Exhibit 10.91

 

PURCHASE AGREEMENT

 

THIS PURCHASE AGREEMENT (this “Agreement”) is entered into effective as of
May 31, 2003 by and among Horizon Group Properties, Inc., a Maryland corporation
(“Parent”); Daleville, Somerset, Tulare Finance Company, Inc., a Delaware
corporation (“Horizon GP”); Horizon Group Properties, L.P., a Delaware limited
partnership (“Horizon LP”); Pleasant Lake Apts. Corp., an Ohio corporation
(“Pleasant Lake GP”); Pleasant Lake Apts. Limited Partnership, an Ohio limited
partnership (“Pleasant Lake LP”); Richard Bongorno (“Bongorno”); Gary Skoien
(“Skoien”); and David Zlatin (“Zlatin”) (Bongorno, Skoien and Zlatin are
hereinafter collectively, the “Other LPs”).  Parent, Horizon GP, Horizon LP,
Pleasant Lake GP Pleasant Lake LP and the Other LPs are herein referred to
individually as the “Party” and collectively as the “Parties.”

 

R E C I T A L S:

 

A.                                   Horizon GP owns a one percent (1%) general
partnership interest in Daleville, Somerset, Tulare Outlet Centers, L.P., a
Delaware limited partnership (the “Limited Partnership”), (the “General
Partnership Interest”).

 

B.                                     Horizon LP owns a ninety-nine percent
(99%) limited partnership interest in the Limited Partnership (the “Limited
Partnership Interest”).

 

C.                                     This Agreement contemplates a transaction
in which Pleasant Lake GP will purchase and Horizon GP will sell the General
Partnership Interest, and Pleasant Lake LP and the Other LPs will purchase and
Horizon LP will sell the Limited Partnership Interest.

 

D.                                    The Limited Partnership owns certain real
property, including, without limitation, the Indiana Factory Shops located in
Daleville, Indiana and The Shops at Georgian Place located in Somerset,
Pennsylvania (collectively, the “Daleville and Somerset Properties”),

 

E.                                      The Limited Partnership recently sold
the Tulare Outlet Center in Tulare, California (the “Tulare Property”), to
Tulare Outlet Center, L.P.

 

NOW, THEREFORE, in consideration of the premises and the mutual promises herein
made, and in consideration of the representations, warranties and covenants
herein contained, the Parties agree as follows:

 

1.                                      PURCHASE AND SALE OF GENERAL PARTNERSHIP
INTEREST AND LIMITED PARTNERSHIP INTEREST.

 

1(a)                           Basic Transaction.  On and subject to the terms
and conditions of this Agreement:

 

(i)                                     Pleasant Lake GP agrees to purchase from
Horizon GP the General Partnership Interest, and Horizon GP agrees to sell to
Pleasant Lake GP the General Partnership Interest; and

 

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(ii)                                  Pleasant Lake LP and the Other LPs agree
to purchase from Horizon LP the Limited Partnership Interest, and Horizon LP
agrees to sell to Pleasant Lake LP and the Other LPs the Limited Partnership
Interest.

 

1(b)                           Purchase Price.  The aggregate purchase price for
the General Partnership Interest and the Limited Partnership Interest shall be
One Million Nine Hundred and Eighty Thousand Dollars ($1,980,000) (the “Purchase
Price”), allocated as follows:  Nineteen Thousand Eight Hundred Dollars
($19,800) for the General Partnership Interest and One Million Nine Hundred
Sixty Thousand Two Hundred Dollars ($1,960,200) for the Limited Partnership
Interest.  The purchase price consideration shall be paid on the Closing Date as
follows:  Pleasant Lake GP shall wire or pay by check to Horizon GP Nineteen
Thousand Eight Hundred Dollars ($19,800); Pleasant Lake LP shall wire or pay by
check to Horizon LP One Million Seven Hundred Two Thousand Eight Hundred Dollars
($1,702,800); Bongorno shall wire or pay by check to Horizon LP Nineteen
Thousand Eight Hundred Dollars ($19,800); Skoien shall wire or pay by check to
Horizon LP One Hundred Ninety-Eight Thousand Dollars ($198,000); and Zlatin
shall wire or pay by check to Horizon LP Thirty-Nine Thousand Six Hundred
Dollars ($39,600).

 

1(c)                           The Closing.  The closing of the transaction
contemplated by this Agreement (the “Closing”) shall take place at the offices
of Schiff Hardin & Waite, 6600 Sears Tower, 233 South Wacker Drive, Chicago,
Illinois 60606, commencing at 10:00 a.m. on May 30, 2003 (the “Closing Date”).

 

1(d)                           Deliveries at the Closing.  At the Closing:

 

(i)                                     Horizon GP will deliver to Pleasant Lake
an Assignment of General Partnership Interest;

 

(ii)                                  Horizon LP will deliver to each of
Pleasant Lake LP and the Other LPs an Assignment of Limited Partnership Interest
assigning to them that percentage of the Limited Partnership Interest as is set
forth in Exhibit A attached hereto and made a part hereof; and

 

(iii)                               Pleasant Lake GP, Pleasant Lake LP and the
Other LPs, as applicable, will deliver to Horizon GP and Horizon LP, as
applicable, the Purchase Price in the manner described in Section 1(b) above.

 

2.                                      REPRESENTATIONS AND WARRANTIES
CONCERNING THE TRANSACTION.

 

2(a)                           Representations and Warranties of Parent.  Parent
represents and warrants to Pleasant Lake GP, Pleasant Lake LP and the Other LPs
that the statements contained in this Section 2(a) are true as of the date of
this Agreement.

 

(i)                                     Organization of Parent.  Parent is a
corporation validly existing and in good standing under the laws of the State of
Maryland, and is qualified and in good standing as a foreign corporation in
Indiana.

 

(ii)                                  Authorization of Transaction.  Parent has
full power and authority to execute and deliver this Agreement and has all
requisite power and authority to perform its obligations hereunder; and has
obtained all necessary corporate consent and other approvals

 

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to authorize Horizon GP to transfer the General Partnership Interest to Pleasant
Lake GP and to authorize Horizon LP to transfer the Limited Partnership Interest
to Pleasant Lake LP and the Other LPs, as applicable.

 

(iii)                               No Conflict.  The execution and delivery of
this Agreement by Parent, the execution and delivery of every other document and
instrument to be delivered at the Closing pursuant to this Agreement by or on
behalf of Parent and the consummation of the transactions contemplated by this
Agreement have been duly authorized and validly executed and delivered by
Parent, and will not (a) constitute or result in the breach of or default under
any oral or written agreement to which Parent is a party; (b) constitute or
result in a violation of any order, decree or injunction with respect to which
Parent is bound; (c) cause or entitle any party to have a right to accelerate or
declare a default under any oral or written agreement to which Parent is a
party; and/or (d) violate any provision of any municipal, state or federal law,
statutory or otherwise, to which Parent may be subject.

 

2(b)                           Representations and Warranties of Horizon GP. 
Horizon GP represents and warrants to Pleasant Lake GP, Pleasant Lake LP and the
Other LPs that the statements contained in this Section 2(b) are true as of the
date of this Agreement.

 

(i)                                     Organization of Parent.  Horizon GP is a
corporation validly existing and in good standing under the laws of the State of
Delaware, and is qualified and in good standing as a foreign corporation in
Indiana, Pennsylvania and California.

 

(ii)                                  Authorization of Transaction.  Horizon GP
has full power and authority to execute and deliver this Agreement and has all
requisite power and authority to perform its obligations hereunder; and has
obtained all necessary corporate consent and other approvals to transfer the
General Partnership Interest to Pleasant Lake GP.

 

(iii)                               General Partnership Interest.  Horizon GP
holds of record and owns beneficially the General Partnership Interest free and
clear of any liens, encumbrances and/or restrictions on transfer (other than
restrictions under the Securities Act of 1933, as amended and state securities
laws), taxes and purchase rights.  Horizon GP is not a party to any option,
warrant, purchase right or other contract or commitment that could require
Horizon GP to sell, transfer or otherwise dispose of the General Partnership
Interest (other than this Agreement).

 

(iv)                              No Conflict.  The execution and delivery of
this Agreement by Horizon GP, the execution and delivery of every other document
and instrument to be delivered at the Closing pursuant to this Agreement by or
on behalf of Horizon GP and the consummation of the transactions contemplated by
this Agreement have been duly authorized and validly executed and delivered by
Horizon GP, and will not (a) constitute or result in the breach of or default
under any written agreement to which Horizon GP is a party; (b) constitute or
result in a violation of any order, decree or injunction with respect to which
Horizon GP is bound; (c) cause or entitle any party to have a right to
accelerate or declare a default under any written agreement to which Horizon GP
is a party; and/or (d) violate any provision of any municipal, state or federal
law, statutory or otherwise, to which Horizon GP may be subject.

 

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2(c)                           Representations and Warranties of Horizon LP. 
Horizon LP represents and warrants to Pleasant Lake GP, Pleasant Lake LP and the
Other LPs that the statements contained in this Section 2(c) are true as of the
date of this Agreement.

 

(i)                                     Organization of Horizon LP.  Horizon LP
is a limited partnership duly formed and validly existing under the laws of the
State of Delaware, and is qualified and in full force and effect as a foreign
limited partnership in Indiana and Pennsylvania.

 

(ii)                                  Authorization of Transaction.  Horizon LP
has full power and authority to execute and deliver this Agreement and has all
requisite power and authority to perform its obligations hereunder; and has
obtained all necessary partnership consent and other approvals to transfer the
Limited Partnership Interest to Pleasant Lake LP and the Other LPs.

 

(iii)                               Limited Partnership Interest.  Horizon LP
holds of record and owns beneficially the Limited Partnership Interest free and
clear of any restrictions on transfer (other than restrictions under the
Securities Act of 1933, as amended and state securities laws), taxes and
purchase rights.  Horizon LP is not a party to any option, warrant, purchase
right or other contract or commitment that could require Horizon LP to sell,
transfer or otherwise dispose of the Limited Partnership Interest (other than
this Agreement).

 

(iv)                              No Conflict.  The execution and delivery of
this Agreement by Horizon LP, the execution and delivery of every other document
and instrument to be delivered at the Closing pursuant to this Agreement by or
on behalf of Horizon LP and the consummation of the transactions contemplated by
this Agreement have been duly authorized and validly executed and delivered by
Horizon LP, and will not (a) constitute or result in the breach of or default
under any written agreement to which Horizon LP is a party; (b) constitute or
result in a violation of any order, decree or injunction with respect to which
Horizon LP is bound; (c) cause or entitle any party to have a right to
accelerate or declare a default under any written agreement to which Horizon LP
is a party; and/or (d) violate any provision of any municipal, state or federal
law, statutory or otherwise, to which Horizon LP may be subject.

 

2(d)                           Representations and Warranties of Pleasant Lake
GP.  Pleasant Lake GP represents and warrants to Parent, Horizon GP and Horizon
LP that the statements contained in this Section 2(d) are true as of the date of
this Agreement.

 

(i)                                     Organization of Pleasant Lake GP. 
Pleasant Lake GP is an Ohio corporation, validly existing and in good standing
under the laws of the State of Ohio.

 

(ii)                                  Authorization of Transaction.  Pleasant
Lake GP has full power and authority to execute and deliver this Agreement and
has all requisite power and authority to perform its obligations hereunder.

 

(iii)                               Investment.  Pleasant Lake GP is not
acquiring the General Partnership Interest with a view to or for sale in
connection with any distribution thereof within the meaning of the Securities
Act of 1933, as amended.

 

2(e)                           Representations and Warranties of Pleasant Lake
LP.  Pleasant Lake LP represents and warrants to Parent, Horizon GP Horizon LP
that the statements contained in this Section 2(e) are true as of the date of
this Agreement.

 

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(i)                                     Organization of Pleasant Lake LP. 
Pleasant Lake LP is an Ohio limited partnership, validly existing and in good
standing under the laws of the State of Ohio.

 

(ii)                                  Authorization of Transaction.  Pleasant
Lake LP has full power and authority to execute and deliver this Agreement and
has all requisite power and authority to perform its obligations hereunder.

 

(iii)                               Investment.  Pleasant Lake LP is not
acquiring the Limited Partnership Interest with a view to or for sale in
connection with any distribution thereof within the meaning of the Securities
Act of 1933, as amended.

 

2(f)                             Representations of Other LPs.  The Other LPs
represent and warrant to Parent, Horizon GP and Horizon LP that the statements
contained in this Section 2(f) are true as of the date of this Agreement.

 

(i)                                     Authorization of Transaction.  The Other
LPs have full power and authority to execute and deliver this Agreement and to
perform the obligations hereunder.

 

(ii)                                  Investment.  The Other LPs are not
acquiring the Limited Partnership Interest with a view to or for sale in
connection with any distribution thereof within the meaning of the Securities
Act of 1933, as amended.

 

3.                                      REPRESENTATIONS AND WARRANTIES REGARDING
THE LIMITED PARTNERSHIP.

 

3(a)                           Title.  The Limited Partnership owns, and has
good and marketable title to, the Daleville and Somerset Properties, free and
clear of all liens, mortgages, pledges, security interests, claims, encumbrances
or charges of any kind whatsoever except for those set forth on Schedule 3(a)
attached hereto and made a part hereof.

 

3(b)                           Compliance with Laws.  Neither Parent, Horizon GP
nor Horizon LP have any knowledge of any non-compliance with applicable federal,
state and local statutes, laws, ordinances, orders, requirements, rules and
regulations that have not been cured (including, but not limited to, building,
zoning and environmental laws) relating to the Limited Partnership; and with
respect to the Americans With Disabilities Act, neither Parent, Horizon GP nor
Horizon LP have received any notice of non-compliance.

 

3(c)                           No Violation.  No written notice of violation of
any applicable federal, state and local statutes, laws, ordinances, orders,
requirements, rules and regulations or of any covenant, condition, restriction
or easement affecting the Daleville and Somerset Properties or with respect to
the maintenance, use or occupancy of the Daleville and Somerset Properties has
been received by the Limited Partnership and remains outstanding from any
governmental authority having jurisdiction over the Daleville and Somerset
Properties or by any other person entitled to enforce the same.  Neither Parent,
Horizon GP nor Horizon LP have received notice that any covenants, conditions,
restrictions or easements affecting the use or title to the Daleville and
Somerset Properties have not been complied with.

 

3(d)                           Environmental.  With respect to environmental
matters:

 

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(i)                                     To the knowledge of Parent, Horizon GP
and Horizon LP, no toxic, hazardous, explosive or otherwise dangerous materials,
substances, pollutants or wastes, as those terms are used in the Clean Air Act;
the Clean Water Act; Resource Conservation and Recovery Act of 1976; the
Hazardous Materials Transportation Act; the Comprehensive Environmental
Response, Compensation and Liability Act of 1980 (“CERCLA”); the Emergency
Planning and Community Right-to-Know Act; or in any other federal, state or
local law environmental law (collectively “Environmental Laws”), petroleum
products, polychlorinated biphenyls or radioactive materials (all of the above
being collectively referred to herein as “Hazardous Materials”) have been or are
stored, treated, disposed of, managed, generated, manufactured, produced,
released, emitted or discharged on, in or under any real property owned by the
Limited Partnership, including, without limitation, the Daleville and Somerset
Properties and the Tulare Property, other than in compliance with applicable law
or as disclosed in any environmental report delivered to Pleasant GP, Pleasant
Lake LP and the Other LPs by Parent, Horizon GP and/or Horizon LP.

 

(ii)                                  To the knowledge of Parent, Horizon GP and
Horizon LP, the Limited Partnership is in compliance with all Environmental Laws
and has not obtained any environmental licenses, permits, approvals,
registrations and authorizations (federal, state and local) material to the
conduct of its business on the Daleville and Somerset Properties and/or the
Tulare Property and has no knowledge of any obligation to obtain any of the
same.

 

(iii)                               No governmental or private action, suit or
proceeding to enforce or impose liability under any Environmental Law has been
instigated or, to the knowledge of Parent, Horizon GP and Horizon LP, threatened
against the Limited Partnership and no lien against the Limited Partnership has
been created under the Environmental Laws.

 

(iv)                              To the knowledge of Parent, Horizon GP and
Horizon LP, there are no underground storage tanks on the Daleville and Somerset
Properties and/or the Tulare Property; and to the best of Parent’s, Horizon GP’s
and Horizon LP’s knowledge, except as set forth on Schedule 3(d)(iv) attached
hereto and made a part hereof, no underground storage tanks have been removed
from the Daleville and Somerset Properties and/or the Tulare Property.

 

3(e)                           Public Utilities.  To the knowledge of Parent,
Horizon GP and Horizon LP, all public utilities, including, but not limited to,
water, sanitary sewer, gas, electricity, telephone and storm sewer and drainage
facilities and other utilities required for the use and operation of the real
property owned by the Limited Partnership (a) are installed to the property
lines of the real property owned by the Limited Partnership; (b) are connected
pursuant to valid permits; and (c) either enter the real property owned by the
Limited Partnership through adjoining public streets, or if they pass through
adjoining private land, do so in accordance with valid public easements or
private easements that inure to the benefit of Seller and its successors in
title to the Daleville and Somerset Properties.  To Parent’s, Horizon GP’s and
Horizon LP’s knowledge, no fact or condition exists that would result in the
termination or impairment of access to the Daleville and Somerset Properties
from adjoining public or private streets or ways or that could result in
discontinuation of necessary sewer, water, electric, gas, telephone or other
utility services.  To the knowledge of Parent, Horizon GP and Horizon LP, no
notice has been issued to the Limited Partnership that any of the sewage,
sanitation or plumbing facilities servicing the Daleville and Somerset
Properties is not in compliance with governmental laws, rules and regulations.

 

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3(f)                             Permits/Consents.  To the knowledge of Parent,
Horizon GP and Horizon LP, all required building permits, occupancy permits or
other required approvals or consents of governmental authorities having
jurisdiction have been obtained with respect to the Daleville and Somerset
Properties.

 

3(g)                          No Litigation.  Except as provided in Schedule
3(g) attached hereto and made a part hereof, there is no pending or to Parent’s,
Horizon GP’s and Horizon LP’s knowledge threatened litigation, arbitration,
administrative action or examination, claim or demand whatsoever against the
Limited Partnership.  Parent, Horizon GP and Horizon LP shall indemnify and hold
harmless Pleasant Lake GP and Pleasant Lake LP from and against any claims,
costs, losses, expenses and liabilities in any manner relating directly or
indirectly to any matters referred to in Schedule 3(g).  No attachments,
execution proceedings, liens (other than the Limited Partnership’s mortgage and
real estate taxes and assessments), assignments or insolvency proceedings are
pending or to Parent’s, Horizon GP’s and Horizon LP’s knowledge threatened
against the Limited Partnership, the Daleville and Somerset Properties and/or
the Tulare Property.  Neither Partner, Horizon GP nor Horizon LP is
contemplating the institution of insolvency proceedings.

 

3(h)                          Insurance.  Except as set forth on Schedule 3(h)
attached hereto and made a part hereof, Parent, Horizon GP and Horizon LP have
not received and have no actual knowledge of any outstanding notice or request,
formal or informal, from any insurance company or board of fire underwriters (a)
identifying any defects in the Daleville and Somerset Properties that would
adversely affect the insurability of the Daleville and Somerset Properties; or
(b) requesting the performance of any work or alteration with respect to the
Daleville and Somerset Properties.  Between the date of this Agreement and the
Closing Date, Parent, Horizon GP and Horizon LP shall cause the Limited
Partnership to: (a) keep the Daleville and Somerset Properties insured against
fire and other hazards by extended coverage endorsement to its policy of
casualty insurance, in an amount not less than the full replacement cost of the
Daleville and Somerset Properties, naming Pleasant Lake GP and Pleasant Lake LP
as an additional insured and providing Purchaser with a certificate of such
insurance promptly following the execution hereof; and (b) keep its existing
comprehensive public liability insurance in effect against claims for bodily
injury, death and damage incurring in, on or about the Daleville and Somerset
Properties.

 

3(i)                             Eminent Domain.  Parent, Horizon GP and Horizon
LP have no knowledge of any pending or threatened eminent domain, condemnation
or other governmental or quasi-governmental taking of any part or all of the
Daleville and Somerset Properties.

 

3(j)                             Public Improvements.  Parent, Horizon GP and
Horizon LP have not received any notice that there are any public improvements
that have not been previously assessed, or any special, general or other
assessments pending or threatened against, the Daleville and Somerset
Properties; and there is no pending real estate tax complaint with respect to
the assessed value of the Daleville and Somerset Properties.

 

3(k)                         Contracts.  Other than the Tenant Leases (defined
below) and the AR Cap Mortgages (defined below), the Limited Partnership is not
a party to any other contracts or agreements except as set forth on Schedule
3(k) attached hereto and made a part hereof (the “Contracts”).  Each of the
Contracts is in full force and effect, and there is no default by any party
under any of the Contracts.  There are no facts and no event of default has
occurred that with the passage of time or giving of notice would constitute a
default under any of the Contracts.

 

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3(l)                             Outstanding Payables.  Except as set forth on
Schedule 3(l) attached hereto and made a part hereof, the Limited Partnership
has paid or will pay prior to the Closing Date in full all of its bills and
invoices of any kind arising from the ownership, operation, management, repair,
maintenance or leasing of the Daleville and Somerset Properties and/or the
Tulare Property; and there are no actual or to the knowledge of Parent, Horizon
GP and Horizon LP potential mechanic’s liens relating to labor or material
outstanding or available to any party in connection with the ownership,
operation, management, repair, maintenance or leasing of the Daleville and
Somerset Properties and/or the Tulare Property.

 

3(m)                       Personal Property.  The personal property of the
Limited Partnership is accurately identified and listed in Schedule 3(m).

 

3(n)                          No Transfer of Real Property.  Between the date of
this Agreement and the Closing Date, no part of the real property owned by the
Limited Partnership will be sold, encumbered or transferred in favor of or to
any party whatsoever.  There are no purchase contracts, options or any other
agreements of any kind, oral or written, by which any person or entity other
than Limited Partnership will have acquired or will have any basis to assert any
right, title or interest in, or right to possession, use, enjoyment or proceeds
of, any part or all of the Daleville and Somerset Properties, except as to
rights created under any leases of such properties.

 

3(o)                           No Broker Fees.  There are no commissions, fees
or other charges that are owed or will be owed to any agent or broker after the
Closing Date with regard to any lease of any of the real property owned by the
Limited Partnership or the renewal, exercise of option, extension or
modification of any existing lease of the Daleville and Somerset Properties to
any tenant.

 

3(p)                           Leases.  All of the leases between the Limited
Partnership and the current tenants of the Daleville and Somerset Properties
(the “Tenants”) are set forth in Schedule 3(p) (the “Tenant Leases”).  Except as
set forth on Schedule 3(p), each of the Tenant Leases is in full force and
effect, and there is no default by any Tenant with respect to any rental payment
due under any of the Tenant Leases.  To the knowledge of Parent, Horizon GP and
Horizon LP, there is no default by the Limited Partnership or any Tenant under
any of the Tenant Leases which in the aggregate would result in an annual loss
of more than $250,000 of revenue to the Limited Partnership if such Tenant
Leases were terminated.

 

3(q)                           754 Election.  No election has been made under
Section 754 of the Internal Revenue Code of 1986, as amended, by or on behalf of
the Limited Partnership.

 

3(r)                           Financial Statements.  Parent, Horizon GP and
Horizon LP previously delivered to Pleasant Lake GP, Pleasant Lake LP and the
Other LPs the Limited Partnership’s balance sheet and income statement as of
December 31, 2002 and for March 31, 2003 (collectively, the “Financial
Statements”).  The Financial Statements have been prepared with [accrual] basis
accounting principles and present fairly the financial position of the Limited
Partnership and the results of operations for the periods indicated in the
Financial Statements all in accordance with generally accepted accounting
principles.  The Financial Statements have been and will be prepared from and
are in accordance with the accounting records of the Limited Partnership.  The
books and records from which the Financial Statements have been prepared
properly and accurately record the transactions and activities that they purport
to record.

 

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3(s)                           Tax Returns.  Except as set forth on Schedule
3(s), the Limited Partnership has filed or caused to be filed (on a timely basis
for all periods prior to the Closing) all federal, state, local and foreign tax
returns and reports required to be filed by it with respect to the business or
otherwise (the “Tax Returns”).  The Limited Partnership will file on a timely
basis all Tax Returns required to be filed by the Limited Partnership for the
First Taxable Year (defined below).  The Limited Partnership has delivered or
made available to Pleasant Lake GP, Pleasant Lake LP and the Other LPs copies of
all such Tax Returns.  Except as set forth on Schedule 3(s), the Limited
Partnership has duly paid or made adequate provision for the payment of all
taxes that have or may have become due as reflected in those Tax Returns or
otherwise, or pursuant to any assessment received by the Limited Partnership. 
Except as set forth on Schedule 3(s), all taxes that the Limited Partnership is
or was required by law to withhold or collected have been duly withheld or
collected and, to the extent required, have been paid to the proper governmental
authority or other person.  There are no encumbrances on any of the assets of
the Limited Partnership that arose in connection with any failure (or alleged
failure) to pay any tax, and the Limited Partnership has no knowledge of any
basis for assertion of any claims attributable to taxes which, if adversely
determined, would result in any such encumbrance, other than the real property
taxes owed on the real property located in Daleville, Indiana.

 

3(t)                             No Other Liabilities.  Except as set forth in
Schedule 3(t), the Limited Partnership has no liabilities or obligations of any
nature (whether known or unknown and whether absolute, accrued, contingent or
otherwise) which are required to be disclosed in accordance with generally
accepted accounting principles (“GAAP”) except for liabilities or obligations
reflected or reserved against the Financial Statements and current liabilities
incurred in the ordinary course of business since the respective dates
thereof.   The AR Cap Mortgages (defined below) have been paid in full as of and
prior to the Closing.

 

3(u)                          Partnership Agreement.  The copies of Agreement of
Limited Partnership of the Limited Partnership dated as of July 9, 1999,
together with the First Amendment to Agreement of Limited Partnership of the
Limited Partnership dated as of May 29, 2003 (collectively, the “Partnership
Agreement”), previously provided to Pleasant Lake GP, Pleasant Lake LP and the
Other LPs, are true and correct copies of such documents, and the Partnership
Agreement has not been amended or modified in any manner whatsoever.

 

3(v)                            Employees.  The Limited Partnership does not
currently have, and has not for the last twelve months had, any employees.

 

3(w)                         Options to Purchase.  The Limited Partnership has
not granted any option, warrant, purchase right or other contract or commitment
to anyone that would require the Limited Partnership to sell to such party any
general or limited partnership interests in the Limited Partnership.

 

3(x)                           Disclosure.  No representation or warranty of
Parent, Horizon GP or Horizon LP in this Agreement omits to state a material
fact necessary to make the statements herein, in light of the circumstances in
which they were made, not misleading.

 

4.                                      INDEMNIFICATION.

 

4(a)                           Indemnification by Parent, Horizon GP and Horizon
LP.  Parent, Horizon GP and Horizon LP, jointly and severally, shall defend,
indemnify and hold harmless the Limited

 

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Partnership, Pleasant Lake GP, Pleasant Lake LP and the Other LPs and their
respective heirs, successors and assigns (collectively “Pleasant Lake
Indemnified Parties”) from, against and in respect of, and shall pay to the
applicable Pleasant Lake Indemnified Party the following damages, losses,
deficiencies, assessments, charges, taxes, fines, penalties, costs and/or
expenses (including reasonable attorneys’ fees) (collectively, “Losses”):

 

(i)                                     Any and all Losses with respect to the
Limited Partnership’s failure to pay its debts, including without limitation,
federal, state or local taxes, or the operation of the Business prior to the
Closing (other than Losses with respect to those liabilities set forth in the
Financial Statements which have not been paid and were not otherwise due before
the Closing  and those liabilities described on Schedules 3(l) and 3(t)).

 

(ii)                                  Any and all Losses arising from any
misrepresentation, omission or breach of any warranty, representation, covenant,
agreement or obligation on the part of Parent, Horizon GP and Horizon LP under
this Agreement or any exhibit, schedule, certificate, instrument or other
document furnished to Buyer in connection with this Agreement.

 

(iii)                               Any and all Losses arising from any and all
(a) Environmental Claims, Environmental Clean-Up Liability, Environmental
Compliance Costs and/or the effect of any Environmental Laws with respect to the
Daleville and Somerset Properties and/or the Tulare Property with respect to the
condition of such properties prior to Closing; and (b) any claims for personal
injury or property damage as a result of the foregoing, to the extent the same
relates to any occurrence existing at any time prior to the Closing Date.

 

(iv)                              Any and all Losses arising from any claims by
any third party arising from the conduct of the Business prior to the Closing.

 

(v)                                 Any and all Losses arising from or in
connection with the mortgage loans from Wells Fargo Bank Minnesota, N.A., as
Trustee (“Wells Fargo”), to the Limited Partnership on the Daleville and
Somerset Properties, and the Tulare Property, including, without limitation,
with respect to any document, instrument, certificate or agreement entered into
by Parent, Horizon GP or Horizon LP and Wells Fargo in connection with such
mortgage loans.

 

(vi)                              Any and all Losses arising from actions,
suits, proceedings, demands, assessments, penalties, fines, judgments, costs and
legal and other expenses incident to any of the foregoing.

 

As used in subparagraph (iii) above, the following terms shall have the
following meanings:  “Environmental Claims” shall mean any claim for personal
injury or property damage under any Environmental Law; “Environmental Clean-Up
Liability” shall mean any cost or expense incurred to respond to, remove,
remediate, clean-up or abate any Hazardous Substances (defined below) located
on, in, under, above or about the property as required by administrative or
judicial action; “Environmental Compliance Cost” shall mean any cost or expense
necessary to enable the property to comply with all applicable Environmental
Laws; “Environmental Law” shall mean any federal, state or local law or
regulation for the protection of human health or the environment or natural
resources at any time in effect; and “Hazardous Substance” shall mean any
hazardous or toxic

 

10

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substance, pollutant, material or waste which is or becomes identified, listed
or regulated as such by or pursuant to any federal, state or local Environmental
Law.

 

The Parties shall promptly notify each other of the existence of any threatened
or possible claim to which the foregoing indemnifications could apply and shall
give such other party a reasonable opportunity to pay or defend the same at its
own expense and with counsel of its own selection; provided, however, that
Parent, Horizon GP and Horizon LP shall at all times also have the right to
participate fully in the defense at their own expense.  In the event that
Parent, Horizon GP and Horizon LP do not promptly assume the defense or
otherwise handle any such matter in accordance with all applicable laws, rules
and regulations, Pleasant Lake GP and/or Pleasant Lake LP may do so at Parent,
Horizon GP and Horizon LP’s expense. The foregoing obligations to indemnify set
forth in Sections 3(g) and 4(a)  shall survive the Closing.

 

4(b)                           Indemnification by Pleasant Lake GP and Pleasant
Lake LP.  Subject to the limitations set forth in Section 12.4, Buyer shall
indemnify and hold harmless Parent, Horizon GP and Horizon LP from, against and
in respect of the following Losses:

 

(i)                                     any and all Losses with respect to
Parent, Horizon GP and Horizon LP’s operation of the Business subsequent to the
Closing;

 

(ii)                                  any and all Losses arising from any
misrepresentation, omission or breach of any warranty, representation, covenant,
agreement or obligation on the part of Parent, Horizon GP and Horizon LP under
this Agreement or any exhibit, schedule, certificate, instrument or other
document furnished to Parent, Horizon GP and Horizon LP in connection with this
Agreement;  and

 

(iii)                               any and all Losses arising from actions,
suits, proceedings, demands, assessments, penalties, fines, judgments, costs and
legal and other expenses incident to any of the foregoing.

 

The Parties shall promptly notify each other of the existence of any threatened
or possible claim to which the foregoing indemnifications could apply and shall
give such other party a reasonable opportunity to defend the same at its own
expense and with counsel of its own selection; provided, however, that Parent,
Horizon GP and Horizon LP shall at all times also have the right to participate
fully in the defense at its own expense. The foregoing obligations to indemnify
shall survive the Closing.

 

5.                                      CONDITIONS TO CLOSING.

 

Pleasant Lake GP’s, Pleasant Lake LP’s and the Other LP’s obligations to
consummate the transactions contemplated by this Agreement shall be subject to
the satisfaction at the Closing of all of the following conditions, any one or
more of which may be waived by Pleasant Lake GP, Pleasant Lake LP and the Other
LPs, as applicable, in their discretion and in writing.

 

5(a)                           Accuracy of Representations and Warranties.  The
representations and warranties of Parent, Horizon GP and Horizon LP contained in
this Agreement shall be true and correct on the Closing Date in all material
respects as though they were made on the Closing Date.

 

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5(b)                           Covenants.  Parent, Horizon GP and Horizon LP
shall not be in breach of and shall not have breached and failure to cure any
covenant contained in this Agreement to be performed by Parent, Horizon GP
and/or Horizon LP, as applicable, on or before the Closing Date.

 

5(c)                           Tax Returns.  Parent, Horizon GP and Horizon LP
shall have delivered the federal tax returns of the Limited Partnership for the
calendar year ended December 31, 2002 to Pleasant Lake GP, Pleasant Lake LP and
the Other LPs.

 

5(d)                           Financial Statements.  Parent, Horizon GP and
Horizon LP shall have delivered the Financial Statements to Pleasant Lake GP,
Pleasant Lake LP and the Other LPs.

 

5(e)                           Mortgages.  Parent, Horizon GP and/or Horizon LP
shall have delivered the [Promissory Notes in the original principal amounts of
$2,650,000, and $10,875,000, in favor of Wells Fargo relating to mortgages in
favor of Wells Fargo on the Daleville and Somerset Properties, marked canceled
and paid in full as well as the canceled mortgages (the “AR Cap Mortgages”)] to
Pleasant Lake GP, Pleasant Lake LP and the Other LPs.  The Parties acknowledge
that the Partnership Agreement shall have been amended to permit the transfer of
the General Partnership Interest and the Limited Partnership Interest hereunder.

 

5(f)                             Title Endorsement.  Pleasant Lake GP, Pleasant
Lake LP and the Other LPs shall have received an endorsement to the title policy
issued to the Limited Partnership with respect to the Daleville and Somerset
Properties insuring title to such properties in the Limited Partnership.

 

5(g)                          Surveys.  Pleasant Lake GP, Pleasant Lake LP and
the Other LPs shall have received a copy of the most recent surveys of the
Daleville and Somerset Properties.

 

5(h)                          Legal Opinion.  Pleasant Lake GP, Pleasant Lake LP
and the Other LPs shall have received from Parent’s, Horizon GP’s and Horizon
LP’s counsel a legal opinion addressed to Pleasant Lake GP, Pleasant Lake LP and
the Other LPs in the form attached hereto as Exhibit B.

 

6.                                      TAXABLE YEAR.

 

In determining each applicable Party’s distributive share of the Limited
Partnership’s income, gain, loss, deduction or credit for 2003, the Parties
shall cause the Limited Partnership to treat the Limited Partnership’s 2003
taxable year as if it consisted of two taxable years, the first beginning on
January 1, 2003 and ending on May     , 2003 (the Parties intend that this be
the date of the day before the Closing Date) (the “First Taxable Year”), and the
second beginning on May     , 2003 and ending on December 31, 2003 (the “Second
Taxable Year”).  The Parties expressly acknowledge and agree that none of
Pleasant Lake GP, Pleasant Lake LP nor the Other LPs shall be allocated any item
of income, gain, loss, deduction or credit for the First Taxable Year,
including, without limitation, any cancellation of indebtedness income realized
by the Limited Partnership as a result of the cancellation of certain mortgages
on the Daleville and Somerset Properties, and that neither Horizon GP nor
Horizon LP shall be allocated any item of income, gain, loss, deduction or
credit for the Second Taxable Year.  Horizon GP and Horizon LP further
acknowledge and agree that when Pleasant Lake GP, Pleasant Lake LP and the Other
LPs cause the Limited Partnership’s tax returns to be prepared and K-1s to be
issued, they will be prepared by the Limited Partnership in accordance with this
Agreement regardless of any conflict with the Limited Partnership’s Limited
Partnership Agreement.

 

12

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7.                                      RELEASE.

 

Parent, Horizon GP and Horizon LP, for valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, do hereby forever release, remise
and discharge the Limited Partnership and its successors and assigns from any
and all claims, claims for relief, demands, actions and causes of action of any
kind or description whatsoever, known or unknown, whether arising out of
contract, tort, statute, treaty or otherwise, in law or in equity, which any of
Parent, Horizon GP and Horizon LP now has or has had against the Limited
Partnership from the beginning of the world to the date of this Agreement,
arising from, connected with, or in any way growing out of, directly or
indirectly, any transactions between the Limited Partnership and Parent, Horizon
GP and Horizon LP prior to the date of this Agreement and all the effects,
consequences, losses, damages, negotiations and dealings relating thereto.

 

8.                                      MISCELLANEOUS.

 

8(a)                           No Third-Party Beneficiaries.  This Agreement
shall not confer any rights or remedies upon any person other than the Parties
and their respective successors and permitted assigns.

 

8(b)                           Entire Agreement.  This Agreement (including the
documents referred to herein) constitutes the entire agreement among the Parties
and supersedes any prior understandings, agreements or representations by or
among the Parties, written or oral, to the extent they have related in any way
to the subject matter hereof.

 

8(c)                           Succession and Assignment.  This Agreement shall
be binding upon and inure to the benefit of the Parties named herein and their
respective successors and permitted assigns.  No Party may assign either this
Agreement or any of its rights, interests or obligations hereunder without the
prior written approval of the other Parties hereto.

 

8(d)                           Counterparts.  This Agreement may be executed in
one or more counterparts, each of which shall be deemed an original but all of
which together will constitute one and the same instrument.

 

8(e)                           Headings.  The section headings contained in this
Agreement are inserted for convenience only and shall not affect in any way the
meaning or interpretation of this Agreement.

 

8(f)                             Notices.  All notices, requests, demands,
claims and other communications hereunder will be in writing.  Any notice,
request, demand, claim or other communication hereunder shall be deemed duly
given if (and then two (2) business days after) it is sent by registered or
certified mail, return receipt requested, postage prepaid, and addressed to the
intended recipient as set forth below:

 

If to Parent or Horizon GP or Horizon LP:

 

Horizon Group Properties, Inc.
77 West Wacker Drive, Suite 4200
Chicago, IL  60601

Attention:

Gary Skoien

Phone:

312-917-4227

Facsimile:

312-917-0911

 

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with a copy, which shall not constitute notice, to:

 

Schiff Hardin & Waite
6600 Sears Tower
Chicago, IL  60606

Attention:

David A. Grossberg

Phone:

312-258-5764

Facsimile:

312-258-5600

 

If to Pleasant Lake GP or Pleasant Lake LP:

 

Pleasant Lakes Apts. Corp.
Pleasant Lakes Apt. Limited Partnership
c/o Ramat Securities
23811 Chagrin Boulevard, #200
Beachwood, OH  44122

Attention:

Howard Amster

Phone:

216-595-1047

Facsimile:

216-595-0989

 

with a copy, which shall not constitute notice, to:

 

Ulmer & Berne LLP
Penton Media Building, Suite 900
1300 East Ninth Street
Cleveland, Ohio  44115-1583

Attention:

Robert Fein

Phone:

216-621-8400

Facsimile:

216-621-7488

 

If to Bongorno:

 

Richard Bongorno
2785 Belgrave Road
Pepper Pike, Ohio  44124

 

If to Skoien:

 

Gary Skoien
511 N. Fairway Drive
Inverness, Illinois  60067

 

14

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If to Zlatin:

 

David Zlatin

2562 Biscayne Boulevard

Beachwood, Ohio  44122

 

Any Party may send any notice, request, demand, claim or other communication
hereunder to the intended recipient at the address set forth above using any
other mean including personal delivery, expedited courier, messenger service,
telecopy, telex, ordinary mail or electronic mail), but no such notice, request,
demand, claim or other communication shall be deemed to have been duly given
unless and until it actually is received by the intended recipient.  Any Party
may change the address to which notices, requests, demands, claims and other
communications hereunder are to be delivered by giving the other Party notice in
the manner herein set forth.

 

8(g)                          Governing Law.  This Agreement shall be governed
by and construed in accordance with the internal laws of the State of Delaware
without giving effect to any choice or conflict of law provision or rule
(whether of the State of Delaware or any other jurisdiction) that would cause
the application of the laws of any jurisdiction other than the State of
Delaware.

 

8(h)                          Amendments and Waivers.  No amendment of any
provision of this Agreement shall be valid unless the same shall be in writing
and signed by all of the Parties.  No waiver by any Party of any default,
misrepresentation, or breach of warranty or covenant hereunder, whether
intentional or not, shall be valid unless in writing and delivered to the other
Parties hereto and no such waiver shall be deemed to extend to any prior or
subsequent default, misrepresentation, or breach of warranty or covenant
hereunder or affect in any way any rights arising by virtue of any prior or
subsequent such occurrence.

 

8(i)                             Severability.  Any term or provision of this
Agreement that is invalid or unenforceable in any situation in any jurisdiction
shall not affect the validity or enforceability of the remaining terms and
provisions hereof or the validity or enforceability of the offending term or
provision in any other situation or in any other jurisdiction.

 

8(j)                             Expenses.  Each Party will bear its own costs
and expenses (including legal fees and expenses) incurred in connection with
this Agreement and the transactions contemplated hereby.

 

8(k)                         Construction.  The Parties have participated
jointly in the negotiation and drafting of this Agreement.  In the event an
ambiguity or question of intent or interpretation arises, this Agreement shall
be construed as if drafted jointly by the Parties and no presumption or burden
of proof shall arise favoring or disfavoring any Party by virtue of the
authorship of any of the provisions of this Agreement.  Any reference to any
federal, state, local or foreign statute of law shall be deemed also to refer to
all rules and regulations promulgated thereunder, unless the context requires
otherwise.  The word “including” shall mean “including, without limitation.”

 

8(l)                             Further Assurances.  The Parties each covenant
and agree to execute and deliver, or cause others to do so, all such powers of
attorney, consents, certificates, affidavits, agreements, instruments and other
documents, and to do or cause to be done all such other acts and things as may
be necessary to carry out the provisions of this Agreement, or as another party
reasonably requests

 

15

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to effectuate the provisions of this Agreement.  The Parties agree to cooperate
with each other to ensure the consummation of the transactions contemplated by
this Agreement.

 

[Signature Page Follows]

 

16

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IN WITNESS WHEREOF, the Parties hereto have executed this Purchase Agreement on
the date first above written.

 

 

HORIZON GROUP PROPERTIES, INC.,
a Maryland corporation

 

 

 

 

 

By:

 

 

Name:

 

 

Its:

 

 

 

 

DALEVILLE, SOMERSET, TULARE
FINANCE COMPANY, INC., a Delaware
corporation

 

 

 

 

 

By:

 

 

Name:

 

 

Its:

 

 

 

 

HORIZON GROUP PROPERTIES, L.P.,
a Delaware limited partnership,

 

By:

Horizon Group Properties, Inc.,
Its General Partner

 

 

 

 

 

 

By:

 

 

Name:

 

 

Its:

 

 

 

 

PLEASANT LAKE APTS. CORP., an Ohio
corporation

 

 

 

 

 

By:

 

 

Name:

 

 

Its:

 

 

 

 

PLEASANT LAKE APTS. LIMITED
PARTNERSHIP, an Ohio limited partnership

 

By:

Pleasant Lake Apts. Corp., Its General Partner

 

 

 

 

 

By:

 

 

Name:

 

 

Its:

 

 

17

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RICHARD BONGORNO

 

 

 

 

 

 

 

GARY SKOIEN

 

 

 

 

 

 

 

DAVID ZLATIN

 

18

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Exhibit A

 

Limited Partner

 

Distribution of Limited Partnership Interest
Percentage

 

Pleasant Lake

 

86

%

Richard Bongorno

 

1

%

Gary Skoien

 

10

%

David Zlatin

 

2

%

TOTAL

 

99

%

 

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