Document:

Exhibit 10.1

     

    EXHIBIT
      10.1

    

    SECURITIES
      PURCHASE AGREEMENT 

    (CONVERTIBLE
      DEBENTURES)

    

    THIS
      SECURITIES PURCHASE AGREEMENT
      (the
“Agreement”), dated as of __________ ____, 2006, is entered into by and among
      Interactive Games, Inc., a Nevada corporation (the “Company”), having its
      address at 319 Clematis Street, Suite 803, West Palm Beach, FL 33401, and each
      entity named on the signature page hereto as a buyer and the permitted assigns
      of such entity (each, a “Buyer”) (each agreement with a Buyer being deemed a
      separate and independent agreement between the Company and such Buyer, except
      that each Buyer acknowledges and consents to the rights granted to each other
      Buyer under this Agreement and the Transaction Documents (as defined
      below)).

     

     

    W
      I T N E S S E T H:

     

    WHEREAS,
      the
      Company and the Buyers are executing and delivering this Agreement in accordance
      with and in reliance upon the exemption from securities registration afforded,
      inter
      alia,
      by Rule
      506 under Regulation D (“Regulation D”) as promulgated by the United States
      Securities and Exchange Commission (the “SEC”) under the Securities Act of 1933,
      as amended (the “1933 Act”), and/or Section 4(2) of the 1933 Act;
      and

     

    WHEREAS,
      the
      Buyers severally, and not jointly, wish to purchase, upon the terms and subject
      to the conditions of this Agreement, a minimum aggregate amount of $200,000
      and
      a maximum aggregate amount of $700,000 of convertible debentures of the Company
      (the “Debentures”), which will be convertible into shares of the Company’s
      Common Stock, par value $0.001 per share (the “Common Stock”), upon the terms
      and subject to the conditions of the Debentures, and subject to acceptance
      of
      this Agreement by the Company;

     

    NOW
      THEREFORE,
      in
      consideration of the premises and the mutual covenants contained herein and
      other good and valuable consideration, the receipt and sufficiency of which
      are
      hereby acknowledged, the parties agree as follows:

     

    1.  AGREEMENT
      TO PURCHASE; PURCHASE PRICE.

     

    a.  Purchase.

     

    (i)  The
      undersigned Buyers hereby severally agree to purchase the Debentures from the
      Company on the terms and conditions set forth below in this Agreement and the
      other Transaction Documents (as defined below).

     

    (ii)  Subject
      to the terms and conditions of this Agreement and the other Transaction
      Documents the Buyers will purchase the Debentures at one or more closings (each,
      a “Closing”) to be held on the respective Closing Dates (as defined below).

     

    (iii)  The
      purchase price to be paid respectively by the Buyers shall equal 100% of the
      face amount of the Debentures being purchased on the Closing Date by each Buyer
      as set forth on the signature page to this Agreement.

     

    b.  Certain
      Definitions.

     

    As
      used
      herein, each of the following terms has the meaning set forth below, unless
      the
      context otherwise requires:

     

    (i)  “Affiliate”
      means, with respect to a specific Person referred to in the relevant provision,
      another Person who or which controls or is controlled by or is under common
      control with such specified Person.

     

    (ii)  “Certificates”
      means the relevant Debentures duly executed on behalf of the Company and issued
      in the name of the respective Buyer. 

     

    (iii)  “Closing
      Date” means the respective dates on which the Closings referred to in this
      Agreement are held.

     

    (iv)  “Conversion
      Shares” means the shares of Common Stock issuable upon conversion of the
      Debentures.

     

    
      
        
        

      

      
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    (v)  “Dollars”
      or “$” means United States Dollars.

     

    (vi)  “Effective
      Date” means the effective date of the Registration Statement covering the
      Registrable Securities (as those terms are defined in the Registration Rights
      Agreement defined below) for the Debentures issued hereunder.

     

    (vii)  “Escrow”
      means the Divine Capital Markets LLC IGAM Special Escrow Account maintained
      at
      JP Morgan/Chase Manhattan Bank.

     

    (viii)  “Final
      Closing Date” shall have the meaning ascribed to such term in Section
      6(a).

     

    (ix)  “Person”
      means any living person or any entity, such as, but not necessarily limited
      to,
      a corporation, partnership or trust.

     

    (x)  “Placement
      Agent” means Divine Capital Markets, LLC.

     

    (xi)  “Purchase
      Price” means the purchase price for the Debentures.

     

    (xii)  “Securities”
      means the Debentures and the Shares. 

     

    (xiii)  “Shares”
      means the Conversion Shares and the shares issued to the Placement Agent or
      any
      of its designees in connection with its services in connection with this
      offering of Debentures.

     

    (xiv)  “Transaction
      Documents” means, collectively, this Agreement, the Debentures, the Registration
      Rights Agreement and the other agreements, documents and instruments
      contemplated hereby or thereby.

     

    c.  Form
      of Payment; Delivery of Certificates. 

     

    (i)  Each
      of
      the Buyers shall pay the Purchase Price for the Debentures to be purchased
      by
      such Buyer by delivering immediately available good funds in United States
      Dollars to the Escrow prior to the respective Closing on the applicable Closing
      Date, determined as provided in Section 6.

     

    (ii)  Promptly
      following payment to the Company from the Escrow of the Purchase Price to be
      paid for the purchase of the Debentures being purchased by such Buyer, the
      Company shall deliver to the Buyers the Certificates purchased at such Closing.
      

     

    d.  Payment
      to the Escrow. All
      payments to the Escrow for the purchase of the Debentures shall be made at
      or
      prior to the Closing by wire transfer of funds to the Escrow, as
      follows:

     

    Beneficiary
      Account Name:       Divine
      Capital Markets LLC

    IGAM
      Special Escrow Account

    

    FBO:
      For
      Exclusive Benefit of Clients of Divine Capital - IGAM

     

    Beneficiary
      Account No.: Acct:
      151-631986-8-65

     

    ABA/Transit
      No.:                    
021-000-021

    

    Beneficiary
      Bank:                     
JP
      Morgan
      Chase Manhattan Bank

    1
      Chase
      Manhattan Plaza

    New
      York,
      NY 10004 

     

    
      
        
        

      

      
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    2.  BUYERS
      REPRESENTATIONS, WARRANTIES, ETC.; ACCESS TO INFORMATION; INDEPENDENT
      INVESTIGATION.

     

    Each
      Buyer represents and warrants to, and covenants and agrees with, the Company
      as
      follows:

     

    a.  Without
      limiting any Buyer’s right to sell the Common Stock pursuant to the Registration
      Statement, each Buyer is purchasing the Debentures and will be acquiring the
      Conversion Shares for its own account for investment only and not with a view
      towards the public sale or distribution thereof and not with a view to or for
      sale in connection with any distribution thereof.

     

    b.  Each
      Buyer is (i) an “accredited investor” as that term is defined in Rule 501 of the
      General Rules and Regulations under the 1933 Act by reason of Rule 501(a)(3),
      (ii) experienced in making investments of the kind described in this Agreement
      and the related documents, (iii) able, by reason of the business and financial
      experience of its officers (if an entity) and professional advisors (who are
      not
      affiliated with or compensated in any way by the Company or any of its
      affiliates or selling agents), to protect its own interests in connection with
      the transactions described in this Agreement, and the related documents, and
      (iv) able to afford the entire loss of its investment in the
      Securities.

     

    c.  All
      subsequent offers and sales of the Securities by each Buyer shall be made
      pursuant to registration of the Shares under the 1933 Act or pursuant to an
      exemption from registration and compliance with applicable states’ securities
      laws.

     

    d.  Each
      Buyer understands that the Securities are being offered and sold to it in
      reliance on specific exemptions from the registration requirements of United
      States federal and state securities laws and that the Company is relying upon
      the truth and accuracy of, and the Buyer’s compliance with, the representations,
      warranties, agreements, acknowledgments and understandings of the Buyers set
      forth herein in order to determine the availability of such exemptions and
      the
      eligibility of the Buyers to acquire the Securities.

     

    e.  Each
      Buyer and its advisors, if any, have been furnished with all materials relating
      to the business, finances and operations of the Company and materials relating
      to the offer and sale of the Securities which have been requested by the Buyer.
      Each Buyer and its advisors, if any, have been afforded the opportunity to
      ask
      questions of the Company and have received complete and satisfactory answers
      to
      any such inquiries. Without limiting the generality of the foregoing, each
      Buyer
      has also had the opportunity to obtain and to review the Company’s (1) Amended
      Annual Report on Form 10-KSB/A for the fiscal year ended July 31, 2005, filed
      December 21, 2005, (2) Amended Quarterly Report on Form 10-QSB/A for the period
      ended October 31, 2005, filed December 21, 2005; (3) Quarterly Report on Form
      10-QSB for the period ended January 31, 2006, filed March 21, 2006
      (collectively, the “Company’s SEC Documents”).

     

    f.  Each
      Buyer understands that its investment in the Securities involves a high degree
      of risk, including the risk of loss of the Buyer’s entire
      investment.

     

    g.  Each
      Buyer understands that no United States federal or state agency or any other
      government or governmental agency has passed on or made any recommendation
      or
      endorsement of the Securities.

     

    h.  Each
      Buyer is duly organized, validly existing and in good standing under the laws
      of
      the jurisdiction of its organization. This Agreement and the other Transaction
      Documents have been duly and validly authorized, executed and delivered on
      behalf of the Buyer and create a valid and binding agreement of the Buyer
      enforceable in accordance with its terms, subject as to enforceability to
      general principles of equity and to bankruptcy, insolvency, moratorium and
      other
      similar laws affecting the enforcement of creditors’ rights
      generally.

     

    i.  The
      state
      in which any offer to purchase shares hereunder was made to or accepted by
      such
      Buyer is the state shown as the Buyer’s address on the signature page
      hereof.

     

    
      
        
        

      

      
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    3.  COMPANY
      REPRESENTATIONS, ETC.

     

    The
      Company represents and warrants to the Buyers that:

     

    a.  Concerning
      the Debentures and the Shares. There
      are
      no preemptive rights of any stockholder of the Company to acquire the Debentures
      or the Shares. 

     

    b.  Reporting
      Company Status. The
      Company is a corporation duly organized, validly existing and in good standing
      under the laws of the State of Nevada and has the requisite corporate power
      to
      own its properties and to carry on its business as now being conducted. The
      Company is duly qualified as a foreign corporation to do business and is in
      good
      standing in each jurisdiction where the nature of the business conducted or
      property owned by it makes such qualification necessary, other than those
      jurisdictions in which the failure to so qualify would not have a material
      adverse effect on the business, operations or condition (financial or otherwise)
      or results of operation of the Company and its subsidiaries taken as a whole
      (a
“Material Adverse Effect”). The Company has registered its Common Stock pursuant
      to Section 12 of the Securities Exchange Act of 1934, as amended (the “1934
      Act”), and the Common Stock is listed and traded on the OTC Bulletin Board
      Market of the National Association of Securities Dealers, Inc. (trading symbol:
      IGAM.otcbb). The Company has received no notice, either oral or written, with
      respect to the continued eligibility of the Common Stock for such listing,
      and
      the Company has maintained all requirements for the continuation of such
      listing.

     

    c.  Authorized
      Shares. The
      authorized capital stock of the Company consists of 105,000,000 shares of
      capital stock, of which 100,000,000 shares are designated as shares of Common
      Stock and 5,000,000 shares are designated as shares of preferred stock. As
      of
      the date hereof, 51,282,100 shares
      of
      Common Stock are issued and outstanding, (excluding an additional approximately
      150,000 shares
      of
      Common Stock underlying Common Stock equivalents that are currently issued
      and
      outstanding, as more specifically described in Schedule
      3(c)
      hereto,
      which is hereby incorporated herein by reference), and zero shares of preferred
      stock are issued and outstanding. All issued and outstanding shares of Common
      Stock have been duly authorized and validly issued and are fully paid and
      nonassessable. The Company has sufficient authorized and unissued shares of
      Common Stock as may be necessary to effect the issuance of the Shares. The
      Shares have been duly authorized and, when issued upon conversion of, or as
      interest on, the Debentures will be duly and validly issued, fully paid and
      non-assessable and will not subject the holder thereof to personal liability
      by
      reason of being such holder. At all times, the Issuer shall keep available
      and
      reserved for issuance to the holders of the Debentures Common Stock duly
      authorized for issuance against the Debentures.

     

    d.  Securities
      Purchase Agreement; Registration Rights Agreement. This
      Agreement and the Registration Rights Agreement, between the Company and the
      Buyers, substantially in the form of Exhibit B annexed hereto (the “Registration
      Rights Agreement”), and the issuance of the Debentures and the other
      transactions contemplated by the Transaction Documents, have been duly and
      validly authorized by the Company, and this Agreement has been duly executed
      and
      delivered by the Company. Each of the Transaction Documents, when executed
      and
      delivered by the Company, are and will be, valid, legal and binding agreements
      of the Company, enforceable in accordance with their respective terms, subject
      as to enforceability to general principles of equity and to bankruptcy,
      insolvency, moratorium, and other similar laws affecting the enforcement of
      creditors’ rights generally.

     

    e.  Non-contravention.
      The
      execution and delivery of the Transaction Documents, the issuance of the
      Securities and the consummation by the Company of the other transactions
      contemplated by this Agreement, the Registration Rights Agreement, and the
      Debentures do not and will not conflict with or result in a breach by the
      Company of any of the terms or provisions of, or constitute a default under
      (i)
      the articles of incorporation or by-laws of the Company, each as currently
      in
      effect, (ii) any indenture, mortgage, deed of trust, or other material agreement
      or instrument to which the Company is a party or by which it or any of its
      properties or assets are bound, including any listing agreement for the Common
      Stock, except as herein set forth or an event which results in the creation
      of
      any lien, charge or encumbrance upon any assets of the Company or of any of
      its
      subsidiaries or the triggering of any preemptive or anti-dilution rights or
      rights of first refusal or first offer on the part of holders of the Company’s
      securities, (iii) to its knowledge, any existing applicable law, rule, or
      regulation or any applicable decree, judgment, or order of any court, United
      States federal or state regulatory body, administrative agency, or other
      governmental body having jurisdiction over the Company or any of its properties
      or assets, or (iv) the Company’s listing agreement for its Common Stock (if
      applicable), except such conflict, breach or default which would not have a
      Material Adverse Effect. 

     

    f.  Approvals.
      No
      authorization, approval or consent of any court, governmental body, regulatory
      agency, self-regulatory organization, or stock exchange or market or the
      stockholders of the Company is required to be obtained by the Company for the
      entering into and performing this Agreement and the other Transaction Documents
      (including without limitation the issuance and sale of the Securities to the
      Buyers as contemplated by this Agreement) except such authorizations, approvals
      and consents that have been obtained, or such authorizations, approvals and
      consents, the failure of which to obtain would not have a Material Adverse
      Affect.

     

    
      
        
        

      

      
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    g.  SEC
      Filings. None
      of
      the Company’s SEC Documents contained, at the time they were filed, any untrue
      statement of a material fact or omitted to state any material fact required
      to
      be stated therein or necessary to make the statements made therein in light
      of
      the circumstances under which they were made, not misleading. Except as set
      forth on Schedule
      3(g)
      to this
      Agreement, the Company has since January 1, 2005 timely filed all requisite
      forms, reports and exhibits thereto with the SEC. The Company is not aware
      of
      any event occurring on or prior to a Closing Date or the Delivery Date (other
      than the transactions effected hereby) that would require the filing of, or
      with
      respect to which the Company intends to file, a Form 8-K after such date.

     

    h.  Absence
      of Certain Changes. Since
      July 31, 2005, there has been no material adverse change and no material adverse
      development in the business, properties, operations, condition (financial or
      otherwise), or results of operations of the Company or any of its subsidiaries,
      except as disclosed in the Company’s SEC Documents. Since July 31, 2005, except
      as provided in the Company’s SEC Documents, neither the Company nor any of its
      subsidiaries has (i) incurred or become subject to any material liabilities
      (absolute or contingent) except liabilities incurred in the ordinary course
      of
      business consistent with past practices; (ii) discharged or satisfied any
      material lien or encumbrance or paid any material obligation or liability
      (absolute or contingent), other than current liabilities paid in the ordinary
      course of business consistent with past practices; (iii) declared or made any
      payment or distribution of cash or other property to stockholders with respect
      to its capital stock, or purchased or redeemed, or made any agreements to
      purchase or redeem, any shares of its capital stock; (iv) sold, assigned or
      transferred any other tangible assets, or canceled any debts or claims, except
      in the ordinary course of business consistent with past practices; (v) suffered
      any substantial losses or waived any rights of material value, whether or not
      in
      the ordinary course of business, or suffered the loss of any material amount
      of
      existing business; (vi) made any changes in employee compensation, except in
      the
      ordinary course of business consistent with past practices; or (vii) experienced
      any material problems with labor or management in connection with the terms
      and
      conditions of their employment.

     

    i.  Full
      Disclosure. There
      is
      no fact known to the Company (other than general economic conditions known
      to
      the public generally or as disclosed in the Company’s SEC Documents) that has
      not been disclosed in writing to the Buyers that (i) would reasonably be
      expected to have a Material Adverse Effect, (ii) would reasonably be expected
      to
      materially and adversely affect the ability of the Company to perform its
      obligations pursuant to the Transaction Documents, or (iii) would reasonably
      be
      expected to materially and adversely affect the value of the rights granted
      to
      the Buyers in the Transaction Documents.

     

    j.  Absence
      of Litigation. Except
      as
      described in Schedule
      3(l),
      there
      is no action, suit, proceeding, inquiry or investigation before or by any court,
      public board or body pending or, to the knowledge of the Company, threatened
      against or affecting the Company or any of its subsidiaries, wherein an
      unfavorable decision, ruling or finding would have a Material Adverse Effect
      or
      which would adversely affect the validity or enforceability of, or the authority
      or ability of the Company and its subsidiaries taken as a whole to perform
      its
      obligations under, any of the Transaction Documents. Neither the Company nor
      any
      of its subsidiaries is a party to or subject to the provisions of, any order,
      writ, injunction, judgement or decree of any court or government agency or
      instrumentality which could reasonably be expected to have a Material Adverse
      Effect. 

     

    k.  Absence
      of Events of Default. Except
      as
      described in Schedule
      3(l), no
      Event
      of Default (or its equivalent term), as defined in the respective agreement,
      indenture, mortgage, deed of trust or other instrument, to which the Company
      or
      any of its subsidiaries is a party, and no event which, with the giving of
      notice or the passage of time or both, would become an Event of Default (or
      its
      equivalent term) (as so defined in such document), has occurred and is
      continuing, which would have a Material Adverse Effect. 

     

    l.  No
      Undisclosed Liabilities or Events. The
      Company has no liabilities or obligations other than those described on
Schedule
      3(l)
      and/or
      disclosed in the Company’s SEC Documents or those incurred in the ordinary
      course of the Company’s business since July 31, 2005, and which individually or
      in the aggregate, do not or would not have a Material Adverse Effect. No event
      or circumstances has occurred or exists with respect to the Company or its
      properties, business, condition (financial or otherwise), or results of
      operations, which, under applicable law, rule or regulation, requires public
      disclosure or announcement prior to the date hereof by the Company but which
      has
      not been so publicly announced or disclosed. There are no proposals currently
      under consideration or currently anticipated to be under consideration by the
      Board of Directors or the executive officers of the Company which proposal
      would
      (x) change the articles of incorporation, by-laws or any other charter document
      of the Company, each as currently in effect, with or without shareholder
      approval, which change would reduce or otherwise adversely affect the rights
      and
      powers of the shareholders of the Common Stock or (y) materially or
      substantially change the business, assets or capital of the Company, including
      its interests in subsidiaries. 

     

    m.  No
      Integrated Offering. Neither
      the Company nor any of its affiliates nor any person acting on its or their
      behalf has, directly or indirectly, at any time since March 1, 2005 made any
      offer or sales of any security or solicited any offers to buy any security
      under
      circumstances that would eliminate the availability of the exemption from
      registration under Rule 506 of Regulation D in connection with the offer and
      sale of the Securities as contemplated hereby.

     

    
      
        
        

      

      
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    n.  Dilution.
      The
      number of Shares issuable upon conversion of the Debentures may increase
      substantially in certain circumstances, including, but not necessarily limited
      to, the circumstance wherein the market price of the Common Stock declines
      prior
      to the conversion of the Debentures. The Company’s executive officers and
      directors have studied and fully understand the nature of the securities being
      sold hereby and recognize that they have a potential dilutive effect and further
      that the conversion of the Debentures and/or sale of the Conversion Shares
      may
      have an adverse effect on the market price of the Common Stock. The board of
      directors of the Company has concluded, in its good faith business judgment,
      that such issuance is in the best interests of the Company. The Company
      specifically acknowledges that its obligation to issue the Conversion Shares
      upon conversion of the Debentures is binding upon the Company and enforceable
      regardless of the dilution such issuance may have on the ownership interests
      of
      other shareholders of the Company.

     

    o.  Regulatory Permits.
      The
      Company has all such permits, easements, consents, licenses, franchises and
      other governmental and regulatory authorizations from all appropriate federal,
      state, local or other public authorities (“Permits”) as are necessary to own and
      lease its properties and conduct its businesses in all material respects in
      the
      manner described in the SEC Documents and as currently being conducted. All
      such
      Permits are in full force and effect and the Company has fulfilled and performed
      all of its material obligations with respect to such Permits, and no event
      has
      occurred that allows, or after notice or lapse of time would allow, revocation
      or termination thereof or will result in any other material impairment of the
      rights of the holder of any such Permit, subject in each case to such
      qualification as may be disclosed in the Prospectus. Such Permits contain no
      restrictions that would materially impair the ability of the Company to conduct
      businesses in the manner consistent with its past practices. The Company has
      not
      received notice or otherwise has knowledge of any proceeding or action relating
      to the revocation or modification of any such Permit.

     

    p.  Hazardous
      Materials.
      The
      Company is in compliance with all applicable Environmental Laws in all respects
      except where the failure to comply does not have and could not reasonably be
      expected to have a Material Adverse Effect. For purposes of the foregoing:
      

     

    “Environmental
      Laws”
means,
      collectively, the Comprehensive Environmental Response, Compensation and
      Liability Act of 1980, as amended, the Superfund Amendments and Reauthorization
      Act of 1986, the Resource Conservation and Recovery Act, the Toxic Substances
      Control Act, as amended, the Clean Air Act, as amended, the Clean Water Act,
      as
      amended, any other “Superfund” or “Superlien” law or any other applicable
      federal, state or local statute, law, ordinance, code, rule, regulation, order
      or decree regulating, relating to, or imposing liability or standards of conduct
      concerning, the environment or any Hazardous Material. 

    

    “Hazardous
      Material”
means
      and includes any hazardous, toxic or dangerous waste, substance or material,
      the
      generation, handling, storage, disposal, treatment or emission of which is
      subject to any Environmental Law.

    

    q.  Independent
      Public Accountants. Sherb
      & Co., LLP, who has certified the consolidated financial statements of the
      Company, including the notes thereto, included in the Company’s Annual Report on
      Forms 10-KSB and 10-KSB/A for the year ended July 31, 2005, is an independent
      public accountant with respect to the Company, as required by the 1933 Act,
      the
      1934 Act and the rules and regulations promulgated thereunder.

     

    r.  Internal
      Accounting Controls. The
      Company maintains a system of internal accounting controls sufficient to provide
      reasonable assurances that (1) transactions are executed in accordance with
      management’s general or specific authorization; (2) transactions are recorded as
      necessary to permit preparation of financial statements in conformity with
      generally accepted accounting principles and to maintain accountability for
      assets; (3) access to assets is permitted only in accordance with management’s
      general or specific authorization; and (4) the recorded accountability for
      assets is compared with existing assets at reasonable intervals and appropriate
      action is taken with respect to any differences.

     

    s.  No
      Brokers.
      The
      Company has not engaged any person to act on its behalf in connection with
      the
      purchase and sale of the Debentures to the Buyers hereunder other than Divine
      Capital Markets, LLC, and no person is entitled to receive any consideration
      from the Company or any Buyer arising from any finder’s agreement, brokerage
      agreement or other agreement to which the Company is a party. 

     

    
      
        
        

      

      
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    4.  CERTAIN
      COVENANTS AND ACKNOWLEDGMENTS.

     

    a.  Transfer
      Restrictions. The
      Buyers acknowledge that (1) the Debentures have not been and are not being
      registered under the provisions of the 1933 Act and, except as provided in
      the
      Registration Rights Agreement, the Shares have not been and are not being
      registered under the 1933 Act, and may not be transferred unless (A)
      subsequently registered thereunder or (B) the Buyers shall have delivered to
      the
      Company an opinion of counsel, reasonably satisfactory in form, scope and
      substance to the Company, to the effect that the Securities to be sold or
      transferred may be sold or transferred pursuant to an exemption from such
      registration; (2) any sale of the Securities made in reliance on Rule 144
      promulgated under the 1933 Act may be made only in accordance with the terms
      of
      said Rule and further, if said Rule is not applicable, any resale of such
      Securities under circumstances in which the seller, or the person through whom
      the sale is made, may be deemed to be an underwriter, as that term is used
      in
      the 1933 Act, may require compliance with some other exemption under the 1933
      Act or the rules and regulations of the SEC thereunder and (4) neither the
      Company nor any other person is under any obligation to register the Securities
      (other than pursuant to the Registration Rights Agreement) under the 1933 Act
      or
      to comply with the terms and conditions of any exemption
      thereunder.

     

    b.  Restrictive
      Legend. The
      Buyers acknowledge and agree that the Debentures, and, until such time as the
      Shares have been registered under the 1933 Act as contemplated by the
      Registration Rights Agreement and sold in accordance with an effective
      Registration Statement, certificates and other instruments representing any
      of
      the Securities shall bear a restrictive legend in substantially the following
      form (and a stop-transfer order may be placed against transfer of any such
      Securities):

     

    THESE
      SECURITIES (THE “SECURITIES”) HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT
      OF 1933, AS AMENDED (THE “SECURITIES ACT”), OR THE SECURITIES LAWS OF ANY STATE
      AND MAY NOT BE SOLD OR OFFERED FOR SALE IN THE ABSENCE OF AN EFFECTIVE
      REGISTRATION STATEMENT FOR THE SECURITIES OR AN OPINION OF COUNSEL OR OTHER
      EVIDENCE ACCEPTABLE TO THE CORPORATION THAT SUCH REGISTRATION IS NOT
      REQUIRED.

     

    c.  Registration
      Rights Agreement. The
      parties hereto agree to enter into the Registration Rights Agreement on or
      before the Closing Date. 

     

    d.  Filings.
      The
      Company undertakes and agrees to make all necessary filings in connection with
      the sale of the Securities to the Buyers required under any United States laws
      and regulations applicable to the Company (including without limitation state
      “blue sky” laws), or by any domestic securities exchange or trading market, and
      to provide a copy thereof to the Buyers promptly after such filing.

     

    e.  Reporting
      Status; Public Trading Market.
      So long
      as any of the Buyers beneficially own any of the Securities, the Company shall
      timely file prior to or on the date when due, all reports required to be filed
      with the SEC pursuant to Section 13 or 15(d) of the 1934 Act, and the Company
      shall not terminate its status as an issuer required to file reports under
      the
      1934 Act even if the 1934 Act or the rules and regulations thereunder would
      permit such termination. Except as otherwise set forth in this Agreement and
      the
      Transaction Documents, the Company will take all action under its control
      necessary to obtain and to continue the listing and trading of its Common Stock
      (including, without limitation, all Registrable Securities) on the OTC Bulletin
      Board Market (“OTCBB”) of the National Association of Securities Dealers, Inc.
      and will comply in all material respects with the Company’s reporting, filing
      and other obligations under the by-laws or rules of the National Association
      of
      Securities Dealers, Inc. (“NASD”). If, so long as any of the Buyers beneficially
      own any of the Securities, the Company receives any written notice from the
      OTCBB, NASD or the SEC with respect to either any alleged deficiency in the
      Company’s compliance with applicable rules and regulations (including without
      limitation any comments from the SEC on any of the Company’s documents filed (or
      the failure to have made any such filing) under the 1933 Act or the 1934 Act)
      (each, a “Regulatory Notice”), then the Company shall promptly, and in any event
      within two business days, provide copies of the Regulatory Notice to the Buyers,
      and shall promptly, and in any event within five (5) business days of receipt
      the Regulatory Notice (a “Regulatory Response”), respond in writing to the
      OTCBB, NASD and/or SEC (as the case may be), setting forth the Company’s
      explanation and/or response to the issues raised in the Regulatory Notice,
      with
      a view towards maintaining and/or regaining full compliance with the applicable
      rules and regulations of the OTCBB, NASD and/or SEC and maintaining or regaining
      good standing of the Company with the OTCBB, NASD and/or SEC, as the case may
      be, the intent being to ensure that the Company maintain its reporting company
      status with the SEC and that its Common Stock be and remain available for
      trading on the OTCBB (excluding the “pink sheets”).

     

    f.  Use
      of Proceeds.
      The
      Company will use the proceeds from the sale of the Debentures (excluding amounts
      paid by the Company for legal fees in connection with the sale of the
      Debentures) for internal working capital purposes. The Company shall not use
      any
      portion of the proceeds of the sale of the Debentures to (i) repay any other
      indebtedness or other obligation of the Company to any related party, including
      without limitation those matters described in the Company’s 10-QSB for the
      period ended January 31, 2006, including the financial statements and footnotes
      contained therein or (ii) pay compensation to any of the directors or officers
      of the Company in excess of that paid in prior period, in each case except
      as
      specifically described in Schedule
      4(f).
      

     

    
      
        
        

      

      
        7

        
          

        

      

      
        
        

      

    

     

    g.  Sale
      of Torpedo, Inc. and Disposition and Satisfaction of the Liabilities of Torpedo,
      Inc. Pursuant
      to an agreement (the “Torpedo
      Agreement”),
      dated
      as of March 30, 2006, by and among the Company, VP Development Corp.
      (“VP”),
      Torpedo Sports, Inc., Torpedo, Inc. and certain creditors of Torpedo, Inc.
      signatory thereto, substantially in the form attached hereto as Exhibit
      C,
      the
      Company shall concurrently with the initial Closing, sell to VP all of the
      issued and outstanding shares of capital stock of its wholly-owned subsidiary,
      Torpedo Sports, Inc. and Torpedo, Inc. (collectively “Torpedo”),
      in
      consideration of an aggregate payment of $250,000. Pursuant to the Torpedo
      Agreement, VP, through its ownership of Torpedo, shall acquire and assume all
      the assets and liabilities of Torpedo, shall indemnify the Company from any
      and
      all costs, expenses, liabilities and damages arising from Torpedo and the
      business, operations, assets and liabilities of Torpedo, whether accruing prior
      to or after the date the Torpedo Agreement is consummated.

     

    h.  Available
      Shares.
      The
      Company shall have at all times authorized and reserved for issuance, free
      from
      preemptive rights, shares of Common Stock equal to three hundred percent (300%)
      of the number of shares of Common Stock issuable upon conversion of the
      then-outstanding Debentures (including accrued interest thereon) as may be
      required to satisfy the conversion rights of the Buyers pursuant to the terms
      and conditions of the Debentures. If at any time, the Company does not have
      available an amount of authorized and non-issued Shares necessary to satisfy
      full Conversion of the then outstanding amount of the Debentures, the Company
      shall, without notice or demand by the Buyers, call within thirty (30) days
      of
      such occurrence and hold within sixty (60) days of such occurrence a special
      meeting of shareholders, for the sole purpose of increasing the number of shares
      authorized. Management of the Company shall recommend to shareholders to vote
      in
      favor of increasing the number of Common Stock authorized. Members of the
      Company’s Management shall also vote all of their own shares in favor of
      increasing the number of Common Stock authorized. Alternatively, to the extent
      permitted by applicable law, the Company may procure the written consent of
      stockholders to increase the number of shares authorized, and provide the
      stockholders with notice thereof as may be required under applicable law
      (including without limitation Section 14(c) of the 1934 Act and Regulation
      14C
      thereunder). Upon obtaining stockholder approval as aforesaid, the Company
      shall
      cause the appropriate increase in its authorized shares of Common Stock within
      one business day or as soon thereafter as permitted by applicable
      law.

     

    i.  Reimbursement.
      If
      (i)
      any Buyer, other than by reason of its gross negligence, willful misconduct
      or
      breach of law, becomes a party defendant in any capacity in any action or
      proceeding brought by any stockholder of the Company, in connection with or
      as a
      result of the consummation of the transactions contemplated by the Transaction
      Documents, or if such Buyer is impleaded in any such action, proceeding or
      investigation by any Person, or (ii) any Buyer, other than by reason of its
      gross negligence, willful misconduct or breach of law, becomes a party defendant
      in any capacity in any action or proceeding brought by the SEC against or
      involving the Company or in connection with or as a result of the consummation
      of the transactions contemplated by the Transaction Documents, or if such Buyer
      is impleaded in any such action, proceeding or investigation by any Person,
      then
      in any such case, the Company will reimburse such Buyer for its reasonable
      legal
      and other expenses (including the cost of any investigation and preparation)
      incurred in connection therewith. The reimbursement obligations of the Company
      under this paragraph shall be in addition to any liability which the Company
      may
      otherwise have, shall extend upon the same terms and conditions to any
      affiliates of the Buyers who are actually named in such action, proceeding
      or
      investigation, and partners, directors, agents, employees and controlling
      persons (if any), as the case may be, of the Buyers and any such Affiliate,
      and
      shall be binding upon and inure to the benefit of any successors, assigns,
      heirs
      and personal representatives of the Company, the Buyers and any such Affiliate
      and any such Person. Except as otherwise set forth in the Transaction Documents,
      the Company also agrees that neither any Buyer nor any such Affiliate, partners,
      directors, agents, employees or controlling persons shall have any liability
      to
      the Company or any person asserting claims on behalf of or in right of the
      Company in connection with or as a result of the consummation of the Transaction
      Documents except to the extent that any losses, claims, damages, liabilities
      or
      expenses incurred by the Company result from the gross negligence or willful
      misconduct of such Buyer or from a breach of the representations, covenants
      and
      conditions contained herein or from a breach of law. 

     

    5.  TRANSFER
      AGENT INSTRUCTIONS.

     

    a.  Promptly
      following the purchase by the Buyers of the Debentures in accordance with
      Section 1(c) hereof, the Company will irrevocably instruct its transfer agent
      in
      writing to (i) reserve that number of shares of Common Stock as is equal to
      three hundred percent (300%) of the number of shares of Common Stock issuable
      upon conversion of the then-outstanding Debentures (including accrued interest
      thereon) as may be required to satisfy the conversion rights of the Buyers
      pursuant to the terms and conditions of the Debentures, and (ii) issue Common
      Stock from time to time upon conversion of the Debentures in such amounts as
      specified from time to time by the Company to the transfer agent, bearing the
      restrictive legend specified in Section 4(b) of this Agreement prior to
      registration of the Shares under the 1933 Act, registered in the name of the
      respective Buyer or its permitted assigns and in such denominations to be
      specified by such Buyer in connection with each conversion of the Debentures.
      The Company shall provide the Placement Agent with a copy of such written
      instructions to the Company’s transfer agent simultaneously with the issuance of
      such instructions to the transfer agent. The Company warrants that if the Buyer
      is not in breach of the representations and warranties contained in this
      Agreement, no instruction other than such instructions referred to in this
      Section 5 and stop transfer instructions to give effect to Section 4(a) hereof
      prior to registration and sale of the Converted Shares under the 1933 Act will
      be given by the Company to the transfer agent and that the Converted Shares
      shall otherwise be freely transferable on the books and records of the Company
      as and to the extent provided in this Agreement, the Registration Rights
      Agreement, and applicable law. Nothing in this Section shall affect in any
      way
      the Buyers’ obligations and agreement to comply with all applicable securities
      laws upon resale of the Securities. If any Buyer provides the Company with
      an
      opinion of counsel reasonably satisfactory to the Company that registration
      of a
      resale by such Buyer of any of the Securities in accordance with clause (1)(B)
      of Section 4(a) of this Agreement is not required under the 1933 Act, the
      Company shall (except as provided in clause (2) of Section 4(a) of this
      Agreement) permit the transfer of the Securities and, in the case of the
      Converted Shares, instruct the Company’s transfer agent to issue one or more
      certificates for Common Stock without legend in such name and in such
      denominations as specified by the Buyer.

     

    
      
        
        

      

      
        8

        
          

        

      

      
        
        

      

    

     

    b.  (i)The
      Company will permit the Buyers to exercise their rights to convert the
      Debentures by telecopying or delivering an executed and completed Notice of
      Conversion to the Company. The Company will within two (2) Business Days respond
      with its endorsement so as to confirm the outstanding principal amount of any
      Debenture submitted for conversion or shall reconcile any difference with the
      Buyer promptly after receiving such Notice of Conversion.

     

    (ii)  The
      term
“Conversion Date” means, with respect to any conversion elected by the holder of
      the Debentures, the date specified in the Notice of Conversion, provided the
      copy of the Notice of Conversion is given either via mail or facsimile to or
      otherwise delivered to the Company in accordance with the provisions hereof
      so
      that it is received by the Company on or before such specified date.

     

    (iii)  The
      Company will transmit the certificates representing the Converted Shares
      issuable upon conversion of any Debentures (together, unless otherwise
      instructed by the Buyer, with Debentures not being so converted) to the Buyer
      at
      the address specified in the Notice of Conversion (which may be the Buyer’s
      address for notices as contemplated by Section 12 hereof or a different address)
      via express courier, by electronic transfer or otherwise, within five (5)
      business days if the address for delivery is in the United States and within
      seven (7) business days if the address for delivery is outside the United States
      (such fifth business day or seventh business day, as the case may be, the
“Delivery Date”) after (A) the business day on which the Company has received
      both of the Notice of Conversion (by facsimile or other delivery) and the
      original Debentures being converted (and if the same are not delivered to the
      Company on the same date, the date of delivery of the second of such items)
      or
      (B) the date an interest payment on the Debentures, which the Company has
      elected to pay by the issuance of Common Stock, as contemplated by the
      Debentures, was due.

     

    c.  From
      and
      after the date on which the Shares have been registered under the 1933 Act
      as
      contemplated by the Registration Rights Agreement, the failure to issue
      unrestricted, freely tradable Conversion Shares to the Buyers upon Conversion
      shall be considered an Event of Default, which if not cured after ten (10)
      days
      prior written notice, shall
      entitle the Buyers (or
      any
      of them) to demand
      that the Debentures held
      by
      them be immediately redeemed by a cash payment equal to 131% of the aggregate
      of
      the unpaid principal amount of and accrued interest on such Debentures (whether
      or not the terms of such Debentures expressly
      permit the redemption thereof).
       The
      Company acknowledges that the failure to honor a Notice of Conversion shall
      cause definable financial hardship on the Buyers.

     

    d.  The
      Company will authorize its transfer agent to give information to a Buyer or
      such
      Buyer’s representative relating to the transfer of the Company’s shares of
      Common Stock to the Buyer, upon the reasonable request of the Buyer or any
      such
      representative. The Company will provide such Buyer with a copy of the
      authorization so given to the transfer agent.

     

    e.  Each
      Buyer shall be entitled to exercise its conversion privilege with respect to
      the
      Debentures notwithstanding the commencement of any case under 11 U.S.C. §101
et
      seq.
      (the
“Bankruptcy Code”). In the event the Company is a debtor under the Bankruptcy
      Code, the Company hereby waives, to the fullest extent permitted, any rights
      to
      relief it may have under 11 U.S.C. §362 in respect of such Buyer’s conversion
      privilege. The Company hereby waives, to the fullest extent permitted, any
      rights to relief it may have under 11 U.S.C. §362 in respect of the conversion
      of the Debentures. The Company agrees, without cost or expense to such Buyer,
      to
      take or to consent to any and all action necessary to effectuate relief under
      11
      U.S.C. §362.

     

    6.  CLOSING
      DATE.

     

    a.  The
      purchases and sales of Debentures will occur at one or more closings under
      this
      Agreement, the first of which will occur after Buyers have deposited not less
      than $200,000 of the Purchase Price in the Escrow for the transactions
      contemplated under this Agreement, on a Closing Date determined by the Placement
      Agent, acting in its sole discretion. Subsequent Closing(s) under this Agreement
      will occur after Buyers who will purchase the balance of the Debentures to
      be
      purchased and sold under this Agreement have deposited the full amount of their
      purchase prices in the Escrow, with the Closing Date(s) for such subsequent
      Closings to be determined by the Placement Agent, acting in its sole discretion.
      The final Closing shall occur after the Buyers who will purchase the balance
      of
      the Debentures to be purchased and sold under this Agreement (which may be
      in
      any amount up to $700,000, in the aggregate) have deposited the full amount
      of
      their purchase prices in the Escrow, with the Closing Date of such final Closing
      (the “Final Closing Date”) to occur on the date determined by the Placement
      Agent, acting in its sole discretion; provided, that should no additional
      amounts be deposited into escrow, the Final Closing Date shall be a date
      determined by the Placement Agent, acting in its sole discretion.

     

    b.  In
      the
      case of each Closing, the Closing Date shall occur on or after the date (as
      determined by the Placement Agent, acting in its sole discretion) after each
      of
      the conditions contemplated by Sections 7 and 8 hereof shall have either been
      satisfied or been waived by the party in whose favor such conditions
      run.

     

    c.  In
      the
      case of each Closing, the Closing of the purchase and issuance of Debentures
      shall occur on the respective Closing Date at the offices of the Placement
      Agent’s counsel, McGuireWoods LLP, 1345 Avenue of the Americas, 7th
      Floor,
      New York, NY 10105 and
      shall
      take place no later than 3:00 P.M., New York time, on such day or such other
      time as is mutually agreed upon by the Company and the Buyers.

     

    
      
        
        

      

      
        9

        
          

        

      

      
        
        

      

    

     

    7.  CONDITIONS
      TO THE COMPANY’S OBLIGATION TO SELL.

     

    The
      Company’s obligation to sell the Debentures to the Buyer pursuant to this
      Agreement on each Closing Date is conditioned upon:

     

    a.  Delivery
      from the Escrow to the Company of good funds as payment in full of an amount
      equal to the Purchase Price for the Debentures in accordance with this
      Agreement; 

     

    b.  The
      accuracy on the Closing Date of the representations and warranties of the Buyers
      contained in this Agreement, each as if made on such date, and the performance
      by the Buyers on or before such date of all covenants and agreements of the
      Buyers required to be performed on or before such date; and

     

    c.  There
      shall not be in effect any law, rule or regulation prohibiting or restricting
      the transactions contemplated hereby, or requiring any consent or approval
      which
      shall not have been obtained.

     

    8.  CONDITIONS
      TO THE BUYERS’ OBLIGATION TO PURCHASE.

     

    The
      Buyer’s obligation of those Buyers who are purchasing Debentures at a particular
      closing to purchase the Debentures on the applicable Closing Date is conditioned
      upon:

     

    a.  The
      execution and delivery of this Agreement and the Registration Rights Agreement
      by the Company;

     

    b.  Delivery
      by the Company to the Buyers of the Debentures to be purchased in accordance
      with this Agreement;

     

    c.  Delivery
      by the Company to the Buyers of an opinion of counsel to the Company,
      substantially in the form attached hereto as Exhibit
      D
      and
      dated as of the Closing Date; 

     

    d.  The
      accuracy in all material respects on the Closing Date of the representations
      and
      warranties of the Company contained in this Agreement, each as if made on such
      date, and the performance by the Company on or before such date of all covenants
      and agreements of the Company required to be performed on or before such
      date;

     

    e.  The
      consummation of the purchase and sale of all shares of capital stock of Torpedo,
      as contemplated by Section 4(g), shall have been completed (simultaneously
      with
      the Closing in the case of the initial Closing);

     

    f.  There
      shall not be in effect any law, rule or regulation prohibiting or restricting
      the transactions contemplated hereby, or requiring any consent or approval
      which
      shall not have been obtained; and

     

    g.  From
      and
      after the date hereof to and including the Closing Date, (i) the trading of
      the
      Common Stock shall not have been suspended by the SEC or the NASD and trading
      in
      securities generally on OTCBB shall not have been suspended or limited, nor
      shall minimum prices been established for securities traded on the OTCBB, (ii)
      there shall not have occurred any outbreak or escalation of hostilities
      involving the United States or any material adverse change in any financial
      market that in either case in the reasonable judgment of the Buyers makes it
      impracticable or inadvisable to purchase the Debentures.

     

    
      
        
        

      

      
        10

        
          

        

      

      
        
        

      

    

     

    9.  GOVERNING
      LAW; MISCELLANEOUS. 

     

    a.  This
      Agreement shall be governed by and interpreted in accordance with the laws
      of
      the State of New York for contracts to be wholly performed in such state and
      without giving effect to the principles thereof regarding the conflict of laws.
      Each of the parties consents to the jurisdiction of the federal courts whose
      districts encompass any part of the City of New York or the state courts of
      the
      State of New York sitting in the City and County of New York in connection
      with
      any dispute arising under this Agreement and hereby waives, to the maximum
      extent permitted by law, any objection, including any objection based on
forum
      non conveniens,
      to the
      bringing of any such proceeding in such jurisdictions. To the extent determined
      by such court, the Company shall reimburse the Buyers for any reasonable legal
      fees and disbursements incurred by the Buyers in enforcement of or protection
      of
      any of its rights under any of the Transaction Documents.

     

    b.  Failure
      of any party to exercise any right or remedy under this Agreement or otherwise,
      or delay by a party in exercising such right or remedy, shall not operate as
      a
      waiver thereof.

     

    c.  This
      Agreement shall inure to the benefit of and be binding upon the successors
      and
      assigns of each of the parties hereto.

     

    d.  All
      pronouns and any variations thereof refer to the masculine, feminine or neuter,
      singular or plural, as the context may require.

     

    e.  A
      facsimile transmission of this signed Agreement shall be legal and binding
      on
      all parties hereto. 

     

    f.  This
      Agreement may be signed in one or more counterparts, each of which shall be
      deemed an original. 

     

    g.  The
      headings of this Agreement are for convenience of reference and shall not form
      part of, or affect the interpretation of, this Agreement. 

     

    h.  If
      any
      provision of this Agreement shall be invalid or unenforceable in any
      jurisdiction, such invalidity or unenforceability shall not affect the validity
      or enforceability of the remainder of this Agreement or the validity or
      enforceability of this Agreement in any other jurisdiction. 

     

    i.  This
      Agreement may be amended only by the written consent of a majority in interest
      of the holders of the Debentures and an instrument in writing signed by the
      Company.

     

    j.  This
      Agreement supersedes all prior agreements and understandings among the parties
      hereto with respect to the subject matter hereof. 

     

    10.  NOTICES.

     

    Any
      notice required or permitted hereunder shall be given in writing (unless
      otherwise specified herein) and shall be deemed effectively given on the
      earliest of:

     

    a.  the
      date
      delivered, if delivered by personal delivery as against written receipt therefor
      or by confirmed facsimile transmission,

     

    b.  the
      seventh business day after deposit, postage prepaid, in the United States Postal
      Service by registered or certified mail, or 

     

    c.  the
      third
      business day after mailing by next-day express courier, with delivery costs
      and
      fees prepaid, in each case, addressed to each of the other parties thereunto
      entitled at the following addresses (or at such other addresses as such party
      may designate by ten (10) days’ advance written notice similarly given to each
      of the other parties hereto):

     

    
      
        
        

      

      
        11

        
          

        

      

      
        
        

      

    

     

    
      	
              COMPANY:
                

            	
              Interactive
                Games, Inc.

            
	
               

            	
              319
                Clematis Street, Suite 803

            
	
               

            	
              West
                Palm Beach, FL 33401

            
	
               

            	
              Fax
                561-514-9046

            
	
               

            	
              Attention:
                Henry Fong, Chief Executive Officer

            
	
              BUYERS:

               

            	
              At
                the address set forth on the signature page of this
                Agreement.

               

            
	
               

            	
              With
                copies to:

               

            
	
               

            	
              Divine
                Capital Markets, LLC

              ATTN:
                Jason Goldstein

            
	
               

            	
              39
                Broadway

              36th
                Floor

              New
                York, NY 10006

            
	
               

            	
              Fax
                No. 212-509-5867
                

            

    

    

    11.  SURVIVAL
      OF REPRESENTATIONS AND WARRANTIES.
      The
      Company’s and the Buyers’ representations and warranties herein shall survive
      for a period of fifteen (15) months after the execution and delivery of this
      Agreement and shall inure to the benefit of the Buyers and the Company and
      their
      respective successors and assigns.

     

    12.  FEES;
      EXPENSES.

     

    a.  At
      each
      Closing, the Placement Agent shall receive cash compensation equal to thirteen
      percent (13%) of the gross proceeds of the Debentures (payable at each Closing),
      and in addition, at the first Closing under this Offering, the Company shall
      cause 1,500,000 shares of Common Stock (in the form of restricted securities
      and
      appropriately legended) to be issued to the Placement Agent or to such persons
      as the Placement Agent shall designate to the Company in writing. The Company
      shall also reimburse the Placement Agent for expenses it incurs in connection
      with its services to the Company in its capacity as Placement Agent in
      accordance with the terms of the agreement, dated March 23, 2006 between the
      Company and the Placement Agent. The cash compensation and expenses shall be
      deducted from the proceeds of the sale of the Debentures at each
      Closing.

     

    b.  The
      Company will pay the legal fees of the Placement Agent in the amount of $10,000
      and will pay the 100% of the disbursements actually incurred by counsel to
      the
      Placement Agent. The Company will pay $10,000 to such counsel at the first
      Closing, and in that connection hereby authorizes the Placement Agent to deduct
      such amount from the proceeds of the first Closing and transmit same to the
      Placement Agent’s legal counsel. The Company will pay disbursements of the
      Placement Agent’s legal counsel within ten (10) days of invoice therefor. The
      $10,000 in respect of fees of the Placement Agent’s counsel shall include only
      those fees paid for services rendered up to the Final Closing Date, and any
      other reasonable legal fees incurred by the Placement Agent’s counsel in
      connection with the Transaction Documents (including enforcement of the
      Company’s obligations or the exercise of the Placement Agent’s or the Buyers’
remedies thereunder) or, if requested by the Placement Agent, review of the
      Registration Statement (including review and comment on drafts thereof and
      advice concerning sales of Registrable Securities (as defined in the
      Registration Rights Agreement) shall be payable by the Company to such counsel
      within ten (10) days of the invoice therefor. 

     

    [Signature
      page follows.]

     

    
      
        
        

      

      
        12

        
          

        

      

      
        
        

      

    

     

        IN
      WITNESS
      WHEREOF,
      this
      Agreement has been duly executed by the Buyers and the Company as of the date
      set forth below.

     

    Date: __________,
      2006

     

    
      	
              COMPANY:

            
	
              Interactive
                Games, Inc.

               

               

            
	
              By:
                _______________________

            
	
              Name:
                Henry Fong

              Title:
                Chief Executive Officer

            
	
               

            
	
               

            
	
              BUYER:
                

            
	
              Name:
                

            
	
              By:____________________

            
	
              (Signature
                of Authorized Person)

            
	
              Printed
                Name: 

            
	
              Address: 

               

            
	
              Telephone: 

            
	
              Facsimile: 

            
	
              Principal
                Amount of Debentures to be Purchased:

              $_______________

            
	
              Tax
                ID No. 

            

    

    

    
      
        
        

      

      
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    DEBENTURE

     

    NEITHER
      THESE SECURITIES NOR THE SECURITIES ISSUABLE UPON CONVERSION HEREOF HAVE BEEN
      REGISTERED WITH THE UNITED STATES SECURITIES AND EXCHANGE COMMISSION OR THE
      SECURITIES COMMISSION OF ANY STATE OR UNDER THE SECURITIES ACT OF 1933, AS
      AMENDED. THE SECURITIES ARE RESTRICTED AND MAY NOT BE OFFERED, RESOLD, PLEDGED
      OR TRANSFERRED EXCEPT AS PERMITTED UNDER THE ACT PURSUANT TO REGISTRATION
      REQUIREMENTS THEREOF OR EXEMPTION THEREFROM. 

     

                                                                  
      $_____________

     

    INTERACTIVE
      GAMES, INC. 

     

    CONVERTIBLE
      DEBENTURE DUE [__________
      ____, 2009 

    [THIRD
      ANNIVERSARY OF FINAL CLOSING DATE]

     

    Date
      of
      Issuance: [__________
      ____, 2006] [CLOSING DATE OF THIS BUYER’S FUNDING]

    

    FOR
      VALUE RECEIVED, INTERACTIVE GAMES, INC.,
      a
      corporation organized and existing under the laws of the State of Nevada (the
      "Company"), hereby promises to pay to [________________],
      having
      its address at [_________________________________________]
      or
      its
      assigns (the "Holder" and together with the other holders of Debentures issued
      pursuant to the Securities Purchase Agreement (as defined below), the
      "Holders"), the principal sum of [___________________]
      and
      00/100 Dollars ($_______________)
      on
[__________
      ____, 2009] [THIRD ANNIVERSARY OF FINAL CLOSING DATE]
      (the
      "Maturity Date") and to pay simple interest on the principal sum outstanding
      from time to time in arrears (i) upon conversion as provided herein or (ii)
      on
      the Maturity Date, at the rate of six percent (6%) per annum (subject to
      adjustment pursuant to Section 10 hereof). Interest shall commence to accrue
      on
      this Debenture on the first such business day to occur after the date hereof
      and
      shall continue on a daily basis until payment in full of the principal sum
      has
      been made or duly provided for or until the full outstanding amount of this
      Debenture has been converted in accordance with the provisions hereof. The
      Company has the option to redeem this Debenture prior to the Maturity Date
      pursuant to Section 2(b). All unpaid principal and interest due and payable
      on
      the Maturity Date shall be paid in the form of Common Stock of the Company,
      par
      value $0.001 per share ("Common Stock") pursuant to Section 3. The Holder has
      the option to cause any outstanding principal and interest on this Debenture
      to
      be converted into Common Stock at any time prior to the Redemption Date (as
      defined below) or the Maturity Date pursuant to Section 2(a).

     

    This
      Debenture is the Debenture referred to in the Securities Purchase Agreement
      (the
      "Securities Purchase Agreement") dated ________ ____, 2006, between the Company
      and the Holder, is subject to the provisions of the Securities Purchase
      Agreement and further is subject to the following additional
      provisions:

     

      This
      Debenture has been issued subject to investment representations of the original
      purchaser hereof and may be transferred or exchanged only (a) with the Company’s
      prior written consent, which consent the Company may grant or withhold, in
      its
      sole discretion, and (b) in compliance with the Securities Act and other
      applicable state and foreign securities laws. In the event of any proposed
      transfer of this Debenture to which the Company has granted its consent, the
      Company may require, prior to issuance of a new Debenture in the name of such
      other person, that it receive reasonable transfer documentation including legal
      opinions that the issuance of the Debenture in such other name does not and
      will
      not cause a violation of the Securities Act or any applicable state or foreign
      securities laws. Prior to due presentment for transfer of this Debenture to
      which the Company has consented, the Company and any agent of the Company may
      treat the person in whose name this Debenture is duly registered on the
      Company's Debenture Register as the owner hereof for the purpose of receiving
      payment as herein provided and for all other purposes, whether or not this
      Debenture be overdue, and neither the Company nor any such agent shall be
      affected by notice to the contrary.

     

    
      
        
        

      

      
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      Conversion
      at Holder’s Option; Redemption at Company’s Option.

     

    a. The
      Holder is entitled to, at any time or from time to time, on or after the date
      that is six (6) months from the Date of Issuance of this Debenture, convert
      the
      Conversion Amount into shares of Common Stock, at a conversion price for each
      share of Common Stock (the “Conversion Price") equal to 75% of the lowest
      closing bid price per share (as reported by Bloomberg, LP) of the Company's
      Common Stock for the twenty (20) Trading Days immediately preceding the date
      of
      conversion. Notwithstanding the foregoing, the Holder shall not be entitled
      to
      convert any part of this Debenture as to which the Company has previously issued
      to the Holder a Redemption Notice in accordance with Section 2(b). The
      Conversion Price will be adjusted as provided in Section 6. For purposes of
      this
      Debenture, the following terms have the meanings indicated below:

     

    (i)  “Conversion
      Amount” shall mean the sum of (A) all or any portion of the outstanding
      principal amount of this Debenture, as designated by the Holder upon exercise
      of
      its right of conversion plus (B) all interest that has accrued on the portion
      of
      the principal amount that has been designated for payment pursuant to
      (A).

     

    (ii)  “Market
      Price of the Common Stock” means (x) the closing bid price of the Common Stock
      for the period indicated in the relevant provision hereof (unless a different
      relevant period is specified in the relevant provision), as reported by
      Bloomberg, LP or, if not so reported, as reported on the over-the-counter market
      or (y) if the Common Stock is listed on a stock exchange, the closing price
      on
      such exchange, as reported in The Wall Street Journal.

     

    (iii)  “Trading
      Day” shall mean any day on which the New York Stock Exchange is open for
      business.

     

    Conversion
      shall be effectuated by delivering by facsimile or other delivery to the Company
      of the completed form of conversion notice attached hereto as Exhibit A,
      executed by the Holder of the Debenture evidencing such Holder's intention
      to
      convert this Debenture or a specified portion hereof. No fractional shares
      of
      Common Stock or scrip representing fractions of shares will be issued on
      conversion, but the number of shares issuable shall be rounded to the nearest
      whole share. The date on which notice of conversion is given (the "Conversion
      Date") shall be deemed to be the date on which the Company receives by fax
      or by
      mail the conversion notice (“Notice of Conversion”), substantially in the form
      annexed hereto as Exhibit A, duly executed, to the Company. Facsimile delivery
      of the Notice of Conversion shall be accepted by the Company at facsimile number
      561-514-9046, ATTN: Corporate Secretary (or to such other facsimile number
      as
      the Company may hereafter advise the Holder in writing). Certificates
      representing Common Stock upon conversion will be delivered within five (5)
      business days from the date of delivery of the Notice of
      Conversion.

     

    b. The
      Company may at its option call for redemption all or part of the Debentures
      prior to the Maturity Date, as follows:

     

    
      	(i)  	
              The
                Debentures called for redemption shall be redeemable for an amount
                (the
                “Redemption Price”) equal to (x) if this Debenture is called for
                redemption prior to the date which is six months from the Issuance
                Date
                set forth on the first page of this Debenture (the “Issuance Date”), 115%,
                if this Debenture is called for redemption on or after the date that
                is
                six months after the Issuance Date but prior to the first anniversary
                of
                the issuance date, 125%, and if this Debenture is called for redemption
                on
                or after the date that is the first anniversary of the Issuance Date,
                131%, in either case of the principal amount called for redemption,
                plus
                (y) interest accrued through the day immediately preceding the date
                of
                redemption (the “Redemption Date”).

            

    

     

    
      	(ii)  	
              If
                fewer than all outstanding Debentures are to be redeemed, then all
                Debentures shall be partially redeemed on a pro
                rata
                basis.

            

    

     

    
      	(iii)  	
              Prior
                to the Redemption Date, the Company shall deposit into escrow an
                amount
                sufficient for the payment of the aggregate Redemption Price of the
                Debentures being called for redemption and shall make such funds
                available
                on and after the Redemption Date for payment to the Holders who present
                their Debentures and otherwise comply with the Company’s instructions
                contained in the Redemption Notice (as defined
                below).

            

    

     

    
      
        
        

      

      
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      	(iv)  	
              On
                the Redemption Date, the Company shall cause the Holders whose Debentures
                have been presented for redemption to be issued payment of the Redemption
                Price. In the case of a partial redemption, the Company shall also
                issue
                new Debentures to the Holders for the principal amount remaining
                outstanding after the Redemption Date promptly after the Holders’
                presentation of the Debentures called for
                redemption.

            

    

     

    
      	(v)  	
              Not
                less than ten (10) days prior to the Redemption Date, the Company
                shall
                issue a notice (the “Redemption Notice”) to each Holder setting forth the
                following:

            

    

     

    
      	1.  	
              the
                Redemption Date;

            

    

     

    
      	2.  	
              the
                Redemption Price;

            

    

     

    
      	3.  	
              the
                aggregate principal amount of the Debentures being called for redemption;
                

            

    

     

    
      	4.  	
              a
                statement instructing the Holders to surrender their Debentures for
                redemption and payment of the Redemption Price, including the name
                and
                address of the Company or, if applicable, the paying agent of the
                Company,
                where Debentures are to be surrendered for
                redemption;

            

    

     

    
      	5.  	
              a
                statement advising the Holders that (x) interest will cease to accrue
                on
                the Debentures (or, in the case of a partial redemption, that portion
                of
                the Debentures being called for redemption) as of the Redemption
                Date, and
                (y) that the Debentures (or, in the case of a partial redemption,
                that
                portion of the Debentures being called for redemption) as of the
                Redemption Date will cease to be convertible into Common Stock as
                of the
                Redemption Date; and

            

    

     

    
      	6.  	
              in
                the case of a partial redemption, a statement advising the Holders
                that
                after the Redemption Date a substitute Debenture will be issued by
                the
                Company after deduction the portion thereof called for redemption,
                at no
                cost to the Holder.

            

    

     

      Unless
      demand has otherwise been made by the Holder in writing for payment in cash
      as
      provided hereunder, any Debentures not previously tendered to the Company for
      conversion as of the Maturity Date shall be deemed to have been surrendered
      for
      conversion, without further action of any kind by the Company or any of its
      agents, employees or representatives, as of the Maturity Date at the Conversion
      Price applicable on the Maturity Date (“Mandatory Conversion”).

     

      No
      provision of this Debenture shall alter or impair the obligation of the Company,
      which is absolute and unconditional to convert this Debenture into Common Stock,
      at the time, place, and rate herein prescribed. This Debenture is a direct
      obligation of the Company.

     

      If
      the
      Company (a) merges or consolidates with another corporation or after business
      entity and the Company is not the surviving entity or (b) sells or transfers
      all
      or substantially all of its assets to another person and the holders of the
      Common Stock are entitled to receive stock, securities or property in respect
      of
      or in exchange for Common Stock, then as a condition of such merger,
      consolidation, sale or transfer, the Company and any such successor, purchaser
      or transferee will agree that this Debenture may thereafter be converted on
      the
      terms and subject to the conditions set forth above into the kind and amount
      of
      stock, securities or property receivable upon such merger, consolidation, sale
      or transfer by a holder of the number of shares of Common Stock into which
      this
      Debenture might have been converted immediately before such merger,
      consolidation, sale or transfer, subject to adjustments which shall be as nearly
      equivalent as may be practicable. In the event of any (i) proposed merger or
      consolidation where the Company is not the surviving entity or (ii) sale or
      transfer of all or substantially all of the assets of the Company (in either
      such case, a "Sale"), the Holder shall have the right to convert by delivering
      a
      Notice of Conversion to the Company within fifteen (15) days of receipt of
      notice of such Sale from the Company.

     

    
      
        
        

      

      
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      If,
      at
      any time while any portion of this Debenture remains outstanding, the Company
      effectuates a stock split or reverse stock split of its Common Stock or issues
      a
      dividend on its Common Stock consisting of shares of Common Stock or otherwise
      recapitalizes its Common Stock, the Conversion Price shall be equitably adjusted
      to reflect such action. By way of illustration, and not in limitation, of the
      foregoing (i) if the Company effectuates a 2:1 split of its Common Stock,
      thereafter, with respect to any conversion for which the Company issues the
      shares after the record date of such split, the Conversion Price shall be deemed
      to be one-half of what it had been calculated to be immediately prior to such
      split; (ii) if the Company effectuates a 1:10 reverse split of its Common Stock,
      thereafter, with respect to any conversion for which the Company issues the
      shares after the record date of such reverse split, the Conversion Price shall
      be deemed to be the amount of such Conversion Price calculated immediately
      prior
      to the record date multiplied by 10; and (iii) if the Company declares a stock
      dividend of one share of Common Stock for every 10 shares outstanding,
      thereafter, with respect to any conversion for which the Company issues the
      shares after the record date of such dividend, the Conversion Price shall be
      deemed to be the amount of such Conversion Price calculated immediately prior
      to
      such record date multiplied by a fraction, of which the numerator is the number
      of shares for which a dividend share will be issued and the denominator is
      such
      number of shares plus the dividend share(s) issuable or issued
      thereon.

     

      All
      payments contemplated hereby to be made “in cash” shall be made by wire transfer
      of immediately available funds in such coin or currency of the United States
      of
      America as at the time of payment is legal tender for payment of public and
      private debts. All payments of cash and each delivery of shares of Common Stock
      issuable to the Holder as contemplated hereby shall be made to the Holder to
      an
      account designated by the Holder to the Company and if the Holder has not
      designated any such accounts at the address last appearing on the Debenture
      Register of the Company as designated in writing by the Holder from time to
      time; except that the Holder may designate, by notice to the Company, a
      different delivery address for any one or more specific payments or
      deliveries.

     

      The
      Holder of the Debenture, by acceptance hereof, agrees that this Debenture is
      being acquired for investment and that such Holder will not offer, sell or
      otherwise dispose of this Debenture or the Shares of Common Stock issuable
      upon
      conversion thereof except in compliance with the terms of the Securities
      Purchase Agreement and the Registration Rights Agreement and under circumstances
      which will not result in a violation of the Securities Act or any applicable
      state Blue Sky or foreign laws or similar laws relating to the sale of
      securities.

     

      This
      Debenture shall be governed by and construed in accordance with the laws of
      the
      State of New York. Each of the parties consents to the jurisdiction of the
      federal courts whose districts encompass any part of the City of New York or
      the
      state courts of the State of New York sitting in the City and County of New
      York
      in connection with any dispute arising under this Agreement and hereby waives,
      to the maximum extent permitted by law, any objection, including any objection
      based on forum
      non coveniens,
      to the
      bringing of any such proceeding in such jurisdictions. To the extent determined
      by such court, the Company shall reimburse the Holder for any reasonable legal
      fees and disbursements incurred by the Holder in enforcement of or protection
      of
      any of its rights under this Debenture or the Securities Purchase
      Agreement.

     

      The
      following shall constitute an "Event of Default":

     

    a. The
      Company fails (i) in the payment of principal or interest on this Debenture
      as
      required to be paid in cash hereunder, (ii) in the issuance of shares of Common
      Stock upon Conversion within five (5) business days from the date of delivery
      of
      the Notice of Conversion as provided pursuant to Section 2, and payment shall
      not have been made or shares shall not have been delivered, as the case may
      be,
      for a period of two (2) business days following the payment due date or required
      share delivery date or (iii) to pay when due any amounts payable by the Company
      under the Torpedo Agreement; or 

    

    b. Any
      of
      the representations or warranties made by the Company herein, in the Securities
      Purchase Agreement, the Registration Rights Agreement, dated as of __________
      ____,
      2006 between the Company and the Investors therein (the "Registration Rights
      Agreement"), or in any certificate or financial or other written statements
      heretofore or hereafter furnished by the Company to in connection with the
      execution and delivery of this Debenture or the Securities Purchase Agreement
      or
      Registration Rights Agreement, shall be false or misleading (including without
      limitation by way of the misstatement of a material fact or the omission of
      a
      material fact) in any material respect at the time made; or 

     

    
      
        
        

      

      
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    c. The
      Company fails to issue shares of Common Stock to the Holder or to cause its
      Transfer Agent to issue shares of Common Stock upon exercise by the Holder
      of
      the conversion rights of the Holder in accordance with the terms of this
      Debenture, fails to transfer or to cause its Transfer Agent to transfer any
      certificate for shares of Common Stock issued to the Holder upon conversion
      of
      this Debenture and when required by this Debenture or the Registration Rights
      Agreement, and such transfer is otherwise lawful, or fails to remove any
      restrictive legend or to cause its Transfer Agent to transfer any certificate
      or
      any shares of Common Stock issued to the Holder upon conversion of this
      Debenture as and when required by this Debenture, the Agreement or the
      Registration Rights Agreement and such legend removal is otherwise lawful,
      and
      any such failure shall continue uncured for five (5) business days after written
      notice from the Holder of such failure; or

     

    d. The
      Company shall fail to perform or observe, in any material respect (i) any other
      covenant, term, provision, condition, agreement or obligation of the Debenture,
      provided that, other than in the case of such failure under Section 5 hereof,
      as
      to which no cure period shall apply, such failure shall continue uncured for
      a
      period of thirty (30) days after written notice from the holder of such failure,
      or (ii) any covenant, term, provision, condition, agreement or obligation of
      the
      Company under the Securities Purchase Agreement or the Registration Rights
      Agreement and such failure shall continue uncured for a period of either (a)
      three (3) days after the occurrence of the Company’s failure under Section 4(d),
      (e), (f), (h) or (i) of the Securities Purchase Agreement, or (b) thirty (30)
      days after the occurrence of the Company’s failure under any other provision of
      the Securities Purchase Agreement or of the Registration Rights Agreement,
      as
      the case may be; or

     

    e. The
      Company shall (1) admit in writing its inability to pay its debts generally
      as
      they mature; (2) make an assignment for the benefit of creditors or commence
      proceedings for its dissolution; or (3) apply for or consent to the appointment
      of a trustee, liquidator or receiver for its or for a substantial part of its
      property or business; or

     

    f. A
      trustee, liquidator or receiver shall be appointed for the Company or for a
      substantial part of its property or business without its consent and shall
      not
      be discharged within sixty (60) days after such appointment; or 

     

    g. Any
      governmental agency or any court of competent jurisdiction at the instance
      of
      any governmental agency shall assume custody or control of the whole or any
      substantial portion of the properties or assets of the Company and shall not
      be
      dismissed within sixty (60) days thereafter; or

     

    h. Any
      final
      money judgment, writ or warrant of attachment, or similar process (including
      an
      arbitral determination), not subject to appeal, in excess of Fifty Thousand
      ($50,000) Dollars in the aggregate shall be entered or filed against the Company
      or any of its properties or other assets and shall remain unpaid, unvacated,
      unbonded or unstayed for a period of sixty (60) days or in any event later
      than
      five (5) days prior to the date of any proposed sale thereunder; or

     

    i. Bankruptcy,
      reorganization, insolvency or liquidation proceedings or other proceedings
      for
      relief under any bankruptcy law or any law for the relief of debtors shall
      be
      instituted by or against the Company and, if instituted against the Company,
      shall not be dismissed within sixty (60) days after such institution or the
      Company shall by any action or answer approve of, consent to, or acquiesce
      in
      any such proceedings or admit the material allegations of, or default in
      answering a petition filed in any such proceeding; or

     

    j. The
      issuance of an order, ruling, finding or similar adverse determination by the
      Securities and Exchange Commission, the Secretary of State of the State of
      Nevada, the National Association of Securities Dealers, Inc. or any other
      securities regulatory body (whether in the United States, Canada or elsewhere)
      having proper jurisdiction that the Company and/or any of its past or present
      directors or officers have committed a material violation of applicable
      securities laws or regulations.

     

    k. The
      Company shall have its Common Stock suspended or delisted from an exchange
      for a
      period in excess of five (5) trading days.

     

    
      
        
        

      

      
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    Then,
      or
      at any time thereafter, the Company shall immediately give written notice of
      the
      occurrence of such Event of Default to the Holders of all Debentures then
      outstanding, and in each and every such case, unless such Event of Default
      shall
      have been waived in writing by a majority in interest of the Holders of the
      Debentures (which waiver shall not be deemed to be a waiver of any subsequent
      default), then at the option of a majority in interest of the Holders and in
      the
      discretion of a majority in interest of the Holders, (i) the interest rate
      applicable to the Debentures shall be increased to the lesser of eighteen
      percent (18%) per annum and the maximum interest rate allowable under applicable
      law, and (ii) the Holder may at its option and discretion declare this
      Debenture, together with all accrued and unpaid interest (the “Acceleration
      Amount”), to be immediately due and payable, without presentment, demand,
      protest or notice of any kinds, all of which are hereby expressly waived,
      anything herein or in any note or other instruments contained to the contrary
      notwithstanding. Notwithstanding the foregoing, in the case of a default under
      Section 10(a)(ii) arising from a Conversion at the option of the Holder under
      Section 2(a), (i) the Holder of the Debenture sought to be converted, acting
      singly, shall have the sole and absolute discretion to increase the applicable
      interest rate on the Debentures held by such Holder and/or to declare the
      Debenture(s) held by such Holder to immediately due and payable, and (ii) the
      Acceleration Amount shall be equal to 130% of the principal plus accrued and
      unpaid interest. The Company expressly acknowledges and agrees that the
      Acceleration Amount as so increased in the event of a default under Section
      10(a)(ii) is reasonable and appropriate due to the inability to define the
      financial hardship that the Company’s default would impose on the Holders. A
      majority in interest of the Holders may immediately enforce any and all of
      the
      Holder's rights and remedies provided herein or any other rights or remedies
      afforded by law. 

     

      Nothing
      contained in this Debenture shall be construed as conferring upon the Holder
      the
      right to vote or to receive dividends or to consent or receive notice as a
      shareholder in respect of any meeting of shareholders or any rights whatsoever
      as a shareholder of the Company, unless and to the extent converted in
      accordance with the terms hereof.

     

      This
      Debenture may be amended only by the written consent of the parties hereto.
      Notwithstanding the foregoing, the principal amount of this Debenture shall
      automatically be reduced by any and all Conversion Amounts (to the extent that
      the same relate to principal hereof). In the absence of manifest error, the
      outstanding principal amount of the Debenture on the Company’s book and records
      shall be the correct amount.

     

      No
      waivers or consents in regard to any provision of this Debenture may be given
      other than by an instrument in writing signed by the Holder.

     

    [Signature
      page follows.]

     

    
      
        
        

      

      
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        IN
      WITNESS
      WHEREOF,
      the
      Company has caused this Debenture to be duly executed by an officer thereunto
      duly authorized.

     

    INTERACTIVE
      GAMES, INC.

     

    

    By:
      _____________________________

    Henry
      Fong

    Chief
      Executive Officer

     

     

    
      
        
        

      

      
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    EXHIBIT
      A

     

    NOTICE
      OF
      CONVERSION

     

    (To
      be
      Executed by the Registered Holder in order to Convert the
      Debenture)

     

        The
      undersigned hereby irrevocably elects to convert $ ________________ of the
      principal amount of the above Debenture into Shares of Common Stock of
      INTERACTIVE GAMES, INC.
      (the
      "Company") according to the conditions hereof, as of the date written below.
      After giving effect to the conversion requested hereby, the outstanding
      principal amount of such debenture is $ ____________________, subject to
      confirmation by the Company endorsed below, absent manifest error.

    

    Conversion
      Date

     

    Applicable
      Conversion Price 

     

    Signature

    [Name]

     

    Address:

     

    The
      Company hereby confirms that $ ___________ in principal amount is outstanding
      under the above Debenture after giving effect to the conversion requested
      hereby.

    

    INTERACTIVE
      GAMES, INC.

    

    By:_______________________________________

     

    __________________________________________

    (Print
      Name)

    __________________________________________

    (Title)

    

    

    
      
        
        

      

      
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    REGISTRATION
      RIGHTS AGREEMENT

    (CONVERTIBLE
      DEBENTURES)

    

    THIS
      REGISTRATION RIGHTS AGREEMENT, dated
      as
      of (this "Agreement"), is made by and between Interactive Games,
      Inc.,
      a Nevada
      corporation, with headquarters located at 319 Clematis Street, Suite 803, West
      Palm Beach, FL 33401 (the “Company”), and each entity named on the signature
      page hereto as “Investors” (each, an “Investor”).

     

    W
      I T N E S S E T H:

     

    WHEREAS,
      upon
      the terms and subject to the conditions of the Securities Purchase Agreement,
      dated as of __________ ____, between the Buyers listed therein and the Company
      (the "Securities Purchase Agreement"; terms not otherwise defined herein shall
      have the meanings ascribed to them in the Securities Purchase Agreement), the
      Company has agreed to issue and sell to the Investors one or more debentures
      of
      the Company, in a minimum aggregate principal amount of $200,000 and a maximum
      aggregate amount of $700,000 (the "Debentures"); and

     

    WHEREAS,
      the
      Debentures are convertible into shares of Common Stock (the "Conversion Shares";
      which term, for purposes of this Agreement, shall be 300% of that number of
      shares of Common Stock into which the Debentures, including without limitation
      all shares of Common Stock issuable by the Company in lieu of accrued interest
      on conversion as contemplated by the Debentures) upon the terms and subject
      to
      the conditions contained in the Debentures. 

     

    WHEREAS,
      to
      induce
      the Investors to execute and deliver the Securities Purchase Agreement, the
      Company has agreed to provide certain registration rights under the Securities
      Act of 1933, as amended, and the rules and regulations thereunder, or any
      similar successor statute (collectively, the "Securities Act"), with respect
      to
      the Conversion Shares; 

     

    NOW,
      THEREFORE, in
      consideration of the premises and the mutual covenants contained herein and
      other good and valuable consideration, the receipt and sufficiency of which
      are
      hereby acknowledged, the Company and the Investors hereby agree as
      follows:

     

    1.  Definitions.As
      used
      in this Agreement, the following terms shall have the following
      meanings:

     

    a.  “Holders’
      Representative” means the person appointed as the Holders’ Representative by the
      Investors pursuant to Section 11 hereof.

     

    b.  "Investor"
      means a Buyer and any permitted transferee or assignee of a Buyer who agrees
      to
      become bound by the provisions of this Agreement in accordance with Section
      9
      hereof and who holds Debentures or Registrable Securities.

     

    c.  "Potential
      Material Event" means any of the following: (i) the possession by the Company
      of
      material information not ripe for disclosure in a registration statement, which
      shall be evidenced by determinations in good faith by the Board of Directors
      of
      the Company that disclosure of such information in the registration statement
      would be detrimental to the business and affairs of the Company; or (ii) any
      material engagement or activity by the Company which would, in the good faith
      determination of the Board of Directors of the Company, be adversely affected
      by
      disclosure in a registration statement at such time, which determination shall
      be accompanied by a good faith determination by the Board of Directors of the
      Company that the registration statement would be materially misleading absent
      the inclusion of such information.

     

    
      
        
        

      

      
        22

        
          

        

      

      
        
        

      

    

     

    d.  "Register,"
      "Registered," and "Registration" refer to a registration effected by preparing
      and filing a Registration Statement or Statements in compliance with the
      Securities Act and pursuant to Rule 415 under the Securities Act or any
      successor rule providing for offering securities on a continuous basis ("Rule
      415"), and the declaration or ordering of effectiveness of such Registration
      Statement by the SEC. 

     

    e.  "Registrable
      Securities" means the Conversion Shares and, to the extent applicable, any
      other
      shares of capital stock or other securities of the Company or any successor
      to
      the Company that are issued upon exchange of the Conversion Shares.

     

    f.  "Registration
      Statement" means a registration statement of the Company under the Securities
      Act.

     

    g.  “SEC”
      means the United States Securities and Exchange Commission.

     

    2.  Piggy-back
      Registration.
      From
      and after the date that is ninety (90) days after the date of this Agreement
      and
      until the fifth anniversary of the Closing Date, for so long as any of the
      Registrable Securities are outstanding and are not the subject of an effective
      registration statement, if the Company contemplates making an offering of Common
      Stock (or other equity securities convertible into or exchangeable for Common
      Stock) registered for sale under the Securities Act or proposes to file a
      Registration Statement covering any of its securities other than (i) a
      registration on Form S-8 or S-4, or any successor or similar forms; and (ii)
      a
      shelf registration under Rule 415 for the sole purpose of registering shares
      to
      be issued in connection with the acquisition of assets, the Company will at
      each
      such time give prompt written notice to the Holders’ Representative and the
      Investors of its intention to do so and of the Investor’s rights under this
      Agreement. Upon the written request of any Investor made within thirty (30)
      days
      after the receipt of any such notice (which request shall specify the
      Registrable Securities intended to be disposed of by such Holder and the
      intended method of disposition thereof), the Company will use its best efforts
      to effect the registration of all Registrable Securities which the Company
      has
      been so requested to register by the Investors, to the extent requisite to
      permit the disposition (in accordance with the intended methods of disposition)
      of the Registrable Securities by the Investors requesting registration, by
      inclusion of such Registrable Securities in the Registration Statement which
      covers the securities which the Company proposes to register; provided,
      that if
      the Company is unable to register the full amount of Registrable Securities
      in
      an “at the market offering” under Commission rules and regulations due to the
      high percentage of the Company’s Common Stock the Registrable Securities
      represents (giving effect to all other securities being registered in the
      Registration Statement), then the Company may reduce, on a pro rata basis,
      the
      amount of Registrable Securities subject to the Registration Statement to a
      lesser amount which equals the maximum number of Registrable Securities that
      the
      Company is permitted to register in an “at the market offering”; and
provided,
      further,
      that
      if, at any time after giving written notice of its intention to register any
      Registrable Securities and prior to the effective date of the Registration
      Statement filed in connection with such registration, the Company shall
      determine for any reason either not to register or to delay registration of
      such
      Registrable Securities, the Company may, at its election, give written notice
      of
      such determination to the Holders’ Representative and the Investors requesting
      registration and, thereupon, (i) in the case of a determination not to register,
      the Company shall be relieved of its obligation to register any Registrable
      Securities in connection with such registration (but not from its obligation
      to
      pay the expenses of registration in connection therewith), and (ii) in the
      case
      of a determination to delay registering such Registrable Securities, shall
      be
      permitted to delay registering any Registrable Securities, for the same period
      as the delay in registering such other securities.

     

    
      
        
        

      

      
        23

        
          

        

      

      
        
        

      

    

     

    3.  Obligations
      of the Company.
      In
      connection with the registration of the Registrable Securities, the Company
      shall do each of the following:

     

    (a)Prepare
      and file with the SEC such amendments (including post-effective amendments)
      and
      supplements to the Registration Statement as set forth in Section 2 and the
      prospectus used in connection with the Registration Statement as may be
      necessary to keep the Registration Statement effective at all times during
      the
      period through the earliest of (i) the date that is five (5) years after the
      last day of the calendar month following the month in which the Registration
      Statement so filed is declared effective by the SEC, (ii) the date when the
      Investors may sell all Registrable Securities under Rule 144, or (iii) the
      date
      the Investors no longer own any of the Registrable Securities (The “Registration
      Period”), Registration Period, comply with the provisions of the Securities Act
      with respect to the disposition of all Registrable Securities of the Company
      covered by the Registration Statement until such time as all of such Registrable
      Securities have been disposed of in accordance with the intended methods of
      disposition by the seller or sellers thereof as set forth in the Registration
      Statement;

     

    (b)The
      Company shall permit a single firm of legal counsel designated by the Holders’
Representative (the “Investors’ Counsel”) to review drafts of the Registration
      Statement and all amendments and supplements thereto a reasonable period of
      time
      (but not less than three (3) business days) prior to their filing with the
      SEC,
      and not file any document in a form to which such Investors’ Counsel reasonably
      objects. If the Investors’ Counsel objects, the Company shall take under
      advisement such objections and shall endeavor to promptly make such revisions
      to
      the Registration Statement (or ancillary documents and/or SEC filings in
      connection therewith) as are necessary to satisfy the objections of the
      Investors’ Counsel;

     

    (c)Notify
      the Holders’ Representative and the Investors’ Counsel, and any managing
      underwriters immediately (and, in the case of (i)(A) below, not less than five
      (5) days prior to the contemplated date of such filing) and (if requested by
      any
      the Holders' Representative) confirm such notice in writing no later than one
      (1) business day following the day (i)(A) when a Prospectus or any Prospectus
      supplement or post-effective amendment to the Registration Statement is proposed
      to be filed; (B) whenever the SEC notifies the Company whether there will be
      a
“review” of Registration Statement; (C) whenever the Company receives (or a
      representative of the Company receives on its behalf) any oral or written
      comments from the SEC relating to a Registration Statement (copies or, in the
      case of oral comments, summaries of such comments shall be promptly furnished
      by
      the Company to the Holders’ Representative and the Investor’s Counsel); and (D)
      with respect to the Registration Statement or any post-effective amendment,
      when
      the same has become effective; (ii) of any request by the SEC or any other
      Federal or state governmental authority for amendments or supplements to the
      Registration Statement or Prospectus or for additional information; (iii) of
      the
      issuance by the SEC of any stop order suspending the effectiveness of the
      Registration Statement covering any or all of the Registrable Securities or
      the
      initiation of any Proceedings for that purpose; (iv) if at any time the Company
      has actual knowledge that any of the representations or warranties of the
      Company contained in any agreement (including any underwriting agreement)
      contemplated hereby ceases to be true and correct in all material respects;
      (v)
      of the receipt by the Company of any notification with respect to the suspension
      of the qualification or exemption from qualification of any of the Registrable
      Securities for sale in any jurisdiction, or the initiation or threatening of
      any
      Proceeding for such purpose; and (vi) of the occurrence of any event that to
      the
      best knowledge of the Company makes any statement made in the Registration
      Statement or Prospectus or any document incorporated or deemed to be
      incorporated therein by reference untrue in any material respect or that
      requires any revisions to the Registration Statement, Prospectus or other
      documents so that, in the case of the Registration Statement or the Prospectus,
      as the case may be, it will not contain any untrue statement of a material
      fact
      or omit to state any material fact required to be stated therein or necessary
      to
      make the statements therein, in light of the circumstances under which they
      were
      made, not misleading. In addition, the Company shall respond to the SEC in
      writing to comments on the Registration Statement by the SEC within fifteen
      (15)
      business days of the Company’s receipt thereof, plus any additional time
      reasonably required by the Company’s independent auditors to respond to
      accounting comments and, if requested by the Holders' Representative and the
      Investors’ counsel, the Company shall furnish the Holders' Representative with
      copies of all intended written responses to the comments contemplated in clause
      (C) of this Section 3(c) not later than one (1) business day in advance of
      the
      filing of such responses with the SEC so that the Holders’ Representative and
      the Investors’ Counsel shall have the opportunity to comment thereon;

     

    
      
        
        

      

      
        24

        
          

        

      

      
        
        

      

    

     

    (d)Furnish
      to the Holders’ Representative and the Investors’ Counsel (i) promptly after the
      same is prepared and publicly distributed, filed with the SEC, or received
      by
      the Company, one (1) copy of the Registration Statement, each preliminary
      Prospectus and Prospectus, and each amendment or supplement thereto, and (ii)
      if
      so requested by any Investor, such number of copies of a Prospectus, and all
      amendments and supplements thereto and such other documents, as such Investor
      may reasonably request in order to facilitate the disposition of the Registrable
      Securities owned by such Investor; 

     

    (e)As
      promptly as practicable after becoming aware thereof, notify the Holders’
Representative of the happening of any event of which the Company has actual
      knowledge, as a result of which the prospectus included in the Registration
      Statement, as then in effect, includes an untrue statement of a material fact
      or
      omits to state a material fact required to be stated therein or necessary to
      make the statements therein, in light of the circumstances under which they
      were
      made, not misleading, and use its best efforts promptly to prepare a supplement
      or amendment to the Registration Statement or other appropriate filing with
      the
      SEC to correct such untrue statement or omission, and deliver a number of copies
      of such supplement or amendment to the Holders' Representative and each Investor
      as such Investor may reasonably request;

     

    (f) As
      promptly as practicable (and in any event not later than one (1) business day)
      after becoming aware thereof, notify the Holders’ Representative of the issuance
      by the SEC of a Notice of Effectiveness or any notice of effectiveness or any
      stop order or other suspension of the effectiveness of the Registration
      Statement at the earliest possible time; 

     

    (g) Notwithstanding
      the foregoing, if at any time or from time to time after the date of
      effectiveness of a Registration Statement, the Company notifies the Holders’
Representative in writing of the existence of a Potential Material Event, the
      Investors shall not offer or sell any Registrable Securities, or engage in
      any
      other transaction involving or relating to the Registrable Securities, from
      the
      time of the giving of notice with respect to a Potential Material Event until
      such Investor receives written notice from the Company that such Potential
      Material Event either has been disclosed to the public or no longer constitutes
      a Potential Material Event; provided,
      however,
      that
      the Company may not so suspend the right to such Holders of Registrable
      Securities for more than two twenty (20) business day periods in the aggregate
      during any 12-month period ("Suspension Period") with at least a ten (10)
      business day interval between such periods, during the periods the Registration
      Statement is required to be in effect;

     

    (h) Use
      its
      reasonable efforts to secure and maintain the designation of all the Registrable
      Securities covered by the Registration Statement on the NASDAQ/National Market
      System or the "OTC Bulletin Board Market" or any successor thereto of the
      National Association of Securities Dealers Automated Quotations System
      ("NASDAQ") within the meaning of Rule 11Aa2-1 of the SEC under the Securities
      Exchange Act of 1934, as amended (the "Exchange Act"), and the quotation of
      the
      Registrable Securities on The NASDAQ National Market System; and further use
      its
      efforts to arrange for at least two market makers to register with the National
      Association of Securities Dealers, Inc. ("NASD") as such with respect to such
      Registrable Securities; 

     

    (i) Provide
      a
      transfer agent and registrar, which may be a single entity, for the Registrable
      Securities not later than one (1) business day after the effective date of
      the
      Registration Statement;

     

    (j) Cooperate
      with the Investors to facilitate the timely preparation and delivery of
      certificates for the Registrable Securities to be offered pursuant to the
      Registration Statement and enable such certificates for the Registrable
      Securities to be in such denominations or amounts as the case may be, as the
      Investors may reasonably request, and, within five (5) business days after
      a
      Registration Statement which includes Registrable Securities is ordered
      effective by the SEC, the Company shall deliver, and shall cause legal counsel
      selected by the Company to deliver, to the transfer agent for the Registrable
      Securities (with copies to the Investors whose Registrable Securities are
      included in such Registration Statement) an appropriate instruction and opinion
      of such counsel; 

     

    
      
        
        

      

      
        25

        
          

        

      

      
        
        

      

    

     

    (k) Take
      all
      other reasonable actions necessary to expedite and facilitate disposition by
      the
      Investor of the Registrable Securities pursuant to the Registration Statement;
      

     

    (l) Not
      take,
      or omit to take, any actions that would preclude the filing or effectiveness
      of
      the Registration Statement or require the withdrawal of the Registration
      Statement; 

     

    (m) If
      the
      Registration Statement has been filed but has not been declared effective by
      the
      SEC, not complete any acquisitions or business combinations until
      the
      SEC has declared effective the Registration Statement that registers the
      Registrable Securities.

     

    4.  Payments
      by the Company.
      Unless
      the Company's performance is waived in writing by the Holders'
      Representative:

     

    (i)  If
      the
      Company fails to satisfy its obligations under Sections 2 or 3, then the Company
      shall immediately pay to the Investors without demand therefor a cash amount
      equal to 2% per month of the outstanding principal amount of the Debentures
      and,
      until such time as all such obligations shall have been satisfied, the same
      amount shall accrue and become payable to the Investors within three days on
      each subsequent month until such obligations shall have been satisfied. In
      light
      of the difficulty of ascertaining the amount of damage that the Investors will
      suffer as a result of the Company’s failure to comply with its obligations under
      Sections 2 or 3, all amounts payable under this Section 4 shall be payable
      as
      liquidated damages, and not as a penalty. The Company shall keep the
      Registration Statement effective throughout the Registration
      Period.

     

    (ii)  The
      parties acknowledge that the damages which may be incurred by the Investors
      if
      the Company fails to satisfy any of its obligations under Sections 2 or 3 may
      be
      difficult to ascertain. The parties agree that the payments to be paid to the
      Investors under this Section 4 represent a reasonable estimate on the part
      of
      the parties, as of the date of this Agreement, of the amount of such
      damages.

     

    5.  Obligations
      of the Investors.
      In
      connection with the registration of the Registrable Securities, the Investors
      shall have the following obligations:

     

    (a)  It
      shall
      be a condition precedent to the obligations of the Company to complete the
      registration pursuant to this Agreement with respect to the Registrable
      Securities of a particular Investor that such Investor shall furnish to the
      Company such information regarding itself, the Registrable Securities held
      by
      it, and the intended method of disposition of the Registrable Securities held
      by
      it, as shall be reasonably required to effect the registration of such
      Registrable Securities and shall execute such documents in connection with
      such
      registration as the Company may reasonably request. At least ten (10) business
      days prior to the first anticipated filing date of the Registration Statement,
      the Company shall notify each Investor of the information the Company requires
      from each such Investor (the "Requested Information") if such Investor elects
      to
      have any of such Investor's Registrable Securities included in the Registration
      Statement. If at least two (2) business days prior to the filing date the
      Company has not received the Requested Information from an Investor (a
      "Non-Responsive Investor"), then the Company may file the Registration Statement
      without including Registrable Securities of such Non-Responsive
      Investor;

     

    (b)  Each
      Investor, by such Investor's acceptance of the Registrable Securities, agrees
      to
      cooperate with the Company as reasonably requested by the Company in connection
      with the preparation and filing of the Registration Statement hereunder, unless
      such Investor has notified the Company in writing of such Investor's election
      to
      exclude all of such Investor's Registrable Securities from the Registration
      Statement; and

     

    (c)  Each
      Investor agrees that, upon receipt of any notice from the Company of the
      happening of any event of the kind described in Section 3(d) or 3(e), above,
      such Investor will immediately discontinue disposition of Registrable Securities
      pursuant to the Registration Statement covering such Registrable Securities
      until such Investor's receipt of the copies of the supplemented or amended
      prospectus contemplated by Section 3(d) or 3(e) and, if so directed by the
      Company, such Investor shall deliver to the Company (at the expense of the
      Company) or destroy (and deliver to the Company a certificate of destruction)
      all copies in such Investor's possession, of the prospectus covering such
      Registrable Securities current at the time of receipt of such
      notice.

     

    
      
        
        

      

      
        26

        
          

        

      

      
        
        

      

    

     

    (d)  Each
      holder of Registrable Securities that sells Registrable Securities pursuant
      to a
      registration under this Agreement agrees that in connection with registration
      as
      follows:

     

    (i)  Such
      seller shall cooperate as reasonably requested by the Company with the Company
      in connection with the preparation of the registration statement, and for as
      long as the Company is obligated to file and keep effective the registration
      statement, shall provide to the Company, in writing, for use in the registration
      statement, all such information regarding such seller and its plan of
      distribution of the Registrable Securities as may reasonably be necessary to
      enable the Company to prepare the registration statement and prospectus covering
      the Registrable Securities, to maintain the currency and effectiveness thereof
      and otherwise to comply with all applicable requirements of law in connection
      therewith; and 

     

    (ii)  During
      such time as such seller may be engaged in a distribution of the Registrable
      Securities, such seller shall comply with Rules 10b-6 and 10b-7 promulgated
      under the Securities Exchange Act and pursuant thereto it shall, among other
      things; (x) not engage in any stabilization activity in connection with the
      securities of the Company in contravention of such rules; (y) distribute the
      Registrable Securities under the registration statement solely in the manner
      described in the registration statement; and (z) cease distribution of such
      Registrable Securities pursuant to such registration statement upon written
      notice from the Company that the prospectus covering the Registrable Securities
      contains any untrue statement of a material fact required to be stated therein
      or necessary to make the statements therein not misleading.

     

    6.  Expenses
      of Registration.
      

     

    (a)  All
      reasonable expenses (other than underwriting discounts and commissions of the
      Investors) incurred for the Registration Statement covering the Registrable
      Securities applicable to the Debentures shall be borne by the Company, up to
      an
      aggregate amount of $50,000 in connection with registrations, filings or
      qualifications pursuant to Sections 2 and 3, a fee for the Investors’ Counsel of
      not more than $5,000 and including, without limitation, all registration,
      listing, and qualifications fees, printers, legal and accounting fees and the
      fees and disbursements of counsel for the Company. 

     

    (b)  Neither
      the Company nor any of its subsidiaries has, as of the date hereof, nor shall
      the Company nor any of its subsidiaries, on or after the date of this Agreement,
      entered into any agreement with respect to its securities that is inconsistent
      with the rights granted to the Investors in this Agreement or otherwise
      conflicts with the provisions hereof. Except as disclosed in the Securities
      Purchase Agreement or the other documents entered into simultaneously therewith,
      neither the Company nor any of its subsidiaries has previously entered into
      any
      agreement granting any registration rights with respect to any of its securities
      to any Person. Without limiting the generality of the foregoing, without the
      written consent of the Investors holding a majority of the Registrable
      Securities, the Company shall not grant to any person the right to request
      the
      Company to register any securities of the Company under the Securities Act
      unless the rights so granted are subject in all respects to the prior rights
      in
      full of the Investors set forth herein, and are not otherwise in conflict or
      inconsistent with the provisions of this Agreement and the other Transaction
      Documents.

     

    7.  Indemnification.
      In the
      event any Registrable Securities are included in a Registration Statement under
      this Agreement:

     

    (a)  To
      the
      extent permitted by law, the Company will indemnify and hold harmless the
      Holders’ Representative, the Investor’s Counsel and each Investor who holds such
      Registrable Securities, the directors, managers, partners, stockholders and
      members, if any, of the Holders’ Representative, the Investor’s Counsel or such
      Investor, the officers and employees, if any, of the Holders’ Representative,
      the Investor’s Counsel or such Investor, and each person, if any, who controls
      the Holders’ Representative, the Investors Counsel or any Investor within the
      meaning of the Securities Act or the Exchange Act (each, an "Indemnified Person"
      or "Indemnified Party"), against any losses, claims, damages, liabilities or
      expenses (joint or several) incurred (collectively, "Claims") to which any
      of
      them may become subject under the Securities Act, the Exchange Act or otherwise,
      insofar as such Claims (or actions or proceedings, whether commenced or
      threatened, in respect thereof) arise out of or are based upon any of the
      following statements, omissions or violations in the Registration Statement,
      or
      any post-effective amendment thereof, or any prospectus included therein: (i)
      any untrue statement or alleged untrue statement of a material fact contained
      in
      the Registration Statement or any post-effective amendment thereof or the
      omission or alleged omission to state therein a material fact required to be
      stated therein or necessary to make the statements therein not misleading,
      (ii)
      any untrue statement or alleged untrue statement of a material fact contained
      in
      the final prospectus (as amended or supplemented, if the Company files any
      amendment thereof or supplement thereto with the SEC) or the omission or alleged
      omission to state therein any material fact necessary to make the statements
      made therein, in light of the circumstances under which the statements therein
      were made, not misleading or (iii) any violation or alleged violation by the
      Company of the Securities Act, the Exchange Act, any state securities law or
      any
      rule or regulation under the Securities Act, the Exchange Act or any state
      securities law (the matters in the foregoing clauses (i) through (iii) being,
      collectively, "Violations"). Subject to clause (b) of this Section 7, the
      Company shall reimburse the Investors, promptly as such expenses are incurred
      and are due and payable, for any legal fees or other reasonable expenses
      incurred by them in connection with investigating or defending any such Claim.
      Notwithstanding anything to the contrary contained herein, the indemnification
      agreement contained in this Section 7(a) shall not (I) apply to a Claim arising
      out of or based upon a Violation which occurs in reliance upon and in conformity
      with information furnished in writing to the Company by or on behalf of any
      Indemnified Person expressly for use in connection with the preparation of
      the
      Registration Statement or any such amendment thereof or supplement thereto,
      if
      such prospectus was timely made available by the Company pursuant to Section
      3(b) hereof; (II) be available to the extent such Claim is based on a failure
      of
      the Investor to deliver or cause to be delivered the prospectus made available
      by the Company; (III) apply to amounts paid in settlement of any Claim if such
      settlement is effected without the prior written consent of the Company, which
      consent shall not be unreasonably withheld; or (IV) apply to any violation
      or
      alleged violation by an Indemnified Person of the Securities Act, the Exchange
      Act, any state securities laws or any rule or regulation under the Securities
      Act, the Exchange Act, or any state securities laws. Each Investor will
      indemnify the Company and its officers, directors and agents (each, an
      "Indemnified Person" or "Indemnified Party") against any claims arising out
      of
      or based upon a Violation which occurs in reliance upon and in conformity with
      information furnished in writing to the Company, by or on behalf of such
      Investor, expressly for use in connection with the preparation of the
      Registration Statement, subject to such limitations and conditions as are
      applicable to the Indemnification provided by the Company to this Section 7.
      Such indemnity shall remain in full force and effect regardless of any
      investigation made by or on behalf of the Indemnified Person and shall survive
      the transfer of the Registrable Securities by the Investors.

     

    
      
        
        

      

      
        27

        
          

        

      

      
        
        

      

    

     

    (b)  Promptly
      after receipt by an Indemnified Person or Indemnified Party under this Section
      7
      of notice of the commencement of any action (including any governmental action),
      such Indemnified Person or Indemnified Party shall, if a Claim in respect
      thereof is to be made against any indemnifying party under this Section 7,
      deliver to the indemnifying party a written notice of the commencement thereof
      and the indemnifying party shall have the right to participate in, and, to
      the
      extent the indemnifying party so desires, jointly with any other indemnifying
      party similarly noticed, to assume control of the defense thereof with counsel
      mutually satisfactory to the indemnifying party and the Indemnified Person
      or
      the Indemnified Party, as the case may be. In case any such action is brought
      against any Indemnified Person or Indemnified Party, and it notifies the
      indemnifying party of the commencement thereof, the indemnifying party will
      be
      entitled to participate in, and, to the extent that it may wish, jointly with
      any other indemnifying party similarly notified, assume the defense thereof,
      subject to the provisions herein stated and after notice from the indemnifying
      party to such Indemnified Person or Indemnified Party of its election so to
      assume the defense thereof, the indemnifying party will not be liable to such
      Indemnified Person or Indemnified Party under this Section 7 for any legal
      or
      other reasonable out-of-pocket expenses subsequently incurred by such
      Indemnified Person or Indemnified Party in connection with the defense thereof
      other than reasonable costs of investigation, unless the indemnifying party
      shall not pursue the action to its final conclusion. The Indemnified Person
      or
      Indemnified Party shall have the right to employ separate counsel in any such
      action and to participate in the defense thereof, but the fees and reasonable
      out-of-pocket expenses of such counsel shall not be at the expense of the
      indemnifying party if the indemnifying party has assumed the defense of the
      action with counsel reasonably satisfactory to the Indemnified Person or
      Indemnified Party. The failure to deliver written notice to the indemnifying
      party within a reasonable time of the commencement of any such action shall
      not
      relieve such indemnifying party of any liability to the Indemnified Person
      or
      Indemnified Party under this Section 7, except to the extent that the
      indemnifying party is prejudiced in its ability to defend such action. The
      indemnification required by this Section 7 shall be made by periodic payments
      of
      the amount thereof during the course of the investigation or defense, as such
      expense, loss, damage or liability is incurred and is due and
      payable.

     

    8.  Contribution.
      To the
      extent any indemnification by an indemnifying party is prohibited or limited
      by
      law, the indemnifying party agrees to make the maximum contribution with respect
      to any amounts for which it would otherwise be liable under Section 7 to the
      fullest extent permitted by law; provided,
      however,
      that
      (a) no contribution shall be made under circumstances where the maker would
      not
      have been liable for indemnification under the fault standards set forth in
      Section 7; (b) no seller of Registrable Securities guilty of fraudulent
      misrepresentation (within the meaning of Section 11(f) of the Securities Act)
      shall be entitled to contribution from any seller of Registrable Securities
      who
      was not guilty of such fraudulent misrepresentation; and (c) contribution by
      any
      seller of Registrable Securities shall be limited in amount to the net amount
      of
      proceeds received by such seller from the sale of such Registrable
      Securities.

     

    9.  Reports
      under Exchange Act.
      With a
      view to making available to the Investors the benefits of Rule 144 promulgated
      under the Securities Act or any other similar rule or regulation of the SEC
      that
      may at any time permit the Investors to sell securities of the Company to the
      public without registration ("Rule 144"), the Company agrees to:

     

    a.  make
      and
      keep public information available, as those terms are understood and defined
      in
      Rule 144; 

     

    b.  file
      with
      the SEC in a timely manner all reports and other documents required of the
      Company under the Securities Act and the Exchange Act; 

     

    c.  furnish
      to each Investor so long as such Investor owns Registrable Securities, promptly
      upon request, (i) a written statement by the Company that it has complied with
      the reporting requirements of Rule 144, the Securities Act and the Exchange
      Act,
      (ii) a copy of the most recent annual or quarterly report of the Company and
      such other reports and documents so filed by the Company and (iii) such other
      information as may be reasonably requested to permit the Investors to sell
      such
      securities pursuant to Rule 144 without registration; and 

     

    d.
      cause
      its counsel to deliver to its transfer agent such opinions of law as shall
      be
      required to remove restrictive legends on the shares to be sold in the standard
      form then employed for such purpose by such counsel or in such other form as
      is
      reasonably acceptable to such transfer agent.

     

    10.  Amendment
      of Registration Rights.
      Any
      provision of this Agreement may be amended and the observance thereof may be
      waived (either generally or in a particular instance and either retroactively
      or
      prospectively), only with the written consent of the Company and Investors
      who
      hold a fifty (50%) percent interest of the Registrable Securities. Any amendment
      or waiver effected in accordance with this Section 10 shall be binding upon
      each
      Investor and the Company.

     

    
      
        
        

      

      
        28

        
          

        

      

      
        
        

      

    

     

    11.  Appointment
      and Indemnification of Holders’ Representative.
      Each of
      the Investors hereby appoints as the Holders’ Representative Divine Capital
      Markets, LLC to so act until such time as all Registrable Securities have become
      Registered and there shall be no Debentures issued and outstanding, or such
      time
      as a successor to the then-acting Holders’ Representative is appointed in
      writing signed by the Investors representing greater than 50% of the
      then-outstanding Debentures and Registrable Securities. The Holders’
Representative shall have full discretion and authority, without consultation
      with the Holders, to accept and give notices on behalf of the Holders, to
      communicate with the Holders at such times and in such manner as the Holders’
Representative in its discretion determines is appropriate and to grant
      extensions of deadlines or waive any payment obligations set forth in Sections
      2
      and 3 hereof. The Holders' Representative shall not have discretion or authority
      to exercise any investment discretion over the Debentures, including causing
      the
      conversion of any Debentures, absent a Holder's express written authority.
      Notwithstanding
      any provision to the contrary contained elsewhere herein or in the Securities
      Purchase Agreement or the Debentures, the Holders’ Representative shall not have
      any duties or responsibilities, except those expressly set forth herein, nor
      shall the Holders’ Representative have or be deemed to have any fiduciary
      relationship with any Holder, and no implied covenants, functions,
      responsibilities, duties, obligations or liabilities shall be read into this
      Agreement or the Securities Purchase Agreement or Debentures or otherwise exist
      against the Holders’ Representative. The Holders shall indemnify upon demand the
      Holders’ Representative (to the extent not reimbursed by or on behalf of the
      Company and without limiting the obligation of the Company to do so under
      Section 7 hereof or under any other agreement or applicable law), pro
      rata,
      and
      hold harmless the Holders’ Representative from and against any and all
against
      any losses, claims, damages, liabilities or expenses (joint or several) incurred
      (collectively, "Holders’ Representative’s Claims") incurred
      by it; provided,
      however,
      that no
      Holder shall be liable for the payment to the Holders’ Representative of any
      portion of such Holders’ Representative’s Claims to the extent determined in a
      final, nonappealable judgment by a court of competent jurisdiction to have
      resulted from the Holders’ Representative’s own gross negligence or willful
      misconduct; provided,
      however,
      that no
      action taken in accordance with the directions of the Holders shall be deemed
      to
      constitute gross negligence or willful misconduct for purposes of this Section
      11. Without limitation of the foregoing, each Holder shall reimburse the
      Holders’ Representative upon demand for its ratable share of any costs or
      out-of-pocket expenses incurred by the Holders’ Representative in connection
      with the preparation, execution, delivery, administration, modification,
      amendment or enforcement (whether through negotiations, legal proceedings or
      otherwise) of, or legal advice in respect of rights or responsibilities under,
      this Agreement, the Securities Purchase Agreement, the Debentures, or any
      document contemplated by or referred to herein, to the extent that the Holders’
Representative is not reimbursed for such expenses by or on behalf of the
      Company.

     

    12.  Miscellaneous.

     

    a.  A
      person
      or entity is deemed to be a holder of Registrable Securities whenever such
      person or entity owns of record such Registrable Securities. If the Company
      receives conflicting instructions, notices or elections from two or more persons
      or entities with respect to the same Registrable Securities, the Company shall
      act upon the basis of instructions, notice or election received from the
      registered owner of such Registrable Securities.

     

    b.  Notices
      required or permitted to be given hereunder shall be given in the manner
      contemplated by the Securities Purchase Agreement, (i) if to the Company or
      to
      the Investors, to their respective address contemplated by the Securities
      Purchase Agreement, and (iii) if to any other Investor, at such address as
      such
      Investor shall have provided in writing to the Company, or at such other address
      as each such party furnishes by notice given in accordance with this Section
      12(b).

     

    c.  Failure
      of any party to exercise any right or remedy under this Agreement or otherwise,
      or delay by a party in exercising such right or remedy, shall not operate as
      a
      waiver thereof.

     

    d.  This
      Agreement shall be governed by and interpreted in accordance with the laws
      of
      the State of New York for contracts to be wholly performed in such state and
      without giving effect to the principles thereof regarding the conflict of laws.
      Each of the parties consents to the jurisdiction of the federal courts whose
      districts encompass any part of the City of New York or the state courts of
      the
      State of New York sitting in the City of New York in connection with any dispute
      arising under this Agreement and hereby waives, to the maximum extent permitted
      by law, any objection, including any objection based on forum
      non coveniens,
      to the
      bringing of any such proceeding in such jurisdictions. To the extent determined
      by such court, the Company shall reimburse the Buyer for any reasonable legal
      fees and disbursements incurred by the Buyer in enforcement of or protection
      of
      any of its rights under this Agreement.

     

    
      
        
        

      

      
        29

        
          

        

      

      
        
        

      

    

     

    e.  If
      any
      provision of this Agreement shall be invalid or unenforceable in any
      jurisdiction, such invalidity or unenforceability shall not affect the validity
      or enforceability of the remainder of this Agreement or the validity or
      enforceability of this Agreement in any other jurisdiction.

     

    f.  Subject
      to the requirements of Section 9 hereof, this Agreement shall inure to the
      benefit of and be binding upon the successors and assigns of each of the parties
      hereto.

     

    g.  All
      pronouns and any variations thereof refer to the masculine, feminine or neuter,
      singular or plural, as the context may require.

     

    h.  The
      headings in this Agreement are for convenience of reference only and shall
      not
      limit or otherwise affect the meaning thereof.

     

    i.  This
      Agreement may be executed in one or more counterparts, each of which shall
      be
      deemed an original but all of which shall constitute one and the same agreement.
      This Agreement, once executed by a party, may be delivered to the other party
      hereto by telephone line facsimile transmission of a copy of this Agreement
      bearing the signature of the party so delivering this Agreement.

     

    j.  The
      Company acknowledges that any failure by the Company to perform its obligations
      under Sections 2 or 3 or any delay in such performance could result in loss
      to
      the Investors, and the Company agrees that, in addition to any other liability
      the Company may have by reason of such failure or delay, the Company shall
      be
      liable for all direct damages caused by any such failure or delay, unless the
      same is the result of force majeure. Neither party shall be liable for
      consequential damages.

     

    k.  This
      Agreement constitutes the entire agreement among the parties hereto with respect
      to the subject matter hereof. There are no restrictions, promises, warranties
      or
      undertakings, other than those set forth or referred to herein. This Agreement
      supersedes all prior agreements and understandings among the parties hereto
      with
      respect to the subject matter hereof. This Agreement may be amended only by
      an
      instrument in writing signed by the party to be charged with enforcement
      thereof. 

     

    [Signature
      page follows.]

     

    
      
        
        

      

      
        30

        
          

        

      

      
        
        

      

    

     

        IN
      WITNESS
      WHEREOF, the
      parties have caused this Agreement to be duly executed by their respective
      officers thereunto duly authorized as of the day and year first above
      written.

     

    
      	
              COMPANY:

            
	
              INTERACTIVE
                GAMES, INC.

               

            
	
              By:
                Henry Fong

            
	
              Name:
                Henry Fong

            
	
              Title: Chief
                Executive Officer

            
	
               

              INVESTOR:
                

            
	
               

            
	
              Print
                Name of Investor Above

               

            
	
              By:

            
	
              Investor
                Signature Above

              Print
                Name of Signatory: 

              Title
                of Signatory:

            

    

    

    

    
      
        
        

      

      
        31EXHIBIT 10.106

                                 LOAN AGREEMENT
                                 --------------

                                 by and between

                              TULSA PROMENADE, LLC
                                  as Borrower,

                                       and

                             CHARTER ONE BANK, N.A.,
                                    as Lender

<PAGE>

                                 LOAN AGREEMENT
                                 --------------

     THIS LOAN AGREEMENT (this "Agreement"), is made and entered into as of the
14th day of March, 2006, by and between Tulsa Promenade, LLC, a Delaware limited
liability company (the "Borrower") and CHARTER ONE BANK, N.A., a national
banking association (the "Lender").

                                    RECITALS
                                    --------

     WHEREAS, Borrower is the owner of certain real property in Tulsa, Oklahoma,
as more particularly described on Exhibit A attached as a part hereof (the
"Land", which term shall include such present improvements and all rights,
privileges, easements, hereditaments and appurtenances thereunto relating or
appertaining);

     WHEREAS, improvements on the Land include a regional shopping mall
containing approximately 438,481 square feet of retail space, parking and common
areas related thereto (the "Mall");

     WHEREAS, Borrower desires to acquire additional land and retail space
containing approximately 81,320 square feet of retail space currently owned by
Mervyn's Department Store (the "Mervyn's Acquisition");

     WHEREAS, Borrower intends to make certain improvements to the Project
(defined herein), including general upgrades and tenant improvements associated
with new leases benefiting the Project;

     WHEREAS, Borrower has applied to Lender for a first mortgage loan in the
amount of $50,000,000.00 (the "Loan") for the purpose of such acquisitions and
improvements, and Lender is willing to make the Loan upon the terms and
conditions hereinafter set forth;

     NOW, THEREFORE, in consideration of the mutual representations, warranties,
covenants and agreements herein contained, the sufficiency of which is hereby
acknowledged, the parties hereto represent and agree as follows:

                                    ARTICLE I

                          INCORPORATION AND DEFINITIONS
                          -----------------------------

     The foregoing recitals and all exhibits hereto are made a part of this
Agreement. The following terms shall have the following meanings in this
Agreement:

     Additional Debt Service: For purposes of a Subsequent Draw shall mean debt
service calculated as set forth in the definition of Debt Service based on the
amount of such Subsequent Draw.

<PAGE>

     Adjusted NOI: The annualized amount of rents from Incremental New Leases,
plus the annualized amount of Incremental Reimbursable Expenses minus the
annualized rental income derived from any existing leases expiring within 90
days of such Subsequent Draw minus annualized operating expenses allocated to
the New Incremental Leases (where applicable) based on actual trailing twelve
month expenses for the Project applied on a square foot basis to the leaseable
area of the New Incremental Leases minus Management Fees based on the projected
gross revenues from the Incremental New Leases minus Reserves for Capital
Expenditures allocated to the Incremental New Leases.

     Applicable Margin: The percentage set forth below corresponding to the Loan
to Value Ratio in effect at such time:

-----------------------------------------------------------------------------
   Level              Loan to Value Ratio            Applicable Margin for
                                                       LIBOR Rate Loans
-----------------------------------------------------------------------------
     1       < or = 0.50 to 1.00                             1.20%
-----------------------------------------------------------------------------
     2       > 0.50 to 1.00 and < or = 0.60 to 1.00          1.35%
-----------------------------------------------------------------------------
     3       > 0.60 to 1.00                                  1.50%
-----------------------------------------------------------------------------

The Applicable Margin shall be determined by the Lender from time to time, based
on the Loan to Value Ratio as determined by Lender in its sole discretion.

     Appraisal: An MAI certified appraisal of the Project performed in
accordance with FIRREA and Lender's appraisal requirements by an appraiser
selected and retained by Lender, which shall be acceptable to Lender in its sole
discretion.

     Borrower: Tulsa Promenade, LLC, an Oklahoma limited liability company.

     Certificate of Compliance: As defined in Section 7.10 (f).

     Debt Service: The annual principal and interest payments required for the
current outstanding principal balance of the Loan assuming a thirty (30) year
amortization and the greater of an interest rate equal to (i) the yield on a
10-year United States Treasury Note plus 2.50% and (ii) 7%, provided that for
purposes of Draw A and Draw B, interest will be assumed to be 7%.
Notwithstanding the foregoing, in the event any portion of the Loan is subject
to a Hedging Contract with a fixed rate of interest, calculations of Debt
Service for the portion of the Loan subject to a Hedging Contract shall be based
on the actual fixed interest rate set forth in such Hedging Contract assuming a
thirty (30) year amortization.

     Debt Service Coverage Ratio: The ratio of the Borrower's Net Operating
Income to Debt Service.

     Default or Event of Default: One or more of the events or occurrences set
forth in Article X below.

     Default Rate: As defined in the Note.

     Disbursement: A disbursement of Loan Proceeds by Lender as contemplated by
Article VI below.

                                      -2-
<PAGE>

     Draw A: As defined in Section 3.3 (a).

     Draw B: As defined in Section 3.3 (b).

     DSC Cash Collateral Reserve: As defined in Section 7.28.1.

     DSCR Requirement: As defined in Section 7.28.

     Environmental Law: As defined in the Indemnity Agreement by and between
Borrower and Lender dated on or about the date hereof.

     Hedging Contracts means, interest rate swap agreements, interest rate cap
agreements and interest rate collar agreements, or any other agreements or
arrangements entered into between the Borrower and the Lender and designed to
protect the Borrower against fluctuations in interest rates or currency exchange
rates.

     Hedging Obligations means, with respect to the Borrower, all liabilities of
the Borrower to the Lender under Hedging Contracts.

     Incremental New Leases: Any New Lease entered into after the immediately
preceding Subsequent Draw, or in the case of the first Subsequent Draw, entered
into after Draw A or Draw B, as the case may be.

     Incremental Reimbursable Expenses: Cash expenses incurred by the Borrower,
but which are required to be reimbursed by the tenant(s).

     Incremental Value: The Adjusted NOI divided by the Prevailing Cap Rate.

     Improvements: All buildings, structures and other improvements, including
all common areas, located or to be located on the Land (and, upon the Mervyn's
Acquisition, on the land subject to such acquisition) and all fixtures and
equipment required for the operation thereof.

     Inspecting Agent: Any and all persons or entities from time to time
designated by Lender as Lender's agent to inspect the Project.

     Interest Period: As defined in the Note.

     LIBOR Rate: Relative to any Interest Period for LIBOR Rate Loans, the
offered rate for deposits of U.S. Dollars in an amount approximately equal to
the amount of the requested LIBOR Rate Loan for a term coextensive with the
designated Interest Period which the British Bankers' Association fixes as its
LIBOR rate as of 11:00 a.m. London time on the day which is two London Banking
Days prior to the beginning of such Interest Period.

     LIBOR Rate Loan: Any Loan the rate of interest applicable to which is based
upon the LIBOR Rate.

                                      -3-
<PAGE>

     LIBOR Lending Rate: Relative to any LIBOR Rate Loan to be made, continued
or maintained as, or converted into, a LIBOR Rate Loan for any Interest Period,
a rate per annum determined pursuant to the following formula:

         LIBOR Lending Rate                 =            LIBOR Rate
                                                         ----------
                                              (1.00 - LIBOR Reserve Percentage)

     London Banking Day: A day on which dealings in US dollar deposits are
transacted in the London interbank market.

     Loan: As defined in the recitals.

     Loan Amount: The lesser of (i) 65% of the value of the Project, or (ii)
$50,000,000.00.

     Loan Closing: The date on which the Mortgage is filed with the County
Recorder's office.

     Loan Documents: This Agreement, the documents specified in Article IV
hereof, and any other instruments evidencing or securing the obligations of
Borrower or any guarantor under the Note or any of the other Loan Documents.

     Loan Opening: The first disbursement of the Loan.

     Loan Proceeds: All amounts advanced as part of the Loan, whether advanced
directly to Borrower or other parties.

     Loan to Value Ratio: The ratio of the outstanding principal amount of the
Loan to the value of the Project securing the Loan (as determined by the most
recent Appraisal) at the time such calculation is made.

     Management Fee: The greater of (i) the actual management fee for the
Project, or (ii) the imputed management fee set forth in the most recent
Appraisal, which, as of the date hereof, is 3%.

     Managing Member Glimcher Properties Limited Partnership, a Delaware limited
liability company, as of Loan Closing, to be immediately replaced by Tulsa
Promenade REIT, LLC as set forth in Section 9.2

     Maturity Date: _______________, 2009.

     Mervyn's Acquisition: As defined in the recitals.

     Mervyn's Collateral Account: As defined in Section 3.3(b).

     Mortgage: As defined in Section 4(b).

                                      -4-
<PAGE>

     Net Operating Income or NOI: The sum of the following (without duplication
and determined on a consistent basis with prior periods): (a) rents and other
revenues received in the ordinary course of business from operating the Project
(including proceeds of rent loss insurance but excluding pre-paid rents and
revenues and security deposits except to the extent applied in satisfaction of
tenants' obligations for rent) during the trailing twelve months minus (b) any
income received from leases where tenant has given Borrower notice of its
intention to terminate or not renew its existing lease minus (c) all expenses
paid or accrued related to the ownership, operation or maintenance of the
Project, including, but not limited to, taxes, assessments and other similar
charges, insurance, utilities, payroll costs, maintenance, repair and
landscaping expenses and on-site marketing expenses during the trailing twelve
months minus (d) the Reserves for Capital Expenditures for the Project for the
trailing twelve months minus (e) the Management Fee for the Project for such
period.

     New Lease(s): Newly executed leases with national or regional tenants in
accordance with Section 7.30 and with terms of at least five(5) years.

     Note: As defined in Section 3.2.

     Permitted Exceptions: Encumbrances on the Land expressly agreed to by
Lender, as set forth in Schedule B I of the Title Policy.

     Prevailing Cap Rate or PCR: In the event that a Subsequent Draw occurs
within 12 months of the Loan Closing, the Prevailing Cap Rate shall mean 7.37%
(as set forth in the most recent Appraisal). In the event that a Subsequent Draw
occurs later than 12 months following the Loan Closing, the Prevailing Cap Rate
shall mean the lesser of (i) the yield on the prevailing 10-year United States
Treasury Note plus 2.50%; or (ii) the capitalization rate set forth in the most
recent Appraisal, provided that such Appraisal may not be older than twelve (12)
months.

     Prime Rate: The rate of interest announced by Lender in Cleveland, Ohio
from time to time as its "Prime Rate." The Borrower acknowledges that the Lender
may make loans to its customers above, at or below the Prime Rate. Interest
accruing by reference to the Prime Rate shall be calculated on the basis of
actual days elapsed and a 360-day year.

     Prime Rate Loan: Any Loan for the period(s) when the rate of interest
applicable to such Loan is calculated by reference to the Prime Rate.

     Proforma Debt Service: For purposes of a Subsequent Draw shall mean current
Debt Service plus Additional Debt Service.

     Proforma NOI: For purposes of a Subsequent Draw shall mean Adjusted NOI
(for such Subsequent Draw) plus NOI (trailing twelve months).

     Project: The Land, together with the Improvements, provided that if/when
the Mervyn's Acquisition occurs, the definition of Project shall automatically
include all the land and improvements related to the Mervyn's Acquisition.

     Prohibited Transfer: As defined in Section 9.2 below.

                                      -5-
<PAGE>

     Reference Banks: Means four major banks in the London interbank market.

     Request for Disbursement: As defined in Article VI hereof.

     Reserves for Capital Expenditures: The amount of annual reserves required
for the Project pursuant to the most recent Appraisal as approved by Lender in
its sole discretion. As of the date hereof, the required annual reserves is $.15
per square foot (total of $43,845.00).

     Regulated Materials: As defined in the Indemnity Agreement by and between
Borrower and Lender dated on or about the date hereof.

     Required NOI: As defined in Section 7.28.1.

     Soft Costs: Costs incurred by Borrower for professional and other services
in connection with the Project.

     Subsequent Draw: As defined in Section 3.3 (c).

     Title Company: Flagler Title Company.

     Title Policy: An ALTA Mortgagee's Loan Title Insurance Policy with extended
coverage issued by the Title Insurer insuring the lien of the Mortgage as a
valid first, prior and paramount lien upon the Project and all appurtenant
easements, and subject to no other exceptions other than the Permitted
Exceptions and otherwise satisfying the requirements of Section 5.1(a).

                                   ARTICLE II

                         REPRESENTATIONS AND WARRANTIES
                         ------------------------------

     2.1 Representations and Warranties. To induce Lender to execute and perform
this Agreement, Borrower hereby represents, covenants and warrants to Lender as
follows:

     (a) At the Loan Closing and at all times thereafter until the Loan is paid
in full, the Borrower will have good and marketable indefeasible fee simple
title to the Land, subject only to the Permitted Exceptions.

     (b) Each of the Loan Documents, when executed and delivered, will
constitute the duly authorized, legal, valid and binding obligations of each
party executing the same, and will be enforceable strictly in accordance with
their respective terms.

     (c) No condition, circumstance, event, agreement, document, instrument,
restriction, or pending or threatened litigation or proceeding exists which
could materially adversely affect the validity or priority of the liens and
security interests granted to Lender under the Loan Documents, which could
materially adversely affect the ability of Borrower to own the Land and to
operate the Project, which could materially adversely affect the ability of
Borrower to perform its or their respective obligations under the Loan
Documents, which would constitute a default in the obligations of the Borrower
under any of the Loan Documents or which would constitute such a default with
the giving of notice or lapse of time or both.

                                      -6-
<PAGE>

     (d) The Land, the present use and occupancy of the Land and the use and
occupancy of the Project, does not violate or conflict in any material respect
with any applicable law, statute, ordinance, rule, regulation or order of any
kind, including, without limitation, zoning, building, environmental, land use,
noise abatement, occupational health and safety or other laws, any building
permit or any condition, grant, easement, covenant, condition or restriction,
whether recorded or not.

     (e) All financial statements submitted by Borrower to Lender in connection
with this Loan are true and correct in all material respects, have been prepared
in accordance with generally recognized accounting principles consistently
applied, and fairly present the respective financial conditions and results of
operations of the entity and persons which are their subject as of the
respective dates thereof. No material adverse change has occurred in the
financial conditions reflected therein since the respective dates thereof and no
additional borrowings have been made by Borrower since the date thereof other
than the Loan contemplated hereby.

     (f) This Agreement and all financial statements, budgets, schedules,
opinions, certificates, confirmations, applications, rent rolls, affidavits,
agreements, and other materials submitted to the Lender in connection with or in
furtherance of this Agreement by or on behalf of the Borrower, fully and fairly
state the matters with which they purport to deal, do not misstate any material
fact, nor, separately or in the aggregate, fail to state any material fact
necessary to make the statements made not misleading.

     (g) All utility and municipal services required for the, occupancy and
operation of the Project, including, but not limited to, water supply, storm and
sanitary sewage disposal system, gas, electric and telephone facilities are
available for use.

     (h) All permits and licenses required by applicable law to occupy and
operate the Project have been issued and are in full force.

     (i) The storm and sanitary sewage disposal system, water system and all
mechanical systems of the Land and the Project comply in all material respects
with all applicable environmental, pollution control and ecological laws,
ordinances, rules and regulations.

     (j) All utility, parking, vehicular access (including curb cuts and highway
access), recreational and other permits and easements required for the use and
operation of the Project have been granted and issued, to the extent necessary
or required for the operation and use of the Project.

     (k) Except as shown on the survey, the Project does not encroach upon any
building line, set back line, side yard line, or any recorded or visible
easement, or other easement of which Borrower is aware or has reason to believe
may exist, affecting the Land.

                                      -7-
<PAGE>

     (l) All roads necessary for ingress and egress to the Project and for the
full utilization of the Improvements for their intended purposes have either
been completed pursuant to easements approved by the Lender or the necessary
rights-of-way thereof have been dedicated to public use and accepted by the
appropriate governmental authority.

     (m)(i) No condemnation of any portion of the Project and (ii) no denial of
access to the Project from any point of access to the Project, has commenced, or
to the best of Borrower's knowledge, is contemplated by any governmental
authority.

     2.2 Continuation of Representations and Warranties. The Borrower hereby
covenants, warrants and agrees that each of the representations and warranties
made in Section 2.1 hereof shall be and shall remain true and correct at the
time of the Loan Closing and at all times thereafter so long as any part of the
Loan shall remain outstanding. Each Request for Disbursement shall constitute a
reaffirmation that these representations and warranties are true on and as of
the date of such Request for Disbursement and will be true on the date of the
Disbursement.

                                   ARTICLE III

                                    THE LOAN
                                    --------

     3.1 Agreement to Borrow and Lend. Borrower agrees to borrow from Lender,
and Lender agrees to lend to Borrower, such amount as shall be requested by the
Borrower, but in no event exceeding the stated Loan Amount, on the terms of and
subject to the conditions of this Agreement.

     3.2 The Note. The Loan shall be evidenced by a promissory note (the
"Note"), executed by Borrower, payable to the order of Lender and in the Loan
Amount. Interest, maturity, terms of payment of principal and interest,
prepayment premiums, and all other similar terms and conditions of the Loan
shall be as set forth in the Note.

     3.3. Permitted Draws.

     (a) Initial Draw: Borrower may request and Lender will provide an initial
draw at Loan Closing in an amount up to the lesser of (i) 65% of the purchase
price of the Mall, (ii) 65% of the appraised value of the Mall, (iii) an amount
such that the Debt Service Coverage Ratio for the Project is not less than
1.25x, or (iv) $35,000,000 ("Draw A");

     (b) Mervyn's Acquisition Draw: In the event that Borrower proceeds with the
Mervyn's Acquisition, Borrower may request and Lender will provide an additional
draw to fund the Mervyn's Acquisition in an amount up to the lesser of (i) 65%
of the purchase price of the Mervyn's Acquisition, or (ii) 65% of the appraised
value of the Mervyn's Acquisition ("Draw B"); provided that Borrower must
deposit its own funds or draw an additional amount from Loan proceeds (such draw
shall not be restricted by the foregoing) in the amount of one year's Debt
Service for Draw B, to be deposited in an account with Lender (the "Mervyn's
Collateral Account") to be held as additional collateral for the Loan, until
such time as the Project (factoring both the Mall and the Mervyn's Acquisition)
achieves the DSCR Requirement, provided that such release shall not occur prior
to the one year anniversary of the Lender's disbursement of Draw B.

                                      -8-
<PAGE>

     (c) Subsequent Draws: At any time following the Loan Opening, but not more
than once per quarter, Borrower may request additional draws in the minimum
amount of $1,000,000 (and $250,000 increments thereafter) to reimburse Borrower
for expenses incurred related to improvements made to the Project or incurred
related to any Incremental New Leases (each being a "Subsequent Draw" and
collectively, the "Subsequent Draws") subject to the following:

          (i) Borrower must provide evidence that the Project currently complies
with the required minimum Debt Service Coverage Ratio of 1.25x;

          (ii) Borrower must provide evidence that the Project will continue to
comply with the required minimum Debt Service Coverage Ratio of 1.25x after such
Subsequent Advance based on Proforma Net Operating Income and Proforma Debt
Service; and

          (iii) Such draw may not exceed 65% of the Incremental Value.

In no event shall the aggregate outstanding amount of Draw A, Draw B, and all
Subsequent Draws exceed the aggregate amount of $50,000,000.

     3.4. Interest Election. Subject to the terms and conditions set forth in
the Note, interest on the outstanding principal amount of the Note shall accrue,
at Borrower's option, at one of the following rates of interest: (i) the Prime
Rate; or (ii) during the Interest Period applicable thereto at a rate equal to
the sum of the LIBOR Lending Rate for such Interest Period plus the Applicable
Margin thereto and be payable on each Interest Payment Date.

                                   ARTICLE IV

                                 LOAN DOCUMENTS
                                 --------------

     Borrower agrees to execute and deliver to Lender, on or prior to the Loan
Opening, the following documents, all of which must be satisfactory to Lender
and Lender's counsel in form, substance and execution and all of which are
executed on or about the date hereof:

     (a) The Note.

     (b) A mortgage with power of sale, security agreement and financing
statements (the "Mortgage"), duly executed by the Borrower and granting a valid
and subsisting first lien on the Land and the portions of the Project
constituting real property, and a security interest in the personal property and
fixtures securing all obligations of the Borrower under all of the Loan
Documents, subject only to the Permitted Exceptions.

     (c) An assignment to Lender from Borrower of the rents, leases, security
and other deposits, income, issues, proceeds and profits associated with or
arising from the Project or any part thereof, and which assignment is prior to
all other such assignments and valid as such against all creditors of Borrower.

                                      -9-
<PAGE>

     (d) Uniform Commercial Code financing statements, executed by Borrower as
debtor with respect to the Mortgage and the security agreement described in
clauses (b) and (d) hereof, and which financing statements are prior to all
other such financing statements and valid as such against all creditors of
Borrower.

     (e) A collateral assignment to Lender of all rights of Borrower in any
contract for management of the Project or any portion thereof, together with
assignments of such maintenance and service contracts entered into in connection
with the operation of the Project as Lender may require, and which assignment is
prior to all other such assignments and valid as such against all creditors of
Borrower.

     (f) An indemnity agreement from Borrower in favor of Lender confirming the
perpetual survival of Borrower's representations, warranties and indemnities
herein with respect to Regulated Materials, among other things, and compliance
with all applicable laws.

     (g) Such other papers and documents as may be required by this Agreement or
as Lender may reasonably require.

                                    ARTICLE V

                           CONDITIONS TO LOAN CLOSING
                           --------------------------

     5.1 Unless waived by Lender, Borrower shall furnish the following to Lender
at least five (5) business days prior to the Loan Closing or at such time as is
set forth below, all of which must be strictly satisfactory to Lender and
Lender's counsel in form, content and execution:

     (a) Title Policy. A commitment (the "Title Commitment") for issuance of an
ALTA Loan Policy of Title Insurance, Form B-1970 (Amended 10-17-70, or 6-18-87)
(the "Title Policy"), issued by the Title Company to Lender, in the Loan Amount,
insuring the Mortgage to be a valid first, prior and paramount mortgage lien
upon the fee title to the Land and the Project, and a valid first lien upon any
easement in favor of the Premises which provides access to the Premises for
ingress and egress and/or for utilities, to the extent of funded Disbursements
of the Loan, subject only to the Permitted Exceptions and to customary
exceptions which, by their nature, cannot be eliminated until construction of
the Project has been completed, and with all so-called "standard" exceptions
deleted. The Title Commitment shall (i) contain a so-called "Comprehensive
Endorsement"; (ii) contain an endorsement affirmatively insuring the priority of
the Mortgage against any vendor's or mechanic's lien; (iii) affirmatively insure
the Lender that (A) no restrictions of record affecting the Land have been
violated, and that such instruments contain no right of reverter or forfeiture,
(B) the survey described in Section 5.1(b) hereof is accurate and accurately
depicts the same real estate as is covered by the Title Commitment, (C) Lender
is the holder of the Mortgage and that the Mortgage is the first lien against
the Project; (iv) insure contiguity of the Land with adjoining public rights of
way; (v) contain ALTA Variable Rate Endorsement No.6; (vi) contain an
endorsement affirmatively insuring that all future advances of Loan Proceeds
made by Lender shall be secured by the Mortgage and have priority as of the date
the Mortgage is filed for record with the Tulsa County Recorder; and (vii)
contain such other endorsements as Lender may require. If requested by Lender,
appropriate provisions satisfactory to Lender for co-insurance and reinsurance,

                                      -10-
<PAGE>

with direct access agreements acceptable in form and substance to Lender, shall
also be obtained. Contemporaneously with delivery to Lender of the Title
Commitment, Borrower shall also deliver to Lender copies of all documents
constituting the Permitted Exceptions. Borrower agrees to deliver to the Title
Agent, with a copy of each to Lender, such other papers, instructions and
documents as the Title Agent may require for the issuance of the Title
Commitment and the issuance of date down endorsements and interim certifications
relating to construction payouts as provided in Article vi hereof, and in
accordance with all requirements of this Agreement.

     (b) Survey. A plat survey (the "Survey") of the Land, in duplicate, made by
a registered land surveyor, dated no later than three (3) months prior to Loan
Closing, showing.

          (i) the location (and recording numbers, to the extent recorded) of
     all visible or recorded easements (including appurtenant easements), water
     courses, drains, sewers, public and private roads (including the names and
     widths thereof and recording numbers for the dedications thereof), other
     rights of way, and curb cuts, if any, within, adjacent to or serving the
     Land and Project or to which the Land and Project are or will be subject,
     and the location of any such proposed easements; that the same are, and
     after Construction of the Project and granting of easements will be,
     unobstructed; and that all portions of the Project will have access over
     recorded easements to dedicated public roads;

          (ii) the common street address of the Land and Project and the
     dimensions, boundaries and acreage or square footage of the Land and the
     Improvements;

          (iii) that all foundations and other structures currently existing and
     all other improvements on the Land, are placed within the lot and building
     lines, all deed restriction, recorded plats, other restrictions of record
     and ordinances relating to the location thereof (and, to the extent that
     any such restrictions or ordinances require any structure to be set back
     specified distances from any line, showing said line and the measured
     distance of said structure, or the proposed location of said structure,
     from said line);

          (iv) that except as may be shown on the survey there are no
     encroachments on the Land from improvements located on adjoining property;

          (v) the location and course of all visible utility lines;

          (vi) if the Land comprises more than one parcel, interior lines and
     other data sufficient to insure contiguity; and

          (vii) such additional information which may be required by the Lender
     or the Title Company.

     The Survey shall be made in accordance with the Minimum Standard Detail
Requirements for ALTA/ACSM Class A Land Title Surveys most recently adopted by
the American Land Title Association.

                                      -11-
<PAGE>

     (c) Insurance Policies. (i) Evidence of insurance policies as set forth
below, all of which must be satisfactory to Lender, in companies, forms, amounts
and coverage satisfactory to Lender, containing waiver of subrogation and first
mortgagee clauses in favor of Lender and providing for thirty (30) days' written
notice to Lender in advance of cancellation of said policies for non-payment of
premiums or any other reason or for material modification of said policies, and
ten (10) days' written notice to Lender in advance of payment of any insurance
claims under said policies to any person.

     (ii) Without limiting the generality of the foregoing, such policies shall
include the following:

          (A) Intentionally deleted.

          (B) Comprehensive general public liability, property damage and
     indemnity insurance, including, without limitation, water damage, so-called
     assumed and contractual liability coverage and claims for bodily injury,
     death or property damage, naming Lender as an additional insured, in a
     minimum amount of One Million Dollars ($1,000,000.00) per person One
     Million Dollars ($1,000,000.00) per occurrence, or such other amounts as
     Lender may from time to time require, with insurance carriers having a
     Best's rating of A or better, in forms and with companies satisfactory to
     Lender and with a maximum deductible of One Thousand Dollars ($1,000.00).
     Borrower shall also carry and maintain excess of umbrella liability, naming
     Lender as an additional insured thereunder in a minimum amount of Two
     Million Dollars ($2,000,000.00), with an insurance carrier having a Best's
     rating of A or better, in form satisfactory to Lender.

          (C) Insurance against loss or damage by fire and such other hazards,
     casualties and contingencies (including, without limitation, so called all
     risk coverages) as Lender may require, in an amount equal to the greater of
     (1) the Loan Amount, or (2) the replacement cost of the Project, with a
     replacement cost endorsement and in such amounts so as to avoid the
     operation of any coinsurance clause, for such periods and otherwise as
     Lender may require from time to time.

          (D) Insurance against rent loss or abatement of rent, covering payment
     of rent and like charges from the Land over a term of not less than twelve
     (12) months, in an amount to be approved by Lender.

          (E) Workers' compensation and employee liability insurance, naming
     Lender as additional insured, covering all employees working on or about
     the Project, and death, injury and/or property damage occurring on or about
     the Project, or resulting from activity thereat, with liability insurance
     limits for death of or injury to persons not less than Statutory Limits and
     for damage to property of not less than Statutory Limits.

Borrower shall deliver renewal certificates of all insurance required above,
together with written evidence of full payment of the annual premiums therefor
at least thirty (30) days prior to the expiration of the existing insurance. Any
such insurance may be provided under so called "blanket" policies, so long as

                                      -12-
<PAGE>

the amounts and coverages thereunder will, in Lender's sole judgment, provide
protection equivalent to that provided under a single policy meeting the
requirements of this paragraph.

     (d) Compliance with Laws. Evidence satisfactory to Lender that the Project
is in compliance with all applicable laws, ordinances (including zoning),
orders, rules and regulations of applicable governmental or quasigovernmental
authorities (including, without limitation, requirements for parking and
operation of the Project), and that any approvals thereof required from third
parties or any governmental or quasigovernmental authorities have been obtained.

     (e) Financial Statements. Current financial statements for the Borrower.

     (f) Management Agreement. Prior to the first advance of Loan Proceeds, a
copy of the management agreement. Said agreement to be collaterally assigned to
Lender and consented to by the Manager and the Service Provider.

     (g) Environmental Assessment. Evidence, including an environment
assessment, indicating that the Land, and the existing improvements, in Lender's
sole judgment, (i) contain no Regulated Materials and no other contamination
which, even if not so regulated, is known to pose a hazard to the health of any
person on or about the Land, (ii) is not located in a "Wetlands" or "Flood
Plain" area, and (iii) contains no underground storage tanks. Lender reserves
the right, at Borrower's expense, to retain an independent consultant to review
any such evidence submitted by Borrower or to conduct its own investigation of
the Land.

     (h) Payment of Loan Origination Fee. Payment to Lender of a Loan
Commitment/Origination Fee in the amount of $52,500.00 (15 basis points of the
amount of Draw A). Borrower shall pay Lender the remainder of the
Commitment/Origination fee in the amount of $22,500 (15 basis points of
remaining undisbursed Loan amount) at the time of the earlier of (i) Draw B, or
(ii) a Subsequent Draw.

     (i) Documents of Record. Copies of all covenants, conditions, restrictions,
easements and matters of record which affect the Land.

     (j) Equity: Borrower shall have provided evidence reasonably satisfactory
to Lender that Borrower's cash equity invested in the Project is not less than
the greater of (i) 35% of the total cost of the Project, or (ii) $20,405,000.
Borrower's cash equity must be used to pay for acquisition of the Mall.

     (k) Borrower's Attorney's Opinion. The opinion of Borrower's legal counsel
that with respect to the Borrower, the Land, and the Project: (a) there is no
threatened or pending litigation that might affect the Loan, the Land, the
Project or the Borrower; (b) the transactions contemplated by this Agreement do
not violate any provision of any law, restriction or other document affecting
the Borrower, the Land, or the Project; (c) the Loan Documents have been duly
executed and delivered, constitute legal, valid and binding obligations of the
Borrower and are enforceable in accordance with their terms; (d) Borrower is a
validly organized and existing limited liability company under the laws of the
State of Delaware and qualified to do business in the State of Oklahoma, that
Borrower has the legal capacity to own, develop and operate the Land and the
Project, and has the legal capacity to perform its obligations under the Loan

                                      -13-
<PAGE>

Documents, and that the Loan has been duly authorized by the Borrower, (e) the
individuals executing the Loan Documents are properly authorized to do so on
behalf of Borrower, (f) such other matters (including an opinion with respect to
zoning of the Land and the Project) concerning the Loan, the Loan Documents, and
the Land, the Project, and the Borrower, as the Lender or its counsel may
require.

     (l) Organizational Documents.

          (1) Certified copy of the Borrower's, Managing Member's, and OG Retail
          Holding Co., LLC's Articles of Organization;

          (2) Certified copy of Borrower's, Managing Member's, and OG Retail
          Holding Co., LLC's Operating Agreement;

          (3) Borrower's, Managing Member's, and OG Retail Holding Co., LLC's
          Resolutions authorizing Borrower to enter into Loan and designating
          the members/officers authorized to execute all Loan Documents.

          (4) Certified copy of the Glimcher Properties Limited Partnership
          Articles of Organization;

          (5) Certified copy of Glimcher Properties Limited Partnership Limited
          Partnership Agreement;

          (6) Certified copy of the Glimcher Properties Corporation's Articles
          of Incorporation;

          (7) Certified copy of Glimcher Properties Corporation's By-laws/Code
          of Regulations;

          (8) Glimcher Properties Corporation's Resolutions authorizing Glimcher
          Properties Limited Partnership Resolutions as sole member of Borrower
          to enter into Loan.

     (m) Full executed copy of the purchase agreement for the Mall.

     (n) Lender shall have obtained (at Borrower's cost) an Appraisal of the
Project which Appraisal is satisfactory to Lender in all respects including, but
not limited to, having a fair market evaluation of the Project indicating a
Loan-to-Value Ratio of sixty-five percent (65%) or lower.

     (o) Borrower shall concurrently with the Loan Opening, enter into a
derivative rate instrument or Hedging Contract in the minimum amount of 75% of
the projected combined amount of Draw A and Draw B; or upon each Draw A and Draw
B, enter into a derivative rate instrument or Hedging Contract in the minimum
amount of 75% of the amount of such draw.

                                      -14-
<PAGE>

     (p) Borrower shall use good faith and commercially reasonable efforts to
deliver to Lender, within 60 days of the date hereof subordination
nondisturbance and attornment agreements (the "SNDA's") with JC Penney and
Hollywood Theater. Notwithstanding anything to the contrary contained herein,
Lender shall not be obligated to fund any Subsequent Draws unless and until the
foregoing SNDA's have been delivered to Lender.

     (q) Additional Documents. Such other papers and documents regarding
Borrower, the Land or the Project as Lender may require.

                                   ARTICLE VI

                                  DISBURSEMENTS
                                  -------------

     6.1 The Disbursements. (a) Subject to the provisions of this Agreement, and
also subject to the terms and conditions of the other Loan Documents, the Lender
shall make and the Borrower shall accept the Loan in periodic Disbursements not
exceeding, in the aggregate, the Loan Amount (except for additional
Disbursements which the Lender shall have the right to make at its option
pursuant to the Mortgage). Disbursements shall be made from Loan Proceeds. The
first disbursement, to be made upon the Loan Closing, shall be in an amount
equal to (i) Draw A, (ii) such other costs and expenses of Loan Closing, as
approved by Lender in its sole and absolute discretion, and (iii) such other
costs and expenses in accordance with Section 6.1(b) below (the "Initial
Disbursement"). All Disbursements following the Initial Disbursement are
hereinafter called "Subsequent Disbursements".

     (b) After an Event of Default, Borrower hereby requests and authorizes
Lender to make Disbursements directly to itself for payment and reimbursement of
all interest, charges, costs and expenses incurred by Lender in connection with
the Loan, pursuant to this Agreement or other Loan Documents, including, but not
limited to, (i) interest due on the Loan and any points, loan fees, service
charges, commitment fees, or other fees due to Lender in connection with the
Loan; (ii) all title examination, survey, escrow, filing, search, recording and
registration fees and charges; (iii) all documentary stamp and other taxes and
charges imposed by law on the issuance or recording of any of the Loan
Documents; (iv) all appraisal fees; (v) all title, casualty liability, payment,
performance or other insurance or bond premiums; (vi) all fees and disbursements
for legal services including, without limitation, in-house attorney's costs and
fees, and outside counsel engaged in connection with the preparation,
negotiation, enforcement or administration of this Agreement or any of the Loan
Documents; and (vii) any amounts required to be paid by Borrower under this
Agreement, the Mortgage or any Loan Document after the occurrence of a Default
(all of which are herein referred to as "Loan Expenses").

     (c) Except for the Initial Disbursement, which shall be made at the Loan
Opening, Lender shall make each Disbursement within fifteen (15) business days
following receipt of all information required by Lender for the funding of such
Disbursement.

     6.2 Requests for Loan Disbursements. All requests for Disbursements,
including, without limitation, the Initial Disbursement shall be submitted on
the Lender's form of "Certificate for Payment", signed by the Borrower stating,
among other things, the amount of Loan Proceeds requested for each item. Each
Certificate for Payment requesting Disbursements for improvements to the Project

                                      -15-
<PAGE>

shall be accompanied by (a) the Borrower's affidavit, certifying the amount of
all outstanding balances due but unpaid for work in place for the Project, (b)
invoices from contractors and any other supporting documentation, and (c) lien
waivers from all contractors in the sum received by each such contractor for all
of Borrower's preceding draw requests, all to be in form and substance
satisfactory to Lender and the Title Agent. Borrower shall not submit more than
one Certificate for Payment per quarter. Each Certificate for Payment must be
received by the Lender on or before a date which is at least fifteen (15) days
prior to the date upon which the requested Disbursement is to be made, excluding
the date of receipt by the Lender.

     6.3 Loan Opening and Initial Disbursement. The Loan Opening shall be made
at such time as all of the conditions and requirements of this Agreement
required to be performed by Borrower or other parties prior to the Loan Opening
have been satisfied or performed. At the Loan Opening, Lender shall disburse, in
addition to the Initial Disbursement, all funds necessary to pay any Loan
Expenses then due.

     6.4 Subsequent Disbursements.

     (a) Draw B shall be made by Lender following receipt of Borrower's written
request, provided that, prior to the funding of Draw B, Borrower shall furnish
the following to Lender, all of which must be in form, substance and execution
satisfactory to Lender:

          (i) Borrower has delivered to Lender all items in Section 5.1, to the
     extent that such items apply or could apply to the Mervyn's Acquisition,
     including 5.1 a, b, c, d, f, g, l, and m.

          (ii) Borrower has delivered to Lender an amendment to Mortgage and
     environmental indemnity agreement in form and substance acceptable to
     Lender in its sole discretion, increasing the amount of the Mortgage and
     adding the property from the Mervyn's Acquisition as additional security
     for the Loan. Borrower hereby agrees to pay any costs related to the
     foregoing amendment, including without limitation all recording costs,
     mortgage tax, title costs, and reasonable attorney's fees;

          (iii) Borrower has caused the Title Company to issue an endorsement to
     the Title Policy, which endorsement insures that no claim exists which
     constitutes a cloud on the Lender's secured position established by the
     insured Mortgage and that no matters exist subordinate to the Mortgage
     which are unacceptable to the Lender; accelerates the effective date of the
     Title Policy to the date of the requested Disbursement; and covers the
     amount of the requested Disbursement so that the total amount insured by
     the Title Policy equals the total amount disbursed by Lender under the
     terms of this Agreement, an endorsement to the Title Policy to add the
     property described in the Mervyn's Acquisition, and any other endorsement
     to Title Policy that the Lender deems necessary to protect its security
     interest (or at the option of the Lender, confirmation from the Title Agent
     that all requirements for the issuance of such an endorsement have been
     satisfied and confirmation that the Title Insurer will issue such an
     endorsement within a specified time acceptable to the Lender).

                                      -16-
<PAGE>

          (iv) Evidence that all conditions set forth in Section 6.5 below shall
     have been met.

          (v) All conditions to the Initial Disbursement have been met, and the
     Initial Disbursement has been funded by Lender.

          (vi) Borrower has delivered to Lender an updated Certificate of
     Compliance, certifying among other things, the names of all tenants who
     have given their notice to terminate or not renew their existing lease.

          (vii) Borrower has delivered to Lender a certified current revised
     rent roll for the Project.

     (b) Prior to the funding of each Subsequent Draw, Borrower shall furnish
the following to Lender, all of which must be in form, substance and execution
satisfactory to Lender in its sole and absolute discretion:

          (i) Borrower has delivered to Lender an amendment to Mortgage in form
     and substance acceptable to Lender in its sole discretion, increasing the
     amount of the Mortgage. Borrower hereby agrees to pay any costs related to
     the foregoing amendment, including without limitation all recording costs,
     mortgage tax, title costs, and reasonable attorney's fees;

          ii) An endorsement to the Title Policy, which endorsement insures that
     no claim exists which constitutes a cloud on the Lender's secured position
     established by the insured Mortgage and that no matters exist subordinate
     to the Mortgage which are unacceptable to the Lender; accelerates the
     effective date of the Title Policy to the date of the requested
     Disbursement; and covers the amount of the requested Disbursement so that
     the total amount insured by the Title Policy equals the total amount
     disbursed by Lender under the terms of this Agreement (or at the option of
     the Lender, confirmation from the Title Agent that all requirements for the
     issuance of such an endorsement have been satisfied and confirmation that
     the Title Insurer will issue such an endorsement within a specified time
     acceptable to the Lender).

          (iii) If applicable, the lien waivers required pursuant to Section
     6.2; lien waivers from contractors, subcontractors and suppliers shall be
     submitted prior to the next scheduled Disbursement.

          (iv) The Certificate for Payment required pursuant to Section 6.2
     above.

          (v) Evidence that all Loan Proceeds disbursed to date have been
     applied to payment of costs of the Project (including, but not limited to,
     satisfactory waivers of mechanic's and materialmen's liens, affidavits,
     sworn statements and receipts for materials), if applicable.

                                      -17-
<PAGE>

          (vi) Upon Lender's request, evidence that any improvements to the
     Project are being constructed in accordance with applicable law. Lender
     shall have the right to require, at Borrower's cost, any additional
     information to complete Lender's analysis of each Disbursement request of
     Borrower.

          (vii) Borrower has delivered to Lender an updated Certificate of
     Compliance, certifying among other things, current compliance with Debt
     Service Coverage Ratio requirements and setting forth all tenants who have
     given their notice to terminate or not renew their existing lease.

          (viii) Borrower shall have delivered to Lender a fully executed copy
     of all Incremental New Leases which contain terms and conditions acceptable
     to Lender in Lender's sole discretion.

          (ix) Borrower shall have delivered to Lender twelve (12) month
     proforma operating statements for the Project reflecting all Incremental
     New Leases.

          (x) Borrower shall have delivered to Lender a certified current
     revised rent roll for the Project.

          (xi) Borrower shall have delivered to Lender copies of paid invoices
     for improvements made to the Project or costs incurred, if any, related to
     Incremental New Leases.

     6.5 Conditions to All Disbursements. No Disbursement of Loan Proceeds shall
be made by Lender to Borrower at any time unless:

     (a) All conditions precedent to that Disbursement have been satisfied,
including without limitation, performance of all of Borrower's obligations under
this Agreement and the Loan Documents which are to be performed prior to such
Disbursement.

     (b) The amount of Loan proceeds disbursed or to be disbursed does not
exceed the lesser of (i) 65% of the purchase price of the Project, (ii) 65% of
the appraised value of the Project, (iii) an amount such that the Debt Service
Coverage Ratio for the Project does not exceed 1.25x (as determined pursuant to
the requirements for such disbursement).

     (c) No Default has occurred under this Agreement, or under any of the Loan
Documents, and no event, circumstance or condition has occurred or exists which,
with the passage of time or the giving of notice, would constitute such a
Default.

     (d) No material litigation or proceedings are pending or threatened
(including but not limited to, proceedings under Title 11 of the United States
Code) against Borrower, the Land or the Project.

     (e) No material adverse change has occurred or is threatened with respect
to the Project or the financial condition of Borrower.

                                      -18-
<PAGE>

     (f) All representations and warranties made by Borrower to Lender herein
and otherwise in connection with this Loan continue to be accurate, and all
statements and representations made in the application for this Loan submitted
to Lender continue to be accurate.

     (g) No uninsured damage to or destruction of the Project or any portion
thereof shall have occurred.

     (h) If requested by Lender, Lender has received a satisfactory report from
Lender's Inspecting Agent, indicating that the items for which payment has been
requested have been performed at or incorporated into the Project. The cost of
this inspection shall be paid directly by Borrower.

     (i) The Loan is not in default and Borrower has complied with all of the
terms and conditions of this Agreement.

     6.6 Intentionally deleted.

     6.7 Documents Required for Final Disbursement. The final Certificate for
Payment for the final Disbursement shall be accompanied by the following, all of
which shall be strictly satisfactory to Lender in its sole and absolute
discretion:

     (a) Borrower shall have furnished Lender with current searches of all
Uniform Commercial Code financing statements filed with the Secretary of State
of Oklahoma and/or the Recorder for Tulsa County, Oklahoma, against Borrower as
debtors, showing that no Uniform Commercial Code financing statements are filed
or recorded against Borrower in which the collateral is described as personal
property or fixtures located on the Project or used in connection with the
Project.

     (b) An affidavit of the Borrower stating that each person providing any
material or performing any work in connection with the Project has been paid in
full and that all withholding taxes have been paid.

     (c) Any permits, licenses, certificates of occupancy or other evidence of
compliance with the requirements of any governmental authorities necessary for
the use of the Land.

     (d) If requested by Lender, a satisfactory final inspection report of
Lender's Inspecting Agent and a representative of the permanent lender if any,
indicating that the Project has been fully completed in accordance, the
requirements of this Agreement and the requirements of all New Leases.

     (e) Evidence that all insurance required under the terms of this Agreement
is in full force and effect.

     (f) Such other items as may be required by Lender, including, without
limitation, evidence that the improvements have been completed to the
satisfaction of the Lender and in a manner sufficient to satisfy the terms of
any permanent loan commitment.

                                      -19-
<PAGE>

     6.10 Intentionally deleted.

     6.11 Intentionally deleted.

     6.12 Intentionally deleted.

     6.13 Provisions Applicable to All Disbursements. (a) By execution of this
Agreement, Borrower authorizes Lender to make any Disbursement to the account to
receive such Disbursement, and the Borrower agrees that, in so doing, the Lender
is not acting as agent or trustee for the Borrower and the Lender will not be
held accountable for any such Disbursement made in good faith.

     (b) Each Certificate For Payment by the Borrower shall constitute an
affirmation that the warranties and representations contained in Article II of
this Agreement remain true and correct and that no breach of the covenants of
Borrower contained in this Agreement has occurred, in each case as of the date
of the Disbursement, unless Lender is notified to the contrary prior to funding
of the requested Disbursement.

     (c) The Lender may apply amounts due hereunder to the satisfaction of the
conditions hereof, and amounts so applied shall be part of the Loan and shall be
secured by the Mortgage, evidenced by the Note, bear interest in accordance with
the Note and shall be due and payable in accordance with the provisions of the
Note.

                                   ARTICLE VII

                          FURTHER COVENANTS OF BORROWER
                          -----------------------------

     7.1 Construction of Project. Borrower agrees that any new improvements to
the Project will be constructed and fully equipped in a good and workmanlike
manner with materials of high quality, in accordance with applicable building,
zoning, pollution control, and environmental protection and other laws and
ordinances and the New Leases. Borrower agrees that all materials contracted or
purchased for construction of new improvements to the Project and all labor
hired or contracted for with respect to the Project and paid for with Loan
Proceeds will be used and employed solely on the Project and for no other
purpose.

     7.2 Intentionally deleted

     7.3 Inspection by Lender. If requested by Lender, Borrower will cooperate
(and will cause the contractors to cooperate) with Lender in arranging for
inspections of the progress of the construction of new improvements to the
Project by Lender's Inspecting Agent, from time to time, and Borrower will
cooperate (and will cause any managing agent to cooperate) with Lender in
arranging for inspections, from time to time, of the Project by Lender and its
Inspecting Agents.

     7.4 Mechanics' Liens. Borrower will not suffer or permit any mechanics'
lien claims to be filed or otherwise asserted against the Project or any funds
due any contractor, and will promptly bond or discharge the same if any claims
for lien or any proceedings for the enforcement thereof are filed or commenced;
provided, however, that Borrower shall have the right to contest in good faith

                                      -20-
<PAGE>

and with due diligence the validity of any such lien or claim upon furnishing to
the Title Agent such security or indemnity as it may require to induce the Title
Agent to issue its Title Policy or an endorsement thereto insuring against all
such claims, liens or proceedings; and provided further that Lender will not be
required to make any further Disbursements of the Loan Proceeds unless (i) any
mechanics' lien claims shown by any title insurance commitments or interim
binders or certifications have been bonded against, released or insured against
by the Title Agent or (ii) Borrower shall have provided Lender with such other
security with respect to such claim as may be acceptable to Lender, in its sole
discretion. In the event Borrower elects to bond any mechanic's lien claim, such
bond shall be in an amount equal to at least one hundred twenty-five percent
(125%) of such claim.

     7.5 Settlement of Mechanics' Lien Claims. If Borrower shall fail promptly
to bond or discharge any mechanics' lien claim filed or otherwise asserted or to
contest any such claims and give security or indemnity in the manner provided in
subsection 7.4 above, or, having commenced to contest the same, and having given
such security or indemnity, shall thereafter fail to prosecute such contest in
good faith or with due diligence, or fail to maintain such indemnity or security
so required by the Title Agent for its full amount, or, upon adverse conclusion
of any such contest, shall fail to cause any judgment or decree to be satisfied
and lien to be released, then, and in any such event, Lender may at its election
(but shall not be required to), (i) procure the release and discharge of any
such claim and any judgment or decree thereon, without inquiring into or
investigating the amount, validity or enforceability of such lien or claim and
(ii) effect any settlement or compromise of the same, or may furnish such
security or indemnity to the Title Agent, and any amounts so expended by Lender,
including premiums paid or security furnished in connection with the issuance of
any surety company bonds, shall be deemed to constitute disbursements of the
Loan Proceeds hereunder (even if the total amount of disbursements would exceed
the face amount of the Note).

     7.6 Intentionally deleted.

     7.7 Renewal of Insurance. Borrower shall pay timely all premiums on all
insurance policies required under this Agreement from time to time; and when and
as additional insurance is required from time to time during the term of the
Loan and when and as any policies of insurance may expire, furnish to Lender,
premiums prepaid, additional and renewal insurance policies in companies,
coverage and amounts satisfactory to Lender, all in accordance with Section
5.1(c). Notwithstanding this Section, in the event of Borrower's default under
this Agreement or any of the Loan Documents, Lender shall have the right (but
not the obligation) to place and maintain insurance required to be placed and
maintained by Borrower hereunder and treat the amounts expended therefor as
additional disbursements of Loan Proceeds (even if the total amount of
disbursements would exceed the face amount of the Note).

     7.8 Proceedings to Enjoin or Prevent Operation. If any proceedings are
filed seeking to enjoin or otherwise prevent or declare unlawful the occupancy,
maintenance or operation of the Project or any portion thereof, Borrower shall
at its sole expense (i) cause such proceedings to be vigorously contested in
good faith and (ii) in the event of an adverse ruling or decision, prosecute all
allowable appeals therefrom. Without limiting the generality of the foregoing,
Borrower shall resist the entry or seek the stay of any temporary or permanent
injunction that may be entered and use its best efforts to bring about a
favorable and speedy disposition of all such proceedings.

                                      -21-
<PAGE>

     7.9 Lender's Action for Its Own Protection Only. The authority herein
conferred upon Lender, and any action taken by Lender, including, without
limitation, actions to inspect the Project, to procure waivers or sworn
statements, and to approve contracts, will be exercised and taken by Lender and
by Lender's other advisors or representatives for their own protection only and
may not be relied upon by Borrower or any other person for any purposes
whatever. Neither Lender nor any other advisor or representative of Lender shall
be deemed to have assumed any responsibility to Borrower or any other person
with respect to any such action herein authorized or taken by Lender or any
other advisor or representative of Lender or with respect to the proper
construction of improvements on the Project, performance of contracts,
subcontracts or purchase orders by any contractor, subcontractor or material
supplier, or prevention of mechanics' liens from being claimed or asserted
against any of the Project. Any review, investigation or inspection conducted by
Lender, or any other architectural or engineering consultants retained by Lender
or any agent or representative of Lender in order to verify independently
Borrower's satisfaction of any conditions precedent to Loan disbursements under
this Agreement, Borrower's performance of any of the covenants, agreements and
obligations of Borrower under this Agreement, or the validity of any
representations and warranties made by Borrower hereunder (regardless of whether
or not the party conducting such review, investigation or inspection should have
discovered that any of such conditions precedent were not satisfied or that any
such covenants, agreements or obligations were not performed or that any such
representations or warranties were not true), shall not affect (or constitute a
waiver by Lender of) (i) any of Borrower's representations and warranties under
this Agreement or Lender's reliance thereon or (ii) Lender's reliance upon any
certifications of Borrower or the Architect required under this Agreement or any
other facts, information or reports furnished Lender by Borrower hereunder.

     7.10 Furnishing Information. (a) Within 90 days of the end of each calendar
year, Borrower shall deliver or cause to be delivered to Lender financial
statements for Borrower prepared by an accountant and within 30 days following
the filing of the same, annual federal income tax returns for Borrower. Any such
financial statements for Borrower shall be of review quality or on a form
provided by Lender and certified as true and correct by Borrower.

     (b) Within 30 days following the end of each quarter and prior to any
Disbursement, Borrower shall deliver to Lender current rent rolls for the
Project, which shall include information on the amount of units rented, the
rental under each lease; and the term of each lease, as well as any other
related information as may be requested by Lender. All such rent rolls shall be
certified as true and correct by Borrower.

     (c) Within 30 days following the end of each quarter except that Borrower
shall have 45 days following the fourth quarter, Borrower shall deliver to
Lender annual cash flow and operating statements for the Project showing actual
sources and uses of cash during the preceding twelve (12) months. All such
statements shall be certified as true and correct by Borrower.

                                      -22-
<PAGE>

     (d) Within 45 days following the end of each fiscal year, Borrower shall
deliver to Lender a proforma operating budget for the Project.

     (e) Within 30 days following the end of each quarter, Borrower shall
deliver historical tenant sales reports (as available).

     (f) Within 30 days following the end of each quarter and prior to any
Disbursement, Borrower shall deliver to Lender a certified certificate of
compliance, substantially in the form attached hereto as Exhibit B, certifying,
among other things, current compliance with Debt Service Coverage Ratio
requirements and setting forth all tenants who have given their notice to
terminate or not renew their existing lease (the "Certificate of Compliance").

     (g) Additionally, Borrower will:

          (i) promptly supply Lender with such information concerning its
     affairs and property relating to the development and operation of the
     Project, including but not limited to monthly management reports, as Lender
     may request from time to time hereafter;

          (ii) promptly notify Lender of any condition or event which
     constitutes (or which upon the giving of notice or lapse of time or both
     would constitute) a breach or event of default of any term, condition,
     warranty, representation or provision of this Agreement or of any of the
     Loan Documents;

          (iii) promptly notify Lender of any "material adverse financial
     change" in its respective financial conditions, and maintain a standard and
     modern system of accounting in accordance with generally accepted
     accounting principles;

          (iv) promptly notify Lender of any "materially adverse financial
     change" in connection with the operation of the Project;

          (v) upon reasonable notice from Lender, at any time whatever during
     regular business hours permit Lender or any of its agents or
     representatives to have access to and examine all of its books and records
     regarding the development and operation of the Project; and

          (vi) permit Lender to copy and make abstracts from any and all of said
     books and records.

     7.11 Documents of Further Assurance. Borrower shall, from time to time,
upon Lender's request, execute, deliver, record and furnish such documents as
Lender may reasonably deem necessary or desirable to (i) perfect and maintain
perfected as valid liens upon the Project, the liens granted by Borrower to
Lender under the Mortgage and the assignments and other security interests under
the other Loan Documents as contemplated by this Agreement, (ii) correct any
errors of a typographical nature which may be contained in any of the Loan
Documents, and (iii) consummate fully the transaction contemplated under this
Agreement.

                                      -23-
<PAGE>

     7.12 Intentionally deleted.

     7.13 Operation of Project. As long as any portion of the Loan remains
outstanding, the Project shall be operated in a first class manner as a
commercial retail property.

     7.14 Management Agents' and Brokers' Contracts. Borrower shall not enter
into, any new management contract or materially modify, or amend any management
contracts for the Project, without the prior written approval of Lender which
approval shall not unreasonably be withheld, except as specifically permitted
pursuant to that certain Assignment of Management Agreement executed in
conjunction herewith.

     7.15 Furnishing Notices. Borrower shall provide Lender with copies of all
notices with respect to any non compliance or default pertaining to the Project
or any part thereof received by Borrower (or its agents or representatives) from
any federal, state or local governmental official, body, board or department,
within three (3) business days after such notice is received.

     7.16 Intentionally deleted.

     7.17 No Additional Debt; No Assignment. As more particularly provided in
Section 9.2, Borrower shall not consent or agree to any lien, mortgage, security
interest, encumbrance, or sale and leaseback transaction affecting the Land.

     7.18 Hold Disbursements in Trust. Borrower will pay all costs, expenses and
fees relating to the equipping, fixturing, use and operation of the Project.

     7.19 Indemnification. Borrower hereby indemnifies Lender and agrees to
defend Lender and hold Lender harmless from and against all claims, injuries,
losses, costs, damages, liabilities and expenses (including attorneys' fees and
consequential damages) of any and every kind to any persons or property by
reason of (i) the construction or other work contemplated herein (except by
reason of the negligence or willful misconduct of Lender), (ii) the operation or
maintenance of the Project (except by reason of the negligence or willful
misconduct of Lender), (iii) any other action or inaction by, or matter which is
the responsibility of Borrower (except by reason of the gross negligence or
willful misconduct of Lender), or (iv) the breach of any representation or
obligation of Borrower hereunder.

     7.20 Prohibition Against Cash Distributions and Application of Net Cash
Flow to Other Expenditures. In no event shall Borrower make any disbursements
from rental or other cash flow from the Land and the Project to any party during
any month until the installment due under the Note has been reserved or
allocated for such month.

     7.21 Insurance Reporting Requirements. Borrower shall promptly notify the
insurance carrier or agent therefor (with a copy of such notification being
provided to Lender) if there is any increase in hazard relating to the Project,
or transfer of ownership.

     7.22 Compliance With Laws. Borrower shall comply with all applicable
requirements of any governmental authority having jurisdiction. In no event
shall Borrower consent to or cause any zoning change on the Project or any
portion thereof (including any variance, plan approval, rezoning, or
modification of any zoning commitment) without Lender's prior written consent.

                                      -24-
<PAGE>

     7.23 Alterations. Without the prior written consent of Lender, Borrower
shall not make any material alterations to the Project, if the costs of such
alterations will exceed $3,000,000.00.

     7.24 Lost Note. Borrower shall, if the Note is mutilated, destroyed, lost
or stolen, deliver to Lender, in substitution therefor, a new promissory note
containing the same terms and conditions as the Note with a notation thereon of
the unpaid principal accrued and unpaid interest.

     7.25 Regulated Materials. Borrower shall comply with any and all laws,
regulations or orders with respect to the discharge and removal of Regulated
Materials, shall pay immediately when due the costs of removal of any such
Regulated Materials, and shall keep the Project free of any lien imposed
pursuant to such laws, regulations or orders. In the event Borrower fails to do
so, after notice to Borrower and the expiration of the earlier of (i) applicable
cure periods hereunder or (ii) the cure period permitted under applicable law,
regulation or order, Lender may either declare this Agreement to be in default
or cause the Project to be freed from the Regulated Materials with the cost of
the removal added to the indebtedness evidenced by the Note and secured by the
Mortgage (regardless of whether such indebtedness then increases the outstanding
balance of the Note to an amount in excess of the face amount thereof). Borrower
further agrees that Borrower shall not release or dispose of any Regulated
Materials at the Project without the express prior approval of Lender and any
such release or disposal will be in compliance with all applicable laws and
regulations and conditions, if any, established by Lender, including, without
limitation, those set forth in Section 6 of the Mortgage. Lender shall have the
right at any time to conduct an environmental audit of the Project for
reasonable cause, at Borrower's sole cost and expense, and Borrower shall
cooperate in the conduct of such environmental audit. Borrower shall give Lender
and its agents and its employees access to the Project to inspect and test the
Project and to remove Regulated Materials. Borrower hereby indemnifies Lender
and agrees to defend Lender and hold Lender harmless from and against all
claims, injuries, losses, costs, damages, liabilities and expenses (including
attorneys' fees and consequential damages) by reason of any claim in connection
with any Regulated Materials which were present at the Project during or prior
to Borrower's ownership of the Project. The foregoing indemnification shall be
included within the indemnity agreement referred to in clause(n) of Article iv
hereof, and shall survive repayment of the Note.

     7.26 Asbestos. Without limiting the generality of Section 7.25 above,
Borrower shall not install nor permit to be installed in the Project asbestos or
any substance containing asbestos. If Borrower shall fail to comply with this
section, Lender may declare this Agreement to be in default and/or do whatever
is necessary to eliminate said substances from the Project or otherwise comply
with the applicable law, regulation, or order and the costs thereof shall be
added to the indebtedness evidenced by the Note and secured by the Mortgage.

     7.27 Additional Appraisals. Borrower hereby covenants and agrees that
Lender may, in its sole discretion, require annually an updated Appraisal for
the Project, at Borrower's expense. Notwithstanding he foregoing, in no event
shall Lender require Borrower to provide more than two (2) additional Appraisals
during the term of the Loan.

                                      -25-
<PAGE>

     7.28 Minimum Debt Service Coverage Ratio. Borrower hereby covenants and
agrees that the Project will maintain a minimum Debt Service Coverage Ratio
during the term of the Loan of 1.25x (the "DSCR Requirement"), measured
quarterly. For purposes of compliance with this Section 7.28, during the 12
months immediately following the Mervyn's Acquisition, all costs, income and
debt service related to the Mervyn's Acquisition will be excluded from such
calculation. Beginning 12 months following the Mervyn's Acquisition, all Debt
Service Coverage Ratio calculations shall include the entire Project, including
all income, costs and debt service related to the Mervyn's Acquisition. Upon
Borrower's achievement of the DSCR Requirement in any quarter beginning with the
twelve month anniversary following the Mervyn's Acquisition, Lender will release
the funds from the Mervyn's Collateral Account to Borrower.

     For purposes of compliance with this Section 7.28, during the 12 months
immediately following a Subsequent Draw, all calculations of Debt Service
Coverage Ratio which include an Incremental New Lease shall include a proforma
annualized number for the income, costs and expenses of any Incremental New
Lease that has been in effect for less than 12 months.

     Borrower hereby covenants and agrees that Borrower must evidence compliance
with the DSCR Requirement prior to Draw B or any Subsequent Draw.

     7.28.1 Failure to Maintain required Debt Service Coverage Ratio. In the
event that Borrower fails to maintain the minimum Debt Service Coverage Ratio
pursuant to Section 7.28, Borrower shall have a period of Six (6) months to cure
such covenant violation.

     In the event that Borrower does not achieve the DSCR Requirement within six
(6) months of the covenant violation, Borrower shall establish with Lender a
cash collateral reserve account (the "DSC Cash Collateral Reserve"). The amount
the DSC Cash Collateral Reserve shall be calculated by Lender as follows:

     Required NOI minus actual NOI
     "Required NOI" shall mean current Debt Service times 1.25

The DSC Cash Collateral reserve shall be held by Lender as additional security
for the Loan until such time as Borrower achieves the DSCR Requirement using
actual NOI. For any quarter in which Borrower fails to achieve the DSCR
Requirement, Borrower shall adjust the amount of the DSC Cash Collateral Reserve
accordingly, to insure that such amount when added to the actual NOI would be
sufficient to achieve the DSCR Requirement. Upon Borrower's achievement of the
DSCR Requirement based on actual NOI, Lender shall release the funds from the
DSC Cash Collateral reserve to Borrower.

     Notwithstanding anything to the contrary contained herein, in the event
that the Debt Service Coverage Ratio for the Project falls below 1.05x, Borrower
shall within three (3) days of receiving notice from Lender, repay the loan in
the aggregate amount of all Subsequent Draws outstanding and shall establish the
DSC Cash Collateral Reserve as calculated above. Lender shall not be obligated
to make any Subsequent Draws until Borrower achieves the DSCR Requirement for
two consecutive quarters. Upon achieving the DSCR Requirement for two

                                      -26-
<PAGE>

consecutive quarters, Borrower may redraw portions of the Loan repaid pursuant
to this section subject to the conditions for Subsequent Draws set forth in
Section 3.3(c).

     7.29 Equity: Borrower shall maintain at all times cash equity invested in
the Project of not less than the greater of (i) 35% of the total cost of the
Project, or (ii) $20,405,000.

     7.30 New Leases with any tenant for space in excess of 10,000 square shall
be subject to Lender's approval which approval shall not be unreasonably
withheld or delayed. Lender approval shall not be required for any new leases
with tenants for 10,000 square feet of space or less if such new leases are: (i)
written substantially in accordance with the standard form of lease which has
been approved by Lender (subject to any commercially reasonable changes made in
the course of negotiations with the applicable tenant), (ii) not be to an
Affiliate of Borrower (iii) be on commercially reasonable terms at rental rates
comparable to existing local market rates for similar properties, (iii) provide
that such lease is subordinate to the Mortgage and that the lessee will attorn
to Lender and any purchaser at a foreclosure sale and (iv) not contain any terms
which would materially adversely affect Lender's rights under the Loan
Documents.

     Whenever Lender's approval or consent is required for any new lease or
leasing action, Borrower shall have the right to submit a term sheet of such
transaction to Lender for Lender's approval, such approval not to be
unreasonably withheld, conditioned or delayed. Any such term sheet submitted to
Lender shall set forth all material terms of the proposed transaction including,
without limitation, identity of tenant, square footage, term, rent, rent
credits, abatements, work allowances and tenant improvements to be constructed
by Borrower. Lender shall use good faith efforts to respond within ten (10)
Business Days after Lender's receipt of Borrower's written request for approval
or consent of such term sheet. If Lender fails to respond to such request within
ten (10) Business Days, and Borrower sends a second request containing a legend
in bold letters stating that Lender's failure to respond within five (5)
Business Days shall be deemed consent or approval, Lender shall be deemed to
have approved or consented to such term sheet if Lender fails to respond to such
second written request before the expiration of such five (5) Business Day
period.

                                  ARTICLE VIII

                           CASUALTIES AND CONDEMNATION
                           ---------------------------

     8.1 Notice. In case of any material damage or destruction, taking, or
condemnation of the Project, or any part thereof, or any interest therein or
right accruing thereto, Borrower shall promptly give to Lender written notice
generally describing the nature and extent of such damage, destruction or taking
which has resulted or which may result therefrom. So long as Borrower is not in
default, Borrower may adjust, settle and compromise any such insurance policy or
any proposed condemnation award, but in any event, no final adjustment,
compromise or settlement of any insurance claim or condemnation award that
exceeds $3,000,000.00 shall be entered into without the prior written approval
of Lender as to such settlement, adjustment or compromise thereof. Lender may
appear in any such proceedings and negotiations and Borrower shall promptly
deliver to Lender copies of all notices and pleadings in any such proceedings.
Borrower will in good faith, file and prosecute all claims necessary for any
award or payment resulting from such damage, destruction or taking. All costs
and expenses incurred by Lender in exercising its rights under this section
shall constitute indebtedness secured by the Mortgage.

                                      -27-
<PAGE>

     8.2 Application of Insurance Proceeds and Condemnation Awards. (a) Upon
occurrence of any loss or damage to all or any portion of the Project resulting
from fire, vandalism, malicious mischief or any other casualty or physical harm
(a "Casualty") or any exercise of the power of condemnation or eminent domain (a
"Taking"), Lender may elect to collect, retain and apply as a Loan prepayment
all proceeds (the "Proceeds") of any insurance policies collected or claimed as
a result of such Casualty and all awards resulting from such Taking ("Awards")
after deduction of all expenses of collection and settlement, including
attorney's and adjusters' fees and charges. To the extent that the proceeds or
awards exceed $3,000,000.00. Subject to the provisions of Section 8.1 above,
Borrower hereby authorizes Lender, at Lender's option, to collect any losses
under any insurance with respect to the Project which is kept, or caused to be
kept, by Borrower, and hereby irrevocably appoints Lender as its
attorney-in-fact, coupled with an interest, for such purposes. Any Proceeds or
Awards remaining after payment in full of the Loan and all other sums due Lender
hereunder shall be paid by Lender to Borrower without any allowance for interest
thereon. Notwithstanding anything to the contrary contained herein, in the event
that (i) no Event of Default has occurred and is continuing hereunder, (ii) the
Proceeds or Awards, as the case may be, are sufficient to rebuild the Project
or, if they are insufficient, as determined by Lender in its sole discretion,
Borrower provides Lender with additional funds necessary, as determined in
Lender's sole discretion (iii) after completion of the reconstruction, the loan
to value ratio of the Project is satisfactory to Lender, as determined in
Lender's sole discretion, then the Proceeds or Awards, as the case may be,
shall, at Borrower's request, be applied towards reconstruction of the Project,
which funds shall be disbursed pursuant to the disbursement provisions set forth
herein.

     (b) In the event Lender does not apply the Proceeds or Awards to prepayment
of the Loan as provided for in Section 8.2(a) above or in the event such
Proceeds or Awards, if applied, do not fully discharge the Loan, Borrower will:

          (i) Proceed with diligence to make settlement (which shall be subject
     to the approval of Lender) with insurers or with condemning authorities and
     cause the Proceeds or Awards to be deposited with Lender, unless Lender
     shall elect to exercise its right under the Mortgage to make such
     settlement without the consent of Borrower.

          (ii) In the event of any unreasonable delay in making settlement with
     insurers or effecting collection of Proceeds or Awards, Borrower shall
     deposit with Lender the full amount required to meet the obligations due
     under the Loan, disregarding such Proceeds or Awards.

          (iii) In the event the Proceeds or Award deposited with Lender are
     insufficient to complete reconstruction of the Project, Borrower shall
     deposit with Lender additional funds as necessary, as determined by Lender
     in its sole discretion.

          (iv) Promptly proceed with construction and restoration of the
     Project, including the repair of all such loss or damage.

                                      -28-
<PAGE>

All Proceeds, Awards and funds deposited by Borrower hereunder shall first be
fully disbursed before disbursement of any further Loan Proceeds. Borrower shall
not be entitled to any payment of or credit for interest on such Proceeds,
Awards and funds. In the event of deposit by Borrower of the full amount
required to complete reconstruction of the Project, as aforesaid, upon the
subsequent receipt of Proceeds or Awards, such Proceeds or Awards, as and when
received, may be collected and retained by Borrower.

     (c) Lender shall not be obligated to see to the proper application of any
of the Proceeds nor shall the amount so released or used be deemed a payment on
any indebtedness evidenced by the Note or secured by any of the Loan Documents.
In the event of foreclosure of the Mortgage or other transfer of title in lieu
of foreclosure, all right, title and interest of Lender, in and to any insurance
policies then in force shall pass to the purchaser or Lender, as the case may
be.

     (d) All proceeds of use and occupancy or rental value insurance shall be
paid to Lender for the purposes of paying, to the extent available and
necessary, in the following order: (i) insurance premiums payable with respect
to any insurance required to be carried by Borrower hereunder; (ii) taxes,
assessments and charges payable by Borrower under any of the Loan Documents; and
(iii) all amounts payable on the Note, together with any and all other amounts
evidenced or secured by any of the Loan Documents, and to the extent that such
insurance proceeds are available to pay the items listed in clauses(i), (ii) and
(iii), Lender shall pay such items for the account of Borrower. All such
insurance proceeds not deemed necessary, in Lender's sole opinion, to pay the
above items shall be paid over to Borrower.

     (e) Upon failure on the part of Borrower promptly to commence or continue
the repair or restoration of the Project after settlement of any claim with the
insurer, Lender shall have the right to apply such Proceeds to the payment of
any indebtedness secured by the Loan Documents, and resort to such other
remedies available to Lender hereunder; provided, however, that nothing herein
contained shall prevent Lender from applying at any time the whole or any part
of such insurance proceeds to the curing of any Event of Default hereunder.

                                   ARTICLE IX

                       ASSIGNMENTS, SALE AND ENCUMBRANCES
                       ----------------------------------

     9.1 Lender's Right to Assign. Lender may assign, negotiate, pledge or
otherwise hypothecate this Agreement or any of its rights and security
hereunder, including the Note, and any of the other Loan Documents to any bank,
participant or financial institution, and in case of such assignment, Borrower
will accord full recognition thereto, and hereby agree that all rights and
remedies of Lender in connection with the interest so assigned shall be
enforceable against Borrower by such bank, participant or financial institution
with the same force and effect and to the same extent as the same would have
been enforceable by Lender but for such assignment.

     9.2 Prohibition of Assignments and Encumbrances by Borrower. Borrower shall
not, without the prior written consent of Lender, create, effect, consent to,
attempt, contract for, agree to make, suffer or permit any conveyance, sale,
assignment, transfer, lien, pledge, mortgage, security interest, encumbrance or
alienation ("Prohibited Transfer") of all or any portion of, or any interest in,
the Land, or the Project, whether effected directly, indirectly, voluntarily,

                                      -29-
<PAGE>

involuntarily, or by operation of law or otherwise; provided, however, that the
foregoing shall not apply to (i) liens securing the Loan, (ii) the lien of
current taxes and assessments not in default, (iii) leases permitted pursuant to
this Agreement, and (iv) the Permitted Exceptions.

     Notwithstanding the foregoing, the transfer of 100% of the Glimcher
Properties Limited Partnership's interest in Borrower to Tulsa Promenade REIT,
LLC shall be a permitted transfer. Also the transfer of up to 50% of the
interest of any member in Tulsa Promenade REIT, LLC or in OG Retail Holding Co.,
LLC shall be permitted without Lender consent.

                                    ARTICLE X

                              DEFAULTS BY BORROWER
                              --------------------

     The occurrence of any one or more of the following shall constitute an
"Event of Default" hereunder, and any Event of Default which may occur hereunder
shall constitute a default under each of the other Loan Documents:

     (a) A failure by Borrower to make any payment on the Note when and as the
same becomes due, which failure continues for a period of fifteen (15) days.

     (b) Any failure of Borrower for a period of thirty (30) days after written
notice from Lender to Borrower, to observe or perform any of the covenants
(other than payment of the Note or payments required hereunder), contained in
this Agreement or any of the other Loan Documents; provided, that such thirty
(30)-day period shall be extended to permit the cure of any default which by its
nature is not reasonably susceptible to cure within said thirty (30)-day period,
so long as Borrower promptly within said thirty (30)-day period commences its
efforts to cure and thereafter diligently pursues the same to completion.

     (c) Any failure by Borrower to repay the Loan or any portion thereof as
required herein.

     (d) The failure of Borrower to fund the DSC Cash Collateral Reserve as
required herein.

     (e) Intentionally deleted.

     (f) The occurrence of a Prohibited Transfer.

     (g) The existence of any collusion, fraud, dishonesty or bad faith by or
with the acquiescence of Borrower, which in any way relates to or affects the
Loan or the Project.

     (h) If, at any time, any material representation, statement, report or
certificate made now or hereafter by Borrower is not true and correct, or if at
any time any material statement or representation made in the construction loan
application or any supporting materials submitted to Lender for this Loan is not
true and correct.

     (i) If all or a substantial part of the assets of Borrower are attached,
seized, subjected to a writ or distress warrant, or is levied upon, and such
attachment, seizure, writ, warrant or levy is not vacated within thirty (30)
days thereafter.

                                      -30-
<PAGE>

     (j) If Borrower is enjoined or restrained or in any way prevented by court
order from performing any of its obligations hereunder or under the other Loan
Documents or conducting all or a substantial part of its business affairs.

     (k) If Borrower:

          (i) Shall file a voluntary petition in bankruptcy or for arrangement,
     reorganization or other relief under any chapter of the federal bankruptcy
     code of any similar law, state or federal, now or hereafter in effect;

          (ii) Shall file an answer or other pleading in any proceedings
     admitting insolvency, bankruptcy, or inability to pay its debts as they
     mature;

          (iii) Within sixty (60) days after the filing against it of any
     involuntary proceedings under the federal bankruptcy code or similar law,
     state or federal, now or hereafter in effect, such proceedings shall not
     have been vacated;

          (iv) Any order appointing a receiver, trustee or liquidator for it or
     for all or a major part of its property or the Land shall not be vacated
     within sixty (60) days following entry thereof;

          (v) Shall be adjudicated a bankrupt;

          (vi) Shall make an assignment for the benefit of creditors or shall
     admit in writing its inability to pay its debts generally as they become
     due or shall consent to the appointment of a receiver or trustee or
     liquidator of all or the major part of its property, or the Land.

     (l) If Borrower fails to maintain the equity required pursuant to Section
7.29, and such covenant violation is not cured within 7 days.

     (m) If Borrower defaults in the due performance under any other Loan
Documents with Lender beyond any applicable grace period contained therein,
including, without limitation, all agreements between Lender and the Borrower
which give rise to Hedging Obligations.

                                   ARTICLE XI

                         LENDER'S REMEDIES UPON DEFAULT
                         ------------------------------

     11.1 Remedies Conferred Upon Lender. Upon the occurrence of any Event of
Default, Lender, in addition to all remedies conferred upon Lender by law and by
the terms of the Note, the Mortgage and the other Loan Documents, may pursue any
one or more of the following remedies concurrently or successively, it being the
intent hereof that none of such remedies shall be to the exclusion of any
others:

                                      -31-
<PAGE>

     (a) Withhold further disbursement of Loan Proceeds and terminate any or all
of its obligations to Borrower.

     (b) Declare the Note to be due and payable forthwith, without presentment,
demand, protest or other notice of any kind, all of which are hereby expressly
waived.

     (c) In addition to any rights of set-off that Lender may have under
applicable law, Lender may, without notice of any kind to Borrower, appropriate
and apply to the payment of the Note or of any sums due under this Agreement,
any and all balances, deposits, credits, accounts, certificates of deposit,
instruments or money of Borrower then or thereafter in the possession of Lender,
including but not limited to the Mervyn's Collateral Account, and the DSC Cash
Collateral Account.

     (d) Exercise or pursue any other remedy or cause of action permitted at law
or at equity or under this Agreement or any other Loan Document, including but
not limited to foreclosure of the Mortgage and enforcement of all Loan
Documents.

     11.2 Right of Lender to Make Advances to Cure Defaults. In the event that
Borrower shall fail to perform any of its covenants or agreements herein or in
any of the other Loan Documents contained, Lender may (but shall not be required
to) perform any of such covenants and agreements, and any amounts so expended by
Lender shall be deemed advanced by Lender under an obligation to do so
regardless of the identity of the person or persons to whom said funds are
disbursed. Loan Proceeds advanced by Lender in the exercise of its judgment that
the same are needed to complete the Project to protect its security for the Loan
are obligatory advances hereunder and shall constitute additional indebtedness
payable on demand which is evidenced and secured by the Loan Documents.

     11.3 Attorneys' Fees. Borrower will pay Lender's reasonable attorneys' fees
and costs in connection with the administration and enforcement of this
Agreement; without limiting the generality of the foregoing, if at any time or
times hereafter the Lender employs counsel for advice or other representation
with respect to any matter concerning Borrower, this Agreement, the Land or the
Loan Documents or to protect, collect, lease, sell, take possession of or
liquidate all or any portion of the Land, or to attempt to enforce or protect
any security interest or lien or other right in any of the premises or under any
of the Loan Documents, or to enforce any rights of the Lender or obligations of
Borrower or any other person, firm or corporation which may be obligated to
Lender by virtue of this Agreement or under any of the Loan Documents or any
other agreement, instrument or document, heretofore or hereafter delivered to
Lender in furtherance hereof, then in any such event, all of the attorneys'
reasonable fees arising from such services, and any expenses, costs and charges
relating thereto, shall constitute an additional indebtedness owing by Borrower
to Lender payable on demand, and evidenced and secured by the Loan Documents.

     11.4 No Waiver. No failure by Lender to exercise, or delay by Lender in
exercising, any right, power or privilege hereunder shall operate as a waiver
thereof, nor shall any single or partial exercise of any right, power or
privilege hereunder preclude any other or further exercise thereof, or the
exercise of any other right, power or privilege. The rights and remedies
provided in this Agreement and in the Loan Documents are cumulative and not
exclusive of each other or of any right or remedy provided by law or equity. No

                                      -32-
<PAGE>

notice to or demand on Borrower in any case shall, in itself entitle Borrower to
any other or further notice or demand in similar or other circumstances or
constitute a waiver of the rights of Lender to any other or further action in
any circumstances without notice or demand.

     11.5 Availability of Remedies. All of the remedies set forth herein and/or
provided by law or equity shall be equally available to Lender, and the choice
by Lender of one (1) such alternative over another shall not be subject to
question or challenge by Borrower or any other person, nor shall any such choice
be asserted as a defense, set-off, or failure to mitigate damages in any action,
proceeding, or counteraction by Lender to recover or seeking any other remedy
under this Loan Agreement or any of the Loan Documents, nor shall such choice
preclude Lender from subsequently electing to exercise a different remedy,
except as otherwise provided by law. The parties have agreed to the alternative
remedies hereof specified in part because they recognize that the choice of
remedies in the event of a failure hereunder will necessarily be and should
properly be a matter of business judgment, which the passage of time and events
may or may not prove to have been the best choice to maximize recovery by Lender
at the lowest cost to Borrower. It is the intention of the parties that such
choice by Lender be given conclusive effect regardless of such subsequent
developments. At any sale of the security or collateral for the Loan or any part
thereof whether by foreclosure or otherwise, Lender may in its discretion
purchase all or any part of such collateral so sold or offered for sale for its
own account and may apply against the balance due Lender pursuant to the terms
of the Note the amount bid therefore.

                                   ARTICLE XII

                                  MISCELLANEOUS
                                  -------------

     12.1 Time Is of the Essence. Lender and Borrower agree that time is of the
essence of all of their covenants under this Agreement.

     12.2 Prior Agreements. This Agreement and the other Loan Documents, and any
other documents or instruments executed pursuant thereto or contemplated
thereby, shall represent the entire, integrated agreement between the parties
hereto with respect to construction and equipping of the Project not yet in
place, and shall supersede all prior negotiations, representations, or
agreements pertaining thereto, either oral or written, which shall survive the
execution of this Agreement by Borrower and Lender, and the occurrence of the
Loan Closing, and shall be included in the term "Loan Documents." This Agreement
and any provision hereof shall not be modified, amended, waived or discharged in
any manner other than by a written amendment executed by all parties to this
Agreement. An action on the part of the Lender waiving a specific provision or
requirement herein contained, shall not be construed to be a waiver of future
application of such provision or requirement or a waiver of any other provision
or requirement hereunder.

     12.3 Disclaimer by Lender. Lender shall not be liable to any subcontractor,
supplier, laborer, architect, engineer or any other party for services performed
or materials supplied in connection with construction of improvements to the
Project. Lender shall not be liable for any debts or claims accruing in favor of
any such parties against Borrower or against the Land. The Borrower shall not be
considered an agent of Lender for any purposes, and Lender is not a venture

                                      -33-
<PAGE>

partner with Borrower. Lender shall not be deemed to be in privity of contract
with any contractor, subcontractor or provider of services on or to the Land,
nor shall any payment of funds directly to a contractor, subcontractor or
provider of services on or to the Land, be deemed to create any third party
beneficiary status or recognition of same by Lender unless and until Lender
expressly assumes such status in writing. Approvals granted by Lender for any
matters covered under this Agreement shall be narrowly construed to cover only
the parties and facts identified in any written approval or if not in writing
such approvals shall be solely for the benefit of Borrower.

     12.4 Indemnification. To the fullest extent permitted by law, Borrower
hereby agrees to protect, indemnify, defend and save harmless, Lender and its
directors, officers, agents and employees from and against any and all
liability, expense or damage of any kind or nature and from any suits, claims,
or demands, including legal fees and expenses, arising out of this Agreement or
in connection herewith, except to the extent such suit, claim or damage is
caused by any act, omission or willful misconduct of Lender, its directors,
officers, agents and authorized employees. This obligation on the part of
Borrower shall survive the closing of the Loan, the repayment thereof and any
cancellation of the Loan Agreement.

     12.5 Captions. The captions and headings of various articles and sections
of this Agreement and exhibits pertaining hereto are for convenience only and
not to be considered as defining or limiting in any way the scope or intent of
the provisions hereof.

     12.6 Inconsistent Terms and Partial Invalidity. In the event of any
inconsistency among the terms hereof (including incorporated terms), or between
such terms and the terms of any other Loan Document, this Loan Agreement shall
be controlling. If any provision of this Agreement, or any paragraph, sentence,
clause, phrase, or word, or the application thereof, in any circumstances, is
adjudicated by a court of competent jurisdiction to be invalid, the validity of
the remainder of this Agreement shall be construed as if such invalid part were
never included herein.

     12.7 Gender and Number. Any word herein which is expressed in the masculine
or neuter gender shall be deemed to include the masculine, feminine and neuter
genders. Any word herein which is expressed in the singular or plural number
shall be deemed, whenever appropriate in the context, to include the singular
and plural.

     12.8 Definitions Included in Amendments. Definitions contained in this
Agreement which identify documents, including, without limitation, the Loan
Documents, shall be deemed to include all amendments and supplements to such
documents from the date hereof, and all future amendments and supplements
thereto entered into from time to time to satisfy the requirements of this
Agreement or otherwise with the consent of the Lender. Reference to this
Agreement contained in any of the foregoing documents shall be deemed to include
all amendments and supplements to this Agreement.

     12.9 WAIVER OF JURY TRIAL. BORROWER AND LENDER EACH WAIVE ANY RIGHT TO A
TRIAL BY JURY IN ANY ACTION OR PROCEEDING TO ENFORCE OR DEFEND ANY RIGHTS UNDER
THIS AGREEMENT OR RELATING THERETO OR ARISING FROM THE BANKING RELATIONSHIP
WHICH IS THE SUBJECT OF THIS AGREEMENT AND AGREES THAT ANY SUCH ACTION OR
PROCEEDING SHALL BE TRIED BEFORE A COURT AND NOT BEFORE A JURY.

                                      -34-
<PAGE>

     12.10 Notices. Except for any notice required under applicable law to be
given in another manner, 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 (i) if hand delivered
or if sent by telecopy, effective upon receipt or (ii) if delivered by overnight
courier service, effective on the day following delivery to such courier
service, or (iii) if mailed by United States registered or certified mail,
postage prepaid, return receipt requested, effective two (2) days after deposit
in the United States mails; addressed in each case as follows:

     If to Borrower:

            Tulsa Promenade, LLC
            c/o Glimcher Properties Limited Partnership
            150 East Gay Street
            Columbus, Ohio  43215
            Attn:  General Counsel

     If to Lender:

            Charter One Bank, N.A.
            1215 Superior Avenue
            Cleveland, Ohio  44114

or at such other address or to such other addressee 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.

     12.11 Office of Foreign Asset Control (OFAC) and Patriot Act 326 (PA 326)
verification of customers.

          a. PAC326. To help the government fight the funding of terrorism and
money laundering activities, Federal law requires all financial institutions to
obtain, verify and record information that identifies each customer who opens an
account (including the extension of credit to a customer). Therefore, all new
and existing customers are subject to the identity verification requirements.
When you open an account with any entity within the Lender's family of
companies, we require the following information for the Business: Business Name,
Business Address, Business TIN and Business Phone Number. For the Business
Representative (person signing for the Business), we require the following
information: Individual's Name, Individual's Address, Identification Information
and Date of Birth.

          b. OFAC. In addition, all financial institutions must check all
Borrowers; Collateral Owners; Guarantors; Co-signors; Receiving and Sending
Parties; Members, Managing Members, and Trustees; and Limited Partners, Managing
Members and Beneficiaries holding interest; against the US Department of
Treasury's list for Specially Designated Nationals and Blocked Persons.

                                      -35-
<PAGE>

          c. Both the PAC 326 and OFAC verifications must be completed prior to
Closing.

     14.11 Governing Law. This Agreement has been negotiated, executed and
delivered at Cleveland, Ohio, and shall be construed and enforced in accordance
with the laws of the State of Ohio, without reference to the choice of law or
conflicts of law principles of that State.

     14.12 Nonrecourse Except as otherwise set forth in this section, Lender's
recourse under this Agreement, the Note, the Mortgage and the Loan Documents
shall be limited to and satisfied from the Project and the proceeds thereof, the
rents and all other income arising therefrom, the other assets of Borrower
arising out of the Project which are given as collateral for the Note, and any
other collateral given in writing to Lender as security for repayment of the
Note, including, but not limited to the Mervyn's Collateral Account and DSC Cash
Collateral Account (all of the foregoing are collectively referred to as the
("Loan Collateral"). Notwithstanding the preceding sentence:

          (a) Lender may, in accordance with the terms of this Agreement, the
Note, the Mortgage or any Loan Document: (i) foreclose the lien of the Mortgage,
(ii) take appropriate action to enforce this Agreement, the Note, the Mortgage
and any Loan Documents to realize upon and/or protect the Loan Collateral, (iii)
name Borrower as a party defendant in any action brought under this Agreement,
the Note, the Mortgage or any Loan Document so long as the exercise of any
remedy is limited to the Loan Collateral, (iv) pursue all of its rights and
remedies against any guarantor or surety or master tenant, whether or not such
guarantor or surety or master tenant is a partner, member or other owner of
Borrower, (v) pursue all of its rights and remedies against Borrower under that
certain Indemnity Agreement of even date herewith;

          (b)Lender may seek damages or other monetary relief to the extent of
actual monetary loss, or any other remedy at law or in equity against Borrower
by reason of or in connection with (i) the failure of Borrower to pay to Lender,
upon demand, all rents, issues and profits of the Project to which Lender is
entitled pursuant to this Agreement, the Note, the Mortgage or the Loan
Documents following an Event of Default, (ii) any waste of the Project or any
willful act or omission by Borrower which damages or materially reduces the
value of the Project, (iii) the failure to apply all rents, issues and profits
from the Project to the payment of operating expenses, real estate taxes,
insurance, capital repair items, and the payment of sums due and owing under
this Agreement, the Note, the Mortgage or the Loan Documents prior to any other
expenditure or distribution by Borrower, (iv) the failure to account for and to
turn over security deposits (and interest required by law or agreement to be
paid thereon) or prepaid rents following the occurrence of an Event of Default
under this Agreement, the Note, the Mortgage or any Loan Documents, (v) the
failure to timely pay real estate taxes or any regular or special assessments
affecting the Project, (vi) the failure to account for and to turn over real
estate tax accruals following the occurrence of an Event of Default under this
Agreement, the Note, the Mortgage or any Loan Documents, (vii) the failure to
maintain casualty and liability insurance as required under the Mortgage or the

                                      -36-
<PAGE>

Loan Documents or to apply insurance proceeds or condemnation awards relating to
the Project or other collateral in the manner required under applicable
provisions of this Agreement, the Note, the Mortgage or any Loan Documents
(viii) costs and expenses, including, without limitation, attorney's fees and
transfer taxes, incurred by Lender in connection with the enforcement of this
Agreement, the Note, the Mortgage or the Loan Documents or a deed-in-lieu of
foreclosure;

          (c) Borrower shall become personally liable for payment of the
indebtedness evidenced by this Agreement, the Note and performance of all other
obligations of Borrower under this Agreement, the Note, the Mortgage and the
Loan Documents upon the occurrence of any of the following: (i) fraud or willful
misrepresentation of a material fact by Borrower, any members of Borrower, in
connection with the Note, the Mortgage or the Loan Documents or any request for
any action or consent by Lender, (ii) a transfer of any interest in the Borrower
or all or any portion of the Project or any interest therein in violation of the
terms of this Agreement, the Note, the Mortgage or the Loan Documents, or (iii)
the incurrence by Borrower of any indebtedness in violation of the terms of this
Agreement, the Note, the Mortgage or any Loan Document (whether secured or
unsecured, direct or contingent), other than unsecured debt or routine trade
payables incurred in the ordinary course of business in connection with the
operation of the Project.

     In addition, Borrower shall be responsible for any costs and expenses
incurred by Lender in connection with the collection of any amounts for which
Borrower is personally liable under this section, including attorneys' fees and
expenses, court costs, filing fees, and all other costs and expenses incurred in
connection therewith.

                 [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK --
                      SIGNATURE PAGE TO IMMEDIATELY FOLLOW]

                                      -37-
<PAGE>

     IN WITNESS WHEREOF, the parties have caused these presents to be executed
the day and year first above written.

                         BORROWER:

                         TULSA PROMENADE, LLC, a Delaware limited liability
                         company

                         By: GLIMCHER PROPERTIES LIMITED
                             PARTNERSHIP, a Delaware limited
                             partnership, its sole member

                             By: GLIMCHER PROPERTIES CORPORATION,
                                 a Delaware corporation, its general partner

                                 By:__________________________________
                                     George A. Schmidt
                                     Executive Vice President

                         LENDER:

                         CHARTER ONE BANK, N.A.

                         By:_______________________________________
                         Name:_____________________________________
                         Title:____________________________________

                                      -38-
<PAGE>

                                    EXHIBIT A
                               (Legal Description

<PAGE>

                                    EXHIBIT B
                            Certificate of Compliance

Charter One Bank, N.A.

________________________

________________________

Re:  Loan Agreement dated as of ________ (as amended, modified, supplemented,
     restated, or renewed, from time to time, the "Agreement"), between TULSA
     PROMENADE, LLC, (the "Borrower"), and CHARTER ONE BANK, N.A. ("Lender").

Reference is made to the Agreement. Capitalized terms used in this Certificate
(including schedules and other attachments hereto, this "Certificate") without
definition have the meanings specified in the Agreement.

Pursuant to applicable provisions of the Agreement, the undersigned, hereby
certifies to the Lender that the information furnished in the attached
schedules, including, without limitation, each of the calculations listed below
are true, correct and complete in all material respects as of the last day of
the fiscal periods subject to the financial statements and associated covenants
being delivered to the Lender pursuant to the Agreement together with this
Certificate (such statements the "Financial Statements" and the periods covered
thereby the "reporting period") and for such reporting periods.

The undersigned hereby further certifies to the Lender that:

1.   Compliance with Financial Covenants. As shown below, the Borrower is in
     full compliance with the financial covenants contained in the Agreement.

     A. Covenant: Debt Service Coverage Ratio of not less than 1.25: 1.0 tested
     quarterly and prior to any Disbursement, the calculation of which is set
     forth in Schedule A attached hereto.

     Debt Service Coverage of ______ : 1.0 for period ending ________, 200___.

     B. Covenant: Draw amount of no more than 65% of Incremental Value and
     Proforma Debt Service Coverage Ratio of not less than 1.25: 1.0 prior to
     any Subsequent Draw, the calculation of which is set forth in Schedule B
     attached hereto.

     65% of Incremental Value: $___________
     Debt Service Coverage of ______ : 1.0

     C. Covenant: Borrower Equity in the Project: The greater of (i) 35% of the
     total cost of the Project, or (ii) $20,405,000.

     Compliance? (Yes or No)                            ____________________

<PAGE>

2.   Tenants Giving Notice. The following tenants have given Borrower or its
     managing agent notice of it intent to terminate or not renew it's existing
     lease. Borrower has no knowledge of any other tenant that intends to give
     such notice.

             (i)_________________________________________________
             (ii) _______________________________________________
             (iii) ______________________________________________

3.   Rent Roll. The undersigned hereby certifies that the rent roll attached
     hereto as Schedule C is accurate as of the date hereof, and accurately
     reflects the status of all leases and their expiration dates.

4.   Review of Condition. The undersigned has reviewed the terms of the
     Agreement, including, but not limited to, the representations and
     warranties of the Borrower set forth in the Agreement and the covenants of
     the Borrower set forth in the Agreement, and has made, or caused to be made
     under his or her supervision, a review in reasonable detail of the
     transactions and condition of the Borrower through the reporting periods.

5.   Representations and Warranties. To the undersigned's actual knowledge, the
     representations and warranties of the Borrower contained in the Loan
     Documents, including those contained in the Agreement, are true and
     accurate in all material respects as of the date hereof and were true and
     accurate in all material respects at all times during the reporting period
     except as expressly noted on Schedule D hereto.

6.   Covenants. To the undersigned's actual knowledge, during the reporting
     period, the Borrower observed and performed all of the respective covenants
     and other agreements under the Agreement and the Loan Documents, and
     satisfied each of the conditions contained therein to be observed,
     performed or satisfied by the Borrower, except as expressly noted on
     Schedule D hereto.

7.   No Event of Default. To the undersigned's actual knowledge, no Event of
     Default exists as of the date hereof or existed at any time during the
     reporting period, except as expressly noted on Schedule D hereto.

                                       -2-
<PAGE>

     IN WITNESS WHEREOF, this Certificate is executed by the undersigned this
____ day of __________, 200__.

                      BORROWER:

                      TULSA PROMENADE, LLC, a Delaware limited liability
                      company

                      By: TULSA PROMENADE REIT, LLC, a Delaware
                          limited liability company, its sole member

                          By: OG RETAIL HOLDING CO., LLC, a Delaware
                              limited liability company, its managing member

                              By: GLIMCHER PROPERTIES LIMITED
                                  PARTNERSHIP, a Delaware limited
                                  partnership, its administering member

                                  By: GLIMCHER PROPERTIES CORPORATION,
                                      a Delaware corporation, its sole member

                                      By:__________________________________
                                         George A. Schmidt
                                         Executive Vice President

                                       -3-
<PAGE>

                                   Schedule A
                Debt Service Coverage Ratio Quarterly Compliance

                                 Tulsa Promenade
                          Quarterly Covenant Compliance
                              Tested as of xx/xx/xx
                          (Trailing Twelve Month $000)

Debt Service Coverage:
--------------------------------------------------------------------------------

        TTM Base Rents                                                         $
        Annualized Rents from new Leases in effect < 12 months         $________
Plus:
        CAM Reimbursement                                              $________
        Specialty Leasing                                              $________
        Other Recovery/Reimbursement                                   $________
        Percentage Rents                                               $________
        Miscellaneous Income                                           $________

Less:   Rents from Tenants Providing Notice                            $________

                                Effective Gross Income                 $________

Less:   TTM Cash Expenses                                              $________
        Annualized Cash Expenses from new Leases in effect < 12 months $________
        Minimum Management Fee (per appraisal)                         $________
        Allowance  for Capital Expenditures (per appraisal)            $________
                               Total Operating Expenses                $________

      (1)                        NET OPERATING INCOME                  $________

      (2)                            DEBT SERVICE                      $________

(1) / (2)                     DEBT SERVICE COVERAGE (DSC)               ________

Required DSC Reserve:
--------------------------------------------------------------------------------

        If DSC > 1.25x then $0; otherwise, DSC Reserve
        equals ((2)*1.25) - (1))                                       $________
                                                                       =========

<PAGE>

                                   Schedule B
                      Subsequent Draw Compliance Worksheet

                                 Tulsa Promenade
                            Supplemental Draw Request
                                 as of xx/xx/xx

                        TTM Compliance? _________ (Y /N)

<TABLE>
<S>                                                                                 <C>
I.  Incremental Value of Acceptable New Leases:

                 Annualized Incremental Base Rents                                  $_________

Plus:            Annualized Incremental Reimbursable Expenses                       $_________

Less:            Annualized Rental Income from Expiring Leases within 90 days       $_________
                 Annualized Incremental Operating Expenses (if applicable)          $_________
                 Incremental Management Fee (per appraisal)                         $_________
                 Allowance  for Incremental Capital Expenditures (per appraisal)    $_________

                 Adjusted Incremental NOI                                           $_________

    Divided by:  Prevailing Cap Rate (per Loan Agreement)                           $_________

                 INCREMENTAL VALUE

                 Subsequent Draw Amount @ 65% Incremental Value                     $_________

II.  Pro-Forma Debt Service Coverage:

                 Net Operating Income (per Covenant Compliance worksheet)           $_________
Plus:            Adjusted Incremental NOI                                           $_________
      (1)                                                 PRO-FORMA ANNUALIZED NOI

III.  Projected Debt Service:

                 Current Outstanding Loan Balance                                   $_________
Plus:            Subsequent Draw Amount                                             $_________
                                                         Proposed Aggregate Balance $_________

      (2)        Projected Debt Service                                             $_________

   (1) / (2)     DSCR (must > 1.25x)                                                 _________
</TABLE>
<PAGE>

                                   Schedule C
                                    Rent Roll

<PAGE>

                                   Schedule D
                      Violations of Covenants or Warranties

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