflicting
          provision, and to this end, the provisions of this Mortgage are declared to be
          severable. In the event that any applicable law limiting the amount of interest
          or other charges permitted to be collected from Mortgagor is interpreted so that
          any charge for which provision is made in this Mortgage, whether considered
          separately or together with other charges permitted to be collected from
          Mortgagor, is interpreted so that any such charge, whether considered separately
          or together with other charges that are considered a part of the transaction
          represented by this Mortgage, violates such law, and Mortgagor is entitled to
          the benefit of such law, such charge is hereby reduced to the extent necessary
          to eliminate such violation. The amounts, if any, previously paid to Mortgagee
          in excess of the amounts payable to Mortgagee pursuant to such charges as
          reduced shall be applied by Mortgagee to reduce the principal of the
          indebtedness evidenced by the Note. 

         25.       
          Discharge. Upon payment and performance of the Secured
          Obligations, Mortgagee shall discharge this Mortgage. Mortgagor shall pay
          Mortgagee’s reasonable costs incurred in discharging this Mortgage. 

         26.       
          Waivers. Mortgagor agrees to the full extent permitted by
          law, that in case of an Event of Default hereunder, neither Mortgagor nor anyone
          claiming through or under Mortgagor shall or will set up, claim or seek to take
          advantage of any appraisal, valuation, stay, extension, homestead, exemption 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 Mortgagor, for
          Mortgagor and all who may at any time claim through or under Mortgagor, hereby
          waives to the fullest extent that Mortgagor may lawfully so do, the benefit of
          all such laws, and any and all right to have the assets comprised in the
          security intended to be created hereby marshaled upon any foreclosure of the
          lien hereof. 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 be a
          waiver of any such default, or acquiescence therein; and every right, power and
          remedy given by this Mortgage to Mortgagee may be exercised from time to time
          and as often as may be deemed expedient by Mortgagee. No consent or waiver,
          expressed or implied, by Mortgagee to or of any Event of Default shall be deemed
          or construed to be a consent or waiver to or of any other Event of Default.
          Failure on the part of Mortgagee to complain of any act or failure to act which
          constitutes an Event of Default, irrespective of how long such failure
          continues, shall not constitute a waiver by Mortgagee of Mortgagee’s rights
          hereunder or impair any rights, powers or remedies consequent on any Event of
          Default. No act or omission of Mortgagee as described in Paragraph 13 above
          shall preclude Mortgagee from exercising any right, power or privilege herein
          granted or intended to be granted in the event of any Event of Default then made
          or of any subsequent Event of Default; nor, except as otherwise expressly
          provided in an instrument or instruments executed by Mortgagee, shall the lien
          of this Mortgage be altered thereby. No acceptance of partial payment or
          performance shall waive, affect or diminish any right of Mortgagee or
          Mortgagor’s duty of compliance and performance therewith. Any Obligation
          which this Mortgage secures is a separate instrument and may be negotiated,
          extended or renewed by Mortgagee without releasing Mortgagor or any guarantor or
          co-maker. In the event of the sale or transfer by operation of law or otherwise
          of all or any part of the Mortgaged Property, Mortgagee, without notice, is
          hereby authorized and empowered to deal with any such vendee or transferee with
          reference to the Mortgaged Property or the Secured Obligations or with reference
          to any of the terms, covenants, conditions or agreements 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 liabilities, obligations or undertakings
          (including, without limitation, the restrictions upon transfer contained in
          Paragraph 6). 

         27.       
          Further Assurances. At any time and from time to time, upon
          request by Mortgagee, Mortgagor will make, execute and deliver, or cause to be
          made, executed and delivered, to Mortgagee and, where appropriate, cause to be
          recorded and/or filed and from time to time thereafter to be re-recorded and/or
          refiled at such time and in such offices and places as shall be deemed desirable
          by Mortgagee, any and all such other and further assignments, mortgages,
          security agreements, financing statements, continuation statements, instruments
          of further assurance, certificates and other documents as may, in the opinion of
          Mortgagee, be necessary or desirable in order to effectuate, complete, or
          perfect, or to continue and preserve (a) the obligations of Mortgagor under this
          Mortgage, and (b) the lien and security interest created by this Mortgage upon
          the Mortgaged Property. Upon any failure by Mortgagor so to do, Mortgagee may
          make, execute, record, file, re-record and/or refile any and all such
          assignments, mortgages, security agreements, financing statements, continuation
          statements, instruments, certificates, and documents for and in the name of
          Mortgagor, and Mortgagor hereby irrevocably appoints Mortgagee the agent and
          attorney in fact of Mortgagor so to do. 

         28.       
          Subrogation. Mortgagee shall be subrogated to all right,
          title, lien or equity of all persons to whom Mortgagee may have paid any monies
          in settlement of liens, charges or assessments, or in acquisition of title or
          for its benefit hereunder, or for the benefit or account of Mortgagor upon
          execution of the Note or subsequently paid under any provisions hereof. 

         29.       
          Time of the Essence. Time is of the essence with respect to
          each and every covenant, agreement and obligation of Mortgagor under this
          Mortgage, the Note, Purchase Agreement, and any and all other Transaction
          Documents. 

         30.       
          Indemnification; Subrogation; Waiver of Offset. 

         (a)       
          Mortgagor shall indemnify, defend and hold Mortgagee harmless against: (i) any
          and all claims for brokerage, leasing, finders or similar fees which may be made
          relating to the Mortgaged Property or the Secured Obligations, and (ii) any and
          all liability, obligations, losses, damages, penalties, claims, actions, suits,
          costs and expenses (including Mortgagee’s reasonable attorneys’ fees,
          together with reasonable appellate counsel fees, if any) of whatever kind or
          nature which may be asserted against, imposed on or incurred by Mortgagee in
          connection with the Secured Obligations, this Mortgage, the Mortgaged Property,
          or any part thereof, or the exercise by Mortgagee of any rights or remedies
          granted to it under this Mortgage; provided, however, that nothing herein shall
          be construed to obligate Mortgagor to indemnity, defend and hold harmless
          Mortgagee from and against any and all liabilities, obligations, losses,
          damages, penalties, claims, actions, suits, costs and expenses enacted against,
          imposed on or incurred by Mortgagee by reason of Mortgagee’s willful
          misconduct or gross negligence. 

         (b)       
          If Mortgagee is made a party defendant to any litigation or any claim is
          threatened or brought against Mortgagee concerning the Secured Obligations, this
          Mortgage, the Mortgaged Property, or any part thereof, or any interest therein,
          or the maintenance, operation or occupancy or use thereof, then Mortgagor shall
          indemnify, defend and hold Mortgagee harmless from and against all liability by
          reason of said litigation or claims, including reasonable attorneys’ fees
          (together with reasonable appellate counsel fees, if any) and expenses incurred
          by Mortgagee in any such litigation or claim, whether or not any such litigation
          or claim is prosecuted to judgment. If Mortgagee commences an action against
          Mortgagor to enforce any of the terms hereof or to prosecute any breach by
          Mortgagor of any of the terms hereof or to recover any sum secured hereby,
          Mortgagor shall pay to Mortgagee its reasonable attorneys’ fees (together
          with reasonable appellate counsel, fees, if any) and expenses. The right to such
          attorneys’ fees (together with reasonable appellate counsel fees, if any)
          and expenses shall be deemed to have accrued on the commencement of such action,
          and shall be enforceable whether or not such action is prosecuted to judgment.
          If Mortgagor breaches any term of this Mortgage, Mortgagee may engage the
          services of an attorney or attorneys to protect its rights hereunder, and in the
          event of such engagement following any breach by Mortgagor, Mortgagor shall pay
          Mortgagee reasonable attorneys’ fees (together with reasonable appellate
          counsel fees, if any) and expenses incurred by Mortgagee, whether or not an
          action is actually commenced against Mortgagor by reason of such breach. All
          references to “attorneys” in this Subparagraph and elsewhere in this
          Mortgage shall include without limitation any attorney or law firm engaged by
          Mortgagee, and all references to “fees and expenses” in this
          Subparagraph and elsewhere in this Mortgage shall include without limitation any
          fees of such attorney or law firm and any allocation charges. 

         (c)       
          A waiver of subrogation shall be obtained by Mortgagor from its insurance
          carrier and, consequently, Mortgagor waives any and all right to claim or
          recover against Mortgagee, its officers, employees, agents and representatives,
          for loss of or damage to Mortgagor, the Mortgaged Property, Mortgagor’s
          Real Estate or the Real Estate of others under Mortgagor’s control from any
          cause insured against or required to be insured against by the provisions of
          this Mortgage. 

         (d)       
          All sums payable by Mortgagor hereunder shall be paid without notice (except as
          may otherwise be provided herein), demand, counterclaim, setoff, deduction or
          defense and without abatement, suspension, deferment, diminution or reduction,
          and the obligations and liabilities of Mortgagor hereunder shall in no way be
          released, discharged or otherwise affected by reason of: (i) any damage to or
          destruction of or any condemnation or similar taking of the Mortgaged Property
          or any part thereof; (ii) any restriction or prevention of or interference with
          any use of the Mortgaged Property or any part thereof; (iii) any title defect or
          encumbrance or any eviction from the Real Estate or the Improvements on the Real
          Estate or any part thereof by title paramount or otherwise; (iv) any bankruptcy,
          insolvency, reorganization, composition, adjustment, dissolution, liquidation,
          or other like proceeding relating to Mortgagee, or any action taken with respect
          to this Mortgage by any trustee or receiver of Mortgagee, or by any court, in
          such proceeding; (v) any claim which Mortgagor has, or might have, against
          Mortgagee; (vi) any default or failure on the part of Mortgagee to perform or
          comply with any of the terms hereof or of any other agreement with Mortgagor; or
          (vii) any other occurrence whatsoever, whether similar or dissimilar to the
          foregoing, whether or not Mortgagor shall have notice or knowledge of any of the
          foregoing. Mortgagor waives all rights now or hereafter conferred by statute or
          otherwise to any abatement, suspension, deferment, diminution, or reduction of
          any sum secured hereby and payable by Mortgagor. 

         31.       
          Declaration of Subordination. At the option of Mortgagee,
          which may be exercised at any time or from time to time, by written notice to
          Mortgagor and to any applicable tenant, this Mortgage shall become subject and
          subordinate, in whole or in part (but not with respect to priority of
          entitlement to insurance proceeds or condemnation awards), to any and all leases
          of all or any part of the Real Estate upon the execution by Mortgagee and
          recording and filing thereof at any time hereafter in the appropriate land
          records of a unilateral declaration to that effect. 

         32.       
          Statutory Conditions and Statutory Power of Sale. This
          Mortgage is made upon the Statutory Conditions of the laws of the State of New
          Hampshire and the Statutory Conditions of the laws of the Commonwealth of
          Massachusetts and with the Statutory Powers of Sale of such States, and upon any
          breach of the Statutory Conditions or upon any other Event of Default, Mortgagee
          shall have the Statutory Power of Sale as provided under the laws of the State
          where the Real Estate is located. 

         33.       
          Future Advances by Mortgagee. Mortgagee may from time to
          time, at its sole option, make further advances to Mortgagor, to be secured
          hereby. Mortgagor shall execute and deliver to Mortgagee a Note or other
          agreement evidencing each and every such further advance which Mortgagee may
          make, which note or agreement shall contain such terms and conditions as
          Mortgagee may require. Mortgagor shall pay when due all such further advances
          with interest and other charges thereon, as applicable, and the same, and each
          note and agreement evidencing the same, shall be fully secured hereby. All
          provisions of this Mortgage shall apply to each such further advance as well as
          to any other indebtedness secured hereby and all such future advances shall
          enjoy the same priority as this Mortgage. Nothing herein contained, however,
          shall limit the amount secured by this Mortgage if such amount is increased by
          advances made by Mortgagee to protect or preserve the Real Estate as provided
          elsewhere herein. Any future advances made hereunder may be made to Mortgagor or
          to any successor to Mortgagor in ownership of the Real Estate. 

         34.       
          Maximum Amount Secured. The maximum amount secured by this
          Mortgage shall include, but not be limited to, the total of all of the following
          items which may be outstanding at any time: the principal amount of the Note;
          accrued interest, charges, and fees under the Note; legal fees and costs;
          collection and foreclosure costs (including appraisals, environmental testing
          (and remediation, if necessary), brokerage commissions, receiver’s fees,
          eviction costs, management and marketing fees and expenses, registry recording
          charges, deed transfer stamps and taxes, commercial advertising costs, and
          auctioneer fees); all taxes, utility payments, insurance premiums, maintenance
          costs, tenant improvements, rental incentives, or other amounts advanced by
          Mortgagee; and all other damages, costs, and expenses to which the holder of a
          mortgage is entitled under applicable law, and to the extent permitted by law,
          future advances described in Paragraph 33 above. If the laws of the State in
          which the Real Estate is located require a stated maximum amount for priority
          purposes, the maximum amount secured by this Mortgage is Ten Million Dollars
          ($10,000,000.00). 

         35.       
          Recording. This Mortgage may be executed in multiple
          original counterparts. One original is to be filed with the land records of
          Essex County, Massachusetts as a mortgage, assignment of leases and financing
          statement pursuant to Section 9-402 of the Uniform Commercial Code of the
          Massachusetts General Laws as amended, and a second in the Hillsborough County
          Registry of Deeds, New Hampshire, as a mortgage, assignment of leases and
          financing statement pursuant to Section 9-402 of the Uniform Commercial Code of
          New Hampshire. 

         36.       
          Single Economic Unit. Mortgagor acknowledges that the
          Mortgaged Property constitutes a single economic entity that is located in both
          Massachusetts and New Hampshire, and Mortgagor agrees that without limiting any
          of the rights or remedies hereunder of the Mortgagee, the Mortgagee, in its sole
          discretion, may sell the Mortgaged Property or some part thereof that
          transverses state border lines as a single parcel or entity at a single sale or
          at different sales, in Massachusetts or New Hampshire, contingent upon the same
          purchaser purchasing the single parcel or entity. In addition, without limiting
          any of the foregoing, Mortgagee may sell the Real Estate and the Improvements
          and any other real property included in the Mortgaged Property either together
          with or separate from the personal property that is subject to a security
          interest under the Uniform Commercial Code in effect in New Hampshire and
          Massachusetts. All covenants and conditions contained in this Mortgage shall be
          construed as affording to the Mortgagee rights additional to, and separate from,
          the rights conferred by the incorporation herein of the STATUTORY CONDITIONS AND
          STATUTORY POWERS OF SALE under the laws of New Hampshire and Massachusetts. 

         37.       
          Waiver of Rights. MORTGAGOR ACKNOWLEDGES THAT THE
          TRANSACTION OF WHICH THIS MORTGAGE IS A PART IS A COMMERCIAL TRANSACTION, AND
          HEREBY VOLUNTARILY AND KNOWINGLY WAIVES ITS RIGHTS TO NOTICE AND HEARING ALLOWED
          BY ANY STATE OR FEDERAL LAW, WITH RESPECT TO ANY PREJUDGMENT REMEDY OR OTHER
          RIGHT THAT MORTGAGEE MAY DESIRE TO EXERCISE OR EMPLOY. FURTHER, MORTGAGOR HEREBY
          WAIVES, TO THE EXTENT PERMITTED BY LAW, THE BENEFITS OF ALL PRESENT AND FUTURE
          VALUATION, APPRAISEMENT, HOMESTEAD, EXEMPTION, STAY, REDEMPTION AND MORATORIUM
          LAWS. The Mortgaged Property is not subject to any homestead interest. 

         38.       
          This Mortgage is subject to a prior mortgage in favor of Mortgagee dated
          February 23, 2004 and recorded in the Rockingham County (New Hampshire) Registry
          of Deeds and Essex County North (Massachusetts) Registry of Deeds at Book 4239,
          Page 301 and Book 8583, Page 17, respectively (“First Mortgage”).
          Mortgagee consents to this Mortgage and the subordinated mortgage in favor of
          Smithfield Fiduciary LLC. 

        IN
WITNESS WHEREOF, Mortgagor has executed this Mortgage under seal, as of _________________,
2004. 

                                                 STOCKERYALE, INC.

______________________________                   By:______________________________________
Witness                                               Name:
                                                      Title

                              
STATE OF
___________________COUNTY 
OF _________________ 

        On
this the _____ day of _____________, 2004, before me, the undersigned officer, personally
appeared __________________, the _________ of StockerYale, Inc., a Massachusetts
corporation, duly authorized, and who acknowledged that he as such __________, being
authorized to do so executed the foregoing instrument for the purposes contained therein
on behalf of the corporation. 

     _________________  

                                                  Notary Public [print name]
                                                  My Commission expires:
                                                  Affix Notarial Seal

                              
   Exhibit
A — Real Estate DescriptionExhibit 
B — Permitted Encumbrances 

                              

                              
EXHIBIT A 

                              

                              
LEGAL DESCRIPTION 

        A
certain tract or parcel of land, with the buildings thereon, situated in Salem, Rockingham
County, State of New Hampshire and Methuen, Essex County, Commonwealth of Massachusetts,
as shown on a plan of land entitled “Property Survey Plan of Land of Stocker &
Yale, Inc.”; 32 Hampshire Road, Town of Salem, Rockingham County, New Hampshire, Town
of Methuen, Essex County, Massachusetts, prepared by Sanford Surveying and Engineering,
dated 12/29/00 and recorded at the Rockingham County (NH) Registry of Deeds as Plan #
D-30358 and the Essex County (MA) Registry of Deeds as Plan # 14431, and more particularly
described as follows: 

        Beginning
at the southwesterly corner of the granted premises by the intersection of Garabedian
Drive, a public way, and Hampshire Road, a public way, at an iron pipe set in the ground
on the Northerly side of said Hampshire Road as shown on said plan; 

	 	        Thence
running N 64o 12’ 05” W, 58.24 feet, along the northerly side of Hampshire
Road to an iron pipe set in the ground on the northerly side of Hampshire Road; 

                              

                              
	 	        Thence
running N 53o 38’ 15” W, 265.76 feet, along the northerly side of Hampshire
Road to an iron pipe set in the ground on the northerly side of Hampshire Road; 

                              

                              
	 	        Thence
running on an arch with a radius of 830 feet, 219.70 feet along the northerly side of
Hampshire Road to an iron pipe set in the ground at the intersection of the northerly side
of Hampshire Road and the Massachusetts/New Hampshire boundary line as shown on said plan; 

                              

                              
	 	        Thence
running N 38o 28’ 17” W, 27.33 feet by the northerly side of said Hampshire
Road to the point where the northerly side of Hampshire Road intersects with the center
line of the ditch as shown on said plan; 

                              

                              
	 	        Thence
turning and running S 31o 35’ 10” W, 82.10 feet along the center of the
ditch to a point shown on said plan; 

                              

                              
	 	        Thence
running S 28o 30’ 05” E, 762.90 feet along the center of the ditch to a
point shown on the said plan at the northeasterly corner of the premises; 

                              

 	 	        Thence
turning and running S 61o 20’ 07” E, 503.90 feet, along land now or
formerly of Construction Industries, Inc. to an pipe set in the ground by a fire hydrant
on the easterly side of Garabedian Drive as shown on said plan; 

                              

                              
	 	        Thence
running on an arch with the radius of 750 feet, 261.32 feet, along the easterly side of
the said Garabedian Drive, to an iron pipe set in the ground on the easterly side of
Garabedian Drive; 

                              

                              
	 	        Thence
proceeding along the easterly side of Garabedian Drive, N 47o 31’ 15” E,
100.26 feet to a nail set in the ground on the easterly side of Garabedian Drive; 

                              

                              
	 	        Thence
proceeding on an arch with a radius of 700 feet, 269.46 feet along the easterly side of
Garabedian Drive to an iron pipe set in the ground on the easterly side of Garabedian
Drive; 

                              

                              
	 	        Thence
running along the easterly side of Garabedian Drive, N 25o 47’ 35” E, 80.09
feet to an iron pipe set in the ground on the easterly side of Garabedian Drive; 

                              

                              
	 	        Thence
running on an arch with the radius of 50 feet 78.54 feet to the point of beginning. 

                              

                              

                              

                              
EXHIBIT B 

                              

                              
[Permitted Encumbrances] 

                              Those matters shown on the Old Republic Title Insurance Policy insuring this Mortgage

                              
        A
subordinate (third) mortgage in favor of Smithfield Fiduciary, LLC in the amount of Five
Hundred Thousand Dollars ($500,000.00)Form of Secured Convertible Note

	  	
THIS
NOTE AND THE COMMON SHARES ISSUABLE UPON CONVERSION OF THIS NOTE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED. THIS NOTE AND THE COMMON SHARES
ISSUABLE UPON CONVERSION OF THIS NOTE MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED
OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT AS TO THIS
NOTE UNDER SAID ACT OR AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO
STOCKERYALE, INC., THAT SUCH REGISTRATION IS NOT REQUIRED. 

SECURED CONVERTIBLE
NOTE 

        FOR
VALUE RECEIVED, STOCKERYALE, INC., a Massachusetts corporation (hereinafter called the
“Borrower”), hereby promises to pay to LAURUS MASTER FUND, LTD., c/o
M&C Corporate Services Limited, P.O. Box 309 GT, Ugland House, South Church Street,
Georgetown, Grand Cayman, Cayman Islands, Fax: 345-949-8080 (the
“Holder”) or its registered assigns, on order, without demand, the sum of
Five Hundred Thousand Dollars ($500,000) (the “Principal Amount”),
together with any accrued and unpaid interest, on December ___, 2007 (the
“Maturity Date”). 

        The
following terms shall apply to this Note: 

ARTICLE I 

INTEREST 

1.1 Interest Rate. Interest
payable on this Note shall accrue at the annual rate of the Prime Rate plus 2.00% (but in
no event less than 6.0% per annum) (subject to adjustment as hereafter provided based upon
fluctuation in the volume weighted average price of Borrower’s common stock (the
“Common Stock”) and be payable in arrears commencing one month from the
date hereof and on the first business day of each consecutive calendar month thereafter,
and on the Maturity Date, accelerated or otherwise, due and payable as described below
(the “Interest Rate”). Interest shall be computed on the basis of actual
days elapsed in a year of 360 days. “Prime Rate” means the “base
rate” or “prime rate” published in the Wall Street Journal from time to
time. The Interest Rate shall be increased or decreased as the case may be for each
increase or decrease in the Prime Rate in an amount equal to such increase or decrease in
the Prime Rate; each change to be effective as of the day of the change in such rate. If a
registration statement covering the resale of the Common Stock underlying this Note and
the Warrant issued pursuant to the Securities Purchase Agreement (as hereafter defined)
becomes effective and remains effective, and the volume weighted average price of the
Common Stock for 10 consecutive trading days during any calendar month (the
“Volume Weighted Average Price”) is greater than the Fixed Conversion
Price, then the applicable annual interest rate for such month shall be decreased by
seventy-five (75) basis points (to a minimum of 0.0%) for each 25% increment by which the
Volume Weighted Average Price is greater than the Fixed Conversion Price. 

ARTICLE II 

PAYMENTS OF PRINCIPAL
AND INTEREST 

2.1 Monthly Payments. Subject
to the terms of this Article II, the Borrower shall repay one thirty-second
(1/32nd) of the Principal Amount (to the extent such amount has not been
converted pursuant to Article III below) (the “Monthly Principal
Amount”), together with interest accrued to date on such portion of the Principal
Amount plus any and all other amounts owing under this Note but not previously paid (the
“Monthly Interest Amount and, together with the Monthly Principal Amount and
all other amounts owing under this Note, collectively, the “Monthly
Amount”), in accordance with Section 2.2 below, on the first business day of each
consecutive calendar month (each, a “Repayment Date”), beginning on the
first such day which occurs one-hundred and twenty days following the date hereof. 

2.2 Cash or Common Stock.
Subject to the terms of this Article II, the Borrower has the sole option to determine
whether to satisfy payment of the Monthly Amount in full on each Repayment Date either in
cash or in shares of the Borrower’s Common Stock, or a combination of both. The
Borrower shall deliver to the Holder a written irrevocable notice in the form of Exhibit B
attached hereto electing to pay such Monthly Amount in full on such Repayment Date in
either cash or Common Stock, or a combination of both (“Repayment Election
Notice”). Such Repayment Election Notice shall be delivered at least ten (10)
days prior to the applicable Repayment Date (the date of such notice being hereinafter
referred to as the “Notice Date”). The Holder shall have the right to
defer for any period of time the payment of the Monthly Amount in shares of Common Stock
in its sole discretion. If such Repayment Election Notice is not delivered within the
prescribed period set forth in the preceding sentence, then the repayment shall be made in
either cash or shares of Common Stock on the same terms hereunder at the Holder’s
sole option. If the Borrower elects or is required to repay all or a portion of the
Monthly Amount in cash on a Repayment Date, then on such Repayment Date the Borrower shall
pay to the Holder 101% of the Monthly Principal Amount and 100% of the Monthly Interest
Amount in satisfaction of such obligation. If the Borrower elects or is required to repay
any portion of the Monthly Amount in shares of Common Stock, the number of such shares to
be issued for such Repayment Date shall be the number determined by dividing (x) the
portion of the Monthly Amount to be paid in shares of Common Stock, by (y) the applicable
Conversion Price as of such Repayment Date. Any shares of Common Stock comprising the
Monthly Amount are referred to herein as “Repayment Shares.” 

2.3 No
Effective Registration. Notwithstanding anything to the contrary herein, the Borrower
shall be prohibited from exercising its right to repay the Monthly Amount in Repayment
Shares (and must deliver cash in respect thereof) and, if applicable, the Holder shall be
prohibited from exercising its right to require repayment of the Monthly Amount in
Repayment Shares if at any time from the Notice Date until the day on which the Holder
receives such Repayment Shares (i) there fails to exist an effective registration
statement covering the resale of such Repayment Shares or (ii) an Event of Default (as
defined in Article V) exists or occurs which is not waived in writing by the Holder in
whole or in part at the Holder’s option. 

2.4 Share Price/Issuance Limitations.
Notwithstanding anything to the contrary herein (a) the Borrower shall have no right to
satisfy payment of the Monthly Amount by delivery of Repayment Shares unless the closing
price of the Common Stock as reported by Bloomberg, L.P. on the Principal Market for any
of the eleven (11) trading days preceding a Repayment Date is greater than 110% of the
Fixed Conversion Price (as defined in Section 3.1 below) and (b) the Borrower shall not be
entitled to issue any Repayment Shares if such issuance would exceed the difference
between the number of shares of Common Stock beneficially owned by such Holder or issuable
upon exercise of warrants held by such Holder and 4.99% of the outstanding shares of
Common Stock of the Borrower. For the purposes of the immediately preceding sentence,
beneficial ownership shall be determined in accordance with Section 13(d) of the Exchange
Act and Rule 13d-3 thereunder. The Holder may void the Repayment Share limitation
described in this Section 2.4 upon 75 days prior notice to the Borrower or without any
notice requirement upon an Event of Default. 

2.5 Deemed Conversions. Any repayment
of the Monthly Amount in Repayment Shares pursuant to the terms hereof shall constitute
and be deemed a conversion of such portion of the applicable Principal Amount and accrued
interest for all purposes under this Note (except as otherwise provided herein). 

2.6
Optional Prepayments. In the event Borrower wishes to prepay all or a portion of
the Principal Amount or any and all other amounts owing under this Note (collectively, the
“Obligations”), Borrower shall deliver to the Holder written notice
indicating the amount intended to be so prepaid (the “Prepayment Amount”)
and the date on which such prepayment shall be made (the “Prepayment
Date”). Such notice shall be delivered to the Holder at least five (5) Business
Days’ prior to the Prepayment Date. On the Prepayment Date, Borrower shall pay to the
Holder the Applicable Percentage of the Prepayment Amount in satisfaction of the
Prepayment Amount. All such prepayments shall be (a) applied to the Obligations in such
order as the Holder shall elect and (b) credited (conditional upon final collection) to
the Obligations three (3) Business Days after receipt of such amounts by Holder in good
funds in dollars of the United States of America. Any amount received by Holder after
12:00 noon (New York time) on any business day shall be deemed received on the next
business day. For purposes of this Section 2.6, the term “Applicable
Percentage” means (1) 115% for the period commencing on the date hereof (the
“Closing Date”) and ending on the first anniversary of the Closing Date,
(2) 110% for the period commencing on the first day following the first anniversary of the
Closing Date and ending on the second anniversary of the Closing Date and (3) 105% for the
period commencing on the first day following the second anniversary of the Closing Date
and ending on the day immediately preceding the Maturity Date. Notwithstanding the
foregoing, in the event the proceeds arising from the sale of the real property located at
32 Hampshire Road, Salem, New Hampshire (the “Real Property”) are
utilized to pay a Prepayment Amount, the Applicable Percentage with respect to such
payment shall equal zero percent (0%). ARTICLE III 

CONVERSION RIGHTS 

3.1 Optional Conversion.
Subject to the terms of this Article III, the Holder shall have the right, but not the
obligation, at any time until the Maturity Date or thereafter during an Event of Default
(as defined in Article V), to convert all or any portion of the outstanding Principal
Amount and/or accrued interest and fees due and payable into fully paid and nonassessable
shares of Common Stock at the conversion price set forth in Section 3.2 (the
“Conversion Price”). The shares of Common Stock to be issued upon such
conversion are herein referred to as the “Conversion Shares.” 

3.2
Conversion Price. Subject to adjustment as provided in Section 3.7 hereof, the
Conversion Price per share shall be $1.10 (the “Fixed Conversion Price”).
If an Event of Default has occurred and shall be continuing hereunder, then the Conversion
Price shall be equal to the lower of (i) the Fixed Conversion Price; or (ii) eighty
percent (80%) of the average of the three lowest closing prices for the Common Stock on
the principal trading exchange or market for the Common Stock, (the “Principal
Market”), or on any securities exchange or other securities market on which the
Common Stock is then being listed or traded, for the thirty (30) trading days prior to but
not including the Conversion Date. 

3.3 Conversion Limitation. Notwithstanding
anything contained herein to the contrary, the Holder shall not be entitled to convert
pursuant to the terms of this Note an amount that would be convertible into that number of
Conversion Shares which would exceed the difference between the number of shares of Common
Stock beneficially owned by such holder or issuable upon exercise of warrants held by such
holder and 4.99% of the outstanding shares of Common Stock of the Borrower. For the
purposes of the immediately preceding sentence, beneficial ownership shall be determined
in accordance with Section 13(d) of the Exchange Act and Rule 13d-3 thereunder. The Holder
may void the Conversion Share limitation described in this Section 3.3 upon 75 days prior
notice to the Borrower or without any notice requirement upon an Event of Default.
Notwithstanding the foregoing, to the extent required by the Nasdaq Marketplace Rules, at
no time may the Holder convert all or part of this Note or the interest payable thereon
into a number of Conversion Shares that, together with any shares of Common Stock acquired
upon exercise of warrants held by the Holder, would in the aggregate exceed 19.99% of the
outstanding shares of the Company’s Common Stock, determined as of the date hereof,
without first obtaining stockholder approval of such issuance of Common Stock (the
“Conversion Limitations”). In obtaining stockholder approval, stockholders shall
not be entitled to vote any shares of Common Stock acquired upon conversion of this Note
and/or exercise of any warrant held by the Holder on such matter. In the event such
approval is so required, then the Company shall (i) within fifteen (15) days following
notice by the Holder to convert an amount in excess of the Conversion Limitations file
proxy materials relating to such stockholder approval with the Securities and Exchange
Commission and (ii) use its best efforts to obtain as promptly as possible such
stockholder approval. 

3.4 Mechanics of Conversion. In the event that the Holder
elects to convert this Note into Common Stock, the Holder shall give notice of such
election by delivering an executed and completed notice of conversion (“Notice of
Conversion”) to the Borrower and such Notice of Conversion shall provide a
breakdown in reasonable detail of the amount of Principal Amount, accrued interest and
fees that are being converted. On each Conversion Date (as hereinafter defined) and in
accordance with its Notice of Conversion, the Holder shall make the appropriate reduction
to the Principal Amount, accrued interest and fees as entered in its records and shall
provide written notice thereof to the Borrower within two (2) business days after the
Conversion Date. Each date on which a Notice of Conversion is delivered or telecopied to
the Borrower in accordance with the provisions hereof shall be deemed a Conversion Date
(the “Conversion Date”). A form of Notice of Conversion that may be
employed by the Holder is annexed hereto as Exhibit A. The Borrower will use commercially
reasonable efforts to cause the transfer agent to transmit the certificates representing
the Conversion Shares to the Holder as promptly as practicable, but in any event within
three (3) business days. The Company shall use commercially reasonable efforts, subject to
the receipt of reasonably satisfactory customary supporting documentation, in the context
of an exercise of a convertible note in conjunction with an immediate resale of the
underlying shares, to issue such shares by crediting the account of the Holder’s
designated broker with the Depository Trust Corporation (“DTC”) through
its Deposit Withdrawal Agent Commission (“DWAC”) system after receipt by
the Borrower of the Notice of Conversion (the “Delivery Date”), if so
requested by the Holder. 

        In
the case of the exercise of the conversion rights set forth herein the conversion
privilege shall be deemed to have been exercised and the Conversion Shares issuable upon
such conversion shall be deemed to have been issued upon the date of receipt by the
Borrower of the Notice of Conversion. The Holder shall be treated for all purposes as the
record holder of such Common Stock, unless the Holder provides the Borrower written
instructions to the contrary. 

3.5 Partial Conversions. In
the event of any partial conversions of outstanding Principal Amount pursuant to this
Article III, such conversions shall be deemed to constitute conversions of outstanding
Principal Amount applying to Monthly Amounts for the Repayment Dates in chronological
order. 

3.6 Late Payments. The
Borrower understands that a delay in the delivery of the shares of Common Stock required
pursuant to this Article beyond the Delivery Date could result in economic loss to the
Holder. As compensation to the Holder for such loss, the Borrower agrees to pay late
payments to the Holder for late issuance of the such shares required pursuant to this
Article III upon conversion of the Note, in the amount equal to the greater of (i) $250
per business day after the Delivery Date and (ii) the Holder’s actual damages from
such delayed delivery. The Borrower shall pay any payments incurred under this Section in
immediately available funds upon demand and, in the case of actual damages, accompanied by
reasonable documentation of the amount of such damages. 

3.7 Adjustment Provisions. The
Fixed Conversion Price and number and kind of shares or other securities to be issued upon
conversion determined pursuant to Sections 3.1 and 3.2, shall be subject to adjustment
from time to time upon the happening of certain events while this conversion right remains
outstanding, as follows: A. Reclassification, etc. If the Borrower at any time
shall, by reclassification or otherwise, change the Common Stock into the same or a
different number of securities of any class or classes, this Note, as to the unpaid
Principal Amount and accrued interest thereon, shall thereafter be deemed to evidence the
right to purchase an adjusted number of such securities and kind of securities as would
have been issuable as the result of such change with respect to the Common Stock
immediately prior to such reclassification or other change. B. Stock Splits,
Combinations and Dividends. If the shares of Common Stock are subdivided or combined
into a greater or smaller number of shares of Common Stock, or if a dividend is paid on
the Common Stock in shares of Common Stock, the Fixed Conversion Price shall be
proportionately reduced in case of subdivision of shares or stock dividend or
proportionately increased in the case of combination of shares, in each such case by the
ratio which the total number of shares of Common Stock outstanding immediately after such
event bears to the total number of shares of Common Stock outstanding immediately prior to
such event. 

     C.    
          Share Issuances. Subject to the provisions of this Section 3.7, if
          the Borrower shall at any time prior to the conversion or repayment in full of
          the Principal Amount issue any shares of Common Stock to a person other than the
          Holder (otherwise than (i) pursuant to Subsections A or B above; (ii) pursuant
          to options, warrants, or other obligations to issue shares outstanding on the
          date hereof as set forth in the Schedules to the Purchase Agreement dated as of
          the date hereof between the Borrower and the Holder, which agreement is
          incorporated herein by this reference (the “Purchase
          Agreement”); or (iii) pursuant to options that may be issued under any
          employee incentive stock option and/or any qualified stock option plan adopted
          by the Borrower) for a consideration per share (the “Offer
          Price”) less than the Fixed Conversion Price in effect at the time
          of such issuance, then the Fixed Conversion Price shall be immediately reset to
          such lower Offer Price. For purposes hereof, the issuance of any security of the
          Borrower convertible into or exercisable or exchangeable for Common Stock shall
          result in an adjustment to the Conversion Price only upon the conversion,
          exercise or exchange of such securities. D. Computation of Consideration.
          For purposes of any computation respecting consideration received pursuant to
          Subsection C above, the following shall apply: 

     (a)    
          in the case of the issuance of shares of Common Stock for cash, the
          consideration shall be the amount of such cash, provided that in no case shall
          any deduction be made for any commissions, discounts or other expenses incurred
          by the Company for any underwriting of the issue or otherwise in connection
          therewith; (b) in the case of the issuance of shares of Common Stock for a
          consideration in whole or in part other than cash, the consideration other than
          cash shall be deemed to be the fair market value thereof as determined in good
          faith by the Board of Directors of the Company (irrespective of the accounting
          treatment thereof); and (c) in the case of the issuance of securities
          convertible into or exchangeable for shares of Common Stock, the aggregate
          consideration received therefor shall be deemed to be the consideration received
          by the Company for the issuance of such securities plus the additional minimum
          consideration, if any, to be received by the Company upon the conversion or
          exchange thereof (the consideration in each case to be determined in the same
          manner as provided in clauses (a) and (b) of this Subsection (D)). 

3.8 Reservation of Shares.
During the period the conversion right exists, the Borrower will reserve from its
authorized and unissued Common Stock a sufficient number of shares to provide for the
issuance of Common Stock upon the full conversion of this Note. The Borrower represents
that upon issuance, such shares will be duly and validly issued, fully paid and
non-assessable. The Borrower agrees that its issuance of this Note shall constitute full
authority to its officers, agents, and transfer agents who are charged with the duty of
executing and issuing stock certificates to execute and issue the necessary certificates
for shares of Common Stock upon the conversion of this Note. 

3.9 Registration Rights. The
Holder has been granted registration rights with respect to the shares of Common Stock
issuable upon conversion of this Note as more fully set forth in a Registration Rights
Agreement dated the date hereof. 

ARTICLE IV 

EVENT OF DEFAULT 

        The
occurrence of any of the following events is an Event of Default (“Event of
Default”): 

4.1 Failure to Pay Principal, Interest or other Fees. The
Borrower fails to pay any installment of principal, interest or other fees hereon or in
respect of any other promissory note issued pursuant to the Purchase Agreement when due. 

4.2 Breach of Covenant. The
Borrower breaches any covenant or other term or condition of this Note or the Purchase
Agreement (as hereafter defined) in any material respect and such breach, if subject to
cure, continues for a period of five (5) business days after the occurrence thereof. 

4.3 Breach of Representations and
Warranties. Any material representation or warranty of the Borrower made herein, in
the Purchase Agreement, or in any agreement, statement or certificate given in writing
pursuant hereto or in connection therewith shall be false or misleading. 

4.4 Receiver or Trustee. The
Borrower shall make an assignment for the benefit of creditors, or apply for or consent to
the appointment of a receiver or trustee for it or for a substantial part of its property
or business; or such a receiver or trustee shall otherwise be appointed. 

4.5 Judgments. Any money
judgment, writ or similar final process shall be entered or filed against the Borrower or
any of its property or other assets for more than $250,000, and shall remain unvacated,
unbonded or unstayed for a period of ninety (90) days. 

4.6 Bankruptcy. Bankruptcy,
insolvency, reorganization or liquidation proceedings or other proceedings or relief under
any bankruptcy law or any law for the relief of debtors shall be instituted by or against
the Borrower. 

4.7 Stop Trade; Delisting. (a)
An SEC stop trade order or Principal Market trading suspension of the Common Stock for 5
consecutive days or 5 days during a period of 10 consecutive days, excluding in all cases
a suspension of all trading on a Principal Market or (b) Borrower’s Common Stock
shall fail to be listed on a Principal Market or any securities exchange or other
securities market (including the Nasdaq OTC Bulletin Board, but excluding the pink and
yellow sheets). 

4.8 Guaranty. (a) Any
guarantor of all or any part of the obligations owing under this Note (each, a
“Guarantor”) attempts to terminate, challenges the validity of, or its
liability under any guaranty agreement made in favor of the Holder (each, a
“Guaranty”), (b) any Guarantor shall default under any Guaranty or any guaranty
security agreement made in favor of the Holder (each a “Guaranty Security
Agreement”), which such default is not cured within any applicable cure or grace
period or (c) any Guaranty or Guaranty Security Agreement shall cease to be valid, binding
and enforceable in accordance with its terms. 

4.9 Further Encumbrance. The
Borrower shall not encumber, mortgage, pledge, assign or grant any lien or security
interest in the Real Property to any person or entity. 

4.10 Existing Note. An Event
of Default shall have occurred under and as defined in the Secured Convertible Note in the
original principal amount of $4,000,000 dated February 20, 2004 made by the Borrower in
favor of the Holder and/or the Secured Convertible Note in the original principal amount
of $2,500,000 dated as of September 24, 2003 made by the Borrower in favor of the Holder
(as each may be amended, modified or supplemented from time to time) which shall not have
been cured during any applicable cure or grace period. 

4.11 Mortgage. An Event of
Default shall have occurred under and as defined in the Mortgage dated as of the date
hereof made by the Borrower in favor of the Holder (as amended, modified or supplemented
from time to time) with respect to the Real Property which shall not have been cured
during any applicable cure or grace period. 

4.12 Cross Default. An Event of Default
shall have occurred under and as defined in any one or more of the Smithfield Documents
which shall not have been cured during any applicable cure or grace period. For purposes
hereof, the term “Smithfield Documents” means the Secured Convertible Note in
the original principal amount of $5,000,000 dated June ___, 2004 made by Borrower in favor
of Smithfield Fiduciary LLC (“Smithfield”), the Security Agreement dated June
___, 2004 made by Borrower in favor of Smithfield, the Secured Convertible Note in the
original principal amount of $500,000 dated December ___, 2004 made by Borrower in favor
of Smithfield and the Mortgage dated December ___, 2004 made by Borrower in favor of
Smithfield, as each may be amended, modified and supplemented from time to time. 

ARTICLE V 

DEFAULT PAYMENT 

5.1      Default Rate.  Upon the occurrence and during the continuance of an Event of Default,  a default  interest
rate of 5% per annum above the Interest Rate shall apply to the amounts owed hereunder.
5.2      Cumulative Remedies.  The remedies under this Note shall be cumulative.

ARTICLE VI 

MISCELLANEOUS 

6.1 Failure or Indulgence Not
Waiver. No failure or delay on the part of the Holder hereof in the exercise of any
power, right or privilege hereunder shall operate as a waiver thereof, nor shall any
single or partial exercise of any such power, right or privilege preclude other or further
exercise thereof or of any other right, power or privilege. All rights and remedies
existing hereunder are cumulative to, and not exclusive of, any rights or remedies
otherwise available. 

6.2 Notices. Any notice herein
required or permitted to be given shall be in writing and shall be deemed effectively
given: (a) upon personal delivery to the party notified, (b) when sent by confirmed telex
or facsimile if sent during normal business hours of the recipient, if not, then on the
next business day, (c) five days after having been sent by registered or certified mail,
return receipt requested, postage prepaid, or (d) one day after deposit with a nationally
recognized overnight courier, specifying next day delivery, with written verification of
receipt. All communications shall be sent to the Borrower at the address as set forth on
the signature page to the Purchase Agreement executed in connection herewith and to the
Holder at the address set forth on the signature page to the Purchase Agreement for such
Holder, with a copy to Scott J. Giordano, Esq., Loeb & Loeb LLP, 345 Park Avenue, New
York, New York 10154, facsimile number (212) 407-4990, or at such other address as the
Borrower or the Holder may designate by ten days advance written notice to the other
parties hereto. A Notice of Conversion shall be deemed given when made to the Borrower
pursuant to the Purchase Agreement. 

6.3 Amendment Provision. The
term “Note” and all reference thereto, as used throughout this
instrument, shall mean this instrument as originally executed, or if later amended or
supplemented, then as so amended or supplemented. 

6.4 Assignability. This Note
shall be binding upon the Borrower and its successors and assigns, and shall inure to the
benefit of the Holder and its successors and assigns, and may be assigned by the Holder.
6.5 Cost of Collection. If default is made in the payment of this Note, the
Borrower shall pay the Holder hereof reasonable costs of collection, including reasonable
attorneys’ fees. 

6.6 Governing Law. This Note
shall be governed by and construed in accordance with the laws of the State of New York,
without regard to principles of conflicts of laws. Any action brought by either party
against the other concerning the transactions contemplated by this Agreement shall be
brought only in the state courts of New York or in the federal courts located in the state
of New York. Both parties and the individual signing this Note on behalf of the Borrower
agree to submit to the jurisdiction of such courts. The prevailing party shall be entitled
to recover from the other party its reasonable attorney’s fees and costs. In the
event that any provision of this Note is invalid or unenforceable under any applicable
statute or rule of law, then such provision shall be deemed inoperative to the extent that
it may conflict therewith and shall be deemed modified to conform with such statute or
rule of law. Any such provision which may prove invalid or unenforceable under any law
shall not affect the validity or unenforceability of any other provision of this Note. 6.7
Maximum Payments. Nothing contained herein shall be deemed to establish or require
the payment of a rate of interest or other charges in excess of the maximum permitted by
applicable law. In the event that the rate of interest required to be paid or other
charges hereunder exceed the maximum permitted by such law, any payments in excess of such
maximum shall be credited against amounts owed by the Borrower to the Holder and thus
refunded to the Borrower. 

6.8 Construction. Each party
acknowledges that its legal counsel participated in the preparation of this Note and,
therefore, stipulates that the rule of construction that ambiguities are to be resolved
against the drafting party shall not be applied in the interpretation of this Note to
favor any party against the other. 6.9 Management Fee. Simultaneously with the
execution of this Note, the Borrower shall pay to Laurus Capital Management, LLC a
management fee in an amount equal to three and one-half percent (3.5%) of the Principal
Amount, which such amount at the Holder’s option may be deducted from funds made
available by the Holder to the Borrower hereunder. 

        IN
WITNESS WHEREOF, the Borrower has caused this Note to be signed in its name effective
as of this ___day of December, 2004. 

        

STOCKERYALE,
INC. 

By:
/s/___________________________

WITNESS: 

_________________________________

NOTICE OF CONVERSION 

(To be executed by the Holder in order
to convert the Note) 

        The
undersigned hereby elects to convert $_________ of the principal and $_________ of the
interest due on the Note issued by STOCKERYALE, INC. (the “Company”) on
December __, 2004 into Shares of Common Stock of the Company according to the conditions set
forth in such Note, as of the date written below. 

	Date of Conversion:  
	

    _________________________________________________________________
	Conversion Price:  
	

    _________________________________________________________________
	Shares To Be Delivered:  
	

    _________________________________________________________________
	Signature:  
	

    _________________________________________________________________
	Print Name:  
	

    _________________________________________________________________
	Address:  
	

    _________________________________________________________________
	   
	

EXHIBIT B 

FORM OF REPAYMENT ELECTION NOTICE 

To: [HOLDER AT HOLDER'S ADDRESS]

        Pursuant to Section 2.2 the Note of
StockerYale, Inc. (the "Company") issued on June 10, 2004 we hereby
notify you that we are irrevocably electing to repay the outstanding Monthly
Amount (as defined in the Note) due on the Repayment Date (as defined in the
Note) which occurs on ______, 20__ (CHECK ONE):         

  _____ In full in cash on such
  Repayment Date.  

 _____ In full in shares of the
 Company's Common Stock within three (3) trading days following such Repayment
 Date.  

    StockerYale, Inc.
     

        By: 
        /s/                                                                 
        

  Name:
  ____________________________________

  Title:
  ______________________________________

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00075-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00075-of-00352.parquet"}]]