Document:

Exhibit  10.1

                                 PROMISSORY NOTE

FACE  AMOUNT                                         $284,000
PRICE                                                $260,000
INTEREST  RATE                                       0%  per  month
NOTE  NUMBER                                         August-2004-101
ISSUANCE  DATE                                       August  24,  2004
MATURITY  DATE                                       December  24  2004

     FOR  VALUE  RECEIVED, Payment Data Systems, Inc., a Nevada corporation (the
"Company"),  (OTC  BB:  PYDS)  hereby  promises to pay DUTCHESS PRIVATE EQUITIES
FUND,  II,  L.P. (the "Holder") within the Maturity Date, or earlier, the Amount
of  Two  Hundred  and  Eighty-Four  Thousand  Dollars  ($284,000)  U.S., in such
amounts,  at such times and on such terms and conditions as are specified herein
(this  "Note").

     Any capitalized term not defined in this Note are defined in the Investment
Agreement  for the Equity Line of Credit between Dutchess Private Equities Fund,
LP  (the  "Investor")  and  the  Company  (the  "Investment  Agreement").

Article  1          Method  of  Payment

     Payments  made  by  the  Company  in  satisfaction  of  this  Note  (each a
"Payment,"  and  collectively,  the "Payments") shall be made from each Put from
the  Equity  Line  of  Credit  with  the  Investor  given  by the Company to the
Investor.   The  Company  shall make payments to the Holder in the amount of the
lesser of 1) $71,000 or 2) fifty percent (50%) of each Put to  the Investor from
the  Company (the "Payment Amount") until the Face Amount is paid in full, minus
any fees due.   First payment will be due at the successful Closing of the first
Put  ("Payment  Date"  or  "Payment  Dates") after the thirty (30) days from the
Issuance  Date  of  this  Note  and  all subsequent payments will be made at the
Closing  of  every  Put  to  the Investor thereafter until  this Note is paid in
full.   Notwithstanding  any provision to the contrary in this Note, the Company
may pay in full to the Holder the Face Amount, or any balance remaining thereof,
in  readily  available  funds at any time and from time to time without penalty.

     Payments  pursuant  to this Note shall be made directly from the Closing of
each  Put  ("Put  Closing")  and  shall  be  wired directly to the Holder on the
Closing  Date.  The Holder shall retain the sole right and from time to time may
elect  to  lower  the  amount  of  a  payment  ("Lowered  Payment Amount") if so
requested  by  the  Company.  In the event of a Lowered Payment Amount, the next
payment  under  this  Note will be increased by the greater of 1) the percentage
difference  between the next Payment and the Lowered Payment Amount (Example: If
the  Company places a Put for $100,000 ($50,000 of which would go toward payment
of the Face Amount of this Note) and the Company requests a Lowered Payment such
that  $30,000  will go toward payment of the Face Amount of this Note (thus, the
Company owes Holder $20,000, which is 40% of the total amount owed to the Holder
under  such  Put),  and  the next Put is for $500,000 ($250,000 of which will go
toward  payment  of the Face Amount of this Note), then the total amount owed to
the  Holder under this Put will be $250,000 multiplied by 1.40) or 2) the actual
dollar  amount  difference  between  the  next  payment  and the Lowered Payment
Amount.

Article  2             Collateral

     The  Company  does  hereby agree to issue 25 Put Notices ("Collateral")  to
the  Investor  for  the full amount applicable under the terms of the Investment
Agreement  and shall do so at the maximum frequency allowed under the Investment
Agreement,  until  such  time  as  the  Note  is paid in full. The Company shall
deliver  25  Put Notices upon execution of this Note (hereto attached as Exhibit
A).  Upon  the  completion of the Company's obligation to the Holder of the Face
Amount  of  this  Note,  the  Company  will  not  be under further obligation to
complete  any more Puts.  All remaining Put sheets shall be marked "VOID" by the
Investor  and  sent  back  to  the  Company  at  the  Company's  request.

Article  3             Unpaid  Amounts

     In  the  event  that  on  the  Maturity  Date the Company has any remaining
amounts unpaid on this Note (the "Residual Amount"), the Holder can exercise its
right to increase the Residual Amount by 2.5% per month paid as liquated damages
("Liquidated  Damages").  The  Liquated Damages will be compounded daily. If the
aforementioned  occurs,  the  Company  will  be  in  Default and the remedies as
described  in  Article  4  may  be  taken at the Holder's discretion.  It is the
intention and acknowledgement of both parties that the Liquidated Damages not be
deemed  as  interest.

Article  4          Defaults  and  Remedies

Section 4.1     Events of Default.  An "Event of Default" or "Default" occurs if
     (a)  the  Company does not make the payment of the Face Amount of this Note
within two (2) business days of the applicable Closing of a Put  or the Maturity
Date,  as applicable, upon redemption or otherwise, (b) the Company, pursuant to
or  within  the  meaning  of  any  Bankruptcy Law (as hereinafter defined):  (i)
commences  a  voluntary  case; (ii) consents to the entry of an order for relief
against  it  in  an  involuntary  case;  (iii)  consents to the appointment of a
Custodian  (as hereinafter defined) of it or for all or substantially all of its
property;  (iv)  makes a general assignment for the benefit of its creditors; or
(v)  a  court  of  competent  jurisdiction  enters  an order or decree under any
Bankruptcy  Law  that:  (A)  is for relief against the Company in an involuntary
case; (B) appoints a Custodian of the Company or for all or substantially all of
its  property;  or  (C)  orders the liquidation of the Company, and the order or
decree  remains  unstayed  and  in  effect for sixty (60) calendar days; (c) the
Company's  $0.001 par value common stock (the "Common Stock") is suspended or is
no  longer  listed  on  any  recognized  exchange,  including  an  electronic
over-the-counter  bulletin  board, for in excess of five (5) consecutive trading
days;  or  (d)  the  registration  statement  for  the  underlying shares in the
Investment  Agreement does not remain effective for any reason.  As used in this
Section  4.1, the term "Bankruptcy Law" means Title 11 of the United States Code
or  any  similar  federal  or  state  law  for  the relief of debtors.  The term
"Custodian"  means  any  receiver,  trustee,  assignee,  liquidator  or  similar
official  under  any  Bankruptcy  Law.

     In  the  event of a Default hereunder, the Holder shall have the right, but
not  the  obligation,  to  1)  switch  the  Residual  Amount  to  a  three-year
("Convertible Maturity Date"), 10% interest bearing convertible debenture at the
terms  described  in  Section 4.2 (the "Convertible Debenture"). At such time of
Default,  the  Convertible  Debenture  shall  be considered closed ("Convertible
Closing  Date").  If  the  Holder  chooses  to  convert the Residual Amount to a
Convertible  Debenture,  the  Company shall have twenty (20) business days after
notice  of  the  same  (the  "Notice  of  Convertible  Debenture")  to  file  a
registration  statement  covering  an  amount  of  shares  equal  to 300% of the
Residual  Amount.  Such registration statement shall be declared effective under
the Securities Act of 1933, as amended (the "Securities Act"), by the Securities
and  Exchange  Commission (the "Commission") within 40 business days of the date
the  Company  files such Registration Statement.   In the event the Company does
not  file  such  registration statement within twenty (20)  business days of the
Holder's  request,  or  such  registration  statement  is  not  declared  by the
Commission  to  be  effective  under  the  Securities Act within the time period
described  above , the Residual Amount shall increase by $1,000 per day.  In the
event  the  Company  is  given  the  option for accelerated effectiveness of the
registration  statement,  it  agrees  that  it  shall  cause  such  registration
statement  to  be  declared effective as soon as reasonably practicable.  In the
event  that the Company is given the option for accelerated effectiveness of the
registration  statement, but chooses not to cause such registration statement to
be  declared  effective  on  such  accelerated  basis, the Residual Amount shall
increase  by  $1,000  per  day  commencing on the earliest date as of which such
registration  statement  would  have been declared to be effective if subject to
accelerated  effectiveness;  or  2)  the  Holder may increase the Payment Amount
described  under Article 1 to fulfill the repayment of the Residual Amount.  The
Company  shall provide full cooperation to the Holder in directing funds owed to
the Holder on any Put to the Investor.    The Company agrees to diligently carry
out  the  terms  outlined  in  the Investment Agreement for delivery of any such
shares.  In the event the Company is not diligently fulfilling its obligation to
direct  funds  owed  to  the  Holder  from  Puts  to the Investor, as reasonably
determined  by  the  Holder,  the  Holder  may, after giving the Company two (2)
business days' advance notice to cure the same, , elect to increase the Residual
Amount  of  the  Note  by  2.5%  each  day,  compounded  daily.

     Section  4.2  Conversion  Privilege

(a)     The  Holder  shall  have  the right to convert the Convertible Debenture
into  shares  of Common Stock at any time following the Convertible Closing Date
and which is before the close of business on the Convertible Maturity Date.  The
number of shares of Common Stock issuable upon the conversion of the Convertible
Debenture  shall be determined pursuant to Section 4.3, but the number of shares
issuable  shall  be rounded up or down, as the case may be, to the nearest whole
share.

(b)     The Convertible Debenture may be converted, whether in whole or in part,
at  any  time  and  from  time  to  time.

(c)     In  the  event  all  or any portion of the Convertible Debenture remains
outstanding  on the Convertible Maturity Date (the "Debenture Residual Amount"),
the  unconverted  portion  of  such  Convertible Debenture will automatically be
converted  into  shares  of Common Stock on such date in the manner set forth in
Section  4.3.

     Section  4.3  Conversion  Procedure.

     The Residual Amount may be converted, in whole or in part any time and from
time  to time, following the Convertible Closing Date.  Such conversion shall be
effectuated  by  surrendering  to  the Company, or its attorney, the Convertible
Debenture  to  be  converted together with a facsimile or original of the signed
notice  of  conversion  (the  "Notice  of  Conversion").   The date on which the
Notice  of Conversion is effective ("Conversion Date") shall be deemed to be the
date on which the Holder has delivered to the Company a facsimile or original of
the  signed  Notice  of  Conversion,  as  long  as  the  original  Convertible
Debenture(s)  to  be  converted  are  received  by  the  Company within five (5)
business  days thereafter.  At such time that the original Convertible Debenture
has  been  received by the Company, the Holder can elect to whether a reissuance
of the Convertible Debenture is warranted, or whether the Company can retain the
Convertible  Debenture  as  to  a  continual  conversion  by  the  Holder.
Notwithstanding  the  above,  any Notice of Conversion received by 4:00 P.M. EST
shall  be deemed to have been received the following business day (receipt being
via  a  confirmation  of  the  time  such facsimile to the Company is received).

(a)     Common  Stock  to  be Issued.     Upon the conversion of any Convertible
Debentures  and  upon  receipt  by the Company or its attorney of a facsimile or
original of the Holder's signed Notice of Conversion, the Company shall instruct
its  transfer  agent  to issue stock certificates without restrictive legends or
stop  transfer  instructions,  if  at  that time the aforementioned registration
statement  described  in Section 4.1 has been declared effective (or with proper
restrictive  legends  if the registration statement has not as yet been declared
effective), in such denominations to be specified at conversion representing the
number  of  shares of Common Stock issuable upon such conversion, as applicable.
In  the event that the Debenture is aged one year and deemed sellable under Rule
144, the Company shall, upon a Notice of Conversion, instruct the transfer agent
to issue free trading certificates without restrictive legends, subject to other
applicable  securities  laws.  The  Company  is responsible to provide all costs
associated  with  the  issuance  of the shares, including but not limited to the
opinion  letter,  FedEx  of the certificates and any other costs that arise. The
Company  shall  act  as  registrar  and  shall  maintain  an  appropriate ledger
containing the necessary information with respect to each Convertible Debenture.
The  Company  warrants that no instructions, other than these instructions, have
been  given  or  will  be  given to the transfer agent and that the Common Stock
shall  otherwise  be freely resold, except as may be set forth herein or subject
to  applicable  law.

(b)     Conversion  Rate.  Holder  is entitled to convert the Debenture Residual
Amount , plus accrued interest, anytime following the Convertible Maturity Date,
at  the  lesser of (i) 75% of the average of the lowest closing bid price during
the  fifteen (15) trading immediately preceding the Convertible Maturity Date or
(ii)  100%  of  the  average of the lowest bid price for the twenty (20) trading
days  immediately  preceding  the  Convertible  Maturity Date ("Fixed Conversion
Price").  No fractional shares or scrip representing fractions of shares will be
issued  on  conversion, but the number of shares issuable shall be rounded up or
down,  as  the  case  may  be,  to  the  nearest  whole  share.

(c)     Nothing  contained  in  the  Convertible  Debenture  shall  be deemed to
establish  or  require the payment of interest to the Holder at a rate in excess
of  the  maximum rate permitted by governing law.  In the event that the rate of
interest  required  to  be  paid exceeds the maximum rate permitted by governing
law,  the rate of interest required to be paid thereunder shall be automatically
reduced  to  the  maximum rate permitted under the governing law and such excess
shall  be  returned  with  reasonable  promptness  by the Holder to the Company.

(d)     It  shall  be the Company's responsibility to take all necessary actions
and  to  bear  all  such  costs  to  issue  the Common Stock as provided herein,
including  the  responsibility and cost for delivery of an opinion letter to the
transfer  agent,  if  so  required.  Holder shall be treated as a shareholder of
record  on  the  date  Common Stock is issued to the Holder. If the Holder shall
designate  another  person  as  the  entity  in  the  name  of  which  the stock
certificates  issuable  upon  conversion  of the Convertible Debenture are to be
issued  prior  to the issuance of such certificates, the Holder shall provide to
the  Company evidence that either no tax shall be due and payable as a result of
such  transfer  or  that  the applicable tax has been paid by the Holder or such
person. Upon surrender of any Convertible Debentures that are to be converted in
part, the Company shall issue to the Holder a new Convertible Debenture equal to
the  unconverted  amount,  if  so  requested  in  writing  by  the  Holder.

(e)     Within  five  (5)  business  days  after  receipt  of  the documentation
referred  to  above in Section 4.2, the Company shall deliver a certificate, for
the number of shares of Common Stock issuable upon the conversion.  In the event
     the  Company  does  not  make delivery of the Common Stock as instructed by
Holder  within  five  (5)  business days after the Conversion Date, then in such
event the Company shall pay to the Holder one percent (1%) in cash of the dollar
value  of  the  Debenture  Residual  Amount  remaining  after  said  conversion,
compounded  daily, per each day after the fifth (5th) business day following the
Conversion  Date  that  the  Common  Stock  is  not  delivered to the Purchaser.

           The Company acknowledges that its failure to deliver the Common Stock
within five (5) business days after the Conversion Date will cause the Holder to
suffer  damages  in an amount that will be difficult to ascertain.  Accordingly,
the  parties  agree  that it is appropriate to include in this  Note a provision
for  liquidated  damages  The  parties acknowledge and agree that the liquidated
damages  provision  set forth in this section represents the parties' good faith
effort  to quantify such damages and, as such, agree that the form and amount of
such  liquidated  damages are reasonable and will not constitute a penalty.  The
payment of liquidated damages shall not relieve the Company from its obligations
to deliver the Common Stock pursuant to the terms of this Convertible Debenture.

(f)     The  Company  shall  at  all  times reserve (or make alternative written
arrangements  for  reservation or contribution of shares) and have available all
Common  Stock necessary to meet conversion of the Convertible Debentures  by the
Holder  of  the entire amount of Convertible Debentures then outstanding. If, at
any time the Holder submits a Notice of Conversion and the Company does not have
sufficient authorized but unissued shares of Common Stock (or alternative shares
of  Common Stock as may be contributed by stockholders of the Company) available
to  effect,  in  full, a conversion of the Convertible Debentures (a "Conversion
Default,"  the  date of such default being referred to herein as the "Conversion
Default  Date"),  the  Company  shall  issue  to the Holder all of the shares of
Common  Stock  which  are  available,  and  the  Notice  of Conversion as to any
Convertible  Debentures  requested  to  be  converted  but  not  converted  (the
"Unconverted  Convertible Debentures"), may be deemed null and void upon written
notice  sent  by  the Holder to the Company. The Company shall provide notice of
such  Conversion  Default  ("Notice  of  Conversion  Default") to the Holder, by
facsimile  within  three  (3)  business  days of such default (with the original
delivered  by  overnight  mail  or  two  day courier), and the Holder shall give
notice  to  the Company by facsimile within five (5) business days of receipt of
the  original  Notice  of  Conversion  Default  (with  the original delivered by
overnight  mail or two day courier) of its election to either nullify or confirm
the  Notice  of  Conversion.

     The  Company  agrees  to  pay  the Holder payments for a Conversion Default
("Conversion  Default  Payments")  in  the  amount  of (N/365) multiplied by .24
multiplied  by the initial issuance price of the outstanding or tendered but not
converted Convertible Debentures held by the Holder where N = the number of days
from the Conversion Default Date to the date (the "Authorization Date") that the
Company  authorizes  a  sufficient  number  of  shares of Common Stock to effect
conversion  of  all  remaining  Convertible  Debentures.  The Company shall send
notice  ("Authorization  Notice") to the Holder that additional shares of Common
Stock  have  been authorized, the Authorization Date, and the amount of Holder's
accrued  Conversion  Default  Payments.  The accrued Conversion Default shall be
paid  in  cash  or shall be convertible into Common Stock at the conversion rate
set  forth  in the first sentence of this paragraph, upon written notice sent by
the Holder to the Company, which Conversion Default shall be payable as follows:
(i)  in  the event the Holder elects to take such payment in cash, cash payments
shall  be  made  to the Holder  by the fifth (5th) day of the following calendar
month,  or  (ii)  in  the event Holder elects to take such payment in stock, the
Holder may convert such payment amount into Common Stock at  the conversion rate
set  forth  in  the first sentence of this paragraph at any time after the fifth
(5th)  day  of the calendar month following the month in which the Authorization
Notice  was  received,  until  the  expiration  of  the mandatory three (3) year
conversion  period.

     The  Company  acknowledges that its failure to maintain a sufficient number
of authorized but unissued shares of Common Stock to effect in full a conversion
of  the  Convertible  Debentures  will  cause the Holder to suffer damages in an
amount that will be difficult to ascertain.  Accordingly, the parties agree that
it  is  appropriate  to  include  in  this  Agreement a provision for liquidated
damages.  The  parties  acknowledge  and  agree  that  the  liquidated  damages
provision set forth in this section represents the parties' good faith effort to
quantify  such  damages  and,  as  such,  agree that the form and amount of such
liquidated  damages  are  reasonable  and  will  not  constitute a penalty.  The
payment of liquidated damages shall not relieve the Company from its obligations
to deliver the Common Stock pursuant to the terms of this Convertible Debenture.

(g)     If,  by  the  fifth  (5th) business day after the Conversion Date of any
portion of the Convertible Debentures to be converted (the "Delivery Date"), the
transfer  agent fails for any reason to deliver the Common Stock upon conversion
by  the  Holder  and  after such Delivery Date, the Holder purchases, in an open
market  transaction or otherwise, shares of Common Stock (the "Covering Shares")
solely  in  order  to make delivery in satisfaction of a sale of Common Stock by
the  Holder  (the "Sold Shares"), which delivery such Holder anticipated to make
using  the Common Stock issuable upon conversion (a "Buy-In"), the Company shall
pay  to  the  Holder, in addition to any other amounts due to Holder pursuant to
this  Convertible  Debenture,  and  not  in  lieu thereof, the Buy-In Adjustment
Amount (as defined below). The "Buy In Adjustment Amount" is the amount equal to
the  excess,  if  any,  of  (x)  the  Holder's  total  purchase price (including
brokerage commissions, if any) for the Covering Shares over (y) the net proceeds
(after  brokerage  commissions,  if any) received by the Holder from the sale of
the  Sold  Shares.  The  Company  shall  pay the Buy-In Adjustment Amount to the
Holder  in  immediately available funds within five (5) business days of written
demand  by  the  Holder.  By  way  of  illustration and not in limitation of the
foregoing,  if  the  Holder  purchases  shares  of  Common  Stock having a total
purchase  price  (including  brokerage commissions) of $11,000 to cover a Buy-In
with  respect to shares of Common Stock it sold for net proceeds of $10,000, the
Buy-In Adjustment Amount which the Company will be required to pay to the Holder
will  be  $1,000.

     (h)     The  Company shall defend, protect, indemnify and hold harmless the
Holder  and  all  of  its shareholders, officers, directors, employees, counsel,
and  direct  or  indirect  investors and any of the foregoing person's agents or
other  representatives  (including,  without  limitation,  those  retained  in
connection  with the transactions contemplated by this Agreement) (collectively,
the  "Section  4.3(h) Indemnitees") from and against any and all actions, causes
of  action,  suits,  claims,  losses,  costs,  penalties,  fees, liabilities and
damages,  and expenses in connection therewith (irrespective of whether any such
Section  4.3(h)  Indemnitee  is  a party to the action for which indemnification
hereunder is sought), and including reasonable attorneys' fees and disbursements
(the  "Section  4.3(h) Indemnified Liabilities"), incurred by any Section 4.3(h)
Indemnitee  as  a  result  of,  or  arising  out  of,  or  relating  to  (i) any
misrepresentation  or  breach  of  any  representation  or  warranty made by the
Company  in  the  Transaction  Documents or any other certificate, instrument or
document  contemplated  hereby  or  thereby,  (ii)  any  breach of any covenant,
agreement,  or  obligation of the Company contained in the Transaction Documents
or  any  other  certificate,  instrument,  or  document  contemplated  hereby or
thereby,  (iii) any cause of action, suit, or claim brought or made against such
Section  4.3(h) Indemnitee by a third party and arising out of or resulting from
the  execution,  delivery,  performance,  or  enforcement  of  the  Transaction
Documents  or any other certificate, instrument, or document contemplated hereby
or thereby, (iv) any transaction financed or to be financed in whole or in part,
directly  or  indirectly,  with the proceeds of the issuance of the Common Stock
underlying  the  Convertible  Debenture ("Securities"), or (v) the status of the
Holder or holder of the Securities as an investor in the Company, except insofar
as  any  such  misrepresentation, breach or any untrue statement, alleged untrue
statement,  omission,  or  alleged  omission  is  made  in  reliance upon and in
conformity  with  written  information furnished to the Company by the Holder or
the  Investor which is specifically intended by the Holder or the Investor to be
relied  upon  by  the  Company, including for use in the preparation of any such
registration  statement,  preliminary  prospectus, or prospectus, or is based on
illegal trading of the Common Stock by the Holder or the Investor. To the extent
that  the  foregoing  undertaking  by  the  Company may be unenforceable for any
reason,  the  Company  shall  make  the  maximum contribution to the payment and
satisfaction  of  each  of the Indemnified Liabilities that is permissible under
applicable  law.  The indemnity provisions contained herein shall be in addition
to  any  cause  of  action  or  similar  rights  the  Holder  may  have, and any
liabilities  the  Holder  may  be  subject  to.

Article  5  Additional  Financing

          The  Company  will  not enter into any additional financing agreements
without  prior  expressed  written  consent  from the Holder, which shall not be
unreasonably  withheld.

Article  6     Notice.

     Any  notices,  consents,  waivers  or  other  communications  required  or
permitted  to  be given under the terms of this Note must be in writing and will
be  deemed  to  have been delivered (i) upon receipt, when delivered personally;
(ii)  upon  receipt,  when  sent  by  facsimile  (provided  a  confirmation  of
transmission is mechanically or electronically generated and kept on file by the
sending  party); or (iii) one (1) day after deposit with a nationally recognized
overnight  delivery  service,  in  each  case properly addressed to the party to
receive  the  same.  The addresses and facsimile numbers for such communications
shall  be:

If  to  the  Company:

     Payment  Data  Systems,  Inc,  Inc.  Attn:  Michael  Long
     12500  San  Pedro,  Suite  120
     San  Antonio,  TX  78216
Tel:  210.249.4100
Fax:  210.249.4130

If  to  the  Holder:

     Dutchess  Private  Equities  Fund,  II,  LP
     Douglas  Leighton
     312  Stuart  Street,  Third  Floor
     Boston,  MA  02116
     (617)  960-3570

     Each  party  shall provide five (5) business days prior notice to the other
party  of  any  change  in  address,  phone  number  or  facsimile  number.

Article  7     Time

     Where  this  Note  authorizes  or  requires  the  payment  of  money or the
performance of a condition or obligation on a Saturday or Sunday or a holiday in
which  the United States Stock Markets ("US Markets") are closed ("Holiday"), or
authorizes or requires the payment of money or the performance of a condition or
obligation  within,  before  or  after  a period of time computed from a certain
date,  and such period of time ends on a Saturday or a Sunday or a Holiday, such
payment  may be made or condition or obligation performed on the next succeeding
business  day,  and  if the period ends at a specified hour, such payment may be
made  or condition performed, at or before the same hour of such next succeeding
business  day,  with  the  same  force  and  effect  as  if made or performed in
accordance  with  the  terms of this Note.  A "business day" shall mean a day on
which  the  US  Markets  are  open  for  a  full  day  or  half  day of trading.

Article  8     No  Assignment

     This  Note  shall  not  be  assigned.

Article  9     Rules  of  Construction.

     In  this Note, unless the context otherwise requires, words in the singular
number  include the plural, and in the plural include the singular, and words of
the  masculine gender include the feminine and the neuter, and when the tense so
indicates,  words of the neuter gender may refer to any gender.  The numbers and
titles  of  sections  contained  in  the  Note  are  inserted for convenience of
reference  only,  and  they  neither form a part of this Note nor are they to be
used  in  the  construction or interpretation hereof.  Wherever, in this Note, a
determination of the Company is required or allowed, such determination shall be
made  by  a majority of the Board of Directors of the Company and, if it is made
in  good  faith,  it  shall  be  conclusive and binding upon the Company and the
Holder.

Article  10     Governing  Law

    The  validity,  terms,  performance  and  enforcement of this Note shall be
governed  and construed by the provisions hereof and in accordance with the laws
of  the  Commonwealth  of  Massachusetts  applicable  to  agreements  that  are
negotiated,  executed,  delivered  and  performed  solely in the Commonwealth of
Massachusetts.

Article  11     Litigation

The  parties  to  this  agreement  will  submit  all disputes arising under this
agreement  to arbitration in Boston, Massachusetts before a single arbitrator of
the  American Arbitration Association ("AAA").  The arbitrator shall be selected
by  application  of the rules of the AAA, or by mutual agreement of the parties,
except that such arbitrator shall be an attorney admitted to practice law in the
Commonwealth  of  Massachusetts.  No  party to this agreement will challenge the
jurisdiction  or  venue  provisions  as  provided  in  this  section.

Article  12      Conditions  to  Closing

     The Company shall have delivered the proper Collateral to the Holder before
Closing  of  this  Note

     Additionally,  the  Company  shall  have signed a consulting agreement with
Edgarization,  LLC  and  shall  have fully paid consideration for such contract.

Article  13     Legal

     The  Company  shall  pay  legal fees associated with the transaction in the
amount  of  $5,000  directly  from  the  Closing  of  this  Note.

Article  14        Indemnification

     In  consideration  of the Holder's execution and delivery of this Agreement
and  the  acquisition  and  funding  by  the Holder of the Note hereunder and in
addition  to  all  of  the  Company's  other  obligations  under  the  documents
contemplated  hereby,  the  Company  shall  defend,  protect, indemnify and hold
harmless the Holder and all of its shareholders, officers, directors, employees,
counsel,  and  direct  or  indirect  investors and any of the foregoing person's
agents  or  other representatives (including, without limitation, those retained
in  connection  with  the  transactions  contemplated  by  this  Agreement)
(collectively,  the  "Indemnities") from and against any and all actions, causes
of  action,  suits,  claims,  losses,  costs,  penalties,  fees, liabilities and
damages,  and expenses in connection therewith (irrespective of whether any such
Indemnitee  is  a  party  to  the  action for which indemnification hereunder is
sought),  and  including  reasonable  attorneys'  fees  and  disbursements  (the
"Indemnified  Liabilities"  ),  incurred  by  any  Indemnitee as a result of, or
arising  out  of,  or  relating  to  (i)  any misrepresentation or breach of any
representation  or  warranty  made  by  the  Company  in  the Note, or any other
certificate,  instrument  or  document  contemplated  hereby or thereby (ii) any
breach  of any covenant, agreement or obligation of the Company contained in the
Note  or  any  other certificate, instrument or document  contemplated hereby or
thereby,  except  insofar  as  any  such misrepresentation, breach or any untrue
statement,  alleged  untrue  statement,  omission or alleged omission is made in
reliance  upon  and  in  conformity  with  written  information furnished to the
Company  by,  or  on behalf of, the Holder or is based on illegal trading of the
Common  Stock by the Holder. To the extent that the foregoing undertaking by the
Company  may be unenforceable for any reason, the Company shall make the maximum
contribution  to  the  payment  and  satisfaction  of  each  of  the Indemnified
Liabilities  that  is permissible under applicable law. The indemnity provisions
contained  herein  shall be in addition to any cause of action or similar rights
the  Holder  may  have,  and  any  liabilities  the  Holder  may  be subject to.

Article  15  Investor  Shares

     The  Company  shall  issue 75,000 shares of unregistered, restricted Common
Stock  to  the Holder as an incentive for the investment ("Shares").  The Shares
shall  be  issued  and  delivered  immediately  to  the  Holder  and shall carry
piggyback  registration  rights.  In  the event the Shares are not registered in
the  next  registration  statement,  the  Company  shall pay to the Holder, as a
penalty,  75,000  additional shares of common stock for each time a registration
statement  is  filed  and  the  Shares are not included.  The Holder retains the
right  to  waive  such  penalty,  in  the  event  Holder  chooses  to  do  so.

Article  16  Use  of  Proceeds

General  corporate  working  capital  purposes. This shall not to be used to pay
down  long-term  debt  to  any  financial  institution.

     Any misrepresentations shall be considered a breach of contract and default
under  this Agreement and the Holder may seek to take actions as described under
Section  4  of  this  Agreement.

     IN  WITNESS WHEREOF, the Company has duly executed this Note as of the date
first  written  above.
                         PAYMENT  DATA  SYSTEMS,  INC.

                         By:  /s/ Michael Long
                       Name:       Michael  Long
                      Title:       Chief  Executive  Officer

                              DUTCHESS  PRIVATE  EQUITIES  FUND,  II,  L.P.
                              BY  ITS  GENERAL  PARTNER  DUTCHESS
                              CAPITAL  MANAGEMENT,  LLC

                         By:  /s/ Douglas H. Leighton
                       Name:  Douglas  H.  Leighton
                      Title:  A  Managing  MemberEXHIBIT 10.1

                                OPEN END MORTGAGE
                   ASSIGNMENT OF RENTS, SECURITY AGREEMENT AND
                                 FIXTURE FILING

                                     MADE BY

                         GLIMCHER RIVER VALLEY MALL, LLC

                                  as Mortgagor

                                       to

                          KEYBANK NATIONAL ASSOCIATION

                                  as Mortgagee

                          Dated as of: August 30, 2004

<PAGE>

UPON RECORDATION RETURN TO:

Sonnenschein Nath & Rosenthal, LLP
8000 Sears Tower
233 South Wacker
Chicago, Illinois 60606
Attention: Pat Moran, Esq.

                                OPEN END MORTGAGE
                   ASSIGNMENT OF RENTS, SECURITY AGREEMENT AND
                                 FIXTURE FILING

                             Project Common Known As
                      "River Valley Mall, Lancaster, Ohio"

     THIS OPEN END MORTGAGE, ASSIGNMENT OF RENTS, SECURITY AGREEMENT AND FIXTURE
FILING (this "Mortgage") is made as of August 30, 2004, by GLIMCHER RIVER VALLEY
MALL, LLC, a Delaware limited liability company ("Mortgagor") whose address is
150 East Gay Street, Columbus, Ohio 43215, and KEYBANK NATIONAL ASSOCIATION, as
administrative agent for itself and one or more Lenders (as defined in that
certain Credit Agreement bearing the date October 17, 2003 by and between
Glimcher Properties Limited Partnership, a Delaware limited partnership (the
"Borrower"), such Lenders and KEYBANK NATIONAL ASSOCIATION, as administrative
agent, hereinafter the "Credit Agreement"), (together with its successors and
assigns, the "Mortgagee"), whose address is 127 Public Square, Cleveland, Ohio
44114.

1.   Grant and Secured Obligations.

     1.1 Grant. Borrower has executed and delivered to the Lenders certain
promissory notes and may in the future execute and deliver to the Lenders
additional promissory notes (the promissory notes, made in favor of the Lenders,
together with any amendments or allonges thereto, or restatements, replacements
or renewals thereof, or new promissory notes to new Lenders under the Credit
Agreement, are collectively referred to herein as the "Notes"), in and by which
the Borrower promises to pay the principal of all Loans under such Credit
Agreement and interest at the rate and in installments as provided in the Notes,
with a final payment of the outstanding principal balance and accrued and unpaid
interest being due on or before October 17, 2006. The maximum aggregate
principal amount of the Loans evidenced by the Notes shall be $150,000,000. The
indebtedness secured hereby shall be governed by the terms and conditions of the
Credit Agreement. To the extent there may be any inconsistency between the terms
and provisions of this Mortgage and the terms and provisions of the Credit
Agreement, the terms and provisions of the Credit Agreement shall govern and
control. All capitalized terms used herein and not otherwise defined shall have
the meanings ascribed to such terms in the Credit Agreement.

     In consideration of the debt evidenced by the Notes and the Commitments
evidenced by the Credit Agreement and to secure the timely payment of both
principal and interest in accordance with the terms and provisions of the Notes
and in accordance with the terms, provisions and limitations of this Mortgage,
to secure the payment of any and all amounts advanced by the Administrative
Agent or the Lenders with respect to the Premises for the payment of taxes,
assessments, insurance premiums or any other costs incurred in the protection

<PAGE>

of the Premises, and to secure the performance of the covenants and agreements
contained herein and in the Notes, the Credit Agreement, the Guaranty, the
Subsidiary Guaranty and any other documents evidencing and securing the loan
secured hereby or delivered to Mortgagee pursuant to the Credit Agreement
(collectively, the "Loan Documents") to be performed by Mortgagor, and to secure
all Rate Management Transactions entered into with the Administrative Agent or
any of the Lenders in connection with the Credit Agreement, and for the purpose
of securing payment and performance of the Secured Obligations defined and
described in Section 1.2 below, Mortgagor hereby irrevocably and unconditionally
grants, bargains, sells, conveys, mortgages and warrants to Mortgagee, with
power of sale and with right of entry and possession, all estate, right, title
and interest which Mortgagor now has or may later acquire in and to the
following property (all or any part of such property, or any interest in all or
any part of it, as the context may require, the "Property"):

          (a) The real property located in the County of Fairfield, State of
     Ohio, as described in Exhibit A, together with all existing and future
     easements and rights affording access to it (the "Premises"); together with

          (b) All buildings, structures and improvements now located or later to
     be constructed on the Premises (the "Improvements"); together with

          (c) All existing and future appurtenances, privileges, easements,
     franchises and tenements of the Premises, including all minerals, oil, gas,
     other hydrocarbons and associated substances, sulphur, nitrogen, carbon
     dioxide, helium and other commercially valuable substances which may be in,
     under or produced from any part of the Premises, all development rights and
     credits, air rights, water, water rights (whether riparian, appropriative
     or otherwise, and whether or not appurtenant) and water stock, and any
     Premises lying in the streets, roads or avenues, open or proposed, in front
     of or adjoining the Premises and Improvements; together with

          (d) All existing and future leases, subleases, subtenancies, licenses,
     occupancy agreements and concessions ("leases") relating to the use and
     enjoyment of all or any part of the Premises and Improvements, and any and
     all guaranties and other agreements relating to or made in connection with
     any of such leases; together with

          (e) All real property and improvements on it, and all appurtenances
     and other property and interests of any kind or character, whether
     described in Exhibit A or not, which may be reasonably necessary or
     desirable to promote the present and any reasonable future beneficial use
     and enjoyment of the Premises and Improvements; together with

          (f) All goods, materials, supplies, chattels, furniture, fixtures,
     equipment and machinery now or later to be attached to, placed in or on, or
     used in connection with the use, enjoyment, occupancy or operation of all
     or any part of the Premises and Improvements, whether stored on the
     Premises or elsewhere, including all pumping plants, engines, pipes,
     ditches and flumes, and also all gas, electric, cooking, heating, cooling,
     air conditioning, lighting, refrigeration and plumbing fixtures and
     equipment, all of which shall be considered to the fullest extent of the
     law to be real property for purposes of this Mortgage and any
     manufacturer's warranties with respect thereto; together with

<PAGE>

          (g) All building materials, equipment, work in process or other
     personal property of any kind, whether stored on the Premises or elsewhere,
     which have been or later will be acquired for the purpose of being
     delivered to, incorporated into or installed in or about the Premises or
     Improvements; together with

          (h) All of Mortgagor's interest in and to all operating accounts
     pertaining to the Property and the Loan funds, whether disbursed or not;
     together with

          (i) All rights to the payment of money, accounts, accounts receivable,
     reserves, deferred payments, refunds, cost savings, payments and deposits,
     whether now or later to be received from third parties (including all
     earnest money sales deposits) or deposited by Mortgagor with third parties
     (including all utility deposits), contract rights, development and use
     rights, governmental permits and licenses, applications, architectural and
     engineering plans, specifications and drawings, as-built drawings, chattel
     paper, instruments, documents, notes, drafts and letters of credit (other
     than letters of credit in favor of Mortgagee), which arise from or relate
     to construction on the Premises or to any business now or later to be
     conducted on it, or to the Premises and Improvements generally and any
     builder's or manufacturer's warranties with respect thereto; together with

          (j) All insurance policies pertaining to the Premises and all
     proceeds, including all claims to and demands for them, of the voluntary or
     involuntary conversion of any of the Premises, Improvements or the other
     property described above into cash or liquidated claims, including proceeds
     of all present and future fire, hazard or casualty insurance policies and
     all condemnation awards or payments now or later to be made by any public
     body or decree by any court of competent jurisdiction for any taking or in
     connection with any condemnation or eminent domain proceeding, and all
     causes of action and their proceeds for any damage or injury to the
     Premises, Improvements or the other property described above or any part of
     them, or breach of warranty in connection with the construction of the
     Improvements, including causes of action arising in tort, contract, fraud
     or concealment of a material fact; together with

          (k) All of Mortgagor's rights in and to all Rate Management
     Transactions entered into with the Administrative Agent or any of the
     Lenders in connection with the Credit Agreement;

          (l) All books and records pertaining to any and all of the property
     described above, including computer-readable memory and any computer
     hardware or software necessary to access and process such memory ("Books
     and Records"); together with

          (m) All proceeds of, additions and accretions to, substitutions and
     replacements for, and changes in any of the property described above.

     Capitalized terms used above and elsewhere in this Mortgage without
definition have the meanings given them in the Credit Agreement referred to in
Subsection 1.2(a)(iii) below.

<PAGE>

     1.2 Secured Obligations.

          (a) Mortgagor makes the grant, conveyance, and mortgage set forth in
     Section 1.1 above, and grants the security interest set forth in Section 3
     below for the purpose of securing the following obligations (the "Secured
     Obligations") in any order of priority that Mortgagee may choose:

               (i) Payment of all obligations at any time owing under the
          Subsidiary Guaranty under the terms of the Credit Agreement; and

               (ii) Payment and performance of all obligations of Mortgagor
          under this Mortgage; and

               (iii) Payment and performance of all obligations of Mortgagor
          under the Credit Agreement; and

               (iv) Payment and performance of any obligations of Mortgagor
          under any Loan Documents which are executed by Mortgagor; and

               (v) Payment and performance of all obligations of Mortgagor
          arising from any Rate Management Transactions entered into with the
          Administrative Agent or any of the Lenders in connection with the
          Credit Agreement. Rate Management Transactions shall mean an interest
          rate hedging program through the purchase by Mortgagor from the
          Administrative Agent or any of the Lenders in connection with an
          interest rate swap, cap or such other interest rate protection product
          with respect to the Credit Agreement; and

               (vi) Payment and performance of all future advances and other
          obligations that Mortgagor or any successor in ownership of all or
          part of the Property may agree to pay and/or perform (whether as
          principal, surety or guarantor) for the benefit of Mortgagee, when a
          writing evidences the parties' agreement that the advance or
          obligation be secured by this Mortgage; and

               (vii) Payment and performance of all modifications, amendments,
          extensions, and renewals, however evidenced, of any of the Secured
          Obligations.

          (b) All persons who may have or acquire an interest in all or any part
     of the Property will be considered to have notice of, and will be bound by,
     the terms of the Secured Obligations and each other agreement or instrument
     made or entered into in connection with each of the Secured Obligations.
     Such terms include any provisions in the Note or the Credit Agreement which
     permit borrowing, repayment and reborrowing, or which provide that the
     interest rate on one or more of the Secured Obligations may vary from time
     to time.

2.   Assignment of Rents.

     2.1 Assignment. Mortgagor hereby irrevocably, absolutely, presently and
unconditionally assigns to Mortgagee all rents, royalties, issues, profits,
revenue, income, accounts, proceeds and other benefits of the Property, whether
now due, past due or to become

<PAGE>

due, including all prepaid rents and security deposits (some or all
collectively, as the context may require, "Rents"). This is an absolute
assignment, not an assignment for security only.

     2.2 Grant of License. Mortgagee hereby confers upon Mortgagor a license
("License") to collect and retain the Rents as they become due and payable, so
long as no Event of Default, as defined in Section 6.2 below, shall exist and be
continuing. If an Event of Default has occurred and is continuing, Mortgagee
shall have the right, which it may choose to exercise in its sole discretion, to
terminate this License without notice to or demand upon Mortgagor, and without
regard to the adequacy of Mortgagee's security under this Mortgage.

     2.3 Collection and Application of Rents. Subject to the License granted to
Mortgagor under Section 2.2 above, Mortgagee has the right, power and authority
to collect any and all Rents. Mortgagor hereby appoints Mortgagee its
attorney-in-fact to perform any and all of the following acts, if and at the
times when Mortgagee in its sole discretion may so choose:

          (a) Demand, receive and enforce payment of any and all Rents; or

          (b) Give receipts, releases and satisfactions for any and all Rents;
     or

          (c) Sue either in the name of Mortgagor or in the name of Mortgagee
     for any and all Rents.

Mortgagee and Mortgagor agree that the mere recordation of the assignment
granted herein entitles Mortgagee immediately to collect and receive rents upon
the occurrence of an Event of Default, as defined in Section 6.2, without first
taking any acts of enforcement under applicable law, such as, but not limited
to, providing notice to Mortgagor, filing foreclosure proceedings, or seeking
and/or obtaining the appointment of a receiver. Further, Mortgagee's right to
the Rents does not depend on whether or not Mortgagee takes possession of the
Property as permitted under Subsection 6.3(c). In Mortgagee's sole discretion,
Mortgagee may choose to collect Rents either with or without taking possession
of the Property. Mortgagee shall apply all Rents collected by it in the manner
provided under Section 6.6. If an Event of Default occurs while Mortgagee is in
possession of all or part of the Property and is collecting and applying Rents
as permitted under this Mortgage, Mortgagee and any receiver shall nevertheless
be entitled to exercise and invoke every right and remedy afforded any of them
under this Mortgage and at law or in equity.

     2.4 Mortgagee Not Responsible. Under no circumstances shall Mortgagee have
any duty to produce Rents from the Property. Regardless of whether or not
Mortgagee, in person or by agent, takes actual possession of the Premises and
Improvements, unless Mortgagee agrees in writing to the contrary, Mortgagee is
not and shall not be deemed to be:

          (a) A "mortgagee in possession" for any purpose; or

          (b) Responsible for performing any of the obligations of the lessor
     under any lease; or

          (c) Responsible for any waste committed by lessees or any other
     parties, any dangerous or defective condition of the Property, or any
     negligence in the management,

<PAGE>

     upkeep, repair or control of the Property, unless caused by the gross
     negligence, willful misconduct or bad faith of Mortgagee; or

          (d) Liable in any manner for the Property or the use, occupancy,
     enjoyment or operation of all or any part of it.

     2.5 Leasing. Mortgagor shall not accept any deposit or prepayment of rents
under the leases for any rental period exceeding one (1) month without
Mortgagee's prior written consent. Mortgagor shall not lease the Property or any
part of it except strictly in accordance with the Credit Agreement.

3.   Grant of Security Interest.

     3.1 Security Agreement. The parties intend for this Mortgage to create a
lien on the Property, and an absolute assignment of the Rents, all in favor of
Mortgagee. The parties acknowledge that some of the Property and some or all of
the Rents may be determined under applicable law to be personal property or
fixtures. To the extent that any Property or Rents may be or be determined to be
personal property, Mortgagor as debtor hereby grants Mortgagee as secured party
a security interest in all such Property and Rents, to secure payment and
performance of the Secured Obligations. This Mortgage constitutes a security
agreement under the Uniform Commercial Code of the State in which the Property
is located, covering all such Property and Rents.

     3.2 Financing Statements. Mortgagor hereby authorizes Mortgagee to file one
or more financing statements. In addition, Mortgagor shall execute such other
documents as Mortgagee may from time to time require to perfect or continue the
perfection of Mortgagee's security interest in any Property or Rents. As
provided in Section 5.10 below, Mortgagor shall pay all fees and costs that
Mortgagee may incur in filing such documents in public offices and in obtaining
such record searches as Mortgagee may reasonably require. In case Mortgagor
fails to execute any financing statements or other documents for the perfection
or continuation of any security interest, Mortgagor hereby appoints Mortgagee as
its true and lawful attorney-in-fact to execute any such documents on its
behalf. If any financing statement or other document is filed in the records
normally pertaining to personal property, that filing shall never be construed
as in any way derogating from or impairing this Mortgage or the rights or
obligations of the parties under it.

4.   Fixture Filing.

     This Mortgage constitutes a financing statement filed as a fixture filing
under Article 9 of the Uniform Commercial Code in the State in which the
Property is located, as amended or recodified from time to time, covering any
Property which now is or later may become fixtures attached to the Premises or
Improvements. For this purpose, the respective addresses of Mortgagor, as
debtor, and Mortgagee, as secured party, are as set forth in the preambles of
this Mortgage.

5.   Rights and Duties of the Parties.

     5.1 Representations and Warranties. Mortgagor represents and warrants that:

<PAGE>

          (a) Mortgagor lawfully possesses and holds fee simple title to all of
     the Premises and Improvements;

          (b) Mortgagor has or will have good title to all Property other than
     the Premises and Improvements;

          (c) Mortgagor has the full and unlimited power, right and authority to
     encumber the Property and assign the Rents;

          (d) This Mortgage creates a first and prior lien on the Property;

          (e) The Property includes all property and rights which may be
     reasonably necessary or desirable to promote the present and any reasonable
     future beneficial use and enjoyment of the Premises and Improvements;

          (f) Mortgagor owns any Property which is personal property free and
     clear of any security agreements, reservations of title or conditional
     sales contracts, and there is no financing statement affecting such
     personal property on file in any public office; and

          (g) Mortgagor's place of business, or its chief executive office if it
     has more than one place of business, is located at the address specified
     below.

     5.2 Taxes, and Assessments. Mortgagor shall, prior to delinquency, pay or
cause to be paid each installment of all taxes and special assessments of every
kind, now or hereafter levied against the Property or any part thereof, without
notice or demand, and shall provide Mortgagee with evidence of the payment of
same. Mortgagor shall pay all taxes and assessments which may be levied upon
Mortgagee's or the Lenders' interest herein or upon this Mortgage or the debt
secured hereby (excluding any income taxes or similar charges imposed upon
Mortgagee or the Lenders), without regard to any law that may be enacted
imposing payment of the whole or any part thereof upon the Mortgagee or any
Lender. Notwithstanding anything contained in this Section to the contrary,
Mortgagor shall have the right to pay or cause to be paid any such tax or
special assessment under protest or to otherwise contest any such tax or special
assessment but only if (i) such contest has the effect of preventing the
collection of such tax or special assessment so contested and also prevent the
sale or forfeiture of the Property or any part thereof or any interest therein,
(ii) Mortgagor promptly notifies Mortgagee in writing of its intent to contest
such tax or special assessment, and (iii) if so requested in writing by
Mortgagee, Mortgagor has deposited security in form and amount reasonably
satisfactory to Mortgagee, and increases the amount of such security so
deposited promptly after Mortgagee's request therefor. Mortgagor shall prosecute
or cause the prosecution of all such contest actions in good faith and with due
diligence.

     5.3 Performance of Secured Obligations. Mortgagor shall promptly pay and
perform each Secured Obligation in accordance with its terms.

     5.4 Liens, Charges and Encumbrances. Mortgagor shall immediately discharge
any lien on the Property which Mortgagee has not consented to in writing in
accordance with the terms of Section 6.16 of the Credit Agreement.

<PAGE>

     5.5 Damages, Restoration, and Insurance Proceeds. As long as no Event of
Default has occurred and is then continuing, all insurance proceeds for losses
at the Property of less than $500,000.00 shall be adjusted with and payable to
the Mortgagor. In case of loss, Mortgagee shall have the right (but not the
obligation) to participate in and reasonably approve the settlement of any
insurance claim in excess of $500,000.00 and all claims thereafter, and
Mortgagee is at all times authorized to collect and receive any insurance money
for those claims which Mortgagee is entitled to approve the settlement of
hereunder however, notwithstanding the forgoing, if the Property is damaged and
the Borrower elects to release the Property from the Collateral Pool in
accordance with the terms of Section 2.7(c) of the Credit Agreement, upon such
release, all insurance proceeds for such damage to the Property shall be payable
to the Mortgagor.

     At the election of Mortgagee, such insurance proceeds may be applied to
reduce the outstanding balance of the indebtedness under the Credit Agreement or
to pay for costs of repair and restoration of the Property; provided, however,
that so long as no Event of Default has occurred and is then continuing,
Mortgagee shall make such insurance proceeds available to pay for such costs of
repair and restoration. If Mortgagee is entitled to and does elect to apply
insurance proceeds in payment or reduction of the indebtedness secured hereby,
then Mortgagee shall reduce the then outstanding balance of the Advances by the
amount of the insurance proceeds received and so applied by Mortgagee. In the
event that Mortgagee does not elect to apply the insurance proceeds to the
indebtedness secured hereby as set forth above, such insurance proceeds shall be
used to reimburse Mortgagor for the cost of rebuilding or restoring the
Premises. The Premises shall be so restored or rebuilt as to be substantially
the same quality and character as the Premises were prior to such damage or
destruction in accordance with the original plans and specifications or to such
other condition as Mortgagee shall reasonably approve in writing.

     If Mortgagee elects to make the proceeds available for repair and
restoration, any request by Mortgagor for a disbursement by Mortgagee of fire or
casualty insurance proceeds and funds deposited by Mortgagor with Mortgagee
pursuant to this Section 5.5 shall be treated by Mortgagee as if such request
were for an Advance under the Credit Agreement, and the disbursement thereof
shall be conditioned upon the Borrower's compliance with and satisfaction of the
same conditions precedent as would be applicable under the Credit Agreement for
such an Advance, and during any such period that funds are available to the
Borrower for application to restore the Property, the amount of the Borrowing
Base attributable to the Property shall be determined in accordance with the
terms of the Credit Agreement. Additionally, such disbursement shall also be
conditioned upon Borrower's providing to Administrative Agent: updated title
insurance, satisfactory evidence, as reasonably determined by Administrative
Agent, that the Premises shall be so restored or rebuilt as to be of at least
equal value and quality and substantially the same character as the Premises
were prior to such damage or destruction in accordance with the original plans
and specifications or to such other condition as Administrative Agent shall
reasonably approve in writing, satisfactory evidence of the estimated cost of
completion thereof and with such architect's certificates, waivers of lien,
contractors' sworn statements and other evidence of cost and of payments as
Administrative Agent may reasonably require and approve. The undisbursed balance
of insurance proceeds shall at all times be sufficient to pay for the cost of
completion of the work free and clear of liens and if such proceeds are
insufficient, Mortgagor shall deposit the amount of such deficiency with

<PAGE>

Mortgagee prior to the disbursement by Mortgagee of (i) any insurance proceeds
or (ii) any additional Advances under the Credit Agreement for such purpose.

     5.6 Condemnation Proceeds. Mortgagor hereby assigns, transfers and sets
over unto Mortgagee its entire interest in the proceeds (the "Condemnation
Proceeds") of any award or any claim for damages for any of the Property taken
or damaged under the power of eminent domain or by condemnation or any
transaction in lieu of condemnation ("Condemnation"), unless, notwithstanding
the forgoing, (i) such taking, damage or condemnation does not cause a material
diminution in the value of the Premises or (ii) Mortgagor elects to release the
Property in accordance with the terms of Section 2.7(c) of the Credit Agreement,
in which case, upon such release, all Condemnation Proceeds for damages to the
Property shall be payable to the Mortgagor. Mortgagee shall make available to
Mortgagor the Condemnation Proceeds for the restoration of the Premises if
Mortgagor satisfies all of the conditions set forth in this Section 5.6 hereof
for disbursement of insurance proceeds. In all other cases Mortgagee shall have
the right, at its option, to apply the Condemnation Proceeds upon or in
reduction of the indebtedness secured hereby, whether due or not. If Mortgagee
is entitled to and does elect to apply Condemnation Proceeds upon or in
reduction of the indebtedness secured hereby, then Mortgagee shall reduce the
then outstanding balance of the Advances under the Credit Agreement by the
amount of the Condemnation Proceeds received and so applied by Mortgagee and the
Borrowing Base reduced. If the Condemnation Proceeds are required to be used as
aforesaid to reimburse Mortgagor for the cost of rebuilding or restoring
buildings or improvements on the Property, or if Mortgagee elects that the
Condemnation Proceeds be so used, and the buildings and other improvements shall
be rebuilt or restored, the Condemnation Proceeds shall be paid out in the same
manner as is provided in this Section 5.6 hereof for the payment of insurance
proceeds toward the cost of rebuilding or restoration of such buildings and
other improvements. Any surplus which may remain out of the Condemnation
Proceeds after payment of such cost of rebuilding or restoration shall, at the
option of Mortgagee, be applied on account of the indebtedness secured hereby or
be paid to any other party entitled thereto.

     5.7 Maintenance and Preservation of Property.

          (a) Mortgagor shall insure the Property as required by Schedule 11 of
     the Credit Agreement and keep the Property in good condition and repair.

          (b) Except as required by the terms of any lease approved by
     Administrative Agent, Mortgagor shall not remove or demolish the Property
     or any material part of it in any way, or materially alter, restore or add
     to the Property, or initiate or allow any material change or variance in
     any zoning or other Premises use classification which adversly affects the
     Property or any material part of it, except with Mortgagee's express prior
     written consent in each instance; the term "materially" or "material" as
     used in this Section 5.7(b) shall mean having a monetary effect in an
     amount greater than (i) $500,000 with respect to any Community Center and
     (ii) $1,000,000 with respect to any Regional Mall.

          (c) Mortgagor shall not commit or allow any act upon or use of the
     Property which would violate: (i) any applicable Laws or order of any
     Governmental Authority, whether now existing or later to be enacted and
     whether foreseen or unforeseen; or (ii) any public or private covenant,
     condition, restriction or equitable servitude affecting

<PAGE>

     the Property. Mortgagor shall not bring or keep any article on the Property
     or cause or allow any condition to exist on it, if that could invalidate or
     would be prohibited by any insurance coverage required to be maintained by
     Mortgagor on the Property or any part of it under the Credit Agreement.

          (d) Mortgagor shall not commit or allow waste of the Property,
     including those acts or omissions characterized under the Credit Agreement
     as waste which arises out of Materials of Environmental Concern.

          (e) Mortgagor shall perform all other acts which from the character or
     use of the Property may be reasonably necessary to maintain and preserve
     its value.

     5.8 Releases, Extensions, Modifications and Additional Security. From time
to time, Mortgagee may perform any of the following acts without incurring any
liability or giving notice to any person:

          (a) Release any person liable for payment of any Secured Obligation;

          (b) Extend the time for payment, or otherwise alter the terms of
     payment, of any Secured Obligation;

          (c) Accept additional real or personal property of any kind as
     security for any Secured Obligation, whether evidenced by deeds of trust,
     mortgages, security agreements or any other instruments of security;

          (d) Alter, substitute or release any property securing the Secured
     Obligations;

          (e) Consent to the making of any plat or map of the Property or any
     part of it;

          (f) Join in granting any easement or creating any restriction
     affecting the Property; or (g) Join in any subordination or other agreement
     affecting this Mortgage or the lien of it; or

          (h) Release the Property or any part of it.

     5.9 Release. If (a) Mortgagor shall fully pay all principal and interest on
the Notes, and all other indebtedness secured hereby and comply with all of the
other terms and provisions hereof to be performed and complied with by
Mortgagor, and terminate the obligations of the Lenders to make additional
advances under the Credit Agreement; or (b) Mortgagor shall comply with the
terms and conditions as set forth in Section 2.7(c) of Credit Agreement for
release of this Mortgage, Mortgagee, upon written request of Mortgagor stating
that the requirements of either clause (a) or clause (b) above have been
satisfied, shall release this Mortgage and the lien thereof by proper instrument
upon payment and discharge of the amounts required under the Credit Agreement
and payment of any filing fee in connection with such release. Mortgagor shall
pay any costs of preparation and recordation of such release.

<PAGE>

     5.10 Compensation, Exculpation, Indemnification.

          (a) Mortgagor agrees to pay fees required by and pursuant to the
     Credit Agreement, for any services that Mortgagee may render in connection
     with this Mortgage, including Mortgagee's providing a statement of the
     Secured Obligations or providing the release pursuant to Section 5.9 above.
     Mortgagor shall also pay or reimburse all of Mortgagee's costs and expenses
     which may be incurred in rendering any such services. Mortgagor further
     agrees to pay or reimburse Mortgagee for all costs, expenses and other
     advances which may be incurred or made by Mortgagee in any efforts to
     enforce any terms of this Mortgage, including any rights or remedies
     afforded to Mortgagee under Section 6.4, whether any lawsuit is filed or
     not, or in defending any action or proceeding arising under or relating to
     this Mortgage, including attorneys' fees and other legal costs, costs of
     any Foreclosure Sale (as defined in Subsection 6.4(i) below) and any cost
     of evidence of title. If Mortgagee chooses to dispose of Property through
     more than one Foreclosure Sale, Mortgagor shall pay all costs, expenses or
     other advances that may be incurred or made by Mortgagee in each of such
     Foreclosure Sales. In any suit to foreclose the lien hereof or enforce any
     other remedy of Mortgagee under this Mortgage or the Note, there shall be
     allowed and included as additional indebtedness in the decree for sale or
     other judgment or decree all expenditures and expenses which may be paid or
     incurred by or on behalf of Mortgagee for reasonable attorneys' costs and
     fees (including the costs and fees of paralegals), survey charges,
     appraiser's fees, inspecting engineer's and/or architect's fees, fees for
     environmental studies and assessments and all additional expenses incurred
     by Mortgagee with respect to environmental matters, outlays for documentary
     and expert evidence, stenographers' charges, publication costs, and costs
     (which may be estimated as to items to be expended after entry of the
     decree) of procuring all such abstracts of title, title searches and
     examinations, title insurance policies, and similar data and assurances
     with respect to title as Mortgagee may deem reasonably necessary either to
     prosecute such suit or to evidence to bidders at any sale which may be had
     pursuant to such decree the true condition of the title to, the value of or
     the environmental condition of the Property. All expenditures and expenses
     of the nature in this Subsection mentioned, and such expenses and fees as
     may be incurred in the protection of the Property and maintenance of the
     lien of this Mortgage, including the fees of any attorney (including the
     costs and fees of paralegals) employed by Mortgagee in any litigation or
     proceeding affecting this Mortgage, the Note or the Property, including
     probate and bankruptcy proceedings, or in preparation for the commencement
     or defense of any proceeding or threatened suit or proceeding, shall be
     immediately due and payable by Mortgagor, with interest thereon at the
     Default Rate and shall be secured by this Mortgage.

          (b) Mortgagee shall not be directly or indirectly liable to Mortgagor
     or any other person as a consequence of any of the following:

               (i) Mortgagee's exercise of or failure to exercise any rights,
          remedies or powers granted to Mortgagee in this Mortgage;

               (ii) Mortgagee's failure or refusal to perform or discharge any
          obligation or liability of Mortgagor under any agreement related to
          the Property or under this Mortgage; or

<PAGE>

               (iii) Any loss sustained by Mortgagor or any third party
          resulting from Mortgagee's failure to lease the Property, or from any
          other act or omission of Mortgagee in managing the Property, after an
          Event of Default, unless the loss is caused by the willful misconduct,
          gross negligence, or bad faith of Mortgagee.

     Mortgagor hereby expressly waives and releases all liability of the types
     described above, and agrees that no such liability shall be asserted
     against or imposed upon Mortgagee.

          (c) Mortgagor agrees to indemnify Mortgagee against and hold it
     harmless from all losses, damages, liabilities, claims, causes of action,
     judgments, court costs, attorneys' fees and other legal expenses, cost of
     evidence of title, cost of evidence of value, and other costs and expenses
     which it may suffer or incur, unless caused by the gross negligence,
     willful misconduct or bad faith of the Mortgagee:

               (i) In performing any act required or permitted by this Mortgage
          or any of the other Loan Documents or by law;

               (ii) Because of any failure of Mortgagor to perform any of its
          obligations; or

               (iii) Because of any alleged obligation of or undertaking by
          Mortgagee to perform or discharge any of the representations,
          warranties, conditions, covenants or other obligations in any document
          relating to the Property other than the Loan Documents.

     This agreement by Mortgagor to indemnify Mortgagee shall survive the
     release and cancellation of any or all of the Secured Obligations and the
     full or partial release of this Mortgage.

          (d) Mortgagor shall pay all obligations to pay money arising under
     this Section 5.9 immediately upon demand by Mortgagee. Each such obligation
     shall be added to, and considered to be part of, the principal of the Note,
     and shall bear interest from the date the obligation arises at the Default
     Rate.

     5.11 Defense and Notice of Claims and Actions. At Mortgagor's sole expense,
Mortgagor shall protect, preserve and defend the Property and title to and right
of possession of the Property, and the security of this Mortgage and the rights
and powers of Mortgagee created under it, against all adverse claims. Mortgagor
shall give Mortgagee prompt notice in writing if any claim is asserted which
does or could affect any such matters, or if any action or proceeding is
commenced which alleges or relates to any such claim.

     5.12 Subrogation. Mortgagee shall be subrogated to the liens of all
encumbrances, whether released of record or not, which are discharged in whole
or in part by Mortgagee in accordance with this Mortgage or with the proceeds of
any loan secured by this Mortgage.

     5.13 Site Visits, Observation and Testing. Mortgagee and its agents and
representatives shall have the right at any reasonable time to enter and visit
the Property for the purpose of performing appraisals, observing the Property,
and conducting non-invasive tests (unless Mortgagee has a good faith reason to
believe that the taking and removing soil or

<PAGE>

groundwater samples is required, and in such case, conducting such tests) on any
part of the Property. Mortgagee has no duty, however, to visit or observe the
Property or to conduct tests, and no site visit, observation or testing by
Mortgagee, its agents or representatives shall impose any liability on any of
Mortgagee, its agents or representatives. In no event shall any site visit,
observation or testing by Mortgagee, its agents or representatives be a
representation that Materials of Environmental Concern are or are not present
in, on or under the Property, or that there has been or shall be compliance with
any law, regulation or ordinance pertaining to Materials of Environmental
Concern or any other applicable governmental law. Neither Mortgagor nor any
other party is entitled to rely on any site visit, observation or testing by any
of Mortgagee, its agents or representatives. Neither Mortgagee, its agents or
representatives owe any duty of care to protect Mortgagor or any other party
against, or to inform Mortgagor or any other party of, any Materials of
Environmental Concern or any other adverse condition affecting the Property.
Mortgagee shall give Mortgagor reasonable notice before entering the Property.
Mortgagee shall make reasonable efforts to avoid interfering with Mortgagor's
use of the Property in exercising any rights provided in this Section 5.13.
Notwithstanding the foregoing, all rights granted to Mortgagee under this
Section 5.13 are subject to all rights of tenants to the Property.

     5.14 Notice of Change. Mortgagor shall give Mortgagee prior written notice
of any change in: (a) the location of its place of business or its chief
executive office if it has more than one place of business; (b) the location of
any of the Property, including the Books and Records; and (c) Mortgagor's name
or business structure. Unless otherwise approved by Mortgagee in writing, all
Property that consists of personal property (other than the Books and Records)
will be located on the Premises and all Books and Records will be located at
Mortgagor's place of business or chief executive office if Mortgagor has more
than one place of business.

6.   Transfers, Default and Remedies.

     6.1 Transfers. Mortgagor acknowledges that Mortgagee is making one or more
advances under the Credit Agreement in reliance on the expertise, skill and
experience of Mortgagor; thus, the Secured Obligations include material elements
similar in nature to a personal service contract. In consideration of
Mortgagee's reliance, Mortgagor agrees that Mortgagor shall not make any
transfer of the Property or transfer of its interests therein, except for leases
in the ordinary course (a "Transfer"), unless the Transfer is preceded by
Mortgagee's express written consent to the particular transaction and
transferee. Mortgagee may withhold such consent in its sole discretion.

     6.2 Events of Default. Mortgagor will be in default under this Mortgage
upon the occurrence of any one or more of the following events (some or all
collectively, "Events of Default;" any one singly, an "Event of Default"):

          (a) If a default shall occur with respect to covenants, agreements and
     obligations of Mortgagor under this Mortgage involving the payment of money
     (other than a default in the payment of principal when due as provided in
     Section 7.1 of the Credit Agreement) and shall continue for a period of
     five (5) business days after the due date thereof; or

          (b) If there is a failure to perform or observe any of the other
     covenants, agreements and conditions contained in this Mortgage in
     accordance with the terms

<PAGE>

     hereof, and such default continues unremedied for a period of thirty (30)
     days after written notice from Mortgagee to defaulting Mortgagor of the
     occurrence thereof; or

          (c) An "Event of Default" occurs under the Credit Agreement or any
     other Loan Document.

     6.3 Remedies. At any time after an Event of Default, Mortgagee shall be
entitled to invoke any and all of the rights and remedies described below, in
addition to all other rights and remedies available to Mortgagee at law or in
equity. All of such rights and remedies shall be cumulative, and the exercise of
any one or more of them shall not constitute an election of remedies.

          (a) Acceleration. Upon the occurrence and continuation of any Event of
     Default above under subsections 6.2 (a) or 6.2 (b) above, the Property
     shall no longer be eligible to be included in the calculation of the
     Borrowing Base unless the Required Lenders consent to its continued
     inclusion. Upon the occurrence of an Event of Default under subsection 6.2
     (c) above, or if upon removal of the Property from the Borrowing Base, the
     Borrower does not reduce the outstanding balance of the Loans to be less
     than or equal to the recomputed Borrowing Base within the time period
     allowed under Section 2.7(b) of the Credit Agreement, then the whole of
     said principal sum hereby secured shall, at once either automatically or at
     the option of Mortgagee as described in Section 8.1 of the Credit
     Agreement, become immediately due and payable, together with accrued
     interest thereon, without any presentment, demand, protest or notice of any
     kind to Mortgagor.

          (b) Receiver. Mortgagee shall, as a matter of right, without notice
     and without giving bond to Mortgagor or anyone claiming by, under or
     through Mortgagor, and without regard for the solvency or insolvency of
     Mortgagor or the then value of the Property, to the extent permitted by
     applicable law, be entitled to have a receiver appointed for all or any
     part of the Property and the Rents, and the proceeds, issues and profits
     thereof, with the rights and powers referenced below and such other rights
     and powers as the court making such appointment shall confer, and Mortgagor
     hereby consents to the appointment of such receiver and shall not oppose
     any such appointment. Such receiver shall have all powers and duties
     prescribed by applicable law, all other powers which are necessary or usual
     in such cases for the protection, possession, control, management and
     operation of the Property, and such rights and powers as Mortgagee would
     have, upon entering and taking possession of the Property under subsection
     (c) below.

          (c) Entry. Mortgagee, in person, by agent or by court-appointed
     receiver, may enter, take possession of, manage and operate all or any part
     of the Property, and may also do any and all other things in connection
     with those actions that Mortgagee may in its sole discretion consider
     necessary and appropriate to protect the security of this Mortgage. Such
     other things may include: taking and possessing all of Mortgagor's or the
     then owner's Books and Records; entering into, enforcing, modifying or
     canceling leases on such terms and conditions as Mortgagee may consider
     proper; obtaining and evicting tenants; fixing or modifying Rents;
     collecting and receiving any payment of money owing to Mortgagee;
     completing any unfinished construction; and/or contracting for and making
     repairs and alterations. If Mortgagee so requests, Mortgagor shall

<PAGE>

     assemble all of the Property that has been removed from the Premises and
     make all of it available to Mortgagee at the site of the Premises.
     Mortgagor hereby irrevocably constitutes and appoints Mortgagee as
     Mortgagor's attorney-in-fact to perform such acts and execute such
     documents as Mortgagee in its sole discretion may consider to be
     appropriate in connection with taking these measures, including endorsement
     of Mortgagor's name on any instruments.

          (d) Cure; Protection of Security. Mortgagee may cure any breach or
     default of Mortgagor, and if it chooses to do so in connection with any
     such cure, Mortgagee may also enter the Property and/or do any and all
     other things which it may in its sole discretion consider necessary and
     appropriate to protect the security of this Mortgage, including, without
     limitation, completing construction of the improvements at the Property
     contemplated by the Credit Agreement. Such other things may include:
     appearing in and/or defending any action or proceeding which purports to
     affect the security of, or the rights or powers of Mortgagee under, this
     Mortgage; paying, purchasing, contesting or compromising any encumbrance,
     charge, lien or claim of lien which in Mortgagee's sole judgment is or may
     be senior in priority to this Mortgage, such judgment of Mortgagee or to be
     conclusive as among the parties to this Mortgage; obtaining insurance
     and/or paying any premiums or charges for insurance required to be carried
     under the Credit Agreement; otherwise caring for and protecting any and all
     of the Property; and/or employing counsel, accountants, contractors and
     other appropriate persons to assist Mortgagee. Mortgagee may take any of
     the actions permitted under this Subsection 6.3(d) either with or without
     giving notice to any person. Any amounts expended by Mortgagee under this
     Subsection 6.3(d) shall be secured by this Mortgage.

          (e) Uniform Commercial Code Remedies. Mortgagee may exercise any or
     all of the remedies granted to a secured party under the Uniform Commercial
     Code in the State in which the Property is located.

          (f) Foreclosure; Lawsuits. Mortgagee shall have the right, in one or
     several concurrent or consecutive proceedings, to foreclose the lien hereof
     upon the Property or any part thereof, for the Secured Obligations, or any
     part thereof, by any proceedings appropriate under applicable law.
     Mortgagee or its nominee may bid and become the purchaser of all or any
     part of the Property at any foreclosure or other sale hereunder, and the
     amount of Mortgagee's successful bid shall be credited on the Secured
     Obligations. Without limiting the foregoing, Mortgagee may proceed by a
     suit or suits in law or equity, whether for specific performance of any
     covenant or agreement herein contained or in aid of the execution of any
     power herein granted, or for any foreclosure under the judgment or decree
     of any court of competent jurisdiction. In addition to the right provided
     in Subsection 6.3(a), upon, or at any time after the filing of a complaint
     to foreclose this Mortgage, Mortgagee shall be entitled to the appointment
     of a receiver of the property by the court in which such complaint is
     filed, and Mortgagor hereby consents to such appointment.

          (g) Other Remedies. Mortgagee may exercise all rights and remedies
     contained in any other instrument, document, agreement or other writing
     heretofore, concurrently or in the future executed by Mortgagor or any
     other person or entity in favor of Mortgagee in connection with the Secured
     Obligations or any part thereof, without prejudice to the right of
     Mortgagee thereafter to enforce any appropriate remedy against

<PAGE>

     Mortgagor. Mortgagee shall have the right to pursue all remedies afforded
     to a mortgagee under applicable law, and shall have the benefit of all of
     the provisions of such applicable law, including all amendments thereto
     which may become effective from time to time after the date hereof.

          (h) Sale of Personal Property. Mortgagee shall have the discretionary
     right to cause some or all of the Property, which constitutes personal
     property, to be sold or otherwise disposed of in any combination and in any
     manner permitted by applicable law.

               (i) For purposes of this power of sale, Mortgagee may elect to
          treat as personal property any Property which is intangible or which
          can be severed from the Premises or Improvements without causing
          structural damage. If it chooses to do so, Mortgagee may dispose of
          any personal property, in any manner permitted by Article 9 of the
          Uniform Commercial Code of the State in which the Property is located,
          including any public or private sale, or in any manner permitted by
          any other applicable law.

               (ii) In connection with any sale or other disposition of such
          Property, Mortgagor agrees that the following procedures constitute a
          commercially reasonable sale: Mortgagee shall mail written notice of
          the sale to Mortgagor not later than thirty (30) days prior to such
          sale. Mortgagee will publish notice of the sale in a local daily
          newspaper of general circulation. Upon receipt of any written request,
          Mortgagee will make the Property available to any bona fide
          prospective purchaser for inspection during reasonable business hours.
          Notwithstanding, Mortgagee shall be under no obligation to consummate
          a sale if, in its judgment, none of the offers received by it equals
          the fair value of the Property offered for sale. The foregoing
          procedures do not constitute the only procedures that may be
          commercially reasonable.

          (i) Single or Multiple Foreclosure Sales. If the Property consists of
     more than one lot, parcel or item of property, Mortgagee may:

               (i) Designate the order in which the lots, parcels and/or items
          shall be sold or disposed of or offered for sale or disposition; and

               (ii) Elect to dispose of the lots, parcels and/or items through a
          single consolidated sale or disposition to be held or made under or in
          connection with judicial proceedings, or by virtue of a judgment and
          decree of foreclosure and sale; or through two or more such sales or
          dispositions; or in any other manner Mortgagee may deem to be in its
          best interests (any such sale or disposition, a "Foreclosure Sale;"
          and any two or more, "Foreclosure Sales").

          If Mortgagee chooses to have more than one Foreclosure Sale, Mortgagee
          at its option may cause the Foreclosure Sales to be held
          simultaneously or successively, on the same day, or on such different
          days and at such different times and in such order as Mortgagee may
          deem to be in its best interests. No Foreclosure Sale shall terminate
          or affect the liens of this Mortgage on any part of the Property which
          has not been sold, until all of the Secured Obligations have been paid
          in full.

<PAGE>

     6.4 Credit Bids. At any Foreclosure Sale, any person, including Mortgagor
or Mortgagee, may bid for and acquire the Property or any part of it to the
extent permitted by then applicable law. Instead of paying cash for such
property, Mortgagee may settle for the purchase price by crediting the sales
price of the property against the following obligations:

          (a) First, the portion of the Secured Obligations attributable to the
     expenses of sale, costs of any action and any other sums for which
     Mortgagor is obligated to pay or reimburse Mortgagee under Section 5.10 of
     this Mortgage; and

          (b) Second, all other Secured Obligations in any order and proportions
     as Mortgagee in its sole discretion may choose.

     6.5 Application of Foreclosure Sale Proceeds. Mortgagee shall apply the
proceeds of any Foreclosure Sale in the following manner:

          (a) First, to pay the portion of the Secured Obligations attributable
     to the expenses of sale, costs of any action and any other sums for which
     Mortgagor is obligated to reimburse Mortgagee under Section 5.10 of this
     Mortgage;

          (b) Second, to pay the portion of the Secured Obligations attributable
     to any sums expended or advanced by Mortgagee under the terms of this
     Mortgage which then remain unpaid;

          (c) Third, to pay all other Secured Obligations in any order and
     proportions as Mortgagee in its sole discretion may choose; and

          (d) Fourth, to remit the remainder, if any, to the person or persons
     entitled to it.

     6.6 Application of Rents and Other Sums. Mortgagee shall apply any and all
Rents collected by it, and any and all sums other than proceeds of a Foreclosure
Sale which Mortgagee may receive or collect under Section 6.3 above, in the
following manner:

          (a) First, to pay the portion of the Secured Obligations attributable
     to the costs and expenses of operation and collection that may be incurred
     by Mortgagee or any receiver;

          (b) Second, to pay all other Secured Obligations in any order and
     proportions as Mortgagee in its sole discretion may choose; and

          (c) Third, to remit the remainder, if any, to the person or persons
     entitled to it.

Mortgagee shall have no liability for any funds which it does not actually
receive.

7.   Miscellaneous Provisions.

     7.1 Additional Provisions. The Loan Documents fully state all of the terms
and conditions of the parties' agreement regarding the matters mentioned in or
incidental to this Mortgage. The Loan Documents also grant further rights to
Mortgagee and contain further

<PAGE>

agreements and affirmative and negative covenants by Mortgagor which apply to
this Mortgage and to the Property.

     7.2 No Waiver or Cure.

          (a) Each waiver by Mortgagee must be in writing, and no waiver shall
     be construed as a continuing waiver. No waiver shall be implied from any
     delay or failure by Mortgagee to take action on account of any default of
     Mortgagor. Consent by Mortgagee to any act or omission by Mortgagor shall
     not be construed as a consent to any other or subsequent act or omission or
     to waive the requirement for Mortgagee's consent to be obtained in any
     future or other instance.

          (b) If any of the events described below occurs, that event alone
     shall not: cure or waive any breach, Event of Default or notice of default
     under this Mortgage or invalidate any act performed pursuant to any such
     default or notice; or nullify the effect of any notice of default or sale
     (unless all Secured Obligations then due have been paid and performed and
     all other defaults under the Loan Documents have been cured); or impair the
     security of this Mortgage; or prejudice Mortgagee or any receiver in the
     exercise of any right or remedy afforded any of them under this Mortgage;
     or be construed as an affirmation by Mortgagee of any tenancy, lease or
     option, or a subordination of the lien of this Mortgage.

               (i) Mortgagee, its agent or a receiver takes possession of all or
          any part of the Property in the manner provided in Subsection 6.3(c).

               (ii) Mortgagee collects and applies Rents as permitted under
          Sections 2.3 and 6.6 above, either with or without taking possession
          of all or any part of the Property.

               (iii) Mortgagee receives and applies to any Secured Obligation
          any proceeds of any Property, including any proceeds of insurance
          policies, condemnation awards, or other claims, property or rights
          assigned to Mortgagee under Section 5.5 and Section 5.6 above.

               (iv) Mortgagee makes a site visit, observes the Property and/or
          conducts tests as permitted under Section 5.13 above.

               (v) Mortgagee receives any sums under this Mortgage or any
          proceeds of any collateral held for any of the Secured Obligations,
          and applies them to one or more Secured Obligations.

               (vi) Mortgagee or any receiver invokes any right or remedy
          provided under this Mortgage.

     7.3 Powers of Mortgagee.

          (a) If Mortgagee performs any act which it is empowered or authorized
     to perform under this Mortgage, including any act permitted by Section 5.8
     or Subsection 6.3(d) of this Mortgage, that act alone shall not release or
     change the personal liability of any person for the payment and performance
     of the Secured Obligations then

<PAGE>

     outstanding, or the lien of this Mortgage on all or the remainder of the
     Property for full payment and performance of all outstanding Secured
     Obligations. The liability of the original Mortgagor shall not be released
     or changed if Mortgagee grants any successor in interest to Mortgagor any
     extension of time for payment, or modification of the terms of payment, of
     any Secured Obligation. Mortgagee shall not be required to comply with any
     demand by the original Mortgagor that Mortgagee refuse to grant such an
     extension or modification to, or commence proceedings against, any such
     successor in interest.

          (b) Mortgagee may take any of the actions permitted under Subsections
     6.3(b) and/or 6.3(c) regardless of the adequacy of the security for the
     Secured Obligations, or whether any or all of the Secured Obligations have
     been declared to be immediately due and payable, or whether notice of
     default and election to sell has been given under this Mortgage.

          (c) From time to time, Mortgagee may apply to any court of competent
     jurisdiction for aid and direction in executing and enforcing the rights
     and remedies created under this Mortgage. Mortgagee may from time to time
     obtain orders or decrees directing, confirming or approving acts in
     executing and enforcing these rights and remedies.

     7.4 Merger. No merger shall occur as a result of Mortgagee's acquiring any
other estate in or any other lien on the Property unless Mortgagee consents to a
merger in writing.

     7.5 Joint and Several Liability. If Mortgagor consists of more than one
person, each shall be jointly and severally liable for the faithful performance
of all of Mortgagor's obligations under this Mortgage.

     7.6 Applicable Law. The creation, perfection and enforcement of the lien of
this Mortgage shall be governed by the law of the State in which the property is
located. Subject to the foregoing, in all other respects, this Mortgage shall be
governed by the substantive laws of the State of Ohio.

     7.7 Successors in Interest. The terms, covenants and conditions of this
Mortgage shall be binding upon and inure to the benefit of the heirs, successors
and assigns of the parties. However, this Section 7.7 does not waive the
provisions of Section 6.1 above.

     7.8 Interpretation.

          (a) Whenever the context requires, all words used in the singular will
     be construed to have been used in the plural, and vice versa, and each
     gender will include any other gender. The captions of the sections of this
     Mortgage are for convenience only and do not define or limit any terms or
     provisions. The word "include(s)" means "include(s), without limitation,"
     and the word "including" means "including, but not limited to."

          (b) The word "obligations" is used in its broadest and most
     comprehensive sense, and includes all primary, secondary, direct, indirect,
     fixed and contingent obligations. It further includes all principal,
     interest, prepayment charges, late charges,

<PAGE>

     loan fees and any other fees and charges accruing or assessed at any time,
     as well as all obligations to perform acts or satisfy conditions.

          (c) No listing of specific instances, items or matters in any way
     limits the scope or generality of any language of this Mortgage. The
     Exhibits to this Mortgage are hereby incorporated in this Mortgage.

     7.9 In-House Counsel Fees. Whenever Mortgagor is obligated to pay or
reimburse Mortgagee for any attorneys' fees, those fees shall include the
reasonable and customary allocated costs for services of in-house counsel.

     7.10 Waiver of Statutory Rights. To the extent permitted by law, Mortgagor
hereby agrees that it shall not and will not apply for or avail itself of any
appraisement, valuation, stay, extension or exemption laws, or any so-called
"Moratorium Laws," now existing or hereafter enacted, in order to prevent or
hinder the enforcement or foreclosure of this Mortgage, but hereby waives the
benefit of such laws. Mortgagor for itself and all who may claim through or
under it waives any and all right to have the property and estates comprising
the Property marshalled upon any foreclosure of the lien hereof and agrees that
any court having jurisdiction to foreclose such lien may order the Property sold
as an entirety. Mortgagor hereby waives any and all rights of redemption from
sale under any judgment of foreclosure of this Mortgage on behalf of Mortgagor
and on behalf of each and every person acquiring any interest in or title to the
Property of any nature whatsoever, subsequent to the date of this Mortgage. The
foregoing waiver of right of redemption is made pursuant to the provisions of
applicable law.

     7.11 Severability. If any provision of this Mortgage should be held
unenforceable or void, that provision shall be deemed severable from the
remaining provisions and shall in no way affect the validity of this Mortgage
except that if such provision relates to the payment of any monetary sum, then
Mortgagee may, at its option, declare all Secured Obligations immediately due
and payable.

     7.12 Notices. Any notice, demand, request or other communication which any
party hereto may be required or may desire to give hereunder shall be in writing
and shall be deemed to have been properly given (a) if hand delivered, when
delivered; (b) if mailed by United States Certified Mail (postage prepaid,
return receipt requested), three Business Days after mailing (c) if by Federal
Express or other reliable overnight courier service, on the next Business Day
after delivered to such courier service or (d) if by telecopier on the day of
transmission so long as copy is sent on the same day by overnight courier as set
forth below:

Mortgagor:           Glimcher River Valley Mall, LLC
                     150 East Gay Street
                     Columbus, Ohio 43215
                     Attention: General Counsel
                     Telephone: (614) 887-5619
                     Facsimile: (614) 621-8863

<PAGE>

With a copy to:      Squire, Sanders, & Dempsey
                     1300 Huntington Center
                     41 South High Street
                     Columbus, Ohio 43215
                     Attention:  Kim A. Rieck, Esq.
                     Telephone: (614) 365-2804
                     Facsimile: (614) 365 2499

Mortgagee:           KeyBank National Association
                     127 Public Square
                     Cleveland, Ohio 44114
                     Attention:  Real Estate Capital
                     Phone:     216-689-4660
                     Facsimile: 216-689-4997

With a copy to:      Sonnenschein Nath & Rosenthal, LLP
                     8000 Sears Tower
                     233 South Wacker
                     Chicago, Illinois 60606
                     Attention: Pat Moran, Esq.
                     Telephone  312-876-8132
                     Facsimile  312-876-7932

or at such other address as the party to be served with notice may have
furnished in writing to the party seeking or desiring to serve notice as a place
for the service of notice.

     Any notice or demand delivered to the person or entity named above to
accept notices and demands for Mortgagor shall constitute notice or demand duly
delivered to Mortgagor, even if delivery is refused.

     7.13 Future Advances. This Mortgage is given to, and the parties intend
that it shall secure indebtedness, exclusive of interest thereon, in a maximum
amount equal to the Aggregate Commitment from time to time under the Credit
Agreement which shall be an amount up to $150,000,000 which indebtedness may
include advances made at the request of Mortgagor or its respective successor(s)
in title after this Mortgage is filed of record to the fullest extent and with
the highest priority contemplated by law (including disbursements that the
Lenders may, but shall not be obligated to, make under this Mortgage, the Loan
Documents or any other document with respect thereto) plus interest thereon, and
any disbursements made for the enforcement of this Mortgage and any remedies
hereunder, payment of taxes, special assessments, utilities or insurance on the
Property and interest on such disbursements and all disbursements by Mortgagee
pursuant to applicable law (all such indebtedness being hereinafter referred to
as the maximum amount secured hereby). This Mortgage shall be valid and have
priority to the extent of the maximum amount secured hereby over all subsequent
liens and encumbrances, including statutory liens, excepting solely taxes and
assessments levied on the Property given priority by law. All future advances
under the Credit Agreement, the Notes, this Mortgage and the other

<PAGE>

Loan Documents shall have the same priority as if the future advance was made on
the date that this Mortgage was recorded

     7.14 Mortgagee's Lien for Service Charge and Expenses. At all times,
regardless of whether any Loan proceeds have been disbursed, this Mortgage
secures the payment of any and all loan commissions, service charges, liquidated
damages, expenses and advances due to or incurred by Mortgagee not to exceed the
maximum amount secured hereby. For purposes hereof, all obligations of Mortgagor
to Mortgagee under all Rate Management Transactions and any indebtedness or
obligation contained therein or evidenced thereby shall be considered an
obligation of Mortgagor secured hereby pursuant to the Credit Agreement;
provided however that in no event shall the total amount secured hereby exceed
$150,000,000.

     7.15 Advances. The loan evidenced by the Notes is a "revolving credit
loan". The lien of the Mortgage shall secure all advances made pursuant to the
terms of the Agreement to the same extent as if such future advances were made
on the date of execution of the Mortgage, provided that such advances are made
within twenty (20) years from the date hereof. Although there may be no
indebtedness outstanding on the Note at the time any such advance is made, the
lien of the Mortgage as to third persons without actual notice thereof, shall be
valid as to all such indebtedness and future advances from the time this
Mortgage is filed for record. The total amount of the indebtedness evidenced by
the Notes and secured by the Mortgage may increase or decrease from time to
time, but the total unpaid balance so secured at any one time shall not exceed
the maximum amount specified in Section 7.14 plus interest thereon and any
disbursements made for the payment of taxes, special assessments, insurance or
other disbursements made pursuant to the terms of this Mortgage, the Credit
Agreement, or the other Loan Documents.

     7.16 WAIVER OF TRIAL BY JURY. MORTGAGOR HEREBY KNOWINGLY, VOLUNTARILY AND
INTENTIONALLY WAIVES ANY RIGHT THAT IT MAY HAVE TO A TRIAL BY JURY IN ANY
LITIGATION ARISING IN ANY WAY IN CONNECTION WITH THIS MORTGAGE, THE NOTE, OR ANY
OF THE OTHER LOAN DOCUMENTS, THE LOAN OR ANY OTHER STATEMENTS OR ACTIONS OF
MORTGAGOR OR MORTGAGEE. MORTGAGOR ACKNOWLEDGES THAT IT HAS BEEN REPRESENTED IN
THE SIGNING OF THIS MORTGAGE AND IN THE MAKING OF THIS WAIVER BY INDEPENDENT
LEGAL COUNSEL SELECTED OF ITS OWN FREE WILL, AND THAT IT HAS DISCUSSED THIS
WAIVER WITH SUCH LEGAL COUNSEL. MORTGAGOR FURTHER ACKNOWLEDGES THAT (i) IT HAS
READ AND UNDERSTANDS THE MEANING AND RAMIFICATIONS OF THIS WAIVER, (ii) THIS
WAIVER IS A MATERIAL INDUCEMENT FOR MORTGAGEE TO MAKE THE LOAN, ENTER INTO THIS
MORTGAGE AND EACH OF THE OTHER LOAN DOCUMENTS, AND (iii) THIS WAIVER SHALL BE
EFFECTIVE AS TO EACH OF SUCH OTHER LOAN DOCUMENTS AS IF FULLY INCORPORATED
THEREIN.

     7.17 Incorporation of Credit Agreement and Environmental Indemnity
Agreement. The terms and provisions of the Credit Agreement and that certain
Environmental Indemnity Agreement (the "Indemnity") dated as of even date
herewith, are incorporated herein by express reference. All advances and
indebtedness arising and accruing under the Credit Agreement from time to time,
whether or not the resulting indebtedness secured hereby may exceed the face
amount of the Notes, shall be secured hereby to the same extent as though said
Credit Agreement were fully incorporated in this Mortgage, and the occurrence of
any Event of Default under said

<PAGE>

Credit Agreement shall constitute a Event of Default under this Mortgage
entitling Mortgagee to all of the rights and remedies conferred upon Mortgagee
by the terms of both this Mortgage and the Credit Agreement. Mortgagor hereby
agrees to comply with all covenants and fulfill all obligations set forth in the
Credit Agreement and Indemnity which pertain to the Premises as if Mortgagor
were a party to such documents. In the event of any conflict or inconsistency
between the terms of this Mortgage and the Credit Agreement or Indemnity, the
terms and provisions of the Credit Agreement or Indemnity as the case may be,
shall in each instance govern and control.

     7.18 Inconsistencies. In the event of any inconsistency between this
Mortgage and the Credit Agreement, the terms hereof shall be controlling as
necessary to create, preserve and/or maintain a valid security interest upon the
Property, otherwise the provisions of the Credit Agreement shall be controlling.

     7.19 Partial Invalidity; Maximum Allowable Rate of Interest. Mortgagor and
Mortgagee intend and believe that each provision in this Mortgage and the Notes
comports with all applicable local, state and federal laws and judicial
decisions. However, if any provision or provisions, or if any portion of any
provision or provisions, in this Mortgage or the Notes is found by a court of
law to be in violation of any applicable local, state or federal ordinance,
statute, law, administrative or judicial decision, or public policy, and if such
court should declare such portion, provision or provisions of this Mortgage and
the Notes to be illegal, invalid, unlawful, void or unenforceable as written,
then it is the intent both of Mortgagor and Mortgagee that such portion,
provision or provisions shall be given force to the fullest possible extent that
they are legal, valid and enforceable, that the remainder of this Mortgage and
the Notes shall be construed as if such illegal, invalid, unlawful, void or
unenforceable portion, provision or provisions were not contained therein, and
that the rights, obligations and interest of Mortgagor and Mortgagee under the
remainder of this Mortgage and the Notes shall continue in full force and
effect. All agreements herein and in the Notes are expressly limited so that in
no contingency or event whatsoever, whether by reason of advancement of the
proceeds hereof, acceleration of maturity of the unpaid principal balance of the
Notes, or otherwise, shall the amount paid or agreed to be paid to the Holders
for the use, forbearance or detention of the money to be advanced hereunder
exceed the highest lawful rate permissible under applicable usury laws. If, from
any circumstances whatsoever, fulfillment of any provision hereof or of the
Notes or any other agreement referred to herein, at the time performance of such
provision shall be due, shall involve transcending the limit of validity
prescribed by law which a court of competent jurisdiction may deem applicable
hereto, then, ipso facto, the obligation to be fulfilled shall be reduced to the
limit of such validity and if from any circumstance the Holders shall ever
receive as interest an amount which would exceed the highest lawful rate, such
amount which would be excessive interest shall be applied to the reduction of
the unpaid principal balance due under the Notes and not to the payment of
interest.

     7.20 UCC Financing Statements. Mortgagor hereby authorizes Mortgagee to
file UCC financing statements to perfect Mortgagee's security interest in any
part of the Property. In addition, Mortgagor agrees to sign any and all other
documents that Mortgagee deems necessary in its sole discretion to perfect,
protect, and continue Mortgagee's lien and security interest on the Property.

     7.21 Applicable Law. This Mortgage shall be construed, interpreted and
governed by the laws of the State in which the Premises are located.

<PAGE>

     7.22 Certain Matters Relating to Property Located in the State of Ohio.
With respect to the Property which is located in the State of Ohio,
notwithstanding anything contained herein to the contrary:

     7.23 Open-End Mortgage Maximum Principal Amount. This Mortgage is an
open-end mortgage made pursuant to Section 5301.232 of the Ohio Revised Code,
and shall secure the payment of all loan advances included within the term
"Obligations," regardless of the time such advances are made. The maximum amount
of unpaid loan indebtedness, exclusive of interest thereon, which may be
outstanding at any time and secured hereby shall be the maximum principal amount
stated on the first page of this Mortgage. As permitted and provided in Section
5301.233 of the Ohio Revised Code, this Mortgage shall also secure unpaid
balances of advances made with respect to the Property for the payment of taxes,
assessments, insurance premiums, or costs incurred for the protection of the
Property and other costs which Mortgagee is authorized by this Mortgage to pay
on Mortgagor's behalf, plus interest thereon, regardless of the time when such
advances are made.

     7.24 Ohio Remedies. Without limitation to the other terms and provisions of
this Mortgage, Mortgagee may, at its option, do all things provided or permitted
to be done by a mortgagee under Section 1311.14 of the Ohio Revised Code and any
amendment thereto, for the protection of Mortgagee's interest in the Property.

<PAGE>

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

                             Mortgagor:

                             GLICMHER RIVER VALLEY MALL, LLC, a
                             Delaware limited liability company

                             By: Glimcher Properties Limited Partnership,
                                 a Delaware limited partnership, sole member

                                 By: Glimcher Properties Corporation, a
                                     Delaware corporation, Sole General Partner

                                     By:  /s/ George A. Schmidt
                                          ------------------------------------
                                          George A. Schmidt,
                                          Executive Vice President

<PAGE>

STATE OF ____________      )

                           ) SS:

COUNTY OF __________       )

     The foregoing instrument was acknowledged before me this 30th day of
August, 2004 by George A. Schmidt, with whom I am personally acquainted (or
proved to me on the basis of satisfactory evidence), and who, upon oath,
acknowledged himself to be the Executive Vice President of Glimcher Properties
Corporation, a Delaware corporation, the Sole General Partner of Glimcher
Properties Limited Partnership, a Delaware limited partnership, the sole member
of River Valley Mall, LLC, a Delaware limited liability company, the within
named bargainor, and that he as such Executive Vice President, executed the
foregoing instrument for the purpose therein contained, by signing the name of
the company by himself as George A. Schmidt. He is personally known to me or has
produced a State of Ohio driver's license as identification.

                                        Sign Name:______________________________
                                                                   Notary Public

                                        Print Name:_____________________________

                                        Serial No. (if any):____________________

                                                    [NOTARIAL SEAL]

My Commission Expires: ___________________

THIS INSTRUMENT WAS PREPARED BY AND UPON RECORDATION RETURN TO: Sonnenschein
Nath & Rosenthal, LLP, 8000 Sears Tower, 233 South Wacker, Chicago, Illinois
60606, Attention: Pat Moran, Esq.

<PAGE>

                                    EXHIBIT A

                             Description of Premises

                                  See Attached

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