Exhibit 10.81


 


PLEDGE
AND SECURITY AGREEMENT


 


This PLEDGE AND SECURITY
AGREEMENT (this “Agreement”), is made and entered into as of the 14th
day of March, 2003, by and between Retail Partners Limited Partnership, an
Illinois limited partnership (“RPLP”), and Retail Partners, Inc., an
Illinois corporation (“RPI”; RPLP and RPI are sometimes referred to
herein, together, as “Pledgors” and, individually, as a “Pledgor”),
and Horizon Group Properties, Inc., a Maryland corporation (“Lender”).


RECITALS:


 


WHEREAS, Lender has
agreed to loan the principal sum of One Million Three Hundred Thousand Dollars
($1,300,000.00) (the “Loan”) to Pledgors, pursuant to a Promissory Note
of even date herewith in such original principal amount, executed by Pledgors
in favor of Lender (the “Note”); and


WHEREAS, Pledgors are the
record and beneficial owner of all of the Class A Units in Prime/Retail
Partners, LLC (“PRP”), an Illinois limited liability company (the “Membership
Interests”), which owns all of the Property Companies which own the
Properties (Pledgors, PRP and the Property Companies are sometimes referred to
herein as the “Pledge Parties”); and


WHEREAS, Lender is
unwilling to make the Loan unless Pledgors pledge to Lender all of Pledgors’
right, title and interest in the Membership Interests as security for the
payment and performance of the Secured Obligations (as defined below); and


WHEREAS, as a condition
to Lender making the Loan, Pledgors have agreed to pledge the Pledged
Collateral (as defined in Section 2 hereof) to Lender.


AGREEMENT


NOW, THEREFORE, in
consideration of the premises and the covenants hereinafter contained and to
induce Lender to make the Loan, it is agreed as follows:


1.                                       Definitions.  Unless otherwise defined herein, terms
defined in the Note are used herein as therein defined, and the following shall
have the following respective meanings (such meanings being equally applicable
to both the singular and plural form of the terms defined):


1.1                                 “Bankruptcy Code”
means Title 11, United States Code, as amended from time to time, and any
successor statute thereto. hereof.


1.2                                 “Business Day” means a calendar
day other than a Saturday, a Sunday or any other day on which banks in Chicago,
Illinois are required or authorized to close.


1.3                                 “Class A Units” has the meaning
assigned to such term in the LLC Agreement.


 


 


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1.4                                 “LLC Agreement” means the Amended
and Restated Operating Agreement for PRP dated August 4, 1998, as amended from
time to time.


1.5                                 “Loan Documents” has the meaning
assigned to such term in the Note.


1.7                                 “Membership Interests”
has the meaning assigned to such term in the Recitals of this Agreement.


1.8                                 “Pledged
Collateral” has the meaning assigned to such term in Section 2
hereof.


1.9                                  “Property” shall
mean any one of the properties listed on Schedule A attached hereto.


1.10                           “Property
Companies” means any one of the entities listed on Schedule A
attached hereto.


1.11                           “Secured
Obligations” has the meaning assigned to such term in Section 3
hereof.


2.                                       Pledge.  To secure the payment and performance
of  the Secured Obligations, Pledgors
hereby pledge to Lender and grant to Lender a first priority security interest
in all of the following (collectively, the “Pledged Collateral”):


2.1                                 The Membership Interests and
the certificates representing the Membership Interests, if any, and, subject to
the provisions of Sections 7.2 and 7.3 hereof, all distributions,
cash, instruments and other property or proceeds from time to time received,
receivable or otherwise distributed in respect of or in exchange for any or all
of the Membership Interests; and


2.2                                 Such portion, as determined
by Lender as provided below, of any additional interests of PRP from time to
time acquired by a Pledgor in any manner (which interests shall be deemed to be
part of the Membership Interests), and the certificates representing such
additional interests, if any, and all distributions, cash, instruments and
other property or proceeds from time to time received, receivable or otherwise
distributed in respect of or in exchange for any or all of such interests.


3.                                       Security for Obligations.  This Agreement secures, and the Pledged
Collateral is security for, the prompt payment in full when due, whether at
stated maturity, by acceleration or otherwise, and performance of all
obligations of any kind under or in connection with the Note or any of the
other Loan Documents and all obligations of any Pledgor now or hereafter
existing under this Agreement including, without limitation, all fees, costs
and expenses whether in connection with collection actions hereunder or
otherwise (collectively, the “Secured Obligations”).


4.                                       Delivery of Pledged
Collateral.  (a) All
certificates and instruments evidencing the Pledged Collateral, if any, shall
be delivered to and held by or on behalf of Lender, accompanied by duly
executed instruments of transfer or assignment in blank, all in form and
substance 


 


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satisfactory to Lender.  In the
event that any or all of the Pledged Collateral are evidenced by a book entry,
Pledgors shall execute and deliver to Lender such documents as are required by
Lender to create and perfect a security interest in such uncertificated Pledged
Collateral.


(b)           Pledgors shall, and
shall cause other appropriate parties under Section 8-313 and 8–321 of
the Uniform Commercial Code as in effect on the date hereof in the State of
Illinois (the “Code”) to, mark it or their books and records with the
numbers and amounts of all uncertificated securities evidencing the Pledged
Collateral, and all rollovers and replacements therefor to reflect the security
interests granted pursuant to Section 2 hereof.  Pledgors shall provide Lender and shall
cause other appropriate persons to provide Lender with written confirmation of
the security interest in such uncertificated securities.  Pledgors shall take, and shall cause all
other necessary persons to take, all action necessary or appropriate to create,
perfect and maintain a first perfected priority lien in such uncertificated
securities in favor of Lender.  In the
event that subsequent to the date hereof, the Pledged Collateral are evidenced
by certificates, Pledgors will promptly deliver such certificates to Lender,
together with an assignment duly endorsed in blank for transfer.


5.                                       Representations and
Warranties.  Pledgors
jointly and severally represent and warrant to Lender that:


5.1                                 Pledgors are, and at the
time of delivery of the Membership Interests to Lender will be, the sole
holders of record and the sole beneficial owners of the Pledged Collateral
pledged by Pledgors to Lender hereunder free and clear of any lien or other
encumbrance or restriction thereon or affecting the title thereto, except for
any lien created by this Agreement;


5.2                                 Each Pledgor has the right
to pledge, assign, transfer, deliver, deposit and set over the Pledged
Collateral pledged by such Pledgor to Lender as provided herein;


5.3                                 The Membership Interests are
presently owned by Pledgors and, as of the date hereof, there are no existing
options, warrants, calls or commitments of any character whatsoever relating to
the Membership Interests, except as set forth in the LLC Agreement;


5.4                                 No consent, approval,
authorization or other order or other action by, and no notice to or filing
with, any governmental authority or any other person is required for the pledge
by Pledgors of the Pledged Collateral pursuant to this Agreement or for the
execution, delivery or performance of this Agreement by Pledgors, except as has
been obtained or received as of the date hereof;


5.5                                 The pledge, assignment and
delivery of the Pledged Collateral pursuant to this Agreement will create a
valid lien on and perfected first security interest in favor of Lender in the
Pledged Collateral and the proceeds thereof, securing the payment of the
Secured Obligations, subject to no other lien;


 


 


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5.6                                 All other
filings, registrations, recordings and other actions necessary or desirable to
create, perfect and protect such security interest have been duly taken, and
such security interests are entitled to all of the rights, priorities and
benefits afforded by the Code or other relevant law as enacted in any relevant
jurisdiction which relates to perfected security interests.


5.7                                 This Agreement has been duly
executed and delivered by Pledgors and constitutes a legal, valid and binding
obligation of Pledgors enforceable against Pledgors in accordance with its
terms, subject only to limitations imposed by bankruptcy, insolvency, moratorium
or other similar laws affecting the rights of creditors generally or the
application of general equitable principles;


5.8                                 The Membership Interests
constitutes all of the issued and outstanding Class A Units of PRP,
representing 99% of all equity interests in PRP;


5.9                                 The execution,
delivery and performance of this Agreement by the Pledgors and the consummation
of the transactions contemplated hereby have been duly and validly authorized
by all requisite action, and no other proceedings on their part are necessary
to authorize the execution, delivery or performance of this Agreement. The
execution, delivery and performance of this Agreement by the Pledgors and the
consummation of the transactions contemplated hereby do not conflict with or
result in any material breach of, constitute a material default under, result
in a material violation of, result in the creation of any material lien upon
any material assets of the Pledgors under, or require any material
authorization, consent, approval, exemption or other action by or notice to any
court or other governmental body under, the provisions of either of the
Pledgor’s organizational documents or any material indenture, mortgage, lease,
loan agreement or other agreement or instrument to which Pledgor is bound, or
any law, statute, rule or regulation or order, judgment or decree to which such
Pledgor is subject.  Assuming that this
Agreement is a valid and binding obligation of the other parties hereto, this
Agreement constitutes a valid and binding obligation of such Pledgor,
enforceable in accordance with its terms, subject, as to enforcement, to
bankruptcy, insolvency, reorganization or other laws affecting creditors’
rights generally and by general principles of equity (whether in a proceeding
at law or in equity).


5.10                           To the best
knowledge of the Pledgors, (a) no lease of any Property is in breach or
default, and (b) no event has occurred which, with notice or lapse of time,
would constitute such a breach or default or permit termination or modification
under such lease.


5.11                           No party to a
lease of a Property has in the four years preceding the date hereof, repudiated
any provision thereof and there are no disputes, oral agreements or forbearance
programs in effect as to any lease.


5.12                           Except as set
forth in Schedule 5.12, the Pledge Parties own good and marketable title
to each Property, free and clear of all liens, security interests, easements
and 


 


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other restrictions, other than (A) real estate taxes not yet
delinquent, (B) easements, covenants and restrictions of record which do not or
would not materially impair the use or occupancy of such Property, (C) utility
easements, building restrictions, zoning restrictions and other easements and
restrictions which are not violated by existing usage of and improvements on
such Property, (D) matters which do not or would not materially impair the use
or occupancy of such Property, (E) public roads and highways, (F) zoning,
building, land use and similar laws relating to the use or occupancy of the
Property or the activities conducted thereon which are imposed by any
government authority having jurisdiction over such Property which are not
violated by the current use or occupancy of such Property or the activities
conducted thereon other than any violations which would not have a material
adverse effect.


5.13                           There are no
outstanding options or rights of first refusal to purchase such Property, any
portion thereof or interest therein.


5.14                           All taxes due
and owing by the Pledge Parties have been paid, and the Pledge Parties have
properly withheld and paid all taxes required to have been withheld and paid.


5.15                           No action,
suit, proceeding or audit or any notice of inquiry is pending as of the date
hereof against or with respect to the Pledge Parties regarding taxes, and no
action, suit, proceeding or audit has, to the Pledge Parties’ knowledge, been
as of the date hereof threatened against or with respect to the Pledge Parties
regarding taxes.


5.16                           No material
permit, consent, approval or authorization of, or declaration to or filing
with, any governmental or regulatory authority is required in connection with
any of the execution, delivery or performance of this Agreement by the Pledgors
or the consummation by the Pledgors of any other transaction contemplated
hereby.


5.17                           The Pledge
Parties have no employees.


5.18                           The Pledge
Parties are in compliance with all applicable laws and regulations of foreign,
federal, state and local governments and all agencies thereof, except where the
failure to comply would not have a material adverse effect.


5.19                           The Pledge
Parties have in the four years prior to the date hereof complied in all
material respects with and are currently in compliance in all material respects
with all requirements under all federal, state and local environmental and
safety laws; provided, that there may be certain environmental
obligations with respect to one or more of the Properties that the lessee of
such Property is required to satisfy.


5.20                           The representations and
warranties set forth in this Section 5 shall survive the execution and
delivery of this Agreement.


6.                                       Covenants.  Pledgors covenant and agree that until all
Secured Obligations have been paid in full and completely discharged:


 


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6.1                                 Without the prior written
consent of Lender, neither Pledgor will sell, assign, transfer, pledge, or
otherwise encumber any of its rights in or to the Pledged Collateral or any
unpaid distributions or payments with respect to the Pledged Collateral or
grant a lien, security interest, encumbrance or other restriction in the
Pledged Collateral;


6.2                                 Pledgors will cooperate with
Lender in obtaining control with respect to the Pledged Collateral and will, at
its expense, promptly execute, acknowledge and deliver all such instruments and
take all such actions as Lender from time to time may reasonably request in
order to ensure to Lender the benefits of the liens in and to the Pledged
Collateral intended to be created by this Agreement, including the filing of
any necessary UCC financing statements, which may be filed by Lender, and will
cooperate with Lender, at Pledgors’ expense, in obtaining all necessary
approvals and making all necessary filings under federal, state, local or
foreign law in connection with such liens or any sale or transfer of the
Pledged Collateral;


6.3                                 Pledgors have and will defend the title to the Pledged
Collateral and the lien of Lender in the Pledged Collateral against the claim
of any person and will maintain and preserve such liens.


6.4                                 This Agreement shall create a continuing
security interest in the Pledged Collateral and shall (i) be binding upon the
Pledgors, their successors and assigns, and (ii) inure to the benefit of the
Lender and its successors, transferees and assigns.


7.                                       Pledgors’
Rights.  As long as no Event of
Default shall have occurred and be continuing and until written notice thereof
shall be received by Pledgors in accordance with Section 18 hereof:


 


7.1                                 Pledgors shall
have the right, from time to time, to vote and give consents with respect to
the Pledged Collateral or any part thereof for all purposes not inconsistent
with the provisions of this Agreement or any other Loan Document; provided,
however, that no vote shall be cast, and no consent shall be given or
action taken, which would have the effect of impairing the position or interest
of Lender in respect of the Pledged Collateral (or materially and adversely
affect the value of the Pledged Collateral) or which would authorize, effect or
consent to (unless and to the extent expressly permitted by the Loan
Documents):


 


(a)                                  the dissolution
or liquidation, in whole or in part, of PRP;


(b)                                 the
consolidation or merger of PRP with any other entity;


(c)                                  the sale,
disposition or encumbrance of any Property or of all or substantially all of
the assets of PRP, except for liens in favor of Lender; provided, that
Lender’s consent is not required for the sale of any Property if the sale price
of such Property is an amount equal to or in excess of five percent (5%) above
the principal amount of indebtedness secured by such Property;


 


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(d)                                 the issuance of
any additional interests, except pursuant to an agreement in effect on the date
hereof; or


(e)                                  the alteration
of the voting rights with respect to the interests of PRP; and


7.2                                 Pledgors shall be entitled,
from time to time, to collect and receive all cash distributions paid in
respect of the Membership Interests other than any and all: (a) distributions
paid or payable other than in cash in respect of any Pledged Collateral, and
instruments and other property received, receivable or otherwise distributed in
respect of, or in exchange for, any Pledged Collateral; (b) distributions paid
or payable in cash in respect of the Membership Interests in connection with a
partial or total liquidation or dissolution or in connection with a reduction
of capital, capital surplus or paid–in capital of PRP; and (c) cash paid,
payable or otherwise distributed, in redemption of or in exchange for, any
Pledged Collateral; provided, however, that until actually paid,
all rights to such distributions shall remain subject to the lien created by
this Agreement; and


7.3                 All distributions (other than such cash
distributions as are permitted to be paid to Pledgors in accordance with Section
7.2 above) and all other distributions in respect of the Membership
Interest, whenever paid or made, shall be delivered to Lender to hold as
Pledged Collateral and shall, if received by any Pledgor, be received in trust
for the benefit of Lender, be segregated from the other property or funds of
such Pledgor, and be forthwith delivered to Lender as Pledged Collateral in the
same form as so received (with any necessary endorsement).


8.                                       Defaults and Remedies; Proxy.


8.1                                 Upon the occurrence of an
Event of Default and during the continuation of such Event of Default, and
concurrently with written notice to Pledgors, Lender solely (personally or
through an agent) is hereby authorized and empowered to transfer and register
in its name or in the name of its nominee the whole or any part of the Pledged
Collateral, to exchange certificates or instruments representing or evidencing
the Pledged Collateral, if any, for certificates or instruments of smaller or
larger denominations, to exercise the voting and all other rights as a holder
with respect thereto, to collect and receive all cash distributions made
thereon, to sell, without giving any warranties as to the Pledged Collateral,
in one or more sales after ten (10) days’ notice of the time and place of any
public sale or of the time at which a private sale is to take place (which
notice Pledgors agree is commercially reasonable) the whole or any part of the
Pledged Collateral and to otherwise act with respect to the Pledged Collateral
as though Lender was the outright owner thereof.  Lender may specifically disclaim any warranties of title or the
like, which shall not adversely affect the commercial reasonableness of any
such sale.  Any sale shall be made at a
public or private sale at Lender’s place of business, or at any place to be
named in the notice of sale, either for cash or upon credit or for future
delivery at such price as Lender may deem fair, and Lender may be the purchaser
of the whole or any part of the Pledged Collateral so sold and hold the same
thereafter in its own right free from 


 


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any claim of Pledgor or any right of redemption.  Each sale shall be made to the highest
bidder, but Lender reserves the right to reject any and all bids at such sale
which, in its discretion, it shall deem inadequate.  Demands of performance, except as otherwise herein specifically
provided for, notices of sale, advertisements and the presence of property at
sale are hereby waived to the extent permitted by law, and any sale hereunder
may be conducted by an auctioneer or any officer or agent of Lender.  Notwithstanding the foregoing, any such sale
must be conducted in a commercially reasonable manner.


8.2                                 PLEDGORS HEREBY IRREVOCABLY
CONSTITUTE AND APPOINT LENDER AS THE PROXY AND ATTORNEY–IN–FACT OF
PLEDGORS WITH RESPECT TO THE PLEDGED COLLATERAL, INCLUDING THE RIGHT TO VOTE
THE MEMBERSHIP INTERESTS UPON THE OCCURRENCE AND DURING THE CONTINUANCE OF AN EVENT
OF DEFAULT, WITH FULL POWER OF SUBSTITUTION TO DO SO.  THE APPOINTMENT OF LENDER AS PROXY AND ATTORNEY–IN–FACT
IS COUPLED WITH AN INTEREST AND SHALL BE IRREVOCABLE UNTIL THIS AGREEMENT IS
TERMINATED.  IN ADDITION TO THE RIGHT TO
VOTE THE MEMBERSHIP INTERESTS UPON THE OCCURRENCE AND DURING THE CONTINUANCE OF
AN EVENT OF DEFAULT, THE APPOINTMENT OF LENDER AS PROXY AND ATTORNEY–IN–FACT
SHALL INCLUDE THE RIGHT TO EXERCISE, UPON THE OCCURRENCE AND DURING THE
CONTINUANCE OF AN EVENT OF DEFAULT, ALL OTHER RIGHTS, POWERS, PRIVILEGES AND
REMEDIES TO WHICH A HOLDER OF THE MEMBERSHIP INTERESTS WOULD BE ENTITLED
(INCLUDING GIVING OR WITHHOLDING WRITTEN CONSENTS OF MEMBERS, CALLING SPECIAL
MEETINGS OF MEMBERS AND VOTING AT SUCH MEETINGS). SUCH PROXY SHALL BE EFFECTIVE,
AUTOMATICALLY AND WITHOUT THE NECESSITY OF ANY ACTION (INCLUDING ANY TRANSFER
OF THE MEMBERSHIP INTERESTS ON THE RECORD BOOKS OF THE ISSUER THEREOF) BY ANY
PERSON (INCLUDING THE ISSUER OF THE MEMBERSHIP INTERESTS OR ANY OFFICER OR
AGENT THEREOF), UPON THE OCCURRENCE OF AN EVENT OF DEFAULT.  NOTWITHSTANDING THE FOREGOING, LENDER SHALL
NOT HAVE ANY DUTY TO EXERCISE ANY SUCH RIGHT OR TO PRESERVE THE SAME AND SHALL
NOT BE LIABLE FOR ANY FAILURE TO DO SO OR FOR ANY DELAY IN DOING SO.


8.3                                 If, at the original time or
times appointed for the sale of the whole or any part of the Pledged
Collateral, the highest bid, if there be but one sale, shall be inadequate to
discharge in full all the Secured Obligations, or if the Pledged Collateral be
offered for sale in lots, if at any of such sales, the highest bid for the lot
offered for sale would indicate to Lender, in its discretion, that the proceeds
of the sales of the whole of the Pledged Collateral would be unlikely to be
sufficient to discharge all the Secured Obligations, Lender may, on one or more
occasions and in its discretion, postpone any of said sales by public
announcement at the time of sale or the time of 


 


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previous postponement of sale, and no other notice of such postponement
or postponements of sale need be given, any other notice being hereby waived; provided,
however, that any sale or sales made after such postponement shall be
after ten (10) days’ notice to Pledgors.


8.4                                 If, at any time when Lender
shall determine to exercise its right to sell the whole or any part of the
Pledged Collateral hereunder, Lender may, in its discretion (subject only to
applicable requirements of law), sell such Pledged Collateral or part thereof
by private sale in such manner and under such circumstances as Lender may deem
necessary or advisable, but subject to the other requirements of this Section
8, and shall not be required to effect such registration or to cause the
same to be effected.  Without limiting
the generality of the foregoing, in any such event, Lender in its discretion
(x) may, in accordance with applicable securities laws, proceed to make such
private sale notwithstanding that a registration statement for the purpose of
registering such Pledged Collateral or part thereof could be or shall have been
filed under the Securities Act of 1933, as amended (the “Act”), or any
similar statute then in effect, (y) may approach and negotiate with a single
possible purchaser to effect such sale, and (z) may restrict such sale to a
purchaser who is an accredited investor under the Act and who will represent
and agree that such purchaser is purchasing for its own account, for investment
and not with a view to the distribution or sale of such Pledged Collateral or
any part thereof.  In addition to a
private sale as provided above in this Section 8, if any of the Pledged
Collateral shall not be freely distributable to the public without registration
under the Act (or similar statute) at the time of any proposed sale pursuant to
this Section 8, then Lender shall not be required to effect such
registration or cause the same to be effected but, in its discretion (subject
only to applicable requirements of law), may require that any sale hereunder
(including a sale at auction) be conducted subject to restrictions:


(a)                                  as to the
financial sophistication and ability of any person permitted to bid or purchase
at any such sale;


(b)                                 as to the
content of legends to be placed upon any certificates representing the Pledged
Collateral sold in such sale, including restrictions on future transfer
thereof;


(c)                                  as to the
representations required to be made by each person bidding or purchasing at
such sale relating to that person’s access to financial information about PRP
and such person’s intentions as to the holding of the Pledged Collateral so
sold for investment for its own account and not with a view to the distribution
thereof; and


(d)                                 as to such
other matters as Lender may, in its reasonable discretion, deem necessary or
appropriate in order that such sale (notwithstanding any failure so to
register) may be effected in compliance with the Bankruptcy Code and other laws
affecting the enforcement of creditors’ rights and the Act and all applicable
state securities laws.


 


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8.5                                 Pledgors recognize that
Lender may be unable to effect a public sale of any or all the Pledged
Collateral and may be compelled to resort to one or more private sales thereof
in accordance with Section 8.4 above. 
Pledgors also acknowledge that any such private sale may result in
prices and other terms less favorable to the seller than if such sale were a
public sale and, notwithstanding such circumstances, agrees that any such
private sale shall not be deemed to have been made in a commercially
unreasonable manner solely by virtue of such sale being private.  Lender shall be under no obligation to delay
a sale of any of the Pledged Collateral for the period of time necessary to
permit PRP to register such securities for public sale under the Act, or under
applicable state securities laws, even if Pledgors and PRP would agree to do
so.


8.6                                 Pledgors agree to the
maximum extent permitted by applicable law that following the occurrence and
during the continuance of an Event of Default, Pledgors will not at any time
plead, claim or take the benefit of any appraisal, valuation, stay, extension,
moratorium or redemption law now or hereafter in force in order to prevent or
delay the enforcement of this Agreement, or the absolute sale of the whole or
any part of the Pledged Collateral or the possession thereof by any purchaser
at any sale hereunder, and Pledgors waive the benefit of all such laws to the
extent they lawfully may do so. 
Pledgors agree that Pledgors will not interfere with any right, power
and remedy of Lender provided for in this Agreement or now or hereafter
existing at law or in equity or by statute or otherwise, or the exercise or
beginning of the exercise by Lender of any one or more of such rights, powers
or remedies.  No failure or delay on the
part of Lender to exercise any such right, power or remedy and no notice or
demand which may be given to or made upon Pledgors by Lender with respect to
any such remedies shall operate as a waiver thereof, or limit or impair Lender’s
right to take any action or to exercise any power or remedy hereunder, without
notice or demand, or prejudice its rights as against Pledgors in any respect.


8.7                                 Pledgors further agree that
a breach of any of the covenants contained in this Section 8 will cause
irreparable injury to Lender, that Lender shall have no adequate remedy at law
in respect of such breach and, as a consequence, agrees that each and every
covenant contained in this Section 8 shall be specifically enforceable
against Pledgors, and Pledgors hereby waive and agree not to assert any
defenses against an action for specific performance of such covenants except
for a defense that the Secured Obligations are not then due and payable in
accordance with the agreements and instruments governing and evidencing such
obligations.


9.                                       Waiver.  No delay on Lender’s part in exercising any
power of sale, lien, option or other right hereunder, and no notice or demand
which may be given to or made upon Pledgors by Lender with respect to any power
of sale, lien, option or other right hereunder, shall constitute a waiver
thereof, or limit or impair Lender’s right to take any action or to exercise
any power of sale, lien, option, or any other right hereunder, without notice
or demand, or prejudice Lender’s rights as against Pledgors in any respect.


 


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10.                                 Assignment.  Lender may assign, endorse or transfer any
instrument evidencing all or any part of the Secured Obligations as provided
in, and in accordance with, the Loan Documents, and the holder of such
instrument shall be entitled to the benefits of this Agreement.


11.                                 Termination.  Immediately following the full and complete
payment and performance of the Secured Obligations and termination of this Agreement,
Lender shall deliver to Pledgors the Pledged Collateral pledged by Pledgors at
the time subject to this Agreement and all instruments of assignment executed
in connection therewith, if any, free and clear of the liens hereof and, except
as otherwise provided herein, all obligations of Pledgors hereunder shall at
such time terminate.


12.                                 Lien Absolute.  All rights of Lender hereunder, and all
obligations of Pledgors hereunder, shall be absolute and unconditional
irrespective of:


(a)                                  any lack of validity
or enforceability of the Note or any other Loan Document or any other agreement
or instrument governing or evidencing any Secured Obligations;


(b)                                 any change in
the time, manner or place of payment of, or in any other term of, all or any
part of the Secured Obligations, or any other amendment or waiver of or any
consent to any departure from the Note, any other Loan Document or any other
agreement or instrument governing or evidencing any Secured Obligations;


(c)                                  any exchange,
release or non–perfection of any other collateral, or any release or
amendment or waiver of or consent to departure from any guaranty, for all or
any of the Secured Obligations;


(d)                                 the insolvency
of PRP; or


(e)                                  any other
circumstance which might otherwise constitute a defense available to, or a
discharge of, Pledgor other than the full and complete payment and performance
of the Secured Obligations.


13.                                 Release.  Pledgors consent and agree that Lender may
at any time, or from time to time, in its discretion:


(a)                                  renew, extend
or change the time of payment, and/or the manner, place or terms of payment of
all or any part of the Secured Obligations; and


(b)                                 exchange,
release and/or surrender all or any part of Lender’s collateral (including the
Pledged Collateral), or any part thereof, by whomsoever deposited, which is now
or may hereafter be held by Lender in connection with all or any of the Secured
Obligations;


                                                all in such
manner and upon such terms as Lender may deem proper, and without notice to or
further assent from Pledgors, it being hereby agreed that Pledgors shall be and
remain bound upon this Agreement, irrespective of the value or condition of any
of the collateral, and 


 


11

















 


notwithstanding any such change, exchange, settlement, compromise,
surrender, release, renewal or extension.


Pledgors hereby
waive notice of acceptance of this Agreement, and also presentment, demand,
protest and notice of dishonor of any and all of the Secured Obligations, and
promptness in commencing suit against any party hereto or liable hereon, and in
giving any notice to or of making any claim or demand hereunder upon Pledgors
except as otherwise provided herein or in the other Loan Documents.  No act or omission of any kind on Lender’s
part shall in any event affect or impair this Agreement.


14.                                 Reinstatement.  This Agreement shall remain in full force
and effect and continue to be effective should any petition be filed by or
against PRP for liquidation or reorganization, should Pledgors or PRP become
insolvent or make an assignment for the benefit of creditors or should a
receiver or trustee be appointed for all or any significant part of the assets
of any Pledgor or of PRP, and shall continue to be effective or be reinstated,
as the case may be, if at any time payment and performance of the Secured
Obligations, or any part thereof, is, pursuant to applicable law, rescinded or
reduced in amount, or must otherwise be restored or returned by any obligee of
the Secured Obligations, whether as a “voidable preference”, “fraudulent
conveyance”, or otherwise, all as though such payment or performance had not
been made.  In the event that any
payment, or any part thereof, is rescinded, reduced, restored or returned, the
Secured Obligations shall be reinstated and deemed reduced only by such amount
paid and not so rescinded, reduced, restored or returned.


15.                                 Lender May
Perform.  If the Pledgors fail to
perform any agreement contained herein and such failure continues for five (5)
Business Days following notice to Pledgors thereof, Lender may itself perform,
or cause performance of, such agreement, and the reasonable expenses of Lender
incurred in connection therewith shall be payable by Pledgors.  Lender shall not exercise the foregoing
right if Pledgors are proceeding with diligence to perform such agreement.


16.                                 Reasonable Care.  Lender shall be deemed to have exercised
reasonable care in the custody and preservation of the Pledged Collateral in
its possession if the Pledged Collateral is accorded treatment substantially
equal to that which Lender accords its own property, it being understood that
Lender shall not have any responsibility for (i) ascertaining or taking action
with respect to calls, conversions, exchanges, maturities, tenders or other
matters relative to any Pledged Collateral, whether or not Lender has or is
deemed to have knowledge of such matters, or (ii) taking any necessary steps to
preserve rights against any parties with respect to any Pledged Collateral; provided,
however, that upon Pledgors’ instruction Lender shall use reasonable
efforts to take such action as Pledgors direct Lender to take with respect to
calls, conversions, exchanges, maturities, tenders, rights against other
parties or other similar matters relative to the Pledged Collateral, but
failure of Lender to comply with any such request shall not of itself be deemed
a failure to exercise reasonable care, and no failure of Lender to preserve or
protect any rights with respect to the Pledged Collateral against prior
parties, or to do any act with respect to preservation of the Pledged
Collateral not so requested by Pledgors, shall be deemed a failure to exercise
reasonable care in the custody or 


 


12

















 


preservation of the Pledged Collateral.


17.                                 Subsequent
Changes Affecting Collateral.  Pledgors represent to Lender that Pledgors have made their own
arrangements for keeping informed of changes or potential changes affecting the
Pledged Collateral (including, but not limited to, rights to convert, rights to
subscribe, payment of dividends or distributions, reorganization or other
exchanges, tender offers and voting rights), and Pledgors agree that Lender
shall have no responsibility or liability for informing Pledgors of any such
changes or potential changes or for taking any action or omitting to take any
action with respect thereto.


18.                                 Miscellaneous.


18.1                           Lender may
execute any of its duties hereunder by or through agents or employees and shall
be entitled to advice of counsel concerning all matters pertaining to its
duties hereunder.


18.2                           Pledgors agree to promptly
reimburse Lender for actual out–of–pocket expenses, including,
without limitation, the cost of UCC insurance and reasonable attorney fees,
incurred by Lender in connection with the administration and enforcement of
this Agreement.


18.3                           Neither Lender, nor any of
its respective officers, directors, employees, agents or counsel shall be
liable for any action lawfully taken or omitted to be taken by it or them
hereunder or in connection herewith, except for its or their own gross
negligence or willful misconduct as finally determined by a court of competent
jurisdiction, and Pledgors hereby agree to indemnify and hold harmless Lender
and/or any of Lender’s directors, officers, agents or employees from and
against any and all liability incurred by any of them, unless such liability
shall be due to its or their own gross negligence or willful misconduct.


19.                                 CHOICE OF LAW.  THIS AGREEMENT SHALL BE BINDING UPON EACH
PLEDGORS AND ITS RESPECTIVE SUCCESSORS AND ASSIGNS, SHALL INURE TO THE BENEFIT
OF, AND BE ENFORCEABLE BY, LENDER AND ITS SUCCESSORS AND ASSIGNS, AND SHALL BE
GOVERNED BY, AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE
STATE OF ILLINOIS APPLICABLE TO CONTRACTS MADE AND PERFORMED IN THAT STATE
(EXCEPT FOR CONFLICT OF LAWS PROVISIONS), AND NONE OF THE TERMS OR PROVISIONS
OF THIS AGREEMENT MAY BE WAIVED, ALTERED, MODIFIED OR AMENDED EXCEPT IN WRITING
DULY SIGNED FOR AND ON BEHALF OF LENDER AND PLEDGORS.  Pledgors hereby irrevocably consent to the jurisdiction and venue
of the courts of the State of Illinois with respect to any and all actions
related to this Agreement or the enforcement of this Agreement and hereby
irrevocably waive any and all objections thereto.


20.                                 Severability.  If for any reason any provision or
provisions hereof are determined to be invalid and contrary to any existing or
future law, such invalidity shall not impair the 


 


13

















 


operation of or effect those
portions of this Agreement which are valid.


21.                                 Notices.  Any and all notices, elections or demands
permitted or required to be made under this Agreement shall be in writing,
signed by the party giving such notice, election or demand and shall be
delivered personally, telecopied, telexed, or sent by certified mail or
overnight via nationally recognized courier service (such as Federal Express),
to the other party at their addresses set forth below, or at such other address
as may be supplied in writing and of which receipt has been acknowledged in
writing.  The date of personal delivery,
telecopy (with receipt confirmed) or two (2) Business Days after the date of
mailing (or the next Business Day after delivery to such courier service), as
the case may be, shall be the date of such notice, election or demand.


	
  If to Pledgors to:

  	
   

  	
  Retail
  Partners Limited Partnership

  
	
   

  	
   

  	
  Retail
  Partners, Inc.

  
	
   

  	
   

  	
  c/o
  The Prime Group, Inc.

  
	
   

  	
   

  	
  77
  West Wacker Drive

  
	
   

  	
   

  	
  Suite
  4200

  
	
   

  	
   

  	
  Chicago,
  Illinois 60601

  
	
   

  	
   

  	
  Attention:

  	
  Michael
  W. Reschke

  
	
   

  	
   

  	
  Facsimile:

  	
  (312)
  917-1511

  
	
   

  	
   

  	
   

  	
   

  
	
  with a copy to:

  	
   

  	
  The
  Prime Group, Inc.

  
	
   

  	
   

  	
  77
  West Wacker Drive

  
	
   

  	
   

  	
  Suite
  4200

  
	
   

  	
   

  	
  Chicago,
  Illinois 60601

  
	
   

  	
   

  	
  Attention:

  	
  Robert
  J. Rudnik

  
	
   

  	
   

  	
  Facsimile:

  	
  (312)
  917-8442

  
	
   

  	
   

  	
   

  	
   

  
	
  If to Lender to:

  	
   

  	
  Horizon
  Group Properties, Inc.

  
	
   

  	
   

  	
  77
  West Wacker Drive

  
	
   

  	
   

  	
  Suite
  4200

  
	
   

  	
   

  	
  Chicago,
  Illinois 60601

  
	
   

  	
   

  	
  Attention:

  	
  Gary
  J. Skoien

  
	
   

  	
   

  	
  Facsimile:

  	
  (312)
  917-0911

  
	
   

  	
   

  	
   

  	
   

  
	
  with a copy to:

  	
   

  	
  Horizon
  Group Properties, L.P.

  
	
   

  	
   

  	
  c/o
  Horizon Group Properties, Inc.

  
	
   

  	
   

  	
  77
  West Wacker Drive

  
	
   

  	
   

  	
  Suite
  4200

  
	
   

  	
   

  	
  Chicago,
  Illinois 60601

  
	
   

  	
   

  	
  Attention:

  	
  David
  R. Tinkham

  
	
   

  	
   

  	
  Facsimile:

  	
  (312)
  917-8440

  



 


22.                                 Section Titles.  The Section titles contained in this
Agreement are and shall be without substantive meaning or content of any kind
whatsoever and are not a part of the agreement 


 


14

















 


between the parties hereto.


23.                                 Counterparts.  This Agreement may be executed in any number
of counterparts, which shall, collectively and separately, constitute one agreement.


24.                                 Waiver of Right
to Jury Trial.  PLEDGORS AND
LENDER WAIVE, TO THE EXTENT PERMITTED BY APPLICABLE LAW, THE RIGHT TO A TRIAL
BY JURY.


25.                                 Benefit of
Lender.  All security interests
granted or contemplated hereby shall be for the benefit of Lender, and all
proceeds or payments realized from the Pledged Collateral in accordance
herewith shall be applied to the Secured Obligations in accordance with the
terms of the Note.


26.                                 Non-Recourse to
Individuals. 
Notwithstanding any other provision of this Agreement or any other Loan
Document, recourse shall not be made to any of the individual officers,
directors, partners, stockholders, owners, employees, agents or representatives
of any Pledgor or any Guarantor who are natural persons (the “Individuals”),
except to the extent of their respective interests in partnership property; provided,
however, that this limitation of liability shall not reduce the
liability that any Individual may otherwise have with respect to any liability,
damage, loss, costs or expenses arising out of fraud or intentional
misrepresentation by such Individual.


[signature page follows]


 


 


15

















 


IN
WITNESS WHEREOF, the parties hereto have caused this Pledge Agreement to be
duly executed as of the date first written above.


 


 




	
   

  	
   

  	
  PLEDGORS:

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  RETAIL
  PARTNERS LIMITED PARTNERSHIP

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  THE
  PRIME GROUP, INC.,

  
	
   

  	
   

  	
   

  	
  General
  Partner

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
   

  	
  Michael
  W. Reschke

  
	
   

  	
   

  	
   

  	
  President

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  RETAIL
  PARTNERS, INC.

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
   

  	
  Michael
  W. Reschke

  
	
   

  	
   

  	
   

  	
  President

  






 


 


 


16

















 




	
   

  	
   

  	
  LENDER:

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  HORIZON
  GROUP PROPERTIES, INC.  

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
   

  	
  Title:

  






 


 


 


 


17

















 


SCHEDULE A


 


 


	
  Property
  Company

  	
   

  	
  Property

  	
   

  	
  Principal 

  Balance of
  

  Mortgage
  Debt 

  as of
  3/12/03

  	
   

  
	
  WEC 98G-10 LLC

  	
   

  	
  335 Center Street*  

  Manchester, Connecticut

  	
   

  	
  $

  	
  2,813,739.33

  	
   

  
	
  WEC 98G-11 LLC

  	
   

  	
  1360 Boston Post
  Road*  

  Milford, Connecticut

  	
   

  	
  $

  	
  2,813,739.33

  	
   

  
	
  WEC 98G-23 LLC

  	
   

  	
  10 Lincoln Highway (Route
  10)*

  Edison, New Jersey

  	
   

  	
  $

  	
  3,300,653.84

  	
   

  
	
  WEC 98G-26 LLC

  	
   

  	
  3817 Center Road  

  Brunswick, Ohio

  	
   

  	
  $

  	
  2,724,693.18

  	
   

  
	
  WEC 98G-27 LLC

  	
   

  	
  4332 Cleveland Avenue  

  Canton, Ohio

  	
   

  	
  $

  	
  2,811,665.99

  	
   

  
	
  WEC 98G-29 LLC

  	
   

  	
  3984 West 117th
  Street  

  Cleveland, Ohio

  	
   

  	
  $

  	
  3,030,998.77

  	
   

  
	
  WEC 98G-32 LLC

  	
   

  	
  4042 Warrensville Center
  Road 

  Warrensville, Ohio

  	
   

  	
  $

  	
  2,322,134.75

  	
   

  
	
  WEC 98G-35 Investment Trust

  	
   

  	
  U.S. Routes 209 and 115 

  Broadheadsville, Pennsylvania

  	
   

  	
  $

  	
  2,899,193.89

  	
   

  
	
  WEC 98G-36 Investment Trust

  	
   

  	
  802-828 Baltimore Street  

  Hanover, Pennsylvania

  	
   

  	
  $

  	
  2,520,213.89

  	
   

  
	
  WEC 98G-37 Investment Trust

  	
   

  	
  3210 Banksville Road  

  Pittsburgh, Pennsylvania

  	
   

  	
  $

  	
  3,140,124.26

  	
   

  
	
  WEC 98G-38 Investment Trust

  	
   

  	
  324 High Street  

  Pottstown, Pennsylvania

  	
   

  	
  $

  	
  3,179,525.44

  	
   

  













* Subject to pending contracts to sell, which
are deemed to have been approved by Lender.


 


 


 


18

















 


SCHEDULE 5.12


 


 


1.                                       All liens and
security interests securing the obligations of the respective Property Company
in connection with the following loans:


 


A.                                   The loan
evidenced by that certain Promissory Note, dated November 20, 1998, effective
December 11, 1998, in the original principal amount of $2,985,602.09, issued by
WEC 98G-10 LLC payable to the order of Legg Mason Mortgage Capital Corporation
Lease-Backed Commercial Mortgage Pass-Through Trust Series 1998-CTL-6, as
successor-in-interest to Legg Mason Real Estate Services, Inc. (“Legg Mason”),
as amended by that certain First Modification of Promissory Note, dated
December 11, 1998, and effective as of December 11, 1998, between WEC 98G-10
LLC and Legg Mason.


 


B.                                     The loan
evidenced by that certain Promissory Note, dated November 20, 1998, effective
December 11, 1998, in the original principal amount of $2,985,602.09, issued by
WEC 98G-11 LLC payable to the order of Legg Mason, as amended by that certain
First Modification of Promissory Note, dated December 14, 1998, effective as of
December 15, 1998, between WEC 98G-11 LLC and Legg Mason.


 


C.                                     The loan
evidenced by that certain Promissory Note, dated November 20, 1998, effective
December 11, 1998, in the original principal amount of $3,523,393.56, issued by
WEC 98G-23 LLC payable to the order of Legg Mason, as amended by that certain
First Modification of Promissory Note, dated December 14, 1998, effective as of
December 15, 1998, between WEC 98G-23 LLC and Legg Mason.


 


D.                                    The loan
evidenced by that certain Promissory Note, dated November 20, 1998, effective
December 11, 1998, in the original principal amount of $2,916,455.78, issued by
WEC 98G-26 LLC payable to the order of Legg Mason.


 


E.                                      The loan
evidenced by that certain Promissory Note, dated November 20, 1998, effective
December 11, 1998, in the original principal amount of $2,994,502.36, issued by
WEC 98G-27 LLC payable to the order of Legg Mason.


 


F.                                      The loan
evidenced by that certain Promissory Note, dated November 20, 1998, effective
December 11, 1998, in the original principal amount of $3,242,490.08, issued by
WEC 98G-29 LLC payable to the order of Legg Mason.


 


G.                                     The loan evidenced
by that certain Promissory Note, dated November 20, 1998, effective December
11, 1998, in the original principal amount of $2,468,190.69, issued by WEC
98G-32 LLC payable to the order of Legg Mason.


 


H.                                    The loan
evidenced by that certain Promissory Note, dated November 20, 1998, effective
December 11, 1998, in the original principal amount of $3,066,995.28, 


 


 


19

















 


issued by WEC 98G-35 Investment Trust payable to the order of Legg
Mason.


 


I.                                         The loan evidenced
by that certain Promissory Note, dated November 20, 1998, effective December
11, 1998, in the original principal amount of $2,666,080.43, issued by WEC
98G-36 Investment Trust payable to the order of Legg Mason.


 


J.                                        The loan
evidenced by that certain Promissory Note, dated November 20, 1998, effective
December 11, 1998, in the original principal amount of $3,329,539.02, issued by
WEC 98G-37 Investment Trust payable to the order of Legg Mason, as amended by
that certain First Modification of Promissory Note, dated December 14, 1998,
effective as of December 15, 1998, between WEC 98G-37 Investment Trust and Legg
Mason.


 


K.                                    The loan
evidenced by that certain Promissory Note, dated November 20, 1998, effective
December 11, 1998, in the original principal amount of $3,373,730.37, issued by
WEC 98G-38 Investment Trust payable to the order of Legg Mason.


 


2.                                       The following
leases, including the Memorandum of Lease recorded in connection with each of
the following leases:


 


A.                                   The Lease
Agreement, dated as of November 16, 1998, between WEC 98G-10 LLC and Rite Aid
of Connecticut, Inc.


 


B.                                     The Lease
Agreement, dated as of November 16, 1998, between WEC 98G-11 LLC and Rite Aid
of Connecticut, Inc.


 


C.                                     The Lease
Agreement, dated as of November 16, 1998, between WEC 98G-23 LLC and Rite Aid
of New Jersey, Inc.


 


D.                                    The Lease
Agreement, dated as of November 16, 1998, between WEC 98G-26 LLC and Rite Aid
of Ohio, Inc.


 


E.                                      The Lease
Agreement, dated as of November 16, 1998, between WEC 98G-27 LLC and Rite Aid
of Ohio, Inc.


 


F.                                      The Lease
Agreement, dated as of November 16, 1998, between WEC 98G-29 LLC and Rite Aid
of Ohio, Inc.


 


G.                                     The Lease
Agreement, dated as of November 16, 1998, between WEC 98G-32 LLC and Rite Aid
of Ohio, Inc.


 


H.                                    The Lease
Agreement, dated as of November 16, 1998, between WEC 98G-35 Investment Trust
and Rite Aid of Pennsylvania, Inc.


 


I.                                         The Lease
Agreement, dated as of November 16, 1998, between WEC 98G-36 


 


 


20

















 


Investment Trust and Rite Aid of Pennsylvania, Inc.


 


J.                                        The Lease
Agreement, dated as of November 16, 1998, between WEC 98G-37 Investment Trust
and Rite Aid of Pennsylvania, Inc.


 


K.                                    The Lease
Agreement, dated as of November 16, 1998, between WEC 98G-38 Investment Trust
and Rite Aid of Pennsylvania, Inc.


 


 


 


21