<PAGE>

                   NONQUALIFIED STOCK OPTION AWARD AGREEMENT
                                     UNDER
      HORIZON  GROUP PROPERTIES, INC. 1998 LONG-TERM STOCK INCENTIVE PLAN


     This  NONQUALIFIED STOCK OPTION AWARD AGREEMENT (the "Agreement") dated
this 15TH day of June, 1998, between Horizon Group Properties, Inc. (the
"Company"), and          (the "Participant"), who is an officer, key employee or
director of the Company.  Any term capitalized but not defined in this Agreement
will have the meaning set forth in the Horizon Group Properties, Inc. 1998 
Long-Term Stock Incentive Plan (the "Plan").

1.   AWARD.  In accordance with the terms of the Plan, the Company hereby grants
     to the Participant a Nonqualified Stock Option to purchase all or any part
     of an aggregate of _____ Shares.  This Award constitutes a Nonqualified
     Stock Option and is not intended to be an Incentive Stock Option within the
     meaning of Section 422 of the Code.

2.   EXERCISE PRICE.  The Exercise Price will be $_______ per Share, which is no
     less than the Fair Market Value of a Share on the date of this Agreement.

3.   MEDIUM AND TIME OF PAYMENT.

     a.   The Exercise Price must be paid in United States dollars, in cash or
          by personal check payable to the order of the Company, at the time of
          purchase. 

     b.   Alternatively, the Exercise Price, or any part of it, may be paid
          with: (i) Shares owned by the Participant duly endorsed for transfer
          to the Company; (ii) Shares issuable to the Participant upon exercise
          of the Option; or (iii) any combination of cash, personal check and
          Shares meeting the requirements of clause (i) or (ii) above.

     c.   The Company will pay the amount of tax it is required to withhold on
          account of exercise of all or part of the Award with Shares otherwise
          issuable to the Participant upon exercise under the Award. 
          Notwithstanding the foregoing, if the Committee agrees, the
          Participant may satisfy the Company's withholding obligation by paying
          the amount of required withholding to the Company and, if he or she
          does so, the Company will not withhold Shares as described in the
          preceding sentence.  If the Award has been transferred pursuant to
          Section 6(b), the Participant must satisfy the Company's withholding
          requirement by paying the Company the amount it is required to
          withhold with:  (i) United States dollars in cash or by personal
          check; (ii) Shares owned by the Participant and duly endorsed for
          transfer to the Company; or (iii) any combination of cash, personal
          check, and Shares meeting the requirements of clause (ii) above. If
          part or all of the Award has been transferred pursuant to Section
          6(b), the withholding obligation may not be satisfied with Shares
          issuable upon exercise of the Award.

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     d.   Shares used to satisfy the Exercise Price and/or any minimum required
          withholding tax will be valued at their Fair Market Value as
          determined by the Committee as of the date of exercise. 

     e.   No Shares will be issued pursuant to the Award before the Exercise
          Price and, if applicable, the withholding obligation, have been paid
          in full.

4.   TERM, VESTING AND EXERCISE OF THE AWARD.

     a.   The Award will expire ten years from the date of this Agreement.

     b.   The Award will vest and become exercisable (i) in accordance with the
          vesting schedule set forth in paragraph (c) below or (ii) if earlier,
          the Participant's death or Disability.

     c.   The vesting schedule for this Award is as follows:

<TABLE>
<CAPTION>

               Anniversary of Agreement
                        Date                       Percent Vested
               ------------------------            --------------
               <S>                                 <C>
                        1st                              33%
                        2nd                              64%
                        3rd                             100%

</TABLE>

     d.   Notwithstanding any other provision of this Agreement, the Participant
          will forfeit his or her right to exercise the Award, whether or not it
          has already vested, if the Participant's employment with the Company
          is terminated for Cause.

     e.   After the Award has vested, and while it is exercisable, it may be
          exercised in whole or in part by written notice to the Company
          indicating the number of Shares being purchased.  The notice must be
          signed by the Participant and must be accompanied by full payment of
          the Exercise Price plus, if applicable, any required withholding tax. 
          Notwithstanding the foregoing, the Award may not be exercised for
          fewer than 100 Shares at any one time or, if fewer than 100 Shares
          remain, all the then-remaining Shares.  The Award must be exercised as
          to a whole number of Shares.

5.   TERMINATION OF EMPLOYMENT.  After termination of employment, the
     Participant's right to exercise the Award will be subject to the following
     rules.

     a.   DISABILITY OR DEATH.  If the Participant terminates employment through
          Disability or death, the Award will immediately vest and become
          exercisable.  The Participant (or in the case of his or her death, the
          Participant's estate) may exercise the Award within


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          the 12-month period following the termination, or, if earlier, by the 
          date the Award would otherwise have expired.

     b.   OTHER TERMINATION.  If the Participant terminates employment for any
          reason other than Disability, death, or termination for Cause, the
          Participant (or, in the case of his or her subsequent death, the
          Participant's estate):  (i) may, within the 180-day period following
          the termination, exercise the Award to the extent that it was vested
          and exercisable on the date of the termination and (ii) will forfeit
          the Award to the extent that it was not vested and exercisable on the
          date of the termination.

     c.   CHANGE OF CONTROL.  Notwithstanding the provisions of paragraphs (a)
          and (b) above, if, within 24 months after a Change of Control, (i) the
          Participant's employment with the Company and all Affiliates is
          terminated for a reason other than Cause, or (ii) the Participant
          terminates his or her employment with the Company and all Affiliates
          for Good Reason, in either case by giving 30 days' prior written
          notice, the Award will immediately vest and become fully exercisable,
          and will remain exercisable until the date that is ten years after the
          date of this Agreement unless otherwise specifically prohibited under
          applicable law or by applicable rules and regulations of any
          governmental agency or national securities exchange.

          For purposes of this Agreement, a "Change of Control" shall be deemed
          to have occurred if (1) any "person" (as such term is used in Sections
          13(d) and 14(d) of the Securities Exchange Act of 1934, as amended),
          other than a trustee or other fiduciary holding securities under an
          employee benefit plan of the Company, a corporation owned directly or
          indirectly by the stockholders of the Company in substantially the
          same proportions as their ownership of stock of the Company, the
          Participant or Michael W. Reschke, or any of their respective
          affiliates, becomes the "beneficial owner" (as defined in Rule 13d-3
          under said Act), directly or indirectly, of securities of the Company
          representing 50% or more of the total voting power represented by the
          Company's then outstanding securities that vote generally in the
          election of directors (referred to herein as "Voting Securities"); (2)
          during any period of two consecutive years, individuals who at the
          beginning of such period constitute the Board of Directors of the 
          Company (the "Board") and any new directors whose election by the
          Board or nomination for election by the Company's stockholders was
          approved by a vote of at least two-thirds of the directors then still
          in office who either were directors at the beginning of the period or
          whose election or nomination for election was previously so approved,
          cease for any reason to constitute a majority of the Board; (3) the
          stockholders of the Company approve a merger or consolidation of the
          Company with any other corporation, other than a merger or
          consolidation that would result in the Voting Securities of the
          Company outstanding immediately prior thereto continuing to represent
          (either by remaining outstanding or by being converted into Voting
          Securities of the surviving entity) at least 50% of the total voting
          power represented by the Voting Securities of the Company or such
          surviving


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          entity outstanding immediately after such merger or consolidation; 
          (4) the stockholders of the Company approve a plan of complete 
          liquidation of the Company or an agreement for the sale or disposition
          by the Company of (in one transaction or a series of transactions) all
          or substantially all of the Company's assets.

          For purposes of this Agreement, "Good Reason" shall have the meaning
          set forth in any unexpired employment or severance agreement between
          the Participant and the Company and/or an Affiliate.  In the absence
          of any such agreement, "Good Reason" shall exist if, without the
          Participant's written consent, (A) the Participant's title or scope of
          responsibilities and duties are materially diminished, or the Company
          fails to provide the Participant with adequate office facilities and
          support services to perform such responsibilities and duties, (B) the
          compensation payable to Executive for services to the  Company is
          materially reduced, or (C) the Company fails to continue in effect any
          cash or stock-based incentive or bonus plan, retirement plan, welfare
          benefit plan, or other benefit plan, program or arrangement, unless
          the aggregate value (as computed by an independent employee benefits
          consultant) of all such compensation, retirement and benefit plans,
          programs and arrangements provided to Executive is not materially less
          than their aggregate value as of the date of this Agreement (or as of
          the Change of Control, if greater).

6.   TRANSFERABILITY OF AWARD AND SHARES ACQUIRED UPON EXERCISE OF AWARD. 

     a.   The Participant may not sell, transfer, pledge, assign or otherwise
          alienate or hypothecate the Award, other than by will or the laws of
          descent and distribution.

     b.   Notwithstanding any other provision of this Agreement, the Participant
          may transfer any portion of this Award to:  (i) the Participant's
          spouse, children, step-children, grandchildren or step-grandchildren
          ("Immediate Family Members"); (ii) a trust or trusts for the exclusive
          benefit of Immediate Family Members; (iii) a partnership in which
          Immediate Family Members are the only partners; or (iv) an
          organization exempt from taxation under Section 501(c)(3) of the Code.
          Such a transfer is permitted only if there is no consideration for the
          transfer, or the transfer is to a partnership in which Immediate
          Family Members are the only partners and the Participant's sole
          consideration for the transfer is an interest in the partnership. 
          Such a transfer will become effective only if the Participant gives
          the Committee advance written notice of the transfer and complies with
          any conditions imposed by the Committee.  Following the transfer, the
          transferee will be subject to the same terms and conditions to which
          the Participant was subject immediately before the transfer, and the
          term "Participant" as used in this Agreement will be deemed to refer
          to the transferee, except for purposes of Sections 4(d) and 5, which
          will continue to apply with respect to the original Participant.  The
          transferee of an Award may not transfer the Award except as provided
          in paragraph (a).


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     c.   During the Participant's lifetime, only the Participant (or a
          transferee pursuant to paragraph (b) above) or his or her guardian or
          legal representative may exercise the Award.  The Committee may, in
          its discretion, require a guardian or legal representative to supply
          it with the evidence the Committee reasonably deems necessary to
          establish the authority of the guardian or legal representative to
          exercise the Award on behalf of the Participant or transferee, as the
          case may be.

     d.   Except as limited by applicable federal or state securities laws, the
          requirements of any stock exchange or market upon which the Shares are
          listed or traded at any given time, and the provisions of Section 7,
          Shares acquired upon exercise of this Award will be freely
          transferable.

7.   SECURITIES LAW REQUIREMENTS.

     a.   If at any time the Committee determines that exercising the Award or
          issuing Shares would violate applicable securities laws, the Award
          will not be exercisable, and the Company will not be required to issue
          Shares.  The Committee may declare any provision of this Agreement or
          action of its own null and void if it determines the provision or
          action fails to comply with the short-swing trading rules.  As a
          condition to exercise, the Company may require the Participant to make
          written representations it deems necessary or desirable to comply with
          applicable securities laws.

     b.   No person who acquires Shares under this Agreement may sell the
          Shares, unless the offer and sale are made pursuant to  an effective
          registration statement under the Securities Act of 1933, as amended,
          which is current and includes the Shares to be sold, or an exemption
          from the registration requirements of that Act.

8.   NO OBLIGATION TO EXERCISE AWARD.  Neither the Participant nor his or her
     transferee is or will be obligated by the grant of the Award to exercise
     it.

9.   NO LIMITATION ON RIGHTS OF THE COMPANY.  The grant of the Award does not
     and will not in any way affect the right or power of the Company to make
     adjustments, reclassifications or changes in its capital or business
     structure, or to merge, consolidate, dissolve, liquidate, sell or transfer
     all or any part of its business or assets.

10.  PLAN AND AGREEMENT NOT A CONTRACT OF EMPLOYMENT.  Neither the Plan nor this
     Agreement is a contract of employment, and no terms of employment of the
     Participant will be affected in any way by the Plan, this Agreement or
     related instruments, except to the extent specifically expressed therein. 
     Neither the Plan nor this Agreement will be construed as conferring any
     legal rights of the Participant to continue to be employed, nor will it
     interfere with the Company's or any Affiliate's right to discharge the
     Participant or to deal with him or her regardless of the existence of the
     Plan, this Agreement or the Award.


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11.  PARTICIPANT TO HAVE NO RIGHTS AS A STOCKHOLDER.  Before the date as of
     which he or she is recorded on the books of the Company as the holder of
     any Shares underlying the Award, the Participant will have no rights as a
     stockholder with respect to those Shares.

12.  NOTICE.  Any notice or other communication required or permitted under this
     Agreement must be in writing and must be delivered personally, sent by
     certified, registered or express mail, or sent by overnight courier, at the
     sender's expense.  Notice will be deemed given when delivered personally
     or, if mailed, three days after the date of deposit in the United States
     mail or, if sent by overnight courier, on the regular business day
     following the date sent.  Notice to the Company should be sent to Horizon
     Group Properties, Inc., 77 West Wacker Drive, Suite 3900, Chicago, Illinois
     60601, Attention: Corporate Secretary.  Notice to the Participant should be
     sent to the address set forth on the signature page below.

13.  SUCCESSORS.  All obligations of the Company under this Agreement will be
     binding on any successor to the Company, whether the existence of the
     successor results from a direct or indirect purchase of all or
     substantially all of the business and/or assets of the Company, or a
     merger, consolidation, or otherwise.

14   GOVERNING LAW.  This Agreement will be construed and enforced in accordance
     with, and governed by, the laws of the State of Maryland, determined
     without regard to its conflict of law rules.

15.  PLAN DOCUMENT CONTROLS.  The rights granted under this Agreement are in all
     respects subject to the provisions set forth in the Plan to the same extent
     and with the same effect as if set forth fully in this Agreement.  If the
     terms of this Agreement conflict with the terms of the Plan document, the
     Plan document will control.


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     IN WITNESS WHEREOF, the Company and the Participant have duly executed this
Agreement as of the date first written above.

                              HORIZON GROUP PROPERTIES, INC.


                              By: _________________________________
                              Its: ________________________________


                              ____________________________________
                                    (Participant's Signature)

                              Participant's Name and Address for notices

                              ____________________________________

                              ____________________________________

                              ____________________________________


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