Exhibit 10.87

 

ENVIRONMENTAL INDEMNITY AGREEMENT

 

THIS ENVIRONMENTAL INDEMNITY AGREEMENT (this “Agreement”), dated as of April 24,
2003 is entered into and delivered, jointly and severally, by HORIZON GROUP
PROPERTIES, L.P., a Delaware limited partnership (“Borrower”) and HORIZON GROUP
PROPERTIES, INC., a Maryland corporation (“Guarantor”) to and for the benefit of
 AMSTER TRADING COMPANY CHARITABLE REMAINDER UNITRUST DATED MARCH 10, 2003
(“Lender”).

 

R E C I T A L S:

 

A.    Pursuant to the terms and conditions of a certain Construction and Term
Loan Agreement, dated of even date herewith, between Borrower and Lender (as
amended, modified, replaced or restated from time to time, the “Loan
Agreement”), Lender has agreed to make certain Loans (as defined below) to
Borrower.

 

B.    The loans to be made pursuant to the Loan Agreement will consist of: (i) a
term loan of Three Million One Hundred Thousand Dollars ($3,100,000) (the “Term
Loan”) and (ii) a construction loan of up to Three Million One Hundred Thousand
Dollars ($3,100,000) (the “Construction Loan”) (the Construction Loan and the
Term Loan are collectively referred to herein as the “Loans”).

 

C.    As a condition precedent to Lender’s extension of the Loans to Borrower
and in consideration therefor, Lender has required, among other things, the
execution and delivery of: (i) this Agreement by Borrower and Guarantor, 
(ii) that certain Promissory Note, dated of even date herewith, from Borrower to
Lender in the original principal amount of Three Million One Hundred Thousand
Dollars ($3,100,000)(as amended, modified, replaced or restated from time to
time, the “Note”), (iii) that certain Construction Deed of Trust, Security
Agreement and Fixture Filing Financing Statement, dated of even date herewith,
among Borrower, as trustor, First American Title, as trustee, and Lender, as
beneficiary, encumbering the real property, improvements and personalty
described therein (“Property”) (as amended, modified, replaced or restated from
time to time, the “Deed of Trust”), and (iv) various other Loan Documents (as
defined in the Loan Agreement).

 

D.    Guarantor: (i) is the general partner of Borrower and has a financial
interest in Borrower, (ii) understands that Lender will not make the Loans to
Borrower unless Guarantor executes and delivers this Agreement to Lender, and
(iii) has agreed to execute and deliver this Agreement.

 

E.     Capitalized terms used and not specifically defined herein shall bear the
same meaning as established in the Loan Agreement.

 

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NOW, THEREFORE, to induce Lender to extend the Loans to Borrower and in
consideration of the foregoing premises and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
Indemnitors (as defined below) hereby covenant and agree for the benefit of
Lender and the other Indemnified Parties (as defined below), as follows:

 

1.             Environmental Matters.

 

(a.)          Definitions.  For purposes of this Agreement the following terms
have the following meanings:

 

“Environmental Laws” means any and all federal, state and local laws (whether
under common law, statute, rule, regulation or otherwise), requirements under
permits or other authorizations issued with respect thereto, and other orders,
decrees, judgments, directives or other requirements of any governmental
authority relating to or imposing liability or standards of conduct (including
disclosure or notification) concerning protection of human health or the
environment or Hazardous Substances or any activity involving Hazardous
Substances, all as previously and in the future to be amended.

 

“Hazardous Substance” means, but is not limited to, any substance, chemical,
material or waste (A) the presence of which causes a nuisance or trespass of any
kind; (B) which is regulated by any federal, state or local governmental
authority because of its toxic, flammable, corrosive, reactive, carcinogenic,
mutagenic, infectious, radioactive, or other hazardous property or because of
its effect on the environment, natural resources or human health and safety,
including, but not limited to, petroleum and petroleum products,
asbestos-containing materials, polychlorinated biphenyls, lead and lead-based
paint, radon, radioactive materials, flammables and explosives; or (C) which is
designated, classified, or regulated as being a hazardous or toxic substance,
material, pollutant, waste (or a similar such designation) under any federal,
state or local law, regulation or ordinance, including under any Environmental
Law such as the Comprehensive Environmental Response Compensation and Liability
Act (42 U.S.C. §9601 et seq.), the Emergency Planning and Community
Right-to-Know Act (42 U.S.C. §11001 et seq.), the Hazardous Substances
Transportation Act (49 U.S.C. §1801 et seq.), or the Clean Air Act (42 U.S.C.
§7401 et seq.).

 

“Indemnified Parties” means and includes Lender, its parent, subsidiaries, and
affiliated companies, assignees of any of Lender’s interest in the Loans or the
Loan Documents, any servicer or originator of the Loans, and the officers,
directors, employees, agents and contractors of any of the foregoing parties.

 

“Indemnitors” means Borrower and Guarantor, jointly and severally.

 

“Loan Documents” shall have the meaning set forth in the Loan Agreement.

 

“Release” means any release, deposit, discharge, emission, leaking, leaching,
spilling, seeping, migrating, injecting, pumping, pouring, emptying, escaping,
dumping, disposing or other movement of Hazardous Substances.

 

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“Reports” means the environmental studies and reports identified on Exhibit A
attached hereto and made a part hereof.

 

(b)           Environmental Representations and Warranties.  Except as otherwise
fully disclosed by Indemnitors to Indemnified Parties in writing detailing any
exceptions to the following environmental representations and warranties or
fully disclosed to Indemnified Parties in the Reports, Indemnitors hereby
represent and warrant to Indemnified Parties that, to the best of their
knowledge, as of the date hereof:

 

(I)            NEITHER THE PROPERTY NOR ANY OPERATIONS OF BORROWER THEREON OR IN
CONNECTION THEREWITH ARE IN VIOLATION OF ANY ENVIRONMENTAL LAWS OR ANY PERMIT OR
OTHER AUTHORIZATION ISSUED PURSUANT THERETO;

 

(II)           NO HAZARDOUS SUBSTANCES ARE, OR TO INDEMNITORS’ KNOWLEDGE AND
BELIEF, HAVE BEEN HANDLED, GENERATED, STORED, PROCESSED OR OTHERWISE MANAGED ON
OR AT THE PROPERTY EXCEPT FOR THOSE SUBSTANCES USED BY BORROWER OR TENANTS UNDER
LEASES AT THE PROPERTY IN THE ORDINARY COURSE OF THEIR BUSINESSES AND IN
COMPLIANCE WITH ALL ENVIRONMENTAL LAWS;

 

(III)          THERE ARE NOT, TO INDEMNITORS’ KNOWLEDGE, ANY PAST OR PRESENT
RELEASES OF HAZARDOUS SUBSTANCES IN, ON, UNDER OR FROM THE PROPERTY;

 

(IV)          THE PROPERTY IS NOT SUBJECT TO ANY PRIVATE OR GOVERNMENTAL LIEN OR
JUDICIAL OR ADMINISTRATIVE NOTICE OR ACTION RELATING TO HAZARDOUS SUBSTANCES;

 

(V)           THERE ARE NO EXISTING OR CLOSED UNDERGROUND STORAGE TANKS OR OTHER
UNDERGROUND STORAGE RECEPTACLES FOR HAZARDOUS SUBSTANCES ON THE PROPERTY;

 

(VI)          BORROWER HAS RECEIVED NO NOTICE OF, AND TO BORROWER’S KNOWLEDGE,
THERE EXISTS NO INVESTIGATION, ACTION, PROCEEDING OR CLAIM BY ANY AGENCY,
AUTHORITY OR UNIT OF GOVERNMENT OR BY ANY THIRD PARTY WHICH COULD RESULT IN ANY
LIABILITY, PENALTY, SANCTION OR JUDGMENT UNDER ANY ENVIRONMENTAL LAWS WITH
RESPECT TO ANY CONDITION, USE OR OPERATION OF THE PROPERTY OR ANY OF BORROWER’S
OPERATIONS, NOR DOES BORROWER KNOW OF ANY BASIS FOR SUCH A CLAIM;

 

(VII)         TO INDEMNITORS’ KNOWLEDGE, THERE HAS BEEN NO CLAIM BY ANY PARTY
THAT ANY USE, OPERATION OR CONDITION OF THE PROPERTY OR ANY OF BORROWER’S
OPERATIONS HAS CAUSED ANY NUISANCE OR ANY OTHER LIABILITY OR ADVERSE CONDITION
ON ANY OTHER PROPERTY NOR DOES BORROWER KNOW OF ANY BASIS FOR SUCH A CLAIM;

 

(VIII)        THERE ARE NO AGREEMENTS, CONSENT ORDERS, DECREES, JUDGMENTS,
LICENSE OR PERMIT CONDITIONS OR OTHER ORDERS OR DIRECTIVES OF ANY FEDERAL, STATE
OR LOCAL COURT, GOVERNMENTAL AGENCY OR AUTHORITY OR AGREEMENTS, WHETHER
SETTLEMENT AGREEMENTS OR OTHERWISE, WITH ANY THIRD PARTIES RELATING TO THE
OWNERSHIP, USE, OPERATION, SALE, TRANSFER OR CONVEYANCE OF THE PROPERTY THAT
REQUIRE ANY CHANGE IN THE PRESENT CONDITION OF THE PROPERTY OR ANY WORK,
REPAIRS, CONSTRUCTION, CONTAINMENT, CLEAN UP,

 

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INVESTIGATIONS, STUDIES, REMOVAL OR OTHER REMEDIAL ACTION OR CAPITAL
EXPENDITURES WITH RESPECT TO THE PROPERTY.

 

(c)           Environmental Covenants.  Borrower covenants and agrees that
Borrower:  (i) shall keep or cause the Property to be kept free from Hazardous
Substances (except those substances used by Borrower or tenants under leases at
the Property in the ordinary course of their businesses and in compliance with
all Environmental Laws); (ii) shall not install or use any underground storage
tanks, shall not itself engage in and shall expressly prohibit all tenants of
space in the Improvements from engaging in the use, generation, handling,
storage, production, processing or management of Hazardous Substances, except in
the ordinary course of their businesses and in compliance with all Environmental
Laws; (iii) shall not itself cause, shall take all action reasonably necessary,
and shall expressly prohibit the Release of Hazardous Substances at, on, under,
or from the Property; shall itself comply and shall expressly require all
tenants and any other persons who may come upon the Property to comply with all
Environmental Laws; (iv) shall keep the Property free and clear of all liens and
other encumbrances imposed pursuant to any Environmental Law, whether due to any
act or omission of Borrower or any other person or entity (“Environmental
Liens”); (v) shall comply and take actions reasonably necessary to cause all
occupants of the Property to comply with the recommendations of any qualified
environmental engineer or other expert that apply or pertain to the Property;
and, (vi) without limiting the generality of the foregoing, during the term of
this Agreement, shall not use any construction materials which contain asbestos
nor install in the Improvements on the Property or permit to be installed in the
Improvements on the Property, any materials which contain asbestos.

 

(d)           Notice and Access.  Indemnitors shall promptly notify Indemnified
Parties in writing if Indemnitors knows, knows or believes there is or are (i)
any Hazardous Substances, other than those used by Borrower or tenants under
leases at the Property in the ordinary course of their businesses and in
compliance with all Environmental Laws, present on the Property; (ii) any
Release of Hazardous Substances in, on, under, from or migrating towards the
Property; (iii) any non-compliance with Environmental Laws related in any way to
the Property; (iv) any actual or threatened Environmental Liens; (v) any
investigation or action or claim, whether threatened or pending, by any
governmental agency or third party pertaining to the Release of Hazardous
Substances in, on, under, from, or migrating towards the Property; and (vi) any
installation of wells, piping, or other equipment at the Property to
investigate, remediate or otherwise address any Release of Hazardous Substances
at, on, in or in the vicinity of the Property.  Indemnitors shall promptly, at
Indemnitors’s sole cost and expense, take all actions as are required by
Environmental Laws with respect to any Hazardous Substances or other
environmental condition at, on or under the Property or other affected property,
including all investigative, monitoring, removal, containment and remedial
actions in accordance with all applicable Environmental Laws, including the
payment, at no expense to Indemnified Parties, of all clean-up, administrative
and enforcement costs of applicable governmental agencies which may be asserted
against the Property in all instances as necessary to comply with all applicable
Environmental Laws (collectively, “Completion of the Clean-up”).  In the event
Indemnitors fail to do so, Indemnified Parties may, but shall not be obligated
or have any duty to, cause the Completion of the Clean-up of the Property. 
Indemnitors hereby grant to Indemnified Parties and their agents and employees
access to the Property as provided in Section 1(f) below, and a license to
remove any items known by Indemnified Parties to be Hazardous Substances and to
do

 

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all things Indemnified Parties shall deem necessary to cause the Completion of
the Clean-up of the Property.

 

(e)           Indemnification.  Indemnitors covenant and agree, at Indemnitors’
sole cost and expense, to indemnify, defend (at trial and appellate levels, and
with attorneys, consultants and experts reasonably acceptable to Indemnified
Parties), and hold Indemnified Parties harmless from and against any and all
liens, damages (including, without limitation, consequential damages), losses,
liabilities, obligations, settlement payments, penalties, claims, judgments,
suits, proceedings, costs, disbursements or expenses of any kind or of any
nature whatsoever (including reasonable attorneys’, consultants’ and experts’
fees and disbursements actually incurred in investigating, defending, settling
or prosecuting any claim, litigation or proceeding) which may at any time be
imposed upon, incurred by or asserted against Indemnified Parties or the
Property (except to the extent they arise out of the gross negligence or willful
misconduct of an Indemnified Party), and arising directly or indirectly from or
out of (except to the extent they arise out of the gross negligence or willful
misconduct of an Indemnified Party):

 

(i)            he past, present or future presence, Release or threat of Release
of any Hazardous Substances on, in, under or affecting all or any portion of the
Property or any surrounding areas, regardless of whether or not caused by or
within the control of any Indemnitor;

 

(ii)           the past, present or future violation of any Environmental Laws,
relating to or affecting the Property or Borrower’s operations, whether or not
caused by or within the control of Indemnitor;

 

(iii)          the failure by Indemnitors to comply fully with the terms and
conditions of this Section 1;

 

(iv)          any misrepresentation or inaccuracy in or the breach of any
representation or warranty contained in this Section 1; or

 

(v)           the enforcement of this Section 1, including any liabilities that
arise as a result of the actions taken or caused to be taken by Indemnified
Parties under this Section 1, the cost of assessment, containment and/or removal
of any and all Hazardous Substances from all or any portion of the Property or
any surrounding areas, the cost of any actions taken in response to the
presence, Release or threat of Release of any Hazardous Substances on, in, under
or affecting any portion of the Property or any surrounding areas to prevent or
minimize such Release or threat of Release so that it does not migrate or
otherwise cause or threaten danger to present or future public health, safety,
welfare or the  environment, and costs incurred to comply with the Environmental
Laws in connection with all or any portion of the Property or any surrounding
areas.  Indemnified Parties’ rights under this Section 1 shall survive payment
in full of Borrower’s obligations under the Loan Documents and shall be in
addition to all other rights of Indemnified Parties under the Deed of Trust, the
Loan Agreement, the Note and the other Loan Documents, but shall terminate upon
the expiration of the applicable statute of limitations.  The foregoing
notwithstanding,

 

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Indemnitors’ obligations under this Section 1 with regard to any Post Transfer
Indemnification Responsibilities (as hereinafter defined) shall be limited to
such obligations directly or indirectly arising out of or resulting from any
Hazardous Substances that were present or released in, on, or around any part of
the Property, or in the soil, groundwater or soil vapor on or under the Property
at any time before or while Borrower held title to or was in possession or
control of the Property (“Indemnitors’ Continuing Responsibility”); provided,
however, that any Post Transfer Indemnification Responsibilities incurred or
suffered by Indemnified Parties shall be presumed, unless shown by a
preponderance of the evidence to the contrary, to be Indemnitors’ Continuing
Responsibility.  “Post Transfer Indemnification Responsibilities” shall mean any
obligations hereunder to indemnify, defend, and hold Indemnified Parties
harmless arising after Indemnified Parties cease to hold a security interest in
the Property or acquire title to the Property as a result of foreclosure, deed
in lieu of foreclosure, or other transfer of the Property.

 

(f)            Site Visits, Observation and Testing.  Indemnified Parties and
their agents and representatives shall have the right at any reasonable time to
enter and visit the Property for the purposes of observing the Property, taking
and removing soil or groundwater samples, and conducting tests on any part of
the Property.  Indemnified Parties have no duty, however, to visit or observe
the Property or to conduct tests, and no site visit, observation or testing by
any Indemnified Party shall impose any liability on any Indemnified Party.  In
no event shall any site visit, observation or testing by any Indemnified Party
be a representation that Hazardous Substances are or are not present in, on or
under the Property, or that there has been or shall be compliance with any law,
regulation or ordinance pertaining to Hazardous Substances or any other
applicable governmental law. Neither Borrower nor any other party is entitled to
rely on any site visit, observation or testing by any Indemnified Party. 
Indemnified Parties owe no duty of care to protect Indemnitors or any other
party against, or to inform Indemnitors or any other party of, any Hazardous
Substances or any other adverse condition affecting the Property.  Indemnified
Parties may in their discretion disclose to Indemnitors or any other party any
report or findings made as a result of, or in connection with, any site visit,
observation or testing by Indemnified Parties.  Indemnitors understand and agree
that Indemnified Parties make no representation or warranty to Indemnitors or
any other party regarding the truth, accuracy or completeness of any such report
or findings that may be disclosed.  Indemnitors also understand that, depending
on the results of any site visit, observation or testing by any Indemnified
Party which are disclosed to Indemnitors, Indemnitors may have a legal
obligation to notify one or more environmental agencies of the results and that
such reporting requirements are site-specific and are to be evaluated by
Indemnitors without advice or assistance from Indemnified Parties.  Any
Indemnified Party shall give Borrower reasonable notice before entering the
Property. Such Indemnified Party shall make reasonable efforts to avoid
interfering with Borrower’s and any tenant’s use of the Property in exercising
any rights provided in this Section 1.

 

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2.             Reinstatement of Obligations.  If at any time all or any part of
any payment made by Borrower or received by Indemnified Parties from Borrower
under or with respect to this Agreement is or must be rescinded or returned for
any reason whatsoever (including the insolvency, bankruptcy or reorganization of
any Indemnitor under any Debtor Relief Law (as defined below)), then the
obligations of Indemnitors hereunder shall, to the extent of the payment
rescinded or returned, be deemed to have continued in existence, notwithstanding
such previous payment made by Indemnitors, or receipt of payment by an
Indemnified Party, and the obligations of Indemnitors hereunder shall continue
to be effective or be reinstated, as the case may be, as to such payment, all as
though such previous payment by Indemnitors had never been made.

 

3.             Waivers.  To the extent permitted by law, each Indemnitor, for
itself and its successors, hereby waives and agrees, with respect to its
obligations under this Agreement, not to assert or take advantage of:

 

(a)           Any right to require Indemnified Parties to proceed against any
other person or to proceed against or exhaust any security held by Indemnified
Parties at any time or to pursue any other remedy in Indemnified Parties’ power
or under any other agreement before proceeding against Borrower  hereunder;

 

(b)           Any defense that may arise by reason of the incapacity, lack of
authority, death or disability of any other person or persons or the failure of
Indemnified Parties to file or enforce a claim against the estate (in
administration, bankruptcy or any other proceedings) of any other person or
person;

 

(c)           Demand, presentment for payment, notice of nonpayment, protest,
notice of protest and all other notices of any kind, or the lack of any thereof,
including, without limiting the generality of the foregoing, notice of the
existence, creation or incurring of any new or additional indebtedness or
obligation or of any action or non-action on the part of the Indemnified
Parties, any endorser or creditor of either Indemnitor or any other person
whomsoever under this or any other instrument in connection with any obligation
or evidence of indebtedness held by Indemnified Parties;

 

(d)           Any right or claim of right to cause a marshalling of the assets
of Indemnitors;

 

(e)           Intentionally Deleted;

 

(f)            Any duty on the part of Indemnified Parties to disclose to
Indemnitors any facts Indemnified Parties may now or hereafter know about the
Property, regardless of whether Indemnified Parties has reason to believe that
any such facts materially increase the risk beyond that which Indemnitors
intends to assume or has reason to believe that such facts are unknown to
Indemnitors or has a reasonable opportunity to communicate such facts to
Indemnitors, it being understood and agreed that Indemnitors is fully
responsible for being and keeping informed of the condition of the Property and
of any and all circumstances bearing on the risk that liability may be incurred
hereunder;

 

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(g)           Any lack of notice of disposition or of manner of disposition of
any collateral for the Loans;

 

(h)           Any invalidity, irregularity or unenforceability, in whole or in
part, of any one or more of the Loan Documents;

 

(i)            Any deficiencies in the collateral for the Loans or any
deficiency in the ability of Indemnified Parties to collect or to obtain
performance from any person or entities now or hereafter liable for the payment
and performance of any obligation hereby guaranteed;

 

(j)            Any assertion or claim that the automatic stay provided by 11
U.S.C. §362 (arising upon the voluntary or involuntary bankruptcy proceeding of
Indemnitors) or any other stay provided under any other debtor relief law
(whether statutory, common law, case law or otherwise) of any jurisdiction
whatsoever, now or hereafter in effect, which may be or become applicable, shall
operate or be interpreted to stay, interdict, condition, reduce or inhibit the
ability of Indemnified Parties to enforce any of its rights, whether now or
hereafter required, which Indemnified Parties may have against Indemnitors or
the collateral for the Loans; and

 

(k)           Any modifications of the Loan Documents or any obligation of
Indemnitors relating to the Loans by operation of law or by action of any court,
whether pursuant to the Bankruptcy Reform Act of 1978, as amended or recodified
(“Bankruptcy Code”), or under any other present or future state or federal law
regarding bankruptcy, reorganization or other relief to debtors (collectively,
“Debtor Relief Law”), or otherwise.

 

4.             General Provisions.

 

(a)           Full Recourse.  All of the terms and provisions of this Agreement
are full recourse obligations of Indemnitors and not restricted by any
limitation on personal liability.

 

(b)           Secured Obligations.  Indemnitors hereby acknowledge that the
obligations of Indemnitors under this Agreement are secured by the lien of the
Deed of Trust and the security interests and other collateral described in the
Deed of Trust and the other Loan Documents.

 

(c)           Survival.  This Agreement shall be deemed to be continuing in
nature and shall remain in full force and effect and shall survive the payment
of the indebtedness evidenced and secured  by the Loan Documents and the
exercise of any remedy by Indemnified Parties under the Deed of Trust or any of
the other Loan Documents, including any foreclosure or deed in lieu thereof,
even if, as a part of such remedy, the Loans are paid or satisfied in full, but
shall terminate upon the expiration of the applicable statute of limitations
period.

 

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(d)           No Recourse Against Indemnified Parties.  Indemnitors shall not
have any right of recourse against Indemnified Parties by reason of any action
Indemnified Parties may take or omit to take under the provisions of this
Agreement or under the provisions of any of the Loan Documents unless the act or
failure to act is found to be gross negligence or willful misconduct on the part
of such Indemnified Party.

 

(e)           Reservation of Rights.  Nothing contained in this Agreement shall
prevent or in any way diminish or interfere with any rights or remedies,
including the right to contribution, which Indemnified Parties may have against
Indemnitors or any other party under the Comprehensive Environmental Response,
Compensation and Liability Act of 1980 (codified at Title 42 U.S.C. §9601 et
seq.), as it may be amended from time to time, or any other applicable federal,
state or local laws, all such rights being hereby expressly reserved.

 

(f)            Rights Cumulative; Payments.  Indemnified Parties’s rights under
this Agreement shall be in addition to all rights of Indemnified Parties under
the Loan Agreement, Note, the Deed of Trust and the other Loan Documents. 
Further, payments made by Indemnitors under this Agreement shall not reduce in
any respect Indemnitors’ obligations and liabilities under the Loan Agreement,
Note, the Deed of Trust and the other Loan Documents.

 

(g)           No Limitation on Liability.  Each Indemnitor hereby consents and
agrees that Indemnified Parties may at any time and from time to time without
further consent from Indemnitors do any of the following events, except as
otherwise provided in this Agreement, and the liability of Indemnitors under
this Agreement shall be unconditional and absolute and shall in no way be
impaired or limited by any of the following events, whether occurring with or
without notice to Indemnitors or with or without consideration: (i) any
extensions of time for performance required by any of the Loan Documents or
extension or renewal of the Note; (ii) any sale, assignment or foreclosure of
the Note, the Deed of Trust or any of the other Loan Documents or any sale or
transfer of the Property; (iii) any change in the composition of any Indemnitor;
(iv) the accuracy or inaccuracy of the representations and warranties made by
Indemnitors herein or in any of the Loan Documents; (v) the release of any
Indemnitor or of any other person or entity from performance or observance of
any of the agreements, covenants, terms or conditions contained in any of the
Loan Documents by operation of law or otherwise; (vi) the release or
substitution in whole or in part of any security for the Loans; (vii) Lender’s
failure to record the Deed of Trust or to file any financing statement (or
Lender’s improper recording or filing thereof) or to otherwise perfect, protect,
secure or insure any lien or security interest given as security for the Loans;
(viii) the modification of the terms of any one or more of the Loan Documents;
or (ix) the taking or failure to take any action of any type whatsoever.  Unless
the act or failure to act is found to be gross negligence or willful misconduct
on the part of such Indemnified Party, no such action which Indemnified Parties
shall take or fail to take in connection with the Loan Documents or any
collateral for the Loans, nor any course of dealing with Indemnitors or any
other person, shall limit, impair or release Indemnitor’s obligations hereunder,
affect this Agreement in any way or afford Borrower any recourse against
Indemnified Parties.  Nothing contained in this Paragraph shall be construed to
require Indemnified Parties to take or refrain from taking any action referred
to herein.

 

(h)           Entire Agreement; Amendment; Severability.  This Agreement
contains the entire

 

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agreement between the parties respecting the matters herein set forth and
supersedes (except as to the Deed of Trusts) all prior agreements, whether
written or oral, between the parties respecting such matters.  Any amendments or
modifications hereto, in order to be effective, shall be in writing and executed
by the parties hereto.  If any provision or obligation under this Agreement or
any of the other Loan Documents shall be determined by a court of competent
jurisdiction to be invalid, illegal or unenforceable, that provision shall be
deemed severed from the Loan Documents and the validity, legality and
enforceability of the remaining provisions or obligations shall remain in full
force as though the invalid, illegal or unenforceable provision had never been a
part of the Loan Documents.

 

(i)            Governing Law; Binding Effect.  This Agreement shall be governed
by and construed in accordance with the laws of the State in which the Property
is located, except to the extent that the applicability of any of such laws may
now or hereafter be preempted by Federal law, in which case such Federal law
shall so govern and be controlling.  The terms, covenants and conditions of this
Agreement shall be binding upon and inure to the benefit of the heirs,
successors and assigns of the parties.  Indemnified Parties and any successor
may, at any time after providing written notice to Indemnitors, sell, transfer,
or assign its interest under the Loan Agreement, the Note, the Deed of Trust,
the other Loan Documents, any or all servicing rights with respect thereto, and
this Agreement or grant participations.  The representations, warranties,
obligations, covenants, and indemnity obligations of Indemnitors under this
Agreement shall also benefit and apply with respect to any purchaser,
transferee, assignee, participant, servicer or investor.

 

(j)            Notice.  All notices or other communications required or
permitted to be given pursuant hereto shall be given in the manner specified in
the Loan Agreement directed to the parties at their respective addresses as
provided therein.

 

(k)           No Waiver: Time of Essence; Interpretation; Counting of Days.  The
failure of any party hereto to enforce any right or remedy hereunder, or to
promptly enforce any such right or remedy, shall not constitute a waiver thereof
nor give rise to any estoppel against such party nor excuse any of the parties
hereto from their respective obligations hereunder.  Any waiver of such right or
remedy must be in writing and signed by the party to be bound. Whenever used,
the singular number shall include the plural, the plural the singular, and the
words “Indemnified Parties” and “Indemnitors” shall include their respective
successors, assigns, heirs, executors and administrators.  The word “include(s)”
means “include(s), without limitation,” and the word “including” means
“including, but not limited to.”  This Agreement is subject to enforcement at
law or in equity, including actions for damages or specific performance.  Time
is of the essence of each and every term and condition of this Agreement.  The
term “days” when used herein shall mean calendar days.  If any time period ends
on a Saturday, Sunday or holiday officially recognized by the state within which
the Property is located, the period shall be deemed to end on the next
succeeding business day.  The term “business day” as used herein shall mean a
weekday, Monday through Friday, except a legal holiday or a day on which banking
institutions in Chicago, Illinois, are authorized by law to be closed.

 

(l)            Headings.  The headings of the sections and paragraphs of this
Agreement are for convenience of reference only and shall not be construed in
interpreting the provisions hereof.

 

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(m)          Attorneys’ Fees.  Indemnitors agree to pay all of Indemnified
Parties’ costs and expenses, including reasonable attorneys’ fees, which may be
incurred in enforcing or protecting Indemnified Parties’ rights or interests. 
From the time(s) incurred until paid in full to Indemnified Parties, all such
sums shall bear interest at the Default Rate.

 

(n)           Successive Actions.  A separate right of action hereunder shall
arise each time Indemnified Parties acquires knowledge of any matter indemnified
by Indemnitors under this Agreement.  Separate and successive actions may be
brought hereunder to enforce any of the provisions hereof at any time and from
time to time.  No action hereunder shall preclude any subsequent action, and
Indemnitors hereby waive and covenant not to assert any defense in the nature of
splitting of causes of action or merger of judgments.

 

(o)           Joint and Several Liability.  The obligations and liabilities of
Borrower and Guarantor under this Agreement are JOINT AND SEVERAL.  Borrower and
Guarantor agree that Lender may pursue its rights and remedies against either
Borrower or Guarantor, or both, in any order as Lender deems appropriate.

 

(p)           Reliance.  Indemnified Parties would not make the Loans to
Borrower without this Agreement.  Accordingly, Indemnitors intentionally and
unconditionally enter into the covenants and agreements herein and understands
that, in reliance upon and in consideration of such covenants and agreements,
the Loans shall be made and, as part and parcel thereof, specific monetary and
other obligations have been, are being and shall be entered into which would not
be made or entered into but for such reliance.

 

(q)           Counterparts.  This Agreement may be executed in any number of
counterparts, all of which shall be taken to be one and the same instrument, for
the same effect as if all parties hereto had signed the same signature page.

 

(r)            WAIVER OF TRIAL BY JURY.  INDEMNITORS AND LENDER (BY ACCEPTANCE
OF THIS AGREEMENT), HAVING BEEN REPRESENTED BY COUNSEL, EACH KNOWINGLY AND
VOLUNTARILY WAIVES ANY RIGHT TO A TRIAL BY JURY IN ANY ACTION OR PROCEEDING TO
ENFORCE OR DEFEND ANY RIGHTS (a) UNDER THIS AGREEMENT OR ANY RELATED AGREEMENT
OR UNDER ANY AMENDMENT, INSTRUMENT, DOCUMENT OR AGREEMENT DELIVERED OR WHICH MAY
IN THE FUTURE BE DELIVERED IN CONNECTION WITH THIS AGREEMENT OR (b) ARISING FROM
ANY BANKING RELATIONSHIP EXISTING IN CONNECTION WITH THIS AGREEMENT, AND AGREES
THAT ANY SUCH ACTION OR PROCEEDING WILL BE TRIED BEFORE A COURT AND NOT BEFORE A
JURY.  INDEMNITORS AGREE THAT THEY WILL NOT ASSERT ANY CLAIM AGAINST LENDER ON
ANY THEORY OF LIABILITY FOR SPECIAL, INDIRECT, CONSEQUENTIAL, INCIDENTAL OR
PUNITIVE DAMAGES.

 

(s)           Waiver of Bankruptcy Stay.  Indemnitors covenant and agree that
upon the commencement of a voluntary or involuntary bankruptcy proceeding by or
against any Indemnitor, such Indemnitor shall not seek a supplemental stay or
otherwise pursuant to 11 U.S.C. § 105 or any

 

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other provision of the Bankruptcy Code or any other Debtor Relief Law, to stay,
interdict, condition, reduce or inhibit the ability of Indemnified Parties to
enforce any rights of Indemnified Parties against such Indemnitor by virtue of
this Agreement or otherwise.

 

(t)            Expiration of this Environmental Indemnity.  Notwithstanding any
other provision to the contrary contained in this Agreement, Indemnitors’
obligations under this Agreement shall only survive and continue for a period of
ten (10) years from the date that the Loans have been repaid in full.

 

[SIGNATURE PAGE FOLLOWS]

 

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Indemnitors have executed and delivered this Environmental Indemnity Agreement
as of the day and year first above written.

 

 

Borrower:

 

 

 

HORIZON GROUP PROPERTIES, L.P.

 

 

 

 

 

 

 

By:

Horizon Group Properties, Inc.

 

 

 

 

 

 

Its:

General Partner

 

 

 

 

 

 

 

By:

/s/ David Tinkham

 

 

 

 

 

David Tinkham,

 

 

 

 

Senior Vice President / CFO

 

 

 

 

 

 

 

Guarantor:

 

 

 

HORIZON GROUP PROPERTIES, INC.

 

 

 

By:

/s/ David Tinkham

 

 

 

 

 

David Tinkham, Senior Vice President / CFO

 

 

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EXHIBIT A

 

REPORTS

 

Phase 1 Environmental Site Assessment of Horizon Outlet Center Prepared by EMG
as Project Number 36305 and Dated May 2, 1998

 

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