Document:

Exhibit 10.84

 

PROMISSORY NOTE

 

	
   

  	
   

  	
  Chicago, Illinois

  
	
  $3,100,000.00

  	
   

  	
  April 24, 2003

  

 

FOR VALUE RECEIVED,
Horizon Group Properties, L.P., a Delaware limited partnership (“Borrower”),
with a mailing address of 77 West Wacker Drive Suite 4200, Chicago, IL 60601
Attention: Gary J. Skoien promises to pay to the order of Amster Trading
Company Charitable Remainder Unitrust dated March 10, 2003 or the holder hereof
(“Lender”),
at its office at 23811 Chagrin Boulevard, Suite 200, Beachwood, Ohio 44122, or
such other place as Lender may designate in writing, in the manner provided
hereinafter, the principal sum of THREE MILLION ONE HUNDRED THOUSAND AND NO/100
Dollars ($3,100,000.00) (the “Loan”), or so much thereof as may now or
hereafter be advanced by Lender to or for the benefit of Borrower on or before
the Maturity Date (as defined below) of this Promissory Note (this “Note”),
with interest, in the manner and upon the terms and conditions set in this Note
and in that certain Construction and Term Loan Agreement of even date herewith
between Borrower and Lender (the “Loan Agreement”).

 

1.             Definitions.           The following terms shall have the
following meanings in this Note:

 

Construction Loan:  Construction loan in the maximum amount of THREE MILLION ONE
HUNDRED THOUSAND AND NO/100 Dollars ($3,100,000.00)

 

Construction Loan Opening: As defined in Section 1.2
of the Loan Agreement.

 

Construction Loan Period:  The period commencing on the date of the
Construction Loan Opening and terminating on the earlier of (i) the Term Loan
Period Opening Date or (ii) the date to which the indebtedness evidenced by
this Note is accelerated as provided under the Loan Agreement.

 

Deed of Trust:  As defined in Paragraph 8 hereof.

 

Default: 
As defined in Paragraph 9 hereof.

 

Default Interest Rate:  As defined in Paragraph 10 hereof.

 

Disbursement: 
Any disbursement of Loan proceeds.

 

Excess Interest:  As defined in Paragraph 15 hereof.

 

Final Disbursement:  The final disbursement of proceeds of the Construction Loan as
required to complete the Project.

 

Interest Rate:  As defined in Paragraph 2 hereof.

 

Loan: 
The Construction Loan or the Term Loan, whichever is then outstanding,
as well as all indebtedness to Lender evidenced by or incurred under the Loan
Documents.  At no time shall the outstanding
principal balance of the Loan evidenced by this Note exceed Three Million One
Hundred Thousand Dollars ($3,100,000).

 

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Loan Agreement:  As defined in the Recitals.

 

Loan Documents:  As defined in Paragraph 8 hereof.

 

Maturity Date:  August 1, 2009 or the date to which the indebtedness evidenced
hereby is accelerated pursuant to the terms of this Note, subject to adjustment
as provided in Section 11.15 of the Loan Agreement.

 

Obligors: 
As defined in Paragraph 12 hereof.

 

Project: 
The project described in the Loan Agreement.

 

Term Loan: 
Term loan in the maximum principal amount of up to THREE MILLION ONE
HUNDRED THOUSAND AND NO/100 Dollars ($3,100,000.00).  The Term Loan will contain a draw feature to facilitate one or
more future advances of the Term Loan proceeds after the Term Loan Period
Commencement Date.

 

Term Loan Period:  The period commencing on the Term Loan Period Commencement Date
and terminating on the earlier of (i) the Maturity Date or (ii) the date to
which the indebtedness evidenced by this Note is accelerated as provided in the
Loan Documents.

 

Term Loan Period Commencement Date: October
15, 2003.

 

2.             Interest Rate.  Interest shall accrue from the date of the
Construction Loan Opening hereunder on the principal balance of the Loan
remaining from time to time outstanding at the rate calculated pursuant to the
following provision:

 

(a)                   Construction
Loan Period.  Commencing
on the date of the Construction Loan Opening through and including the Term
Loan Commencement Date, the interest rate shall be the greater of (i) the LIBOR
Rate (as hereinafter defined) per annum plus 300 basis points or (ii) five and
one-half percent (5.5%) per annum (the “Construction Loan Interest Rate”), adjusted
on the first Business Day (as such term is defined in the Loan Agreement) of
each January, April, July and October (each, an “Adjustment Date”) of each
year the Loan is outstanding.  For
purposes of this Note, the “LIBOR Rate” shall mean the annual rate of
interest as indicated on the Bloomberg web site
(http://www.bloomberg.com/markets/rates.html) under the heading “Three Month
LIBOR” on each Adjustment Date.  From
the date of the Construction Loan Opening until the first Adjustment Date, the
Construction Loan Interest Rate shall be 5.5%.

 

(b)                   Term Loan
Period.  Provided that
there is no Default under the terms of this Note, commencing on the day next
following Term Loan commencement Date through the Maturity Date, except as
hereinafter set forth, the interest rate on the outstanding principal balance
of the Loan remaining from time to time shall be equal to the greater of (i)
the LIBOR Rate per annum plus 300 basis points or (ii) five and one-half
percent (5.5%) per annum (the “Term Loan Interest Rate”), as adjusted on
each Adjustment Date.

 

Interest shall
be payable on the basis of a year consisting of three hundred sixty (360) days
and charged for the number of days actually elapsed.  For purposes of this Note, the Construction Loan Interest Rate
and the Term Loan Interest Rate shall be referred to collectively as the “Interest

 

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Rate”.  The Interest Rate shall be subject to
adjustment as provided in Section 11.15 of the Loan Agreement.

 

3.             Principal
and Interest Payments.

 

(a)           Construction Loan Period.  During the Construction Loan Period,
interest on the Construction Loan at the Construction Loan Interest Rate shall
be payable monthly in arrears on the first day of each month (each, a “Payment Date”),
commencing on the first day of the second month immediately succeeding the
Initial Disbursement Date, except that the first such payment due hereunder
shall also include interest which has accrued on the balance of the principal
outstanding hereunder from the Construction Loan Opening through such first
Payment Date.

 

(b)           Term Loan Period.  During the Term Loan Period, interest on the
Term Loan at the Term Loan Interest Rate shall be payable monthly in arrears on
each Payment Date with the first payment commencing on: (i) November 1, 2003,
if the Term Loan Period Commencement Date occurs on October 15, 2003 and (ii)
the first day of the second month immediately succeeding the Term Loan Period
Commencement Date, if the Term Loan Period Commencement Date occurs prior to
October 15, 2003.  Principal and
interest payments shall be computed (to be pro rated for any partial month
during such period), so that the monthly principal and interests payments will
amortize the unpaid principal balance of this Note in full over a twenty-five
(25) year term (the “Amortization Term”) at the Interest Rate
then in effect.  Principal and interest
payments due hereunder shall be adjusted on each Adjustment Date so that said
payments shall equal the principal and interest payments necessary to fully
amortize the then outstanding principal balance due under this Note over the
then remaining portion of the Amortization Term.  The final payment of all principal and interest, if not sooner
paid, shall be due on the Maturity Date. 
All payments hereunder shall be made in immediately available funds in
lawful money of the United States of America. 
Principal amounts repaid hereunder may not be reborrowed.

 

The payment
terms set forth above shall be subject to adjustment as provided in Section
11.15 of the Loan Agreement.

 

4.             Draw
Feature. 
This Note contains a draw feature. 
Upon: (a) Borrower’s satisfaction of the terms and conditions set forth
in the Loan Agreement and in this Note and (b) provided that no Default has
occurred and is continuing, Borrower may make draws hereunder for the
reimbursement of the cost of Tenant Improvements (as defined below) at the
Project (as defined in the Loan Agreement) and retainage amounts (collectively,
the “Term Loan Draws” and each a “Term Loan Draw”).  Such Term Loan Draws shall: (x) be in an amount of not less than
TWENTY-FIVE THOUSAND DOLLARS ($25,000) each, and (y) be made no more frequently
than one (1) time per calendar month. 
Notwithstanding the foregoing: (aa) Lender shall be under no obligation to
make a Term Loan Draw which would result in the then outstanding principal
balance of the Term Loan to exceed THREE MILLION ONE HUNDRED THOUSAND DOLLARS
($3,100,000) and (bb) Lender’s obligation to make Term Loan Draws shall in all
events expire on September 1, 2005.  In
addition to all other requirements set forth herein and in the Loan Agreement
for Borrower to obtain Term Loan Draws, the maximum aggregate amount of the
Term Loan Draws available to Borrower pursuant to this Note shall be determined
by subtracting the amount of the Construction Loan that is

 

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rolled into the Term Loan on
the Term Loan Period Commencement Date from Three Million One Hundred Thousand
Dollars ($3,100,000).  Once Borrower has
repaid any portion of amounts drawn pursuant to this Note, Borrower shall not
be entitled to re-draw such amounts and any and all such repayments shall
reduce Lender’s aggregate obligation to extend funds hereunder.  For purposes of this Note, “Tenant Improvements”
shall mean the costs associated with allowances, build out costs and LOD
packages that Borrower is obligated to pay for pursuant to the terms of the
Leases (as defined below).  For purposes
of this Note, “Leases” mean any and all written leases of the Project.  Lender shall not be obligated to advance a
Term Loan Draw to Borrower until: (xx) Borrower provides Lender with an
executed copy of the Lease requiring the Tenant Improvements for which Borrower
is seeking reimbursement, (yy) Borrower 
provides Lender with evidence that Borrower has paid for the Tenant
Improvements for which Borrower is seeking reimbursement, and (zz) the Title
Insurer (as defined in the Loan Agreement) provides Lender, at Borrower’s cost,
with a date down endorsement or other applicable endorsement bringing forward
the date of the Title Policy to the date the applicable Term Loan Draw is to be
made.  Lender agrees to act in a
reasonably prompt manner in responding to requests for Term Loan Draws.  Amounts advanced pursuant to Term Loan Draws
shall bear interest and be repayable in the same manner as other amounts
outstanding under this Note.

 

5.             Prepayments.  Borrower shall have the right to prepay this
Note, in whole or in part, at any time, without penalty or premium.

 

6.             Agreement to Make Term Loan.  Notwithstanding anything in this Note to the
contrary, Lender shall have no obligation to make the Term Loan unless all
conditions set forth in the Loan Agreement have been satisfied.

 

7.             Application of Payments.  All payments on account of the indebtedness
evidenced by this Note shall be applied first to any unpaid late charges or
costs (including reasonable legal fees) due hereunder, then to interest on the
unpaid principal balance and the remainder to principal, or at Lender’s sole
discretion, in any other order it may elect.

 

8.             Late Charges.  If any monthly installment of principal or
interest or any other amount due hereunder or under any of the other Loan
Documents is not paid on or before the date on which such payment is due,
Borrower shall pay Lender a late charge in an amount equal to five percent (5%)
of the amount so due to defray part of the increased cost of collecting the
late payments and the opportunity cost incurred by Lender because of the
unavailability of the funds.

 

9.             Security for Payment.  The payment of this Note is secured in part
by that certain Construction Deed of Trust, Security Agreement, Financing
Statement and Fixture Filing (with Assignment of Rents) (the “Deed of
Trust”) of even date herewith, executed by Borrower in favor of
Lender, encumbering the property described therein, that certain Environmental
Indemnity Agreement of even date herewith from Borrower in favor of Lender (the
“Environmental
Indemnity Agreement”), that certain Assignment of Rents (as defined
in the Loan Agreement), that certain Assignment of Plans and Permits (as
defined in the Loan Agreement) and all other documents evidencing or securing
the repayment of the Loan (the Loan Agreement, this Note, the Deed of Trust,
the Environmental Indemnity Agreement, the Assignment of Rents, the Assignment
of Plans and Permits and all other documents evidencing or securing the
indebtedness evidenced by this Note which are executed and delivered to Lender
as additional evidence of or security for repayment of the Loan, whether now or
hereafter existing, and all renewals, amendments, supplements, restatements,

 

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extensions and modifications
thereof and thereto, are collectively referred to herein as the “Loan
Documents”).  All of the
agreements, conditions, covenants, provisions and stipulations contained in the
Loan Documents are hereby made a part of this Note to the same extent and with
the same force and effect as if they were fully set forth herein, and Borrower
covenants and agrees to keep and perform them or cause them to be kept and
performed, strictly in accordance with their terms.

 

10.          Defaults and Acceleration.  IT IS HEREBY EXPRESSLY AGREED by Borrower
that time is of the essence hereof.  Any
Default (as defined in the Loan Agreement) shall constitute an event of default
(a “Default”)
hereunder.  At any time: (a) during the
existence of any Default or (b) following a Prohibited Transfer (as defined in
the Deed of Trust), Lender, at its option, may, without prior written notice to
Borrower, declare the entire unpaid principal balance of this Note together
with all interest accrued thereon, and all other sums due by Borrower hereunder
and under the other Loan Documents to be due and payable immediately.

 

11.          Default Interest Rate.  While any Default exists and is continuing,
Borrower promises to pay interest on the amount of principal due and
outstanding hereunder at the rate of the sum of the then applicable Interest
Rate plus five percent (5%) per annum (“Default Interest Rate”), which shall be
payable upon demand.  All monies paid
for any of the purposes authorized herein, together with unpaid interest, and
all expenses paid or incurred in connection therewith, including, without limitation,
reasonable attorneys’ fees and court costs, and any other monies advanced by
Lender to protect the premises encumbered by the Deed of Trust and the lien of
the Deed of Trust, shall be so much additional indebtedness secured hereby, and
shall become immediately due and payable by Borrower to Lender without notice
and with interest thereon at the Default Interest Rate from the date an advance
is made to and including the date the same is paid.

 

12.          Nature of Remedies.  Upon a Default, the remedies of Lender, as
provided in the Loan Agreement, this Note, the Deed of Trust and any of the
other Loan Documents, shall be cumulative and concurrent, and may be pursued
singly, successively or together against either or any of Borrower, any
guarantor hereof or any other security, at the sole and absolute discretion of
Lender.

 

13.          Waivers, Consents, Etc.  Borrower and any endorsers, sureties or
guarantors hereof and any and all others who are now or may become liable for
all or part of the obligations of Borrower under this Note (all of the
foregoing being collectively referred to herein as “Obligors”), agree to be
jointly and severally bound hereby and jointly and severally waive presentment
for payment, demand, notice of nonpayment, notice of dishonor, protest of any
dishonor, notice of protest and protest of this Note and, except as expressly
provided to the contrary herein or in the other Loan Documents, all other
notices in connection with the delivery, acceptance, performance, default or
enforcement of the payment of this Note, and agree that the liability of each
of them shall be unconditional, joint and several without regard to the
liability of any other party and shall not in any manner be affected by any
indulgence, extension of time, renewal, waiver or modification granted or
consented to by Lender.  Each Obligor
hereby consents to any and all extensions of time, renewals, waivers or
modifications that may be granted by Lender with respect to the payment or
other provisions of this Note, and to the release of the collateral, or any
part thereof, with or without substitution, and agree that additional
borrowers, endorsers, guarantors or sureties may become parties hereto without
notice to them or affecting their liability hereunder.  Borrower hereby authorizes Lender, at any
time after a Default hereunder, to apply any money or other property which
Lender may have or hold on deposit or otherwise for Borrower towards the
payment of this Note.  By execution
hereof, Borrower hereby specifically pledges and grants to Lender a security
interest in any money or other property which Lender may have or hold on
deposit for the undersigned.

 

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14.          Non-Waiver.  Lender shall not by any act of omission or
commission be deemed to waive any of its rights or remedies hereunder unless
such waiver is in writing and signed by Lender and then only to the extent
specifically set forth therein.  A
waiver of one event shall not be construed as continuing or as a bar to or
waiver of such right or remedy in connection with a subsequent event.

 

15.          Business Loan.  Borrower warrants and represents to Lender
(a) that the proceeds of this Note will be used for the purposes specified in
815 ILCS 205/4(1)(c) (or any substitute, amended or replacement statute), and
that the indebtedness secured hereby constitutes a business loan which comes
within the purview of 815 ILCS 205/4(1)(c), and (b) that the Loan evidenced by
this Note is an exempted transaction under the Truth In Lending Act, 15 U.S.C.
§1601 et  seq.  Borrower
further warrants and represents to Lender and covenants with Lender that
Borrower is not in the business of extending credit for the purpose of
purchasing or carrying margin securities (within the meaning of Regulation U
issued by the Board of Governors of the Federal Reserve System), and no
proceeds represented by this Note will be used to purchase or carry any margin
securities or to extend credit to others for the purpose of purchasing or
carrying any margin securities.

 

16.          Interest Laws.  It being the intention of Lender and
Borrower to comply with the laws of the State of Illinois, it is agreed that
notwithstanding any provision to the contrary in this Note, the Deed of Trust
or any of the other Loan Documents, no such provision shall require the payment
or permit the collection of any interest (“Excess Interest”) in excess of the maximum
amount of interest permitted by law to be charged for the use or detention, or
the forbearance in the collection, of all or any portion of the indebtedness
evidenced by this Note.  If any Excess
Interest is provided for, or is adjudicated to be provided for, in this Note,
the Deed of Trust or any of the other Loan Documents, then in such event:  (a) the provisions of this Paragraph 16
shall govern and control; (b) neither Borrower nor any of the other Obligors
shall be obligated to pay any Excess Interest; (c) any Excess Interest that
Lender may have received hereunder shall, at the option of Lender, be (i)
applied as a credit against the then outstanding principal balance of the Loan,
accrued and unpaid interest thereon not to exceed the maximum amount permitted
by law, or both, (ii) refunded to the payor thereof, or (iii) any combination
of the foregoing; (d) the applicable Interest Rate or rates hereunder shall be
automatically subject to reduction to the maximum lawful contract rate allowed
under the applicable usury laws of the aforesaid State, and this Note, the Deed
of Trust and the other Loan Documents shall be deemed to have been, and shall
be, reformed and modified to reflect such reduction in such applicable Interest
Rate or rates; and (e) neither Borrower nor any of the other Obligors shall
have any action against Lender for any damages whatsoever arising out of the
payment or collection of any Excess Interest.

 

17.          Subsequent Holders.  Upon any endorsement, assignment or other
transfer of this Note by Lender or by operation of law, the term “Lender”,
as used herein, shall mean the endorsee, assignee or other transferee or
successor to Lender then becoming the holder of this Note.

 

18.          Subsequent Obligors.  This Note and all provisions hereof shall be
binding on all persons claiming under or through Borrower.  The terms “Borrower” and “Obligors”,
as used herein, shall include the respective successors, assigns, legal and
personal representatives, executors, administrators, devisees, legatees and
heirs of Borrower and any other Obligors.

 

19.          Fees and Expenses.  If at any time or times after the date of
this Note, Lender:  (a) employs counsel
which Lender reasonably believes is necessary for advice or other
representation (i) with respect to this Note, any of the other Loan Documents
or any collateral securing this Note, (ii) to represent Lender in any
litigation, contest, dispute, suit or proceeding or to commence, defend or
intervene or to take any other action in or with respect to any litigation,
contest, dispute or

 

6

 

proceeding (whether instituted
by Lender, Borrower or any other person) in any way or respect relating to this
Note, any of the other Loan Documents or any replacement therefor, any
collateral securing this Note or Borrower’s affairs, or (iii) to enforce any
rights of Lender against Borrower; (b) takes any action to protect, collect,
sell, liquidate or otherwise dispose of any collateral securing this Note;
and/or (c) attempts to or enforces any of Lender’s rights and remedies against
Borrower or any guarantor of this Note, the reasonable costs and expenses
incurred by Lender in any manner or way with respect to the foregoing shall be
part of the indebtedness evidenced by this Note, payable by Borrower to Lender
on demand.  Without limiting the
generality of the foregoing, such reasonable expenses and costs include:  court costs, reasonable attorneys’ fees and
expenses, and accountants’ fees and expenses and other expert fees.

20.          Interpretation.  Whenever possible each provision of this
Note and the other Loan Documents shall be interpreted in such manner as to be
effective and valid under applicable law, but if any provision of this Note or
any of the other Loan Documents shall be prohibited or invalid under such law,
such provision shall be ineffective only to the extent of such prohibition or
invalidity, without invalidating the remainder of said documents.  As used in this Note, the singular shall
include the plural, and masculine, feminine and neuter pronouns shall be fully
interchangeable, where the context so requires.

 

21.          Governing Law; Litigation.  THE VALIDITY OF THIS NOTE, ITS CONSTRUCTION,
INTERPRETATION AND ENFORCEMENT, AND THE RIGHTS OF BORROWER AND LENDER SHALL BE
DETERMINED UNDER, GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE INTERNAL
LAWS OF THE STATE OF ILLINOIS, WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAW.  TO THE MAXIMUM EXTENT PERMITTED BY LAW,
BORROWER HEREBY AGREES THAT ALL ACTIONS OR PROCEEDINGS ARISING IN CONNECTION
WITH THIS NOTE SHALL BE TRIED AND DETERMINED ONLY IN THE STATE OR FEDERAL
COURTS LOCATED IN THE COUNTY OF COOK, STATE OF ILLINOIS.  TO THE MAXIMUM EXTENT PERMITTED BY LAW,
BORROWER HEREBY EXPRESSLY WAIVES ANY RIGHT IT MAY HAVE TO ASSERT THE DOCTRINE
OF FORUM NON CONVENIENS OR TO OBJECT TO VENUE TO THE EXTENT ANY
PROCEEDING IS BROUGHT IN ACCORDANCE WITH THIS PARAGRAPH.

 

22.          Jury Waiver.  BORROWER AND LENDER, EACH HAVING BEEN
REPRESENTED BY COUNSEL, EACH KNOWINGLY AND VOLUNTARILY, TO THE MAXIMUM EXTENT
PERMITTED BY LAW, EXPRESSLY WAIVES ANY RIGHT TO TRIAL BY JURY OF ANY ACTION,
CAUSE OF ACTION, CLAIM, DEMAND OR PROCEEDING ARISING UNDER OR WITH RESPECT TO
THIS NOTE, OR IN ANY WAY CONNECTED WITH, RELATED TO OR INCIDENTAL TO THE
DEALINGS OF BORROWER AND LENDER WITH RESPECT TO THIS NOTE OR THE TRANSACTIONS
RELATED HERETO, IN EACH CASE WHETHER NOW EXISTING OR HEREAFTER ARISING, AND
WHETHER SOUNDING IN CONTRACT, TORT OR OTHERWISE.  TO THE MAXIMUM EXTENT PERMITTED BY LAW, BORROWER HEREBY AGREES
THAT ANY SUCH ACTION, CAUSE OF ACTION, CLAIM, DEMAND OR PROCEEDING SHALL BE
DECIDED BY A COURT TRIAL WITHOUT A JURY AND THAT LENDER MAY FILE A COPY OF THIS
NOTE WITH ANY COURT OR OTHER TRIBUNAL AS WRITTEN EVIDENCE OF THE CONSENT OF
BORROWER TO THE WAIVER OF ITS RIGHT TO TRIAL BY JURY.

 

23.          Notices.  Any notice, request or demand that Lender or
Borrower may desire or be required to give to the other shall be in writing and
shall be mailed or delivered to the intended

 

7

 

recipient thereof at its
address hereinabove set forth or at such other address as such intended
recipient may, from time to time, by notice in writing, designate to the sender
pursuant hereto.  Any such notice shall
be deemed to have been delivered (a) upon receipt when delivered in person or
if sent by nationally recognized overnight air courier, or (b) two (2) business
days after being deposited in the United States mail sent by certified mail,
postage prepaid, return receipt requested. 
Unless specifically required herein, notice of the exercise of any
option granted to Lender by this Note is not required to be given.

 

[SIGNATURE PAGE FOLLOWS]

 

8

 

This Note has been executed and
delivered on the date first set forth above.

 

	
   

  	
  HORIZON GROUP
  PROPERTIES, L.P., a

  Delaware limited partnership

  
	
   

  	
   

  
	
   

  	
  By:

  	
  Horizon Group Properties, Inc.

  
	
   

  	
  Its:

  	
  General
  Partner

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/ David
  Tinkham

  	
   

  
	
   

  	
   

  	
   

  	
  David
  Tinkham,

  
	
   

  	
   

  	
   

  	
  Senior Vice
  President / CFO

  

 

9Exhibit 10.85

 

	
  Document prepared by and after

  recording should be returned to:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Beth S. Rubin 

  	
   

  	
   

  
	
  SCHIFF HARDIN & WAITE

  	
   

  	
   

  
	
  6600 Sears Tower 

  	
   

  	
   

  
	
  Chicago, IL 60606

  	
   

  	
   

  
	
   

  	
   

  	
  For Recorder Use Only

  

 

CONSTRUCTION
DEED OF TRUST, SECURITY AGREEMENT,

FINANCING STATEMENT AND FIXTURE FILING

(with
Assignment of Rents)

 

NOTICE:  THIS INSTRUMENT SECURES THE REPAYMENT OF A
PROMISSORY NOTE WHICH CONTAINS VARIABLE RATES OF INTEREST.

 

ATTENTION: 
COUNTY RECORDER—THIS INSTRUMENT COVERS GOODS THAT ARE OR ARE TO BECOME
FIXTURES ON THE REAL PROPERTY DESCRIBED HEREIN AND IS TO BE FILED FOR RECORD IN
THE RECORDS WHERE DEEDS OF TRUST ON REAL ESTATE ARE RECORDED.  ADDITIONALLY, THIS INSTRUMENT SHOULD BE
APPROPRIATELY INDEXED, NOT ONLY AS A DEED OF TRUST, BUT ALSO AS A FINANCING STATEMENT
COVERING GOODS THAT ARE OR ARE TO BECOME FIXTURES ON THE REAL PROPERTY
DESCRIBED HEREIN.  THE MAILING ADDRESSES
OF THE TRUSTOR (DEBTOR) AND BENEFICIARY (SECURED PARTY) ARE SET FORTH IN SECTION
7.05 OF THIS DEED OF TRUST.

 

THIS CONSTRUCTION
DEED OF TRUST, SECURITY AGREEMENT, FINANCING STATEMENT AND FIXTURE FILING (WITH
ASSIGNMENT OF RENTS) (this “Deed of Trust”) is made as of
April  24, 2003, by and among Horizon
Group Properties, L.P. a Delaware limited partnership (“Trustor”), with an address of
77 West Wacker Drive, Suite 4200, Chicago, Illinois  60601, First American Title (“Trustee”), whose address is
1850 South Central Street, Visalia, California 93277, and Amster Trading
Company Charitable Remainder Unitrust

 

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dated March 10, 2003 (“Beneficiary”),
whose address is 23811 Chagrin Boulevard, Suite 200, Beachwood, Ohio 44122.

 

THIS DEED OF TRUST
is given, inter  alia, for the purpose of securing a loan (the “Loan”)
from Beneficiary, as lender, to Trustor, as borrower, the proceeds of which are
to be used, inter  alia, for the purpose of constructing
improvements on the real property located in the County of Tulare, State of
California, more particularly described in Exhibit A attached hereto and by this
reference incorporated herein (the “Premises”).  The information required by California Civil Code Section
3097(j) is as follows:

 

	
  Name and address

  	
   

  	
  Amster Trading Company Charitable Remainder Unitrust

  
	
  of Lender:

  	
   

  	
  dated March 10, 2003

  
	
   

  	
   

  	
  23811 Chagrin Boulevard, Suite 900

  
	
   

  	
   

  	
  Beachwood, Ohio  44122

  
	
   

  	
   

  	
   

  
	
  Name and address

  	
   

  	
  Horizon Group Properties, L.P.

  
	
  of Owner:

  	
   

  	
  77 West Wacker Drive, Suite 4200

  
	
   

  	
   

  	
  Chicago, Illinois 60601

  

 

FOR GOOD AND VALUABLE
CONSIDERATION, including the indebtedness herein
recited and the trust herein created, the receipt of which is hereby
acknowledged, Trustor hereby irrevocably grants, transfers, conveys and assigns
to Trustee, IN TRUST, WITH POWER OF SALE, for the benefit and security of
Beneficiary, subject to the terms and conditions hereinafter set forth, the
Premises;

 

TOGETHER WITH
any and all buildings and improvements now or hereafter erected on the Premises
owned by Trustor including, but not limited to the fixtures, attachments,
appliances, equipment, machinery, and other articles attached to said buildings
and improvements (the “Improvements”), all of which shall be
deemed and construed to be a part of the realty;

 

TOGETHER WITH
all rents, issues, profits, royalties, income and other benefits (collectively,
the “Rents”)
derived from any lease, sublease, license, franchise, concession or other
agreement (collectively, the “Leases”) now or hereafter affecting all or
any portion of the Premises and the Improvements or the use or occupancy
thereof;

 

TOGETHER WITH
all interests, estates or other claims, both in law and in equity, which
Trustor now has or may hereafter acquire in the Premises or the Improvements;

 

TOGETHER WITH
all easements, rights-of-way and rights now owned or hereafter acquired by
Trustor used in connection therewith or as a means of access thereto,
including, without limiting the generality of the foregoing, all rights
pursuant to any trackage agreement and all rights to the nonexclusive use of
common drive entries, and all tenements, hereditaments and appurtenances
thereof and thereto, and all water and water rights and shares of stock
evidencing the same;

 

2

 

TOGETHER WITH
all leasehold estate, right, title and interest of Trustor in and to all Leases
or subleases covering the Premises, the Improvements or any portion thereof now
or hereafter existing or entered into, and all right, title and interest of
Trustor thereunder including, without limitation, all cash or security
deposits, advance rentals, and deposits or payments of similar nature;

 

TOGETHER WITH
all right, title and interest now owned or hereafter acquired by Trustor in and
to any greater estate in the Premises or the Improvements;

 

TOGETHER WITH
all right, title and interest of Trustor, now owned or hereafter acquired, in
and to any land lying within the right-of-way of any street, open or proposed,
adjoining the Premises, and any and all sidewalks, alleys and strips and gores
of land adjacent to or used in connection with the Premises;

 

TOGETHER WITH
all fixtures and personal property now or hereafter owned by Trustor and
attached to or contained in and used in connection with the Premises or the
Improvements as more fully described herein;

 

TOGETHER WITH
all the estate, interest, right, title, other claim or demand, both in law and
in equity, including claims or demands with respect to the proceeds of
insurance in effect with respect thereto, which Trustor now has or may
hereafter acquire in the Premises or the Improvements, and any and all awards made
for the taking by eminent domain, or by any proceeding or purchase in lieu
thereof, of the whole or any part of the Trust Estate (as hereinafter defined),
including, without limitation, any awards resulting from a change of grade of
streets and awards for severance damages.

 

The entire
estate, property and interest hereby conveyed to Trustee may hereafter be
collectively referred to as the “Trust Estate”.

 

FOR
THE PURPOSE OF SECURING:

 

(a)           payment
of indebtedness in the total principal amount of THREE MILLION ONE HUNDRED
THOUSAND and No/100 Dollars ($3,100,000.00), with interest thereon, evidenced
by that certain Promissory Note in the principal amount of THREE MILLION ONE
HUNDRED THOUSAND and No/100 Dollars ($3,100,000.00) (the “Note”) of even date herewith,
executed by Trustor pursuant to that certain Construction and Term Loan
Agreement between Trustor and Beneficiary of even date herewith (the “Loan
Agreement”) which Note and any and all modifications, extensions,
renewals and replacements thereof are by this reference hereby made a part
hereof;

 

(b)           payment
of all sums advanced by Beneficiary to protect the Trust Estate, with interest
thereon from the date of the advance at the Interest Rate or the Default
Interest Rate as applicable (as each such term is defined in the Note) (which
rates of interest an hereinafter sometimes referred to collectively as the “Agreed Rate”);

 

(c)           payment
of all other sums, with interest thereon, which may hereafter be loaned to
Trustor, or its successors or assigns, by Beneficiary, or its successors or
assigns

 

3

 

when evidenced by a promissory note or notes
reciting that they are secured by this Deed of Trust;

 

(d)           performance of every obligation,
covenant or agreement of Trustor contained herein and in the Note or the Loan
Agreement or any other documents executed in conjunction therewith and all
supplements, amendments and modifications thereto and all extensions and
renewals thereof;

 

(e)           performance
of every obligation, covenant and agreement of Trustor contained in any
agreement now or hereafter executed by Trustor which recites that the
obligations thereunder are secured by this Deed of Trust; and

 

(f)            substantial
compliance with and performance of each and every material provision of any
declaration of covenants, conditions and restrictions pertaining to the Trust
Estate or any portion thereof.

 

This Deed of
Trust, the Note, the Loan Agreement and any other deeds of trust, mortgages,
agreements, guaranties or other instruments given to evidence or further secure
the payment and performance of any obligation secured hereby may hereafter be
collectively referred to as the “Loan Documents”.  All initially-capitalized terms used and not otherwise defined in
this Deed of Trust shall have the same meaning herein as given to such terms in
the Note or the Loan Agreement.

 

TO PROTECT THE
SECURITY OF THIS DEED OF TRUST, TRUSTOR HEREBY COVENANTS AND AGREES AS FOLLOWS:

 

ARTICLE
I

COVENANTS
AND AGREEMENTS OF TRUSTOR

 

1.01.       Payment of Secured Obligations.  Trustor shall pay when due the principal of
and the interest on the indebtedness evidenced by the Note; all charges, fees
and other sums as provided in the Loan Documents; the principal of and interest
on any future advances secured by this Deed of Trust; and the principal of and
interest on any other indebtedness secured by this Deed of Trust.

 

1.02.       Maintenance, Repair, Alterations and
Compliance with Laws. 
Trustor shall (a) maintain, preserve and keep the Trust Estate in good
condition and repair; (b) not remove, demolish or substantially alter any of
the Improvements except as may be required by law or upon the prior written
consent of Beneficiary; (c) complete promptly and in a good and workmanlike
manner any Improvement which may be now or hereafter constructed on the
Premises and promptly restore in like manner any portion of the Improvements
which may be damaged or destroyed thereon from any cause whatsoever, and pay
when due all claims for labor performed and materials furnished therefor; (d)
comply with all laws, ordinances, regulations, covenants, conditions and
restrictions now or hereafter affecting the Trust Estate or any part thereof or
requiring any alterations or improvements; (e) use commercially reasonable
efforts to not commit or permit any waste or deterioration of the Trust Estate,
and keep and maintain abutting grounds, sidewalks, roads, parking and landscape
areas in good and neat order and repair; and (f) use commercially reasonable
efforts to not commit, or knowingly suffer or permit any act to be done in or
upon the Trust Estate in violation of any law,

 

4

 

ordinance or regulation.  Trustor shall not apply for, or willingly
suffer or permit any change in zoning, subdivision or land use regulations
affecting the Property without first obtaining the written consent of
Beneficiary.

 

1.03.       Required Insurance.  Trustor shall at all times provide, maintain
and keep in force or cause to be provided, maintained and kept in force, at no
expense to Trustee or Beneficiary, policies of insurance in form and amounts as
are acceptable to Beneficiary and are 
customary and reasonable for developments similar to the Premises.  All such policies of insurance required by
Beneficiary shall contain an endorsement or agreement by the insurer that any
loss shall be payable in accordance with the terms of such policy with the
agreement of the insurer waiving all rights of setoff, counterclaim or
deductions against Trustor and shall not be cancellable with less than thirty
(30) days written notice to Beneficiary.

 

1.04.       Delivery of Policies, Payment of
Premiums.

 

(a)           All
policies of insurance shall name Beneficiary as loss payee and an additional
insured.  Trustor shall furnish
Beneficiary with an original, a certified copy of an original or a certificate
of all policies of insurance required under Section 1.03 above which sets
forth the coverage, the limits of liability, the name of the carrier, the
policy number and the period of coverage. 
Trustor may provide any of the required insurance through blanket
policies carried by Trustor and covering more than one location, or by policies
procured by a tenant or other party holding under Trustor; provided, however,
all such policies shall be in form and substance and issued by companies
satisfactory to Beneficiary.  At least
thirty (30) days prior to the expiration of each required policy, Trustor shall
deliver to Beneficiary evidence of the renewal or replacement of such policy,
continuing insurance in form and substance as required by this Deed of
Trust.  All such policies shall contain
a provision that, notwithstanding any contrary agreement between Trustor and
insurance company, such policies will not be cancelled, allowed to lapse
without renewal, surrendered or materially amended, which term shall include
any reduction in the scope or limits of coverage, without at least thirty (30)
days’ prior written notice to Beneficiary.

 

(b)           In
the event Trustor fails to provide, maintain, keep in force or deliver to
Beneficiary the policies of insurance required by this Deed of Trust or by any
Loan Document, Beneficiary may (but shall have no obligation to) procure such
insurance or single-interest insurance for such risks covering Beneficiary’s
interest, and Trustor will pay all premiums thereon promptly upon demand by
Beneficiary, and until such payment is made by Trustor, the amount of all such
premiums shall bear interest at the Default Interest Rate.  Upon written request by Beneficiary after an
Event of Default, Trustor shall deposit with Beneficiary in monthly
installments, an amount equal to one-twelfth (1/12) of the estimated aggregate
annual insurance premiums on all policies of insurance required by this Deed of
Trust.  In such event Trustor further
agrees to cause all bills, statements or other documents relating to the
foregoing insurance premiums to be sent or mailed directly to Beneficiary.  Upon receipt of such bills, statements or
other documents evidencing that a premium for a required policy is then
payable, and providing Trustor has deposited sufficient funds with Beneficiary
pursuant to this Section 1.04(b), Beneficiary shall timely pay such amounts as
may be due thereunder out of the funds so deposited with Beneficiary.  If at any time and for

 

5

 

any reason the funds deposited with
Beneficiary are or will be insufficient to pay such amounts as may be then or
subsequently due, Beneficiary shall notify Trustor and within fifteen (15) days
thereof Trustor shall deposit an amount equal to such deficiency with
Beneficiary.  Notwithstanding the
foregoing, nothing contained herein shall cause Beneficiary to be deemed a
trustee of said funds or to be obligated to pay any amounts in excess of the
amount of funds deposited with Beneficiary pursuant to this Section
1.04(b), nor shall anything contained herein modify the obligation
of Trustor set forth in Section 1.03 hereof to maintain and keep
such insurance in force at all times. 
Beneficiary may commingle said reserve with its own funds and Trustor
shall be entitled to no interest thereon.

 

1.05.       Casualties; Insurance Proceeds.  Trustor shall give prompt written notice
thereof to Beneficiary after the happening of any casualty to or in connection
with the Trust Estate or any part thereof, whether or not covered by insurance
(a “Casualty”).  In the event of such Casualty, all proceeds
of insurance shall be payable to Beneficiary, and Trustor hereby authorizes and
directs any affected insurance company to make payment of such proceeds
directly to Beneficiary.  If Trustor
receives any proceeds of insurance resulting from such casualty, Trustor shall
promptly pay over such proceeds to Beneficiary.  Beneficiary and Trustor shall use reasonably cooperative efforts
to settle, adjust or compromise any and all claims for loss, damage or
destruction under any policy or policies of insurance.  In the event of any damage or destruction of
the Premises or the Improvements, and provided that there is no Event of
Default hereunder or under the other Loan Documents and provided that the
Beneficiary has determined, in its reasonable discretion, that the insurance
proceeds received by it are sufficient to pay for the cost of completion of the
work to repair and restore the Improvements free and clear of any liens,
Beneficiary shall apply all loss proceeds to the restoration of the
Improvements.  If Beneficiary elects to
apply insurance proceeds toward repairing, restoring, and rebuilding the
Improvements, such insurance proceeds shall be made available therefor, by
Beneficiary, or such other depositary designated by Beneficiary, from time to
time, to Trustor or at Beneficiary’s option in accord with the Loan Agreement
or directly to contractors, subcontractors, material suppliers and other
persons entitled to payment in accordance with and subject to such additional
reasonable conditions to disbursement as Beneficiary may impose to insure that
the work is fully completed in a good and workmanlike manner and paid for and
that no liens or claims arise by reason thereof, upon Beneficiary’s being
furnished with evidence satisfactory to Beneficiary of the estimated cost of
such repairs, restoration and rebuilding and with architect’s and other
certificates, waivers of lien, certificates, contractors’ sworn statements, and
other evidence of the estimated cost thereof and of payments as Beneficiary may
reasonably require and approve.  In
addition to the foregoing, if the estimated cost of the work exceeds ten
percent (10%) of the original principal amount of the indebtedness secured
hereby, Trustor shall also deliver to Beneficiary for its prior approval
evidence satisfactory to Beneficiary that the appraised value of the Trust
Estate after such work will not be less than its appraised value established in
the “As Completed” appraisal delivered to Beneficiary on or prior to the date
hereof and all plans and specifications for such repairs, restoration and
rebuilding as Beneficiary may require and approve.  No payment made prior to the final completion of the work shall
exceed ninety percent (90%) of the value of the repair, restoration or
rebuilding work performed, from time to time, and at all times the undisbursed
balance of such proceeds remaining in the custody or control of Beneficiary
shall be at least sufficient to pay for the cost of completion of the work,
free and clear of any liens. 
Beneficiary may, at any time after an Event of Default hereunder, or a
default under any of the other Loan

 

6

 

Documents, procure and
substitute for any and all of the insurance policies so held as aforesaid, such
other policies of insurance in such amounts and carried in such companies as
Beneficiary may select.  Beneficiary may
commingle any such funds held by it hereunder and shall not be obligated to pay
any interest in respect of any sums held by or on behalf of it.  If there is an Event of Default hereunder or
if any one or more of the conditions of the Loan Agreement have not been met at
the time of receipt of any insurance proceeds or if the insurance proceeds are
not sufficient in Beneficiary’s sole discretion, to complete any repairs,
restoration or rebuilding to the Improvements free and clear of any liens, then
Beneficiary shall not be obligated to make any further disbursements pursuant
to the Loan Agreement and Beneficiary shall apply all such proceeds remaining
after deduction of all expenses and collection and settlement thereof,
including without limitation, reasonable attorneys’ fees and costs and
adjustors’ fees and charges, to the repayment of the outstanding balance of the
Note, together with accrued interest, notwithstanding that the outstanding
balance may not be due and payable. 
Nothing herein contained shall be deemed to excuse Trustor from
repairing or maintaining the Trust Estate as provided in Section 1.02 hereof or
restoring all damage or destruction to the Trust Estate, regardless of whether
or not there are insurance proceeds available to Trustor or whether any such
proceeds are sufficient in amount, and the application or release by
Beneficiary of any insurance proceeds shall not cure or waive any default or
notice of default under this Deed of Trust or invalidate any act done pursuant
to such notice.

 

1.06.       Assignment of Policies Upon Foreclosure.  In the event of foreclosure of this Deed of
Trust or other transfer of title or assignment of the Trust Estate in
extinguishment, in whole or in part, of the debt secured hereby, all right,
title and interest of Trustor in and to all policies of insurance required by Section 1.03
and covering solely the Trust Estate or any portion thereof shall inure to the
benefit of and pass to the successor in interest to Trustor or to the purchaser
or grantee of the Trust Estate.

 

1.07.       Financial Statements.  During the term of this Deed of Trust,
Trustor shall deliver to Beneficiary copies of such financial statements as
required pursuant to the Loan Agreement. 
In addition, during the term of this Deed of Trust, Trustor shall
deliver to Beneficiary, within thirty (30) days after filing, copies of federal
tax returns of Borrower and Guarantor (as such term is defined in the Loan
Agreement).  Beneficiary shall have the
right during normal business hours, to audit and inspect all books and records
relating thereto upon two (2) Business Days’ notice to Trustor.

 

1.08.       Indemnification; Subrogation; Waiver of
Offset.

 

(a)           If Beneficiary is made a party to any
litigation concerning the Note, this Deed of Trust, any of the Loan Documents,
the Trust Estate or any part thereof or interest therein, or the occupancy of
the Trust Estate by Trustor, then Trustor shall indemnify, defend and hold
Beneficiary harmless from all liability by reason of said litigation, including
reasonable attorneys’ fees and expenses incurred by Beneficiary as a result of
any such litigation, whether or not any such litigation is prosecuted to
judgment.  However, Trustor shall not be
obligated to indemnify, defend and hold Beneficiary harmless from and against
any claims or liability which are attributable to the gross negligence or
willful misconduct of Beneficiary. 
Beneficiary may employ an attorney or attorneys to protect its rights
hereunder, and in the event of such employment, following any breach by
Trustor, Trustor shall pay Beneficiary

 

7

 

reasonable attorneys’ fees and
expenses incurred by Beneficiary, whether or not an action is actually
commenced against Trustor by reason of its breach.

 

(b)           All
sums payable by Trustor pursuant to this Deed of Trust shall be paid without
notice, demand, counterclaim, setoff, deduction or defense and without
abatement, suspension, deferment, diminution or reduction, and the obligations
and liabilities of Trustor hereunder shall in no way be released, discharged or
otherwise affected (except as expressly provided herein) by reason of:  (i) any damage to or destruction of or any
condemnation or similar taking of the Trust Estate or any part thereof; (ii) any
restriction or prevention of or interference by any third party with any use of
the Trust Estate or any part thereof; (iii) any title defect or encumbrance or
any eviction from the Premises or the Improvements or any part thereof by title
paramount or otherwise; (iv) any bankruptcy, insolvency, reorganization,
composition, adjustment, dissolution, liquidation or other like proceeding
relating to Beneficiary, or any action taken with respect to this Deed of Trust
by any trustee or receiver of Beneficiary, or by any court, in any such
proceeding; (v) any claim which Trustor has or might have against Beneficiary;
(vi) any default or failure on the part of Beneficiary to perform or comply
with any of the terms hereof or of any other agreement with Trustor; or (vii)
any other occurrence whatsoever, whether similar or dissimilar to the
foregoing; whether or not Trustor shall have notice or knowledge of any of the
foregoing.  Except as expressly provided
herein, Trustor waives all rights now or hereafter covered by statute or
otherwise to any abatement, suspension, deferment, diminution or reduction of
any sum secured hereby and payable by Trustor.

 

1.09.       Taxes and Impositions.

 

(a)           Trustor
shall pay, or cause to be paid prior to delinquency, all real property taxes
and assessments, general and special, and all other taxes and assessments of
any kind or nature whatsoever, including, without limitation, nongovernmental
levies or assessments such as maintenance charges, levies or charges resulting
from covenants, conditions and restrictions affecting the Trust Estate, which
are assessed or imposed upon the Trust Estate, or become due and payable, and
which create, may create or appear to create a lien upon the Trust Estate, or
any part thereof, or upon any property, equipment or other facility used in the
operation or maintenance thereof (all the above shall collectively be
hereinafter referred to as “Impositions”); provided, however, that if,
by law any such Imposition is payable, or may at the option of the taxpayer be
paid, in installments, Trustor may pay the same or cause it to be paid,
together with any accrued interest on the unpaid balance of such Imposition, in
installments as the same become due and before any fine, penalty, interest or
cost may be added thereto for the nonpayment of any such installment and
interest.

 

(b)           If
at any time after the date hereof there shall be assessed or imposed (i) a tax
or assessment on the Trust Estate in lieu of or in addition to the Impositions
payable by Trustor pursuant to Section 1.09(a), or (ii) a license fee, tax
or assessment imposed on Beneficiary and measured by or based in whole or in
part upon the amount of the outstanding obligations secured hereby, then all
such taxes, assessments or fees shall be deemed to be included within the term
“Impositions”
as defined in Section 1.09(a) and Trustor shall pay and discharge the same
as herein provided with respect to the payment of Impositions.  If

 

8

 

Trustor fails to pay such Impositions prior
to delinquency, Beneficiary may at its option declare all obligations secured
hereby together with all accrued interest thereon, immediately due and
payable.  Anything to the contrary
herein notwithstanding, Trustor shall have no obligation to pay any franchise,
estate, inheritance, income, excess profits or similar tax levied on
Beneficiary or on the obligations secured hereby.

 

(c)           Subject
to the provisions of Section 1.09(d) and upon request by
Beneficiary, Trustor shall deliver to Beneficiary within thirty (30) days after
the last date prior to delinquency for payment of any such Imposition official
receipts of the appropriate taxing authority, or other proof satisfactory to
Beneficiary, evidencing the payment thereof.

 

(d)           Trustor
shall have the right before any delinquency occurs to contest or object in good
faith to the amount or validity of any Imposition by appropriate proceedings,
but such right shall not be deemed or construed in any way as relieving,
modifying or extending Trustor’s covenant to pay any such Imposition at the
time and in the manner provided in this Section 1.09, unless (i) Trustor shall
demonstrate to Beneficiary’s reasonable satisfaction that the proceedings to be
initiated by Trustor shall operate to prevent the sale of the Trust Estate, or
any part thereof, to satisfy such Imposition prior to final determination of
such proceedings; or (ii) Trustor shall furnish a good and sufficient bond or
surety as requested by and satisfactory to Beneficiary; or (iii) Trustor shall
demonstrate to Beneficiary’s satisfaction that Trustor has provided a good and
sufficient undertaking as may be required or permitted by law to accomplish a
stay of any such sale.

 

(e)           Upon
written request of Beneficiary after an Event of Default, Trustor shall pay to
Beneficiary monthly installments in an amount equal to one-twelfth (1/12) of
the sum of the annual Impositions reasonably estimated by Beneficiary, for the
purpose of paying the installment of Impositions next due on the Trust Estate
(funds deposited for this purpose shall hereinafter be referred to as “Impounds”).  In such event Trustor further agrees to
cause all bills, statements or other documents relating to Impositions to be
sent or mailed directly to Beneficiary. 
Upon receipt of such bills, statements or other documents, and providing
Trustor has deposited sufficient Impounds with Beneficiary pursuant to this Section
1.09(e), Beneficiary shall timely pay such amounts as may be due
thereunder out of the Impounds so deposited with Beneficiary.  If at any time and for any reason the
Impounds deposited with Beneficiary are or will be insufficient to pay such
amounts as may then or subsequently be due, Beneficiary may notify Trustor and
within fifteen (15) days of such notice Trustor shall deposit an amount equal
to such deficiency with Beneficiary. 
Notwithstanding the foregoing, nothing contained herein shall cause
Beneficiary to be deemed a trustee of said funds or to be obligated to pay any
amounts in excess of the amount of funds deposited with Beneficiary pursuant to
this Section
1.09(e).  Beneficiary may
commingle Impounds with its own funds and shall not be obligated to pay or
allow any interest on any Impounds held by Beneficiary pending disbursement or
application hereunder.  Beneficiary may
reserve for future payment of Impositions such portion of the Impounds as
Beneficiary may in its absolute discretion deem proper.  Upon an Event of Default under any of the
Loan Documents or this Deed of Trust, Beneficiary may apply the balance of the
Impounds upon any indebtedness or obligation secured hereby in such order as
Beneficiary may determine, notwithstanding that said indebtedness or the
performance of said obligation may not yet be due according to the

 

9

 

terms thereof.  Should Trustor fail to deposit with Beneficiary (exclusive of
that portion of said payments which has been applied by Beneficiary upon any
indebtedness or obligation secured hereby) sums sufficient to fully pay such
Impositions before delinquency thereof, Beneficiary may, at Beneficiary’s
election, but without any obligation so to do, advance any amounts required to
make up the deficiency, which advances, if any, shall be secured hereby and
shall be repayable to Beneficiary as herein elsewhere provided, or at the
option of Beneficiary the latter may, without making any advance whatever,
apply any Impounds held by it upon any indebtedness or obligation secured
hereby in such order as Beneficiary may determine, notwithstanding that said
indebtedness or the performance of said obligation may not yet be due according
to the terms thereof.  Should any Event
of Default occur or exist on the part of the Trustor in the payment or
performance of any of Trustor’s or Guarantor’s obligations under the terms of
the Loan Documents, Beneficiary may, at any time at Beneficiary’s option, apply
any sums or amounts in its hands received pursuant to Sections 1.04(b) and 1.09(e)
hereof, or as rents or income of the Trust Estate or otherwise, to any
indebtedness or obligation of the Trustor secured hereby in such manner and
order as Beneficiary may elect, notwithstanding said indebtedness or the
performance of said obligation may not yet be due according to the terms
thereof.  The receipt, use or
application of any such Impounds paid by Trustor to Beneficiary hereunder shall
not be construed to affect the maturity of any indebtedness secured by this
Deed of Trust or any of the rights or powers of Beneficiary or Trustee under
the terms of the Loan Documents or any of the obligations of Trustor or
Guarantor under the Loan Documents.

 

(f)            Trustor
shall use commercially reasonable best efforts so as to not suffer, permit or
initiate the joint assessment of any real and personal property which may
constitute all or a portion of the Trust Estate or suffer, permit or initiate
any other procedure whereby the lien of the real property taxes and the lien of
the personal property taxes shall be assessed, levied or charged to the Trust
Estate as a single lien.

 

(g)           If
requested by Beneficiary, Trustor shall cause to be furnished to Beneficiary a
tax reporting service covering the Trust Estate of the type, duration and with
a company satisfactory to Beneficiary.

 

1.10.       Utilities.  Trustor shall pay or shall cause to be paid
prior to delinquency all utility charges which are incurred by Trustor for the
benefit of the Trust Estate or which may become a charge or lien against the
Trust Estate for gas, electricity, water or sewer services furnished to the
Trust Estate and all other assessments or charges of a similar nature, whether
public or private, affecting or related to the Trust Estate or any portion
thereof, whether or not such taxes, assessments or charges are or may become
liens thereon.

 

1.11.       Actions Affecting Trust Estate.  Trustor shall appear in and contest any
action or proceeding purporting to affect the security hereof or the rights or
powers of Beneficiary or Trustee; and shall pay all costs and expenses,
including the cost of evidence of title and reasonable attorneys’ fees and
costs, in any such action or proceeding in which Beneficiary or Trustee may
appear.

 

1.12.       Actions By Trustee or Beneficiary to
Preserve Trust Estate.  After the occurrence of an Event of Default, Beneficiary and/or
Trustee, each in its own discretion, without obligation so

 

10

 

to do, without releasing
Trustor from any obligation, and without notice to or demand upon Trustor, may
make or do the same in such manner and to such extent as either may deem
necessary to protect the security hereof. 
In connection therewith (without limiting their general powers, whether
conferred herein, in another Loan Document or by law), Beneficiary and Trustee
shall have and are hereby given the right, but not the obligation, (a) to enter
upon and take possession of the Trust Estate; (b) to make additions,
alterations, repairs and improvements to the Trust Estate which they or either
of them may consider necessary or proper to keep the Trust Estate in good
condition and repair; (c) to appear and participate in any action or proceeding
affecting or which may affect the security hereof or the rights or powers of
Beneficiary or Trustee; (d) to pay, purchase, contest or compromise any
encumbrance, claim, charge, lien or debt which in the judgment of either may
affect or appears to affect the security of this Deed of Trust or be prior or
superior hereto; and (e) in exercising such powers, to pay necessary expenses,
including employment of counsel or other necessary or desirable consultants.  Trustor shall, within fifteen (15) days of
demand therefor by Beneficiary and Trustee or any of them, pay to Beneficiary
and Trustee an amount equal to all amounts advanced by Beneficiary and
reasonable costs and expenses incurred by them in connection with the exercise
by either Beneficiary or Trustee or both of the foregoing rights, including,
without limitation, costs of evidence of title, court costs, appraisals,
surveys and receiver’s, trustee’s and attorneys’ fees and costs, together with
interest thereon from the date of such expenditures at the Agreed Rate.

 

1.13.       Transfer of Trust Estate by Trustor.  Beneficiary has found Trustor’s particular
expertise to be an important element in its decision to enter into the Loan
Agreement, and advance funds to the Trustor, and Beneficiary continues to rely
upon such expertise to ensure the satisfactory completion of the Project and
administration of the Premises. 
Therefore, Trustor agrees that, unless Beneficiary otherwise consents in
writing, (a) Trustor will not sell, lease, transfer or convey (whether directly
or indirectly), or permit to be sold, leased, transferred or conveyed (whether
directly or indirectly), at any time, by agreement for sale or in any other
manner (whether directly or indirectly), whether voluntarily, involuntarily, by
operation of law or otherwise, any portion of the Trust Estate or Trustor’s
interest therein, and (b) the general partner of Trustor will not assign,
transfer, hypothecate, pledge, convey or dispose of, whether voluntarily involuntarily,
by operation of law or otherwise, legal or beneficial ownership of any interest
in Trustor or approve or consent to the assignment, transfer, hypothecation,
pledge, conveyance or disposal of, whether voluntarily, involuntarily, by
operation of law or otherwise, legal or beneficial ownership of any guarantor’s
interest in Trustor.  Consent to one
such transaction shall not be deemed to be a waiver of the right to consent to
future or successive transactions. 
Beneficiary may grant or deny such consent in its reasonable discretion
and, if consent should be given, any such transfer shall be subject to this
Deed of Trust, and any such transferee shall assume all obligations hereunder
and under the other Loan Documents and agree to be bound by all provisions
contained herein and therein. 
Beneficiary may condition its consent to the requirement that:  (i) Trustor, or any guarantor of Trustor’s
obligations under the Note, remain obligated thereunder, (ii) one or more of
the indemnitors under the Environmental Indemnification Agreement remain
obligated thereunder, and (iii) such transferee execute and deliver a written
environmental indemnification agreement in form and substance reasonably
satisfactory to Beneficiary.  If any of
the events described in (a) or (b) shall occur without the prior written
consent of Beneficiary the Note and all other sums secured by this Deed of
Trust may be declared due and payable at the option of Beneficiary.  The foregoing shall not be deemed to

 

11

 

apply to taking of the Trust
Estate, or any part thereof or interest therein, for public or quasi-public use
under the power of eminent domain, condemnation or otherwise.  A transfer or conveyance in violation of this
Section 1.13 shall be referred to as a “Prohibited Transfer”.

 

1.14.       Full Performance Required; Survival of
Warranties. 
All representations, warranties and covenants of Trustor contained in
any loan application or other written document executed by Trustor in connection
with the Note secured hereby or contained in the Loan Documents or incorporated
by reference therein, shall survive the execution and delivery of this Deed of
Trust and shall remain continuing obligations, warranties and representations
of Trustor so long as any portion of the obligations secured by this Deed of
Trust remain outstanding.

 

1.15.       Eminent Domain.  In the event that any proceeding or action
be commenced for the taking of the Trust Estate, or any part thereof or
interest therein, for public or quasi-public use under the power of eminent
domain, condemnation or otherwise, or if the same be taken or damaged by reason
of any public improvement or condemnation proceeding, or in any other manner (a
“Condemnation”),
or should Trustor receive any notice or other information regarding such
proceeding, or in any other manner, or should Trustor receive any notice or
other information regarding such proceeding, action, taking or damage, Trustor
shall give prompt written notice thereof to Beneficiary.  Beneficiary shall be entitled at its option,
without regard to the adequacy of its security, to commence, appear in and
prosecute in its own name any such action or proceeding.  Beneficiary shall also be entitled to make
any compromise or settlement in connection with such taking or any damage to
the Premises or the Improvements incidental to such taking.  All compensation, awards, damages, rights of
action and proceeds awarded to Trustor by reason of any such taking or damage
incidental to such taking to the Premises of the Improvements, or any part
thereof or any interest therein for public or quasi-public use under the power
of eminent domain by reason of any public improvement or condemnation
proceeding, or in any other similar manner (the “Condemnation Proceeds”) are
hereby assigned to Beneficiary and Trustor agrees to execute such further
assignments of the Condemnation Proceeds as Beneficiary or Trustee may
require.  After deducting therefrom all
reasonable costs and expenses (regardless of the particular nature thereof and
whether incurred with or without suit), including reasonable attorneys’ fees,
incurred by it in connection with any such action or proceeding, Beneficiary
shall apply all such Condemnation Proceeds to the restoration of the Improvements,
provided that:

 

(a)           the
taking or damage will not, in Beneficiary’s reasonable judgment, materially
affect the contemplated use and operation of the Improvements;

 

(b)           there is no Event of
Default hereunder;

 

(c)           all terms and
conditions of the Loan Agreement have been met; and

 

(d)           there
are sufficient Condemnation Proceeds, in Beneficiary’s sole discretion, which
alone or when added to undisbursed loan proceeds under the Loan Agreement will
be sufficient to restore the Improvements.

 

If all of the above conditions
are met, Beneficiary shall disburse the Condemnation Proceeds only as repairs
or replacements are effected and continuing expenses become due and
payable.  If any one or

 

12

 

more of the above conditions
are not met, Beneficiary shall have the right to apply all of the Condemnation
Proceeds, after deductions as herein provided, to the repayment of the
outstanding balance of the Note, together with accrued interest thereon,
notwithstanding that said outstanding balance may not be due and payable; and
Beneficiary shall have not further obligation to make disbursements pursuant to
the Loan Agreement or any other Loan Documents.  If the Condemnation Proceeds are not sufficient to repay the Note
in full, Trustor shall immediately pay any remaining balance, together with
accrued interest thereon.  Application
or release of the Condemnation Proceeds as provided herein shall not cure or
waive any default or notice of default hereunder or under any other Loan
Document or invalidate any act done pursuant to such notice.

 

1.16.       Additional Security.  No other security now existing, or hereafter
taken, to secure the obligations secured hereby shall be impaired or affected
by the execution of this Deed of Trust; and all additional security shall be
taken, considered and held as cumulative. 
The taking of additional security, execution of partial releases of the
security, or any extension of the time of payment of the indebtedness shall not
diminish the force, effect or lien of this Deed of Trust and shall not affect
or impair the liability of any maker, surety or endorser for the payment of
said indebtedness.  In the event
Beneficiary at any time holds additional security for any of the obligations
secured hereby, it may enforce the sale thereof or otherwise realize upon the
same, at its option, either before, concurrently, or after a sale is made
hereunder.

 

1.17.       Appointment of Successor Trustee.  Beneficiary may, from time to time, by a
written instrument executed and acknowledged by Beneficiary, mailed to Trustor
and recorded in the county in which the Trust Estate is located and by
otherwise complying with the provisions of applicable law, substitute a
successor or successors to any Trustee named herein or acting hereunder; and
said successor shall, without conveyance from the Trustee predecessor, succeed
to all title, estate, rights, powers and duties of said predecessor.

 

1.18.       Successors and Assigns.  This Deed of Trust applies to, inures to the
benefit of and binds all parties hereto, their heirs, legatees, devisees,
administrators, executors, successors and assigns.  The term “Beneficiary” shall mean the owner and holder of the
Note, whether or not named as Beneficiary herein.

 

1.19.       Inspections.  Upon three (3) Business Days notice to
Trustor, Beneficiary, or its agents, representatives or workers, are authorized
to enter at any reasonable time upon or in any part of the Trust Estate for the
purpose of inspecting the same and for the purpose of performing any of the
acts it is authorized to perform hereunder or under the terms of any of the
Loan Documents.  Beneficiary may upon
three (3) Business Days notice to Trustor enter its principal place of business
for the purpose of examining its books and records.

 

1.20.       Liens.  Trustor shall pay and promptly discharge, at
Trustor’s cost and expense, all monetary liens, encumbrances and charges upon
the Trust Estate, or any part thereof or interest therein other than the
Permitted Exceptions (as defined in the Loan Agreement); provided that Trustor
shall have the right to contest in good faith the validity of any such lien,
encumbrance or charge in accordance with the terms of the Loan Agreement or Section
1.09(d) hereof or provided that the Trustor has furnished sufficient
additional collateral to the Beneficiary in its sole and

 

13

 

absolute discretion.  If Trustor shall fail to remove and
discharge any such lien, encumbrance or charge as required hereby, then, in
addition to any other right or remedy of Beneficiary, Beneficiary may, but
shall not be obligated to, discharge the same, either by paying the amount
claimed to be due, or by procuring the discharge of such lien, encumbrance or
charge by depositing in a court a bond for the amount claimed or otherwise
giving security for such claim, or by procuring such discharge in such manner
as is or may be prescribed by law. 
Trustor shall, within fifteen (15) days after demand therefor by
Beneficiary, pay to Beneficiary an amount equal to all costs and expenses
incurred by Beneficiary in connection with the exercise by Beneficiary of the
foregoing right to discharge any such lien encumbrance or charge, including
reasonable attorneys’ fees, together with interest thereon from the date of
such expenditure at the Default Interest Rate.

 

1.21.       Trustee’s Powers.  At any time, or from time to time, without
liability therefor and without notice to Trustor, upon written request of
Beneficiary and presentation of this Deed of Trust and the Note secured hereby
for endorsement, and without affecting the personal liability of any person for
payment of the indebtedness secured hereby or the effect of this Deed of Trust
upon the remainder of said Trust Estate, Trustee may (a) reconvey any part of
said Trust Estate, (b) consent in writing to the making of any map or plat
thereof, (c) join in granting any easement thereon, (d) or join in any
extension agreement or any agreement subordinating the lien or charge hereof.

 

1.22.       Beneficiary’s Powers.  Without affecting the liability of any other
person liable for the payment of any obligation herein mentioned, and without
affecting the lien or charge of this Deed of Trust upon any portion of the
Trust Estate not then or theretofore released as security of the full amount of
all unpaid obligations, Beneficiary may, from time to time and without notice
(a) release any person so liable, (b) extend the maturity or alter any of the
terms of any such obligation, (c) grant other indulgences, (d) release or
reconvey or cause to be released or reconveyed at any time at Beneficiary’s
option any parcel, portion or all of the Trust Estate, (e) take or release any
other or additional security for any obligation herein mentioned, or (f) make
compositions or other arrangements with debtors in relation thereto.

 

1.23.       Trade Names.  At the request of Beneficiary, Trustor shall
execute a certificate in form satisfactory to Beneficiary listing the trade
names or fictitious business names under which Trustor intends to operate the
Trust Estate or any business located thereon and representing and warranting
that Trustor does business under no other trade names or fictitious business
names with respect to the Trust Estate. 
Trustor shall immediately notify Beneficiary in writing of any charge in
said trade names or fictitious business names, and will, upon request of
Beneficiary, execute any additional financing statements and other certificates
necessary to reflect the change in trade names or fictitious business names.

 

1.24.       Leasehold.  If a leasehold estate constitutes a portion
of the Trust Estate, Trustor agrees not to amend, change terminate or modify
such leasehold estate or any interest therein without the prior written consent
of Beneficiary.  Consent to one amendment,
change, agreement or modification shall not be deemed to be a waiver of the
right to require consent to other, future or successive amendments, changes,
agreements or modifications.  Trustor
agrees to perform all obligations and agreements under said leasehold and shall
not take any action or omit to take any action which would effect or permit the
termination of said leasehold.  Trustor
agrees to promptly

 

14

 

notify Beneficiary in writing
with respect to any default or alleged default by any party thereto and respect
to any default or alleged default by any party thereto and to deliver to
Beneficiary copies of all notices, demands, complaints or other communications
received or given by Trustor with respect to any such default or alleged
default.  Beneficiary shall have the
option to cure any such default and to perform any or all of Trustor’s
obligations thereunder.  All sums
expended by Beneficiary in curing any such default shall be secured hereby and
shall be immediately due and payable without demand or notice and shall bear
interest from the date of expenditure at the Default Interest Rate.

 

ARTICLE
II

ASSIGNMENT
OF RENTS, ISSUES AND PROFITS

 

2.01.       Intentionally Omitted.

 

2.02.       Assignment to Trustee.  Trustor hereby assigns and transfers to
Trustee all the rents of the Trust Estate, and hereby gives to and confers upon
Trustee the right, power and authority to collect such rents.  Trustor irrevocably appoints Trustee its
true and lawful attorney-in-fact, at the option of Beneficiary at any time and
from time to time upon and after the occurrence of an Event of Default, to
demand, receive and enforce payment, to give receipts, releases and
satisfactions, and to sue, in the name of Trustor, Trustee or Beneficiary, for
all such rents, issues and profits and apply the same to the indebtedness
secured hereby; provided, however, that so long as an Event of Default shall
not have occurred hereunder and be continuing, Trustor shall have the right to
collect such rents.  Upon request of
Beneficiary, Trustor shall execute and deliver to Beneficiary, in recordable
form, a specific assignment of any Lease, now or hereafter affecting the Trust
Estate or any portion thereof, to further evidence the assignment hereby made.

 

2.03.       Election of Remedies.  Upon the occurrence of any Event of Default
hereunder Beneficiary may, at its option, exercise its rights (or cause the
Trustee to exercise) its rights hereunder. 
If Beneficiary elects to exercise its rights hereunder, Beneficiary or
Trustee may, at any time without notice, either in person, by agent or by a
receiver appointed by a court, enter upon and take possession of all or any
portion of the Trust Estate, enforce all Leases, collect all Rents, including
those past due and unpaid, and apply the same, to the costs and expenses of
operation and collection, including, without limitation, attorneys’ fees and
costs, and to any indebtedness then secured hereby, and in such order as
Beneficiary may determine.  In
connection with the exercise by Beneficiary of its rights hereunder, Trustor
agrees that Beneficiary shall have the right to specifically enforce such
rights and to obtain the appointment of a receiver in accordance with the
provision of Section 5.05 hereof without regard to the value of the Trust
Estate or the adequacy of any security for the obligations then secured
hereby.  The collection of such Rents or
the entering upon and taking possession of the Trust Estate, or the application
thereof as aforesaid, shall not cure or waive any default or notice of default
hereunder or invalidate any act done in response to such default or pursuant to
such notice of default, or be deemed or construed to make Beneficiary a
mortgagee-in-possession of the Trust Estate or any portion thereof.

 

15

 

ARTICLE III

TRUSTOR’S REPRESENTATIONS

 

3.01.       Trustor’s Representations.  Trustor hereby represents and covenants to
Beneficiary that:

 

(a)           Trustor
is lawfully seized of the Trust Estate hereby mortgaged, granted and conveyed
and has the right to mortgage, grant and convey the Trust Estate that the Trust
Estate is unencumbered except for the Permitted Exceptions and that Trustor
will warrant and defend generally the title to the Trust Estate or any portion
thereof, against any and all claims and demands, subject only to the schedule
of exceptions, if any, listed in the title insurance policy insuring
Beneficiary’s interest in the Premises.

(b)           The
execution, delivery and performance of the Note and the other Loan Documents
(i) have received all necessary governmental approval; (ii) do not violate any
provision of any law, any order of any court or agency of government or any
indenture, agreement or other instrument to which Trustor is a party, or by
which it or any portion of the Premises is bound; and (iii) are not in conflict
with, nor will it result in breach of, or constitute (with due notice and/or
lapse of time) a default under any indenture, agreement, or other instrument,
or result in the creation or imposition of any lien, charge or encumbrance of
any nature whatsoever, upon any of its property or assets, except as
contemplated by the provisions of this Deed of Trust.

 

(c)           The
Note and the other Loan Documents, when executed and delivered by Trustor will
constitute the legal, valid and binding obligations of Trustor and all other
obligors named therein, if any, in accordance with their respective terms.

 

(d)           All
other information, reports, papers, balance sheets, statements of profit and
loss, and data given to Beneficiary or its agents and employees regarding
Trustor or any other party obligated under the terms of the Note or any of the
other Loan Documents are accurate and correct in all material respects, and are
complete insofar as completeness may be necessary to give Beneficiary a true
and accurate knowledge of the subject matter.

 

(e)           There
is not now pending against or affecting Trustor or any other party obligated
under the terms of the Note or any of the other Loan Documents, nor, to the
best of Trustor’s knowledge, is there threatened any action, suit or proceeding
at law, in equity or before any administrative agency which, if adversely
determined, would materially impair or affect the financial condition or
operation of Trustor.

 

3.02.       Hazardous Waste.  Based solely on the Environmental Reports
(as such term is defined in the Loan Agreement), Trustor represents and
warrants that the Premises are in compliance with all “Environmental Laws” (as
hereinafter defined); that, there are no conditions existing that require
cleanup, removal or other remedial action pursuant to any Environmental Laws;
that Trustor is not a party to any litigation or administrative proceeding,
nor, to the best of Trustor’s knowledge, is there any litigation or
administrative proceeding contemplated or threatened which would assert or
allege any violation of any Environmental Laws; that neither the Premises nor
Trustor is subject to any judgment, decree, order or citation related to or
arising out of any Environmental Laws; and that

 

16

 

no permits or licenses are
required under any Environmental Laws regarding the Premises.  The term “Environmental Laws” shall
mean any and all federal, state and local laws, statutes, regulations,
ordinances, codes, rules and other governmental restrictions or requirements
relating to the environment or hazardous substances, including without
limitation the Federal Solid Waste Disposal Act, the Federal Clean Air Act, the
Federal Clean Water Act, the Federal Resource Conservation and Recovery Act of
1976 and the Federal Comprehensive Environmental Responsibility, Cleanup and
Liability Act of 1980, as well as all regulations of the United States
Environmental Protection Agency, the Nuclear Regulatory Agency and any state
department of natural resources or state environmental protection agency of the
State of California now or at any time hereafter in effect.  Trustor covenants and agrees to comply with
all applicable Environmental Laws; to provide to Beneficiary immediately upon
receipt copies of any correspondence, notice, pleading, citation, indictment,
complaint, order or other document received by Trustor asserting or alleging a
circumstance or condition that requires or may require a cleanup, removal or
other remedial action under any Environmental Laws, or that seeks criminal or
punitive penalties for an alleged violation of any Environmental Laws; and to
advise Beneficiary in writing as soon as Trustor becomes aware of any condition
or circumstances which makes any of the representations or statements contained
in this Paragraph incomplete or inaccurate. 
In the event Beneficiary obtains or receives written evidence that any
such circumstance might exist, Trustor agrees, at Trustor’s expense and at the
request of Beneficiary, to permit an environmental audit to be conducted by
Beneficiary or an independent agent selected by Beneficiary.  This provision shall not relieve Trustor
from conducting its own environmental audits or taking any other steps
necessary to comply with any Environmental Laws.  If, in the opinion of Beneficiary, there exists any uncorrected
violation by Trustor of an Environmental Law or any condition which requires or
may require any cleanup, removal or other remedial action under any
Environmental Laws, and such cleanup, removal or other remedial action is not
completed within the time period required under any applicable Environmental
Laws, the same shall, at the option of Beneficiary constitute a default hereunder,
without further notice or cure period provided, however that if Trustor has
commenced appropriate cleanup, removal or remedial action within the aforesaid
period and is, in Beneficiary’s discretion, diligently pursuing same, then the
foregoing shall not constitute a default. 
Trustor and Beneficiary agree that: 
(a) this Section 3.02 is intended as Beneficiary’s written request for
information (and Trustor’s response) concerning the environmental condition of
the real property security as required by California Code of Civil Procedure
Section 726.5; and (b) this Section 3.02 (together with any indemnity
applicable to a breach of this Section 3.02) with respect to the
environmental condition of the real property security is intended by Trustor
and Beneficiary to be an “environmental provision” for purposes of California
Code of Civil Procedure Section 736. 
Further, it is expressly understood and agreed that Trustor’s duty to
indemnify Beneficiary pursuant to the Loan Documents with respect to the environmental
condition of the real property security shall, except as provided to the
contrary herein, survive: (x) any judicial or nonjudicial foreclosure under
this Deed of Trust, or the transfer of the Trust Estate in lieu thereof; (y)
the release and reconveyance or cancellation of the Deed of Trust; and (z) the
satisfaction of all of Trustor’s obligations under the Loan Documents.

 

17

 

ARTICLE
IV

INTENTIONALLY
OMITTED

 

ARTICLE
V

REMEDIES
UPON DEFAULT

 

5.01.       Events of Default.  Each of the following events shall
constitute a default (“Event of Default”) under this Deed of
Trust:

 

(a)           Failure
of Trustor to pay within ten (10) days of the date when due any sum secured
hereby, including but not limited to any installment of principal thereof or
interest thereon;

 

(b)           Failure
of Trustor to perform or observe any other covenant, warranty or other
provision contained in this Deed of Trust and not otherwise covered in any of
the other provisions of this Section 5.01, for a period in excess of
thirty (30) days after the date on which notice of the nature of such failure
is given by Beneficiary to Trustor (provided, however, that if such default is
susceptible to cure but cannot by the use of reasonable efforts be cured within
such thirty (30) day period, such default shall not constitute an Event of
Default if and so long as Trustor has commenced to cure such default within
such thirty (30) day period and thereafter is proceeding to cure such default
continuously and diligently in Beneficiary’s reasonable judgment and such
default, in any event, is cured not later than ninety (90) days after the
occurrence of such default);

 

(c)           The
occurrence of any default or event of default under the terms of any of the
other Loan Documents which is not cured within any applicable notice and/or
cure period; or

 

(d)           A
default under any deed of trust subordinate to this Deed of Trust which is not
cured within any applicable notice and/or cure period.

 

5.02.       Acceleration Upon Default, Additional
Remedies.  Upon
the occurrence of an Event of Default, Beneficiary may, at its option, declare
all indebtedness secured hereby to be immediately due and payable without any
presentment, demand, protest or notice of any kind.  Thereafter Beneficiary may:

 

(a)           Either in person or by agent, with or
without bringing any action or proceeding, or by a receiver appointed by a
court and without regard to the adequacy of its security, enter upon and take
possession of the Trust Estate, or any part thereof, in its own name or in the
name of Trustee, and do any acts which it deems reasonably necessary to
preserve the value, marketability or rentability of the Trust Estate, or any
part thereof or interest therein, increase the income therefrom or protect the
security hereof and, with or without taking possession of the Trust Estate, sue
for or otherwise collect the rents, issues and profits thereof, including those
past due and unpaid, and apply the same, less costs and expenses of operation
and collection including, without limitation, attorneys’ fees, upon any
indebtedness secured hereby, all in such order as Beneficiary may
determine.  The entering upon and taking
possession of the Trust Estate, the collection of such rents, issues and
profits

 

18

 

and the application thereof as
aforesaid, shall not cure or waive any default or notice of default hereunder
or invalidate any act done in response to such default or pursuant to such
notice of default and, notwithstanding the continuance in possession of all or
any portion of the Trust Estate or the collection, receipt and application of
rents, issues or profits, Trustee or Beneficiary shall be entitled to exercise
every right provided for in any of the Loan Documents or by law upon occurrence
of any Event of Default, including the right to exercise the power of sale;

 

(b)           Commence an action to foreclose this
Deed of Trust as a mortgage, appoint a receiver, or specifically enforce any of
the covenants hereof;

 

(c)           Deliver
to Trustee a written declaration of default and demand for sale, and a written
notice of default and election to cause Trustor’s interest in the Trust Estate
to be sold, which notice Trustee or Beneficiary shall cause to be duly filed
for record in the Official Records of the County in which the Trust Estate is
located; or

 

(d)           Exercise
all other rights and remedies provided herein, in any Loan Document or other
document or agreement now or hereafter securing all or any portion of the
obligations secured hereby, or by law.

 

5.03.       Foreclosure By Power of Sale.  Should Beneficiary elect to foreclose by
exercise of the power of sale herein contained, Beneficiary shall notify
Trustee and shall deposit with Trustee this Deed of Trust and the Note and such
receipts and evidence of expenditures made and secured hereby as Trustee may
require.

 

(a)           Upon
receipt of such notice from Beneficiary, Trustee shall cause to be recorded,
published and delivered to Trustor such Notice of Default and Election to Sell
as then required by law and by this Deed of Trust.  Trustee shall, without demand on Trustor, after lapse of such
time as may then be required by law and after recordation of such Notice of
Default and after Notice of Sale having been given as required by law, sell the
Trust Estate at the time and place of sale fixed by it in said Notice of Sale,
either as a whole, or in separate lots or parcels or items as Trustee shall
deem expedient, and in such order as it may determine, at public auction to the
highest bidder for cash in lawful money of the United States payable at the
time of sale.  Trustee shall deliver to
such purchaser or purchasers thereof its good and sufficient deed or deeds
conveying the property so sold, but without any covenant or warranty, express
or implied.  The recitals in such deed
of any matters or facts shall be conclusive proof of the truthfulness
thereof.  Any person, including, without
limitation, Trustor, Trustee or Beneficiary, may purchase at such sale.

 

(b)           After
deducting all costs, fees and expenses of Trustee and of this Trust, including
costs of evidence of title in connection with sale and reasonable attorneys’
fees and costs, Trustee shall apply the proceeds of sale in the following
priority, to payment of:  (i) first, all
sums expended under the terms hereof, not then repaid, with accrued interest at
the Agreed Rate;  (ii) second, all other
sums then secured hereby; and (iii) the remainder, if any, to the person or
persons legally entitled thereto.

 

19

 

(c)           Subject
to California Civil Code Section 2924g, Trustee may postpone sale of all
or any portion of the Trust Estate by public announcement at such time and
place of sale, and from time to time thereafter may postpone such sale by public
announcement or subsequent notice of sale, and without further notice make such
sale at the time fixed by the last postponement, or may, in its discretion,
give a new notice of sale.

 

5.04.       Grant of Security Interest.  In addition to and not in substitution for
any other interest granted herein, Trustor hereby grants to Beneficiary an
express security interest in, and mortgages to the Beneficiary, all goods,
types and items of property owned by the Trustor which are described in
Subsection (a) below (herein, the “Equipment”) whether now or hereafter
erected on or placed in or upon the Premises or any part thereof, and all
replacements thereof, additions and accessions thereto and products and
proceeds thereof, to further secure the payment of the Note, the payment of all
other sums due from the Trustor to the Beneficiary, and the performance by
Trustor of all the covenants and agreements set forth herein.  Trustor represents and covenants that,
except for the security interest granted hereby, Trustor is the owner of the
Equipment free from any adverse lien, security interest or encumbrance and that
Trustor has made payment in full for all such Equipment; and Trustor will
defend and protect the Equipment and title thereto against all claims and
demands of all persons at any time claiming the Equipment or any interest
therein.  Trustor will upon request from
Beneficiary deliver to Beneficiary such further security agreements, chattel
mortgages, financing statements and evidence of ownership of such items as Beneficiary
may reasonably request.

 

(a)           The
security interest hereby granted to Beneficiary shall cover the following types
or items of property now or hereafter owned by the Trustor and used in
connection with, and located upon, the Premises: All property described in Exhibit B
attached hereto.  In addition, Trustor
hereby grants to Beneficiary an express security interest in all tenements,
hereditaments, easements, appendages, licenses, privileges and appurtenances
belonging or in any way appertaining to the Trust Estate, and all interests in
property, rights and franchises or any part thereof, together with all the
reversions and remainders, and to the extent permitted by law, all rents,
tolls, issues and profits from the Trust Estate, and all the estate, right,
title, interest and claims whatsoever, at law and in equity, which Trustor now
has or may hereafter acquire with respect to the Trust Estate and the
Equipment.

 

(b)           Upon
the occurrence of an Event of Default, Beneficiary may proceed in any sequence:
(i) to exercise its rights hereunder with respect to all or any portion of the
Trust Estate and all or any portion of the Collateral; and (ii) to exercise its
rights under the security interest granted herein with respect to all or any
portion of the collateral in accordance with the provisions of Section 9501(4)
of the California Commercial Code.

 

5.05.       Appointment of Receiver.  Upon the occurrence of an Event of Default
hereunder, Beneficiary, as a matter of right and without notice to Trustor or
anyone claiming under Trustor, and without regard to the then value of the
Trust Estate or the adequacy of any security for the obligations then secured
hereby, shall have the right to apply to any court having jurisdiction to
appoint a receiver or receivers of the Trust Estate, and, except to the extent
that Trustor is entitled to withhold consent or receive notice by law, Trustor
hereby irrevocably consents to such appointment and waives notice of any
application therefor.  Any such receiver
or receivers shall have all the usual

 

20

 

powers and duties of receivers
in like or similar cases and all the powers and duties of Beneficiary in case
of entry as provided herein and shall continue as such and exercise all such
powers until the later of (a) the date of confirmation of sale of the Trust
Estate; (b) the disbursement of all proceeds of the Trust Estate collected by
such receiver and the payment of all expenses incurred in connection therewith;
or (c) the termination of such receivership with the consent of Beneficiary or
pursuant to an order of a court of competent jurisdiction.

 

5.06.       Remedies Not Exclusive.  Subject to applicable law, Trustee and
Beneficiary, and each of them, shall be entitled to enforce payment and
performance of any indebtedness or obligations secured hereby and to exercise
all rights and powers under this Deed of Trust or under any Loan Document or
other agreement or any laws now or hereafter in force, notwithstanding some or
all of the said indebtedness and obligations secured hereby may now or
hereafter be otherwise secured, whether by mortgage, deed of trust, pledge,
lien, assignment or otherwise.  Neither
the acceptance of this Deed of Trust nor its enforcement whether by court
action or pursuant to the power of sale or other powers herein contained, shall
prejudice or in any manner affect Trustee’s or Beneficiary’s right to realize
upon or enforce any other security now or hereafter held by Trustee or
Beneficiary, it being agreed that Trustee and Beneficiary, and each of them,
shall be entitled to enforce this Deed of Trust and any other security now or
hereafter held by Beneficiary or Trustee in such order and manner as they or
either of them may in their absolute discretion determine.  No remedy herein conferred upon or reserved
to Trustee or Beneficiary is intended to be exclusive of any other remedy
herein or by law provided or permitted, but each shall be cumulative and shall
be in addition to every other remedy given hereunder or now or hereafter
existing at law or in equity or by statute. 
Every power or remedy given by any of the Loan Documents to Trustee or
Beneficiary or to which either of them may be otherwise entitled, may be
exercised, concurrently or independently, from time to time and as often as may
be deemed expedient by Trustee or Beneficiary and either of them may pursue
inconsistent remedies

 

5.07.       Request for Notice.  Trustor hereby requests a copy of any notice
of default and that any notice of sale hereunder be mailed to it at the address
set forth in Section 7.05 of this Deed of Trust.

 

ARTICLE
VI

 

6.01.       Financing Statement and Fixture Filing.

 

(a)           This
Deed of Trust constitutes a financing statement filed as a fixture filing in
the Official Records of the County Recorder of the county in which the Premises
is located with respect to any and all Fixtures (as hereinafter defined)
included within the term “Improvements” as used herein and with
respect to any goods, collateral or other personal property that may now be or
hereafter become Fixtures.  As used
herein, the term “Fixtures” shall mean all fixtures located
upon or within the Improvements or now or hereafter installed in, or used in
connection with any of the Improvements, including, but not limited to, any and
all partitions, screens, awnings, motors, engines, boilers, furnaces, pipes,
plumbing, elevators, cleaning and sprinkler systems, fire extinguishing
apparatus and equipment, water tanks, heating, ventilating, air conditioning,
air cooling equipment, refrigerators, washer and dryer units, and gas and
electric machinery, appurtenances and equipment, whether or not

 

21

 

permanently affixed to the Premises or the
Improvements.

 

(b)           It
is understood and agreed that, to protect Beneficiary against the effect of California
Commercial Code Section 9313, as amended from time to time, in the
event that (x) any Fixture owned by Trustor on the Trust Estate, or any
part thereof, is replaced or added to, or any new Fixture owned by Trustor is
installed by Trustor, and in each case such Fixture has a cost or fair market
value in excess of Ten Thousand and No/100 Dollars ($10,000.00), and
(y) such Fixture is or may be subject to a security interest held by a
seller or any other party:

 

(i)            Trustor or any owner of all or any part of the Trust
Estate shall, before the replacement, addition or installation of any such
Fixture, obtain the prior written approval of Beneficiary, and give Beneficiary
written notice that a security agreement with respect to such Fixture has been
or will be consummated, which notice shall contain the following information:

 

(A)          a description of the Fixtures to be replaced, added to,
installed or substituted;

 

(B)           a recital of the location at which the Fixtures will be
replaced, added to, installed or substituted;

 

(C)           a statement of the name and address of the holder and
amount of the security interest; and

 

(D)          the
date of the purchase of such Fixtures.

 

Neither this
subparagraph nor any consent by Beneficiary pursuant to this subparagraph shall
constitute an agreement to subordinate any right of Beneficiary in Fixtures or
other property covered by this Deed of Trust.

 

(ii)           Unless Beneficiary has given Trustor its prior written
approval of a proposed security agreement as provided in Section 6.01 (b)(i)
hereof, Beneficiary may, at its option, at any time, pay the balance due under
said security agreement and the amount so paid shall be (A) secured by
this Deed of Trust and shall be a lien on the Trust Estate enjoying the same
priorities vis-a-vis the estates and interests encumbered hereby as this Deed
of Trust, and (B) payable on demand with interest at the Agreed Rate from
the time of such payment as aforesaid; and the Beneficiary shall have the
privilege of acquiring by assignment from the holder of said security interest
any and all contract rights, accounts receivable, chattel paper, negotiable or
non-negotiable instruments, or other evidence of Trustor’s indebtedness for
such Fixtures, and, upon acquiring such interest aforesaid by assignment, shall
have the right to enforce the security interest as assignee thereof, in
accordance with the terms and provisions of the California Commercial Code, as
amended or supplemented, and in accordance with the law.

 

(iii)          The provisions of subparagraph (ii) above shall not apply
if the goods

 

22

 

that may become Fixtures are of at least
equivalent value and quality as any property being replaced and if the rights
of the party holding such security interest have been expressly subordinated,
at no cost to Beneficiary, to the lien of this Deed of Trust in a manner
satisfactory to Beneficiary, including, without limitation, at the option of
Beneficiary providing to Beneficiary a satisfactory opinion of counsel to the
effect that this Deed of Trust constitutes a valid and subsisting lien on such
Fixtures which is not subordinate to the lien of such security interest under
any applicable law, including, without limitation, the provisions of
Section 9313 of the California Commercial Code.

 

ARTICLE
VII

MISCELLANEOUS

 

7.01.       Amendments.  This Deed of Trust or any provision hereof
cannot be waived, changed, discharged or terminated orally, but only by an
instrument in writing signed by the party against whom enforcement of any
waiver, change, discharge or termination is sought.

 

7.02.       Trustor Waiver of Rights.  Trustor waives to the extent permitted by
law, (a) the benefit of all laws now existing or that may hereafter be enacted
providing for any appraisement before sale of any portion of the Trust Estate,
and, (b) all rights of redemption, valuation, appraisement, stay of execution,
notice of election to mature or declare due the whole of the secured
indebtedness and marshaling in the event of foreclosure of the liens hereby
created, and (c) all rights and remedies which Trustor may have or be able to
assert by reason of the laws of the State of California pertaining to the
rights and remedies of sureties; provided, however, nothing contained herein
shall be deemed to be a waiver of Trustor’s rights under Section 2924c of the California
Civil Code.

 

7.03.       Statements by Trustor.  Trustor shall, within ten (10) days after
written notice thereof from Beneficiary, deliver to Beneficiary a written
statement stating to Trustor’s knowledge the unpaid principal of and interest
on the Note and any other amounts secured by this Deed of Trust and stating
whether any offset or defense exists against such principal and interest.

 

7.04.       Reconveyance by Trustee.  Upon written request of Beneficiary stating
that all sums secured hereby have been paid in full, and upon surrender of this
Deed of Trust and the Note to Trustee for cancellation and retention, and upon
payment by Trustor of Trustee’s fees, Trustee shall reconvey to Trustor, or to
the person or persons legally entitled thereto, without warranty, any portion
of the Trust Estate then held hereunder. 
The recitals in such reconveyance of any matters or facts shall be
conclusive proof of the truthfulness thereof. 
The grantee in any reconveyance may be described as “the person or
persons legally entitled thereto.” 
Notwithstanding anything to the contrary contained in this Deed of
Trust, Trustor may obtain a partial release of this Deed of Trust with respect
to a Condominium upon its compliance with and satisfaction of the provisions of
Article
IV of this Deed of Trust, and the applicable provisions of the Loan
Agreement.

 

7.05.       Notices.  Any notice, demand or other communication
required or permitted hereunder shall be deemed given (i) upon receipt when
delivered or if sent by nationally recognized

 

23

 

overnight air courier, or (ii)
two (2) business days after being deposited in the United States certified
mail, return receipt requested, properly addressed to the party, at the address
of such party set forth below:

 

	
  To Beneficiary:

  	
   

  	
  Amster Trading Company Charitable Remainder Trust

  
	
   

  	
   

  	
  dated March 10, 2003

  
	
   

  	
   

  	
  23811 Chagrin Boulevard, Suite 200

  
	
   

  	
   

  	
  Beachwood, Ohio  44122

  
	
   

  	
   

  	
  Attention:  Howard Amster,
  Trustee

  
	
   

  	
   

  	
   

  
	
  With a copy to:

  	
   

  	
  Ulmer & Berne LLP

  
	
   

  	
   

  	
  Penton Media Building

  
	
   

  	
   

  	
  1300 East Ninth Street, Suite 900

  
	
   

  	
   

  	
  Cleveland, Ohio 44114

  
	
   

  	
   

  	
  Attention:  Robert A. Fein,
  Esq.

  
	
   

  	
   

  	
   

  
	
  To Trustor:

  	
   

  	
  Horizon Group Properties, L.P.

  
	
   

  	
   

  	
  77 West Wacker Drive, Suite 4200

  
	
   

  	
   

  	
  Chicago, Illinois  60601

  
	
   

  	
   

  	
  Attention:  Gary J. Skoien

  
	
   

  	
   

  	
   

  
	
  With a copy to:

  	
   

  	
  Schiff Hardin & Waite

  
	
   

  	
   

  	
  6600 Sears Tower

  
	
   

  	
   

  	
  Chicago, Illinois 60606

  
	
   

  	
   

  	
  Attention:  David A.
  Grossberg, Esq.

  
	
   

  	
   

  	
   

  
	
  To Trustee:

  	
   

  	
  First American Title

  
	
   

  	
   

  	
  1850 South Central Street

  
	
   

  	
   

  	
  Visalia, California 93277

  

 

or such other address the party
to receive such notice may have theretofore furnished to all other parties by
notice in accordance herewith.

 

7.06.       Acceptance by Trustee.  Trustee accepts this Trust when this Deed of
Trust, duly executed and acknowledged, is made a public record as provided by
law.

 

7.07.       Captions.  The captions or headings at the beginning of
each Section hereof are for the convenience of the parties and are not a part
of this Deed of Trust.

 

7.08.       Invalidity of Certain Provisions.  Every provision of this Deed of Trust is
intended to be severable.  In the event
any term of provision hereof is declared to be illegal or invalid for any
reason whatsoever by a court of competent jurisdiction, such illegality or
invalidity shall not affect the balance of the terms and provisions hereof,
which terms and provisions shall remain binding and enforceable.  If the lien of this Deed of Trust is invalid
or unenforceable as to any part of the debt, or if the lien is invalid or
unenforceable as to any part of the Trust Estate, the unsecured or partially
secured portion of the debt shall be completely paid prior to the payment of
the remaining and

 

24

 

secured or partially secured
portion of the debt, and all payments made on the debt, whether voluntary or
under foreclosure or other enforcement action or procedure, shall be considered
to have been first paid on and applied to the full payment of that portion of
the debt which is not secured or fully secured by the lien of this Deed of
Trust.

 

7.09.       Subrogation.  To the extent that proceeds of the Note are
used to pay any outstanding lien, charge or prior encumbrance against the Trust
Estate, such proceeds have been or will be advanced by Beneficiary at Trustor’s
request and Beneficiary shall be subrogated to any and all rights and liens
held by any owner or holder of such outstanding liens, charges and prior
encumbrances, irrespective of whether said liens, charges or encumbrances are
released.

 

7.10.       Attorneys’ Fees.  If the Note is not paid when due or if any
Event of Default occurs, Trustor promises to pay all costs of enforcement and
collection, including but not limited to, reasonable attorneys’ fees and costs,
whether or not such enforcement and collection includes the filing of a
lawsuit.

 

7.11.       No Merger of Lease.  If both lessor’s and lessee’s estate under
any lease or any portion thereof which constitutes a part of the Trust Estate
shall at any time become vested in the owner, this Deed of Trust and the lien
created hereby shall not be destroyed or terminated by application of the
doctrine of merger unless Beneficiary so elects as evidenced by recording a
written declaration so stating, and, unless and until Beneficiary so elects,
Beneficiary shall continue to have and enjoy all of the rights and privileges
of Beneficiary as to the separate estates. 
In addition, upon the foreclosure of the lien created by this Deed of
Trust on the Trust Estate pursuant to the provisions hereof, any leases or
subleases then existing and affecting all or any portion of the Trust Estate
shall not be destroyed or terminated by application of the law of merger or as
a matter of law or as a result of such foreclosure unless Beneficiary or any
purchaser at such foreclosure sale shall so elect.

 

7.12.       Governing Law.  The creation, perfection, priority and
enforcement of the lien created by this Deed of Trust shall be governed by and
construed in accordance with the laws of the State of California and in all
other respects this Deed of Trust shall be governed by the internal laws of the
State of Illinois without regard to principles of conflicts of law.  Enforcement of the Loan Agreement, the Note
secured by this Deed of Trust and the other Loan Documents, except as otherwise
expressly provided therein, shall be governed by and construed in accord with
the internal laws of the State of Illinois without regard to principles of
conflicts of law.

 

7.13.       Joint and Several Obligations.  Should this Deed of Trust be signed by more
than one party, all obligations herein contained shall be deemed to be the
joint and several obligations of each party executing the Deed of Trust.  Any married person signing this Deed of Trust
agrees that recourse may be had against community assets and against his or her
separate property for the satisfaction of all obligations contained herein.

 

7.14.       Interpretation.  In this Deed of Trust the singular shall
include the plural and the masculine shall include the feminine and neuter and
vice versa, if the context so requires.

 

25

 

7.15.       Counterparts.  This Deed of Trust may be executed and
acknowledged in counterparts, all of which executed and acknowledged
counterparts shall together constitute a single document.  Signature and acknowledgment pages may be
detached from the counterparts and attached to a single copy of this document
to physically form one document, which may be recorded.

 

7.16.       Completion of Construction.  This Deed of Trust is a Construction Deed of
Trust within the meaning of California Commercial Code Section 9313 for
purposes of subdivision (6) of said statute “completion of construction” shall
not be deemed to occur prior to completion of all work, and installation or
incorporation into the improvements of all materials, for which sums secured
hereby are disbursed by Beneficiary.

 

7.17.       Further Assurances.  Trustor, Beneficiary and Trustee agree to do
or to cause to be done such further acts and things and to execute and deliver
or to cause to be executed and delivered such additional assignments,
agreements, powers and instruments, as any of them may reasonably require or
deem advisable to keep valid and effective the charges and lien hereof, to
carry into effect the purposes of this Deed of Trust or to better assure an
confirm unto any of them their rights, powers and remedies hereunder; and, upon
request by Beneficiary, shall supply evidence of fulfillment of each of the covenants
herein contained concerning which a request for such evidence has been made.

 

7.18.       Nonforeign Entity.  Section 1445 of the Internal Revenue
Code of 1986, as amended (the “Internal Revenue Code”) and
Section 18805 of the California Revenue and Taxation Code provides that a
transferee of a U.S. real property interest must withhold tax if the transferor
is a foreign person.  To inform
Beneficiary that the withholding of tax will not be required in the event of
the disposition of the Premises or Improvements pursuant to the terms of this
Deed of Trust, Trustor hereby certifies, under penalty of perjury, that:

 

(a)           Trustor is not a foreign corporation, foreign partnership,
foreign trust or foreign estate, as those terms are defined in the Internal
Revenue Code and the regulations promulgated thereunder; and

 

(b)           Trustor’s U.S. employer identification number is
38-3414551; and

 

(c)           Trustor’s principal place of business is 5000 Hakes Drive,
Muskegon, Michigan 49441.

 

It is
understood that Beneficiary may disclose the contents of this certification to
the Internal Revenue Service and the California Franchise Tax Board and that
any false statement contained herein could be punished by fine, imprisonment or
both.  Trustor covenants and agrees to
execute such further certificates, which shall be signed under penalty of
perjury, as Beneficiary shall reasonably require.  The covenant set forth herein shall survive the foreclosure of
the lien of this Deed of Trust or acceptance of a deed in lieu thereof.

 

7.19.         Substitution
of New Legal Description for the Premises. 
The legal description of the Premises attached as Exhibit A
to this Deed of Trust is a metes and bounds description of the Premises (the
“Metes and Bounds Legal Description”). 
The Premises will, upon the completion of

 

26

 

the reconfiguration of various
parcels comprising the Tulare Outlet Center (the “Reconfiguration”), be platted
and described as the parcel depicted as Parcel 2 on Exhibit C attached to this
Deed of Trust (the “Platted Legal Description”).  Trustor shall cause the Reconfiguration to be completed by the
Term Loan Period Commencement Date and, upon completion of the Reconfiguration,
the parties shall enter into a modification agreement of this Deed of Trust
reasonably acceptable to Beneficiary (the “Modification of Deed of Trust”),
which shall provide that the Metes and Bounds Description shall be deleted from
this Deed of Trust and replaced with the Platted Legal Description which shall thereafter
for all purposes be subject to this Deed of Trust.  Beneficiary agrees that, upon Trustor’s completion of the
Reconfiguration, Beneficiary shall execute and deliver the Modification of Deed
of Trust for the purpose of substituting the Platted Legal Description for the
Metes and Bounds Legal Description. 
Beneficiary’s obligation to enter into the Modification of Deed of Trust
as provided in the prior sentence is conditioned upon the issuance by the Title
Insurer of an endorsement to the Title Policy such that the Title Policy
insures that this Deed of Trust as modified by the Modification of Deed of
Trust creates a first lien on the Platted Legal Description with the same
priority as the lien created by this Deed of Trust.

 

[SIGNATURE PAGE FOLLOWS]

 

27

 

IN WITNESS WHEREOF,
Trustor has executed this Deed of Trust as of the day and year first above
written.

 

	
   

  	
  TRUSTOR:

  
	
   

  	
   

  
	
   

  	
  HORIZON GROUP
  PROPERTIES, L.P., a

  
	
   

  	
  Delaware limited partnership

  
	
   

  	
   

  
	
   

  	
  By:

  	
  Horizon Group Properties, Inc.

  
	
   

  	
  Its:

  	
  General Partner

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   

  	
  /s/ David Tinkham

  	
   

  
	
   

  	
   

  	
   

  	
  David Tinkham,

  
	
   

  	
   

  	
   

  	
  Senior Vice President / CFO

  

 

28

 

	
  STATE OF

  	
   

  	
  )

  
	
   

  	
   

  	
  )  SS:

  
	
  COUNTY OF

  	
   

  	
  )

  

 

On April
     , 2003, before me,                               ,
a Notary Public in and for said State, personally appeared David Tinkham
personally known to me (or proved to me on the basis of satisfactory evidence)
to be the person whose name is subscribed to the within instrument and acknowledged
to me that he executed the same in his capacity as Senior Vice President / CFO
of Horizon Group Properties, Inc., a Maryland corporation, in its capacity as
the general partner of Horizon Group Properties, L.P., a Delaware limited
partnership, on behalf of said limited partnership.

 

WITNESS my
hand and official seal.

 

 

	
  Signature:

  	
   

  	
   

  

 

29

 

EXHIBIT
A

 

LEGAL
DESCRIPTION

 

Real property in the City of Tulare, County of Tulare, State of
California, described as follows:

 

That portion of Parcel 4 and the ‘REMAINDER’ parcel of Parcel Map No.
4406, in the City of Tulare, County of Tulare, State of California, as per Map
recorded in Book 45, Page 11 of Parcel Maps, in the office of the County
Recorder of Said County and Situated in Section 35, Township 19 South, Range 24
East, Mount Diablo Base and Meridian, more particularly described as follows:

 

COMMENCING at the northwesterly corner of
said ‘REMAINDER’ parcel; thence S 30°45’35”
E 486.95 feet along the westerly line thereof; thence North 59°41’05”
E 212.98 feet; thence South
30°18’55” East 275.86 feet to the beginning of a tangent curve concave to the
southwest having a radius of 99.50 feet; thence southeasterly 18.84 feet along
said curve through a central angle of 10°50’49”; thence South 19°28’06”E 13.78
feet to the beginning of a tangent curve concave to the northeast having a
radius of 100.50 feet; thence Southeasterly 19.03 feet along said curve through
a central angle of 10°50’49”; thence South 30°18’55”
E 2.47 feet to the TRUE POINT OF BEGINNING; thence South 30°18’55” E
115.70 feet; thence South 14°41’05” W 25.49 feet; thence South 59°41’05” W 7.07
feet; thence South 30°18’55” E 116.21 feet; thence North 59°41’05” E 17.17
feet; thence South 30°18’55” E 113.92 feet; thence South 59°41’05” W 117.17
feet; thence North 30°18’55” W 363.85 feet; thence North 59°41’05” E 125.10
feet to the POINT OF BEGINNING.

 

Excepting therefrom all oil, gas and/or
minerals in and under said land and rights incidental to the development of the
same, as reserved by California Lands Incorporated, a corporation, in Deed
dated October 15, 1936, recorded December 19, 1936 in Book 707, Page 309 of
Official Records of Tulare County.

 

30

 

Excepting therefrom the following described land:

 

Commencing at the northeasterly corner of Parcel 4, Thence S30°18’55”
East 9.07 feet; Thence N59°41’05” East 21.10 feet; Thence S30°18’55” East
275.86 feet to the beginning of a tangent curve concave to the Southwest having
a radius of 99.50 feet; Thence Southeasterly 18.84 feet along said curve
through a central angle of 10°50’49”; Thence S19°28’06” East 13.78 feet to the
beginning of a tangent curve concave to the Northeast having a radius of 100.5
feet; Thence Southeasterly 19.03 feet along said curve through a central angle
of 10°50’49”; Thence S30°18’55” East 99.56 feet to the true point of beginning;
Thence S30°18’55” East 18.61 feet; Thence S14°41’05” West 25.49 feet; Thence
S59°41’05” West 7.07 feet; Thence S30°18’55” East 116.21 feet; Thence
S59°42’35” West 4.83 feet; Thence N30°18’55” West 136.75 feet; Thence
N59°41’05” East 13.45 feet; Thence N15°22’01” East 23.03 feet to the point of
beginning.

 

Also excepting therefrom the following described land:

 

Beginning at the Southeasterly corner of said Parcel 4, thence
S59°36’20” West 1.25 feet; Thence N30°18’55” West 113.92 feet; Thence
N59°35’14” East 1.25 feet; Thence S30°18’55” East 113.92 feet to the point of
beginning.

 

Also excepting therefrom the following described land:

 

Beginning at the Southwesterly corner of said Parcel 4, Thence
N30°18’55” West 363.85 feet; Thence N59°41’05” East 1.33 feet; Thence
S30°18’55” East 363.85 feet; Thence S59°45’32” West 1.33 feet to the point of
beginning.

 

APN:  Portion of 166-030-050 and
166-030-051.

 

31

 

EXHIBIT
B

 

DESCRIPTION
OF COLLATERAL

 

An express security interest is granted in the following:

 

1.             All of Trustor’s right, title and
interest in personal property of any kind or nature whatsoever, whether
tangible or intangible, which is used or will be used in the construction of,
or is or will be placed in or upon, or is derived from or used in connection
with, the maintenance, use, occupancy or enjoyment of the real property and the
buildings and improvements constructed thereon located in Tulare, California.

 

All of the
above buildings are or will be located on the land (the “Premises”) legally described
in Exhibit
A of the instrument to which this Exhibit B is attached.

 

2.             The security interest granted
herein attaches, without limitation, to Trustor’s interest in all accounts,
documents, instruments, chattel paper, equipment, machinery, fixtures, general
intangibles, inventory (as such terms are defined in the Uniform Commercial
Code of the State of California), furniture, carpeting and subcontracts for the
construction, reconstruction or repair of improvements, bonds, permits,
licenses, guarantees, warranties, causes of action, judgments, claims, profits,
rents, security deposits, utility deposits, refunds of fees, insurance
premiums, deposits paid to any governmental authority, letters of credit,
insurance policies and insurance proceeds, any awards that may be made by any
condemning authority for any partial or total taking of the Trust Property by
condemnation or eminent domain or any conveyance in lieu thereof, together with
all present and future attachments, accretions, accessions, replacements, and
additions thereto and products and proceeds thereof, together with all of
Trustor’s interest in:

 

(a)             all
machinery, furniture, furnishings, equipment, computer software and hardware,
fixtures (including, without limitation, all heating, air conditioning,
plumbing, lighting, communications, elevator, or kitchen fixtures), cleaning
apparatus, beds, linens, televisions, carpeting, telephones, cash registers,
computers, lamps, glassware, restaurant and kitchen equipment, supplies, and
other property of every kind and nature, whether tangible or intangible, whatsoever
owned by Trustor, or in which Trustor has or shall have an interest, now or
hereafter located upon the Premises and the Improvements, or appurtenant
thereto, and usable in connection with the present or future operation and
occupancy of the Premises and the Improvements (hereinafter collectively called
the “Equipment”),
including any leases of any of the foregoing, any deposits existing at any time
in connection with any of the foregoing, and the proceeds of any sale or
transfer of the foregoing, and the right, title and interest of Trustor in and
to any of the Equipment that may be subject to any “security interests” as
defined in the Uniform Commercial Code, as adopted and enacted by the state or
state where the Trust Property is located (the “Uniform Commercial Code”),
superior in lien to the lien of this Deed of Trust;

 

(b)             all awards or
payments, including interest thereon, that may heretofore and hereafter be made
with respect to the Premises and the Improvements, whether from the exercise of
the right of eminent domain or condemnation (including, without limitation, any
transfer made in lieu of or in

 

32

 

anticipation of the exercise of
said rights), or for a change of grade, or for any other injury to or decrease
in the value of the Premises and Improvements;

 

(c)             all
residential or commercial leases, and other agreements or arrangements
heretofore or hereafter entered into affecting the use, enjoyment or occupancy
of, or the conduct of any activity upon or in, the Premises and the
Improvements, including any extensions, renewals, modifications or amendments
thereof (all of the foregoing collectively called the “Leases”) and all rents, rent
equivalents, moneys payable as damages or in lieu of rent or rent equivalents,
royalties (including, without limitation, all oil and gas or other mineral
royalties and bonuses), income, receivables, receipts, revenues, deposits
(including, without limitation, security, utility and other deposits),
accounts, cash, issues, profits, charges for services rendered, and other
consideration of whatever form or nature received by or paid to or for the
account of or benefit of Trustor or its agents or employees from the Leases and
any and all other sources arising from or attributable to the Premises and the
Improvements (the “Rents”), together with all proceeds from
the sale or other disposition of the Leases and the Trust Property and the
right to receive and apply the Rents to the payment of the indebtedness secured
hereby; together with

 

(d)             all
accounts including rights to payment for goods sold or leased or to be sold or
leased or for services rendered or to be rendered), escrows, documents,
instruments, chattel paper, claims, deposits and general intangibles, as the
foregoing terms are defined in the Uniform Commercial Code, and all franchises,
trade names, trademarks, symbols, service marks, books, records, plans,
specifications, designs, drawings, permits, licenses (to the extent assignable,
including, without limitation, business licenses, state health department
licenses, food service licenses, licenses to conduct business, certificates of
need and all such other permits, licenses and rights, obtained from any
governmental, quasi-governmental or private person or entity whatsoever
concerning ownership, operation, use or occupancy of the Trust Property),
contract rights (including, without limitation, any contract with any architect
or engineer or with any other provider of goods or services for or in
connection with any construction, repair, or other work upon the Trust
Property, approvals, actions, refunds of real estate taxes and assessments and
any other governmental impositions related to the Trust Property, approvals,
actions and causes of action that now or hereafter relate to, are derived from
or are used in connection with the Trust Property or the use, operation,
maintenance, occupancy or enjoyment thereof or the conduct of any business or
activities thereon (hereinafter collectively called the “Intangibles”); together with

 

(e)             all
proceeds, products, offspring, rents and profits from any of the foregoing,
including, without limitation, those from sale, exchange, transfer, collection,
loss, damage disposition, substitution or replacement of any of the foregoing.

 

33

 

EXHIBIT C

 

PLATTED LEGAL DESCRIPTION

 

34

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