Document:

Exhibit 10.78

 

March
13, 2003

 

 

Pleasant Lake Apts. Corp.

Pleasant Lake Apts., Ltd.

23811 Chagrin Boulevard

Suite 200

Beachwood, OH 44122

 

Attn: 
Howard Amster

 

                Re:          Agreement to Purchase Units in

                                Horizon
Group Properties, L.P. (the “Partnership”)

 

Dear Howard:

 

This letter is to
confirm the agreement of Pleasant Lake Apts., Ltd. (“Pleasant Lake”), an
affiliate of Howard M. Amster, to purchase up to 261,628 limited partnership
units (the “Units”) in Horizon Group Properties, L.P. (the “Partnership”) from
Horizon Group Properties, Inc. (“HGPI”) and the agreement of HGPI to sell the
Units to Pleasant Lake at a purchase price of $5.16 per Unit for an aggregate
purchase price of up to $1,350,000.00, payable in full and in cash within three
business days following the receipt of notice from HGPI to Pleasant Lake that
the conditions set forth in this letter have been satisfied.  Pleasant Lake hereby acknowledges and agrees
on behalf of itself and any transferee, assignee or successor (i) that the
Units shall not now or at any future time be convertible or exchangeable for
securities of HGPI, and (ii) that the certificate representing the Units will
bear a legend indicating that they are not convertible or exchangeable.

HGPI represents
and warrants that it has converted the Units from general partnership units,
owns the Units and has full power and authority to sell the Units; such Units
will be transferred free and clear of any liens or encumbrances; such sale will
not violate the partnership agreement of the Partnership, the Articles of
Amendment and Restatement of HGPI or any other contract or agreement that HGPI
is a party to; such sale will not violate any state or federal securities laws;
that all authorizations and approvals required for the sale of the Units have
been obtained; that no assessments or other amounts are owed to the Partnership
by the owner of the Units; and that the purchase of the Units will not cause a
violation of the Excepted Holder Certificate of Howard M. Amster.

Pleasant Lake
represents and warrants that it has full power and authority to purchase the
Units; that such purchase will not violate any contract or agreement to which
it is a party; that such purchase will not violate any state or federal
securities laws; and that Howard M. Amster controls and is the holder of
approximately 96% of the ownership interests in Pleasant Lake.  In addition, Pleasant Lake acknowledges that
it has not relied on any advice of HGPI, the Partnership or any of their respective
affiliates, employees, directors, counsel or other advisors regarding the
federal, state 

 

1

 

and local tax
consequences or tax attributes of owning the Units.  Pleasant Lake is aware that there are substantial limitations and
restrictions on the circumstances under which Pleasant Lake may offer to sell,
transfer or otherwise dispose of the Units, so that it might not be possible to
liquidate this investment readily and it may be necessary to hold the
investment for an indefinite period. 
Pleasant Lake is an accredited investor under the Securities Act of
1933, as amended, is not a registered investment company under the Investment
Company Act of 1940, as amended, and is not a business development company as
defined in the U.S. Investment Advisers Act of 1940, as amended.

The
representations and warranties of the parties shall be true as of the closing.

This Agreement
shall be further conditioned upon receipt by Pleasant Lake of (i) certified
resolutions of HGPI approving the sale of the Units to Howard M. Amster or his
affiliate; (ii) an acceptance of Pleasant Lake as a substituted limited partner
executed by HGPI. This Agreement shall be further conditioned upon receipt by
the Partnership of an Acknowledgment by Substituted Limited Partner from
Pleasant Lake in form satisfactory to the Partnership.

HGPI hereby
commits to cause to be prepared and filed with the Form K-1 for each partner of
the Partnership, schedules listing the profit and loss of each of the
properties owned directly or indirectly by the Partnership commencing for the
year ending December 31, 2002.

At the closing of
this transaction, HGPI shall deliver the Units to Pleasant Lake with
duly-executed unit powers attached.  At
such closing, HGPI and the Partnership shall provide Pleasant Lake with an
executed letter directing the transfer agent to transfer such Units into the
name of Pleasant Lake.

This Agreement
sets forth the complete understanding of HGPI and Pleasant Lake and shall be
binding and enforceable on each party in accordance with its terms.

	
   

  	
   

  	
   

  	
   

  	
  Very truly yours,

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
  /s/ Gary J. Skoien

  
	
   

  	
   

  	
   

  	
   

  	
  Gary J. Skoien

  
	
   

  	
   

  	
   

  	
   

  	
  Chairman and Chief
  Executive Officer

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
  Date:

  	
  March 13, 2003

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ACCEPTED AND AGREED:

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  PLEASANT LAKE APTS., LTD.

  	
   

  	
   

  	
   

  
	
  By

  	
  Pleasant Lake Apts. Corp.,

  	
   

  	
   

  	
   

  
	
   

  	
  General Partner

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  /s/ Howard M. Amster

  	
   

  	
   

  	
   

  
	
   

  	
  Howard M. Amster, President

  	
   

  	
   

  	
   

  
	
   

  	
  Date:

  	
  March 13, 2003

  	
   

  	
   

  	
   

  

 

 

2Exhibit 10.79

 

PROMISSORY NOTE

	
   

  	
   

  	
  Chicago,
  Illinois

  
	
  $1,300,000.00

  	
   

  	
  March
  14, 2003

  

 

FOR VALUE RECEIVED, the
undersigned entities (collectively, the “Borrower”) HEREBY JOINTLY AND
SEVERALLY PROMISE TO PAY to the order of Horizon Group Properties, Inc., a Maryland
corporation (the “Lender”) the principal sum of One Million Three
Hundred Thousand Dollars ($1,300,000.00), together with all accrued but unpaid
interest thereon, on the Maturity Date.

The Borrower
promises to pay interest to the Lender on the outstanding principal amount
hereof from the date hereof until such principal amount is paid in full.

1.             Defined Terms. As used in
this Note:

“Affiliate”
means, as to any Person, any other Person that, directly or indirectly,
controls, is controlled by, or is under common control with, such Person.

 “Borrower” is defined in the
introductory paragraph.

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

“Company”
has the meaning ascribed to such term on Exhibit 1 attached hereto.

 “Default Rate” is defined in Section 2(b).

 “Dollars” and the sign “$” each
means lawful currency of the United States of America.

“Event
of Default” is defined in Section 5.

“Guarantors”
means The Prime Group, Inc., an Illinois corporation, Prime Group Limited
Partnership, an Illinois limited partnership, Prime Group II, L.P., an Illinois
limited partnership, PGLP, Inc., an Illinois corporation and Prime
International, Inc., an Illinois corporation.

“Guaranty”
means that certain Guaranty, dated as of the date hereof, issued by Guarantors
in favor of the Lender.

“Interest
Rate” means five percent (5%) per annum.

 

1

 

 “Lender” is defined in the
introductory paragraph.

“Letter
Agreement” means that certain Letter Agreement, dated as of the date
hereof, by Huntley Development Limited Partnership, an Illinois limited
partnership and Huntley Meadows Residential Venture, an Illinois partnership,
in favor of the Lender.

 “Loan” means the term loan made to the
Borrower by the Lender which is evidenced by this Note.

“Loan
Documents” means, collectively, this Note, the Guaranty, the Pledge
Agreement, the Letter Agreement, the Option Agreement and other documents
entered into by the Borrower or any other Person to evidence or secure the
repayment of the Loan evidenced by this Note and all documents delivered or
required to be delivered by the Borrower pursuant thereto.

“Maturity
Date” means May 15, 2004, being fourteen months after the date of this
Note.

“Note”
means this Promissory Note, as it may be amended or modified and in effect from
time to time.

“Person”
means any natural person, corporation, limited liability company, firm, joint
venture, partnership, association, enterprise, trust or other entity or
organization, or any government or political subdivision or any agency,
department or instrumentality thereof.

“Pledge
Agreement” means that certain Pledge and Security Agreement, dated as of the
date hereof, between Borrower, as pledgors, and the Lender, as secured party,
pursuant to which Borrower pledges to the Lender the Pledged Collateral to
secure all obligations of the Borrower and Guarantors under the Loan Documents.

“Pledged
Collateral” shall have the meaning ascribed to such term in the Pledge
Agreement.

2.             Interest and Fees.

(a)                                  Interest Rate.  Except as
otherwise provided in clause (b) of this Section 2, the
outstanding principal amount of this Note shall, from the date hereof until such
principal amount is paid in full, bear interest at the Interest Rate.  Interest on this Note shall accrue and be
payable on the Maturity Date or, if earlier, on any date on which the Loan is
prepaid, whether by acceleration or otherwise.

(b)                                 Rates Applicable After Default. 
During the continuance of an Event of Default, the Lender may, at its
option, by notice to the Borrower, declare that any amount due and owing
hereunder from the Borrower and overdue in respect of the principal amount of
the Loan evidenced by this Note shall bear 

 

2

 

interest at a rate per annum equal to fifteen percent
(15%) per annum (the “Default Rate”). Interest accrued at the Default
Rate on the principal amount of this Note shall be payable on demand.

(c)                                  Interest Basis. 
Interest shall be calculated based on the actual days elapsed on the
basis of a 365-day year.  Interest
payable with respect to this Note or any portion hereof which is paid or
prepaid shall be payable for the day the Loan is made but not for the day of
any payment on the amount paid if payment is received by the Lender prior to
3:00 p.m. (Chicago time) at the place of payment.

3.                                       Required Payments; Voluntary Prepayment.

(a)                                  The principal balance of this Note shall
be payable by the Borrower on the Maturity Date.

(b)                                 In the event that (i) any of the Pledged Collateral or
any assets of Borrower, Prime/Retail Partners, LLC or any of their respective
subsidiaries are sold for cash or (ii) any distributions are made to Borrower
or any Guarantor by Prime/Retail Partners, LLC, then the net proceeds generated
by such sale (in the case of clause (i)) or such distributions (in the case of
clause (ii)) shall be paid by the Borrower to the Lender in payment of amounts
due under this Note.  Any such payment
shall be applied first to the payment of any costs or expenses payable
hereunder by the Borrower to the Lender, next to payment of accrued but unpaid
interest hereunder, and then to the outstanding principal amount of this Note.

(c)                                The Borrower may, at any time and from
time to time, pay, without penalty or premium, the entire outstanding principal
amount of this Note or any portion of the outstanding principal amount of this
Note.

4.             Method
of Payment.  All payments of principal,
interest and other amounts owing hereunder shall be made, without set off,
deduction or counterclaim, in immediately available funds to the Lender at the
Lender’s address at 77 West Wacker Drive, Suite 4200, Chicago Illinois 60601,
or at any other office of the Lender specified in writing by the Lender to the
Borrower, by 3:00 p.m. (Chicago time) on the date when due. Whenever any
payment to be made hereunder shall be stated to be due on a day which is not a
Business Day, such payment shall be made on the next succeeding Business Day,
and, in the case of a principal payment, such extension of time shall in such
case be included in computing interest with respect to such payment.

5.             Event
of Default.  If any of the following
events (each such event, an “Event of Default”) shall occur and be
continuing:

(a)           Any
representation or warranty made, or any financial or other information
provided, by the Borrower, any Guarantor 
or any Affiliate of Borrower to the Lender in connection 

 

3

 

with this Note or
any other Loan Document shall be untrue in any material respect on the date as
of which made;

(b)           The Borrower shall fail to pay any
amount of principal on this Note when due, or the Borrower shall fail to pay any
amount of interest on, or other amount due under, this Note when due;

(c)           The breach by the Borrower or any
Guarantor (other than a breach which constitutes an Event of Default under
another clause of this Section 5) of any of the terms or provisions
of this Note or other Loan Document which is not remedied within thirty (30)
days after written notice from the Lender; provided, that such 30-day
period shall be extended by an additional 30 days if such breach can be cured
within such time and the Borrower or Guarantors, as the case may be, are
diligently proceeding to cure such breach;

(d)           The occurrence of a default by the
Borrower or any Guarantor after applicable notice and the expiration of all
applicable cure periods under any agreement for borrowed money (other than
loans made or held by Vornado PS, LLC, 
Cadim Acquisitions, LLC, or any of their respective Affiliates) which
allows the acceleration of the payment of amounts owed by the Borrower under
such agreement in an amount in excess of $1,000,000 in the aggregate; provided,
that a loan made or held by Vornado PS, LLC, Cadim Acquisitions, LLC or any of
their respective Affiliates shall be held to be in default under this clause
(d) upon a final non-appealable judicial determination of default; or

(e)           The Borrower shall generally not pay
its debts as such debts become due, or shall admit in writing its inability to
pay its debts generally, or shall make a general assignment for the benefit of
creditors; or any proceeding shall be instituted by or against the Borrower
seeking to adjudicate it a bankrupt or insolvent, or seeking liquidation,
winding up, reorganization, arrangement, adjustment, protection, relief, or
composition of it or debts under any law relating to bankruptcy, insolvency or
reorganization or relief of debtors, or seeking the entry of an order for
relief or the appointment of a receiver, trustee, or other similar official for
it or for any substantial part of its property, then the Lender may declare the
principal amount and interest and other amounts outstanding under this Note
owing by the Borrower, to be forthwith due and payable, whereupon such
principal amount, all such interest and all such other amounts shall become and
be forthwith due and payable, without presentment, demand, protest or notice of
any kind by the Lender, all of which are hereby expressly waived by the
Borrower; provided, however, that if an Event of Default
described in clause (d) above occurs with respect to the Borrower, the
principal amount and interest and other amounts outstanding under this Note
shall immediately become due and payable without any election or action on the
part of the Lender.  The Borrower shall,
as soon as possible, and in any event within five (5) Business Days after
becoming aware of the occurrence of an Event of Default or an event which, with
notice or lapse of time or both, could constitute an Event of Default, deliver
to the Lender a statement setting forth details of such Event of Default.  In addition, Lender may exercise any and all
other rights and remedies available to Lender under any of the other Loan
Documents or otherwise available to Lender at law or in equity.

(f)            Any of the representations or
warranties set forth in Exhibit 1 attached hereto are untrue or
inaccurate in any material respect as of the date hereof or if, at any time
after the date 

 

4

 

hereof, any of
such representations or warranties would be untrue or inaccurate in any
material respect if such representation or warranty were to be made by the
Borrower on such date.

6.             Option Agreement.  As a condition to borrowing, The Prime Group, Inc. (or the
appropriate Affiliate or Affiliates of The Prime Group, Inc.) agrees to enter
into an agreement (the “Option Agreement”), substantially on the terms
set forth on Schedule A attached hereto, within thirty (30) days after
the date hereof.  The failure of The
Prime Group, Inc. (or the appropriate Affiliate or Affiliate of The Prime
Group, Inc.) to enter into the Option Agreement within thirty (30) days after
the date hereof shall, at the option of Lender, constitute a default hereunder,
unless the failure is attributable to failure of Lender to negotiate the Option
Agreement in good faith.

7.             Set
off.  Upon the occurrence and during
the continuance of any Event of Default, the Lender is hereby authorized at any
time and from time to time, to the fullest extent permitted by law, to set off
and apply any and all deposits (including all account balances, whether
provisional or final and whether or not collected or available) and any other
indebtedness and other obligations at any time held or owing by the Lender to
or for the credit or account of the Borrower against any and all of the
obligations of the Borrower now or hereafter existing under this Note and the
Loan Documents executed in connection herewith, irrespective of whether or not
the Lender shall have made any demand under this Note and although such
obligations may be unmatured.

8.             Amendments.  This Note may not be amended orally but only
in writing signed by the Borrower and the Lender.

9.             Preservation
of Rights; Survival.  No delay or
omission of the Lender to exercise any right under this Note shall impair such
right or be construed to be a waiver of any Event of Default or an acquiescence
therein.  Any single or partial exercise
of any such right shall not preclude other or further exercise thereof or the
exercise of any other right, and no waiver, amendment or other variation of the
terms, conditions or provisions of this Note whatsoever shall be valid unless
in writing signed by the Lender and then only to the extent in such writing
specifically set forth.  All remedies
contained in the Loan Documents or available to Lender at law or in equity
shall be cumulative and all shall be available to the Lender until this Note
has been paid in full.  All
representations and warranties of the Borrower contained in this Note and any
other Loan Document shall survive delivery of this Note and the making of the
Loan evidenced hereby.

10.           Headings;
Entire Agreement.  Section headings
in this Note are for convenience of reference only, and shall not govern the
interpretation of any of the provisions of this Note.  This Note and the Loan Documents embody the entire agreement and
understanding between the Borrower and the Lender and supersede all prior
agreements and understandings between the Borrower and the Lender relating to
the subject matter thereof.

11.           Benefits
of this Agreement.  This Note shall
be binding upon the Borrower and the Borrower’s successors and assigns and,
subject to the following sentence, shall not be construed so as to confer any
right or benefit upon any Person other than the Borrower and his or her
personal representatives, heirs and assigns. 
This Note shall inure to the benefit of the Lender and its successors
and assigns, it being understood that the Lender may from time to time assign,
or grant 

 

5

 

participations in,
its rights hereunder in whole or in part. 
The Borrower shall not have the right to assign its rights or
obligations hereunder.

12.           Expenses;
Indemnification.  The Borrower
agrees to reimburse the Lender for any costs, internal charges and out-of-pocket
expenses (including reasonable attorneys’ fees and time charges and expenses of
attorneys for the Lender, which shall include, without limitation, $25,000
payable to Winston & Strawn on the date hereof, subject to a reconciliation
of fees and expenses payable to Winston & Strawn) paid or incurred by the
Lender in connection with the preparation, administration, collection or
enforcement of this Note or the other Loan Documents.  The Borrower further agrees to indemnify the Lender, its
directors, officers and employees (collectively, the “indemnified parties”)
against all losses, claims, damages, penalties, judgments, liabilities and
expenses (collectively, “indemnified obligations”) (including, without
limitation, all expenses of litigation or preparation therefor whether or not
the Lender is a party thereto) which any of them may pay or incur arising out
of or relating to this Note, the transactions contemplated hereby or the direct
or indirect application of the proceeds of the Loan evidenced hereby, except
that no indemnified party shall be indemnified for any indemnified obligations
to the extent that they arise from the gross negligence or willful misconduct
of any of the indemnified parties.  The
obligations of the Borrower under this Section shall survive the repayment of
this Note.

13.           Severability
of Provisions.  Any provision in
this Note that is held to be inoperative, unenforceable, or invalid in any
jurisdiction shall, as to that jurisdiction, be inoperative, unenforceable, or
invalid without affecting the remaining provisions in that jurisdiction or the
operation, enforceability, or validity of that provision in any other
jurisdiction, and to this end the provisions of this Note are declared to be
severable.  If any interest payment or
other charge or fee payable by the Borrower under this Note exceeds the maximum
amount then permitted by applicable law, the Borrower shall be obligated to
pay, and the Lender shall be entitled to receive, only the maximum amount
permitted by applicable law.  If the
Lender has collected interest in excess of such maximum rate, the Borrower’s
only remedy will be that the Lender will apply such excess interest as a full
or partial prepayment of the unpaid balance of the principal amount to the
extent of the unpaid principal balance and refund any additional excess amount
to the Borrower.

14.           CHOICE
OF LAW.  THE LOAN DOCUMENTS SHALL BE
CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS, WITHOUT REGARD TO CONFLICT OF
LAWS PROVISIONS, OF THE STATE OF ILLINOIS.

15.           CONSENT
TO JURISDICTION.  THE BORROWER
HEREBY IRREVOCABLY SUBMITS TO THE NON-EXCLUSIVE JURISDICTION OF ANY
UNITED STATES FEDERAL OR ILLINOIS STATE COURT SITTING IN CHICAGO IN ANY ACTION
OR PROCEEDING ARISING OUT OF OR RELATING TO THIS NOTE, AND THE BORROWER HEREBY
IRREVOCABLY AGREES THAT ALL CLAIMS IN RESPECT OF SUCH ACTION OR PROCEEDING MAY
BE HEARD AND DETERMINED IN ANY SUCH COURT AND IRREVOCABLY WAIVES ANY OBJECTION
IT MAY NOW OR HEREAFTER HAVE AS TO THE VENUE OF ANY SUCH SUIT, ACTION OR
PROCEEDING BROUGHT IN SUCH COURT OR THAT SUCH COURT IS AN INCONVENIENT FORUM.  NOTHING HEREIN SHALL LIMIT THE RIGHT OF THE
LENDER TO BRING PROCEEDINGS AGAINST 

 

6

 

THE BORROWER IN
THE COURTS OF ANY OTHER JURISDICTION IN WHICH ANY COLLATERAL SECURING REPAYMENT
OF THE LOAN MAY BE LOCATED.  ANY
JUDICIAL PROCEEDING BY THE BORROWER AGAINST THE LENDER OR ANY AFFILIATE OF THE
LENDER INVOLVING, DIRECTLY OR INDIRECTLY, ANY MATTER IN ANY WAY ARISING OUT OF,
RELATED TO, OR CONNECTED WITH ANY LOAN DOCUMENT SHALL BE BROUGHT ONLY IN A
COURT IN CHICAGO, ILLINOIS.

16.           WAIVER OF JURY TRIAL.  THE BORROWER AND, BY ACCEPTANCE HEREOF, THE
LENDER HEREBY WAIVE TRIAL BY JURY IN ANY JUDICIAL PROCEEDING INVOLVING,
DIRECTLY OR INDIRECTLY, ANY MATTER (WHETHER SOUNDING IN TORT, CONTRACT OR
OTHERWISE) IN ANY WAY ARISING OUT OF, RELATED TO, OR CONNECTED WITH THIS NOTE.

              17.           Notices.  Any notice required or desired to be served,
given or delivered hereunder shall be in writing (including facsimile
transmission), and shall be deemed to have been validly served, given or
delivered upon the earlier of (a) personal delivery to the address set forth
below, (b) in the case of mailed notice, three (3) days after deposit in the
United States mails, with proper postage for certified mail, return receipt
requested, prepaid, or in the case of notice by Federal Express or other
reputable overnight courier service, one (1) day after delivery to such courier
service, and (c) in the case of facsimile transmission, upon transmission with
confirmation of receipt, addressed to the party to be notified as follows:

 

	
  If to the Borrower:

  	
   

  	
  Retail Partners, Inc.

  
	
   

  	
   

  	
  Retail Partners Limited Partnership

  
	
   

  	
   

  	
  77 West Wacker Drive

  
	
   

  	
   

  	
  Suite 4200

  
	
   

  	
   

  	
  Attn: Michael W. Reschke

  
	
   

  	
   

  	
  Facsimile Number: (312) 917-1511

  
	
   

  	
   

  	
   

  
	
  With copies to:

  	
   

  	
  The Prime Group, Inc.

  
	
   

  	
   

  	
  77 West Wacker Drive

  
	
   

  	
   

  	
  Suite 4200

  
	
   

  	
   

  	
  Attn: Robert J. Rudnik, Esq.

  
	
   

  	
   

  	
  Facsimile Number: (312) 917-8442

  
	
   

  	
   

  	
   

  
	
  If
  to the Lender:

  	
   

  	
  Horizon
  Group Properties, Inc.

  
	
   

  	
   

  	
  77
  West Wacker Drive

  
	
   

  	
   

  	
  Suite
  4200

  
	
   

  	
   

  	
  Attention:
  Gary J. Skoien

  
	
   

  	
   

  	
  Facsimile
  Number:  (312) 917-0911

  

 

 

7

 

	
   

  	
   

  	
   

  
	
  With
  a copy to:

  	
   

  	
  Horizon
  Group Properties, L.P.

  
	
   

  	
   

  	
  77
  West Wacker Drive

  
	
   

  	
   

  	
  Suite
  4200

  
	
   

  	
   

  	
  Attention:
  David Tinkham

  
	
   

  	
   

  	
  Facsimile
  Number:  (312) 917-8440

  

 

 

or to such other address as any of the parties may
hereafter designate for itself by written notice to the other parties in the
manner herein prescribed.

 

18.           Borrower’s Waiver.  Borrower and all endorsers, guarantors and
sureties of this Note and all other persons liable or to become liable on this
Note severally waive presentment for payment, demand, notice of demand and of
dishonor and nonpayment of this Note, notice of intention to accelerate the
maturity of this Note, notice of acceleration, protest and notice of protest,
diligence in collection, and the bringing of suit against any other party, and
agree to all renewals, extensions, modifications, partial payments, releases or
substitutions of security, in whole or in part, with or without notice, before
or after maturity.

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

 

[Remainder of page intentionally left blank]

 

 

8

 

IN WITNESS WHEREOF, the undersigned have executed this Note as of the
day and year first above written.

 

	
   

  	
  BORROWER:

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  RETAIL PARTNERS, INC.

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Name:

  	
   

  	
   

  
	
   

  	
  Title:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  RETAIL PARTNERS LIMITED PARTNERSHIP

  
	
   

  	
  By:  

  	
   

  	
  THE PRIME GROUP, INC.,

  
	
   

  	
   

  	
   

  	
  General Partner

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Name:

  	
   

  	
   

  
	
   

  	
  Title:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  

 

 

9

 

Exhibit 1-A

Prime/Retail Partners,
LLC (the “Company”) makes the following representations and warranties
concerning the Company’s conduct:

The Company is a limited
liability company formed under the laws of the State of Illinois and operated
pursuant to the Amended and Restated Operating Agreement of Prime/Retail
Partners, LLC, dated as of August 4, 1998 and all amendments thereto (as
amended, the “Company Agreement”). 
The Company has observed all applicable legal formalities and procedures
required by the Company Agreement, the laws of the State of Illinois and the
laws of any other state or jurisdiction, to the extent it has done business
outside the United States, in which the Company has done business, as such
formalities, procedures and law relate to the separateness of the Company from
any other person or entity.  The Company
has maintained its existence in good standing and/or in full force and effect
under the laws of the State of Illinois, as well as in any other state or
jurisdiction in which it is so required. 
The Company has been qualified and authorized to do business in each
state in which the conduct of its business so requires.

The Company has acted solely
in accordance with and has complied with the provisions of the Company
Agreement as such provisions relate to separateness of the Company from any
other person or entity.

The business of the
Company has been conducted by its manager(s) and officer(s) (the “Managers
and Officers”), or any authorized substitutes for such persons or entities
as permitted by the Company Agreement and all applicable state law.  The Managers and Officers have duly
authorized all of the actions heretofore taken by the Company to the extent
such actions are required to be authorized by the Managers and the
Officers.  The Managers and Officers,
when acting in such capacity, have acted in the best interests of the Company,
consistent with their fiduciary duties to the Company to the extent such duties
are created by applicable state law. 
The business of Retail Partners, Inc. and Retail Partners Limited
Partnership or any of their respective affiliates (the “Members”) has not been
conducted by the Company.

The Company has maintained
company and financial books and records separate from those of the Members.

The financial statements
of the Company have been prepared and maintained using the same method of
accounting used for the preparation of income tax returns or in accordance with
generally accepted accounting principles. 
The Company’s financial statements have not been prepared or maintained
on a consolidated basis with those of either of the Members. The Company has
maintained financial statements separate from the financial statements of
either of the Members, showing its assets and liabilities separate and apart
from those of either of the Members and accurately portraying the financial
condition, assets and liabilities of the Company.  No assets or liabilities of either of the Members have been set
forth on the financial statements of the Company.

The Company has conducted
its business solely in its own name and in accordance with the provisions of
the Company Agreement and all amendments thereto.  The Company has entered into its own contracts in its own name
and has used its own name for purposes of obtaining 

 

10

 

any required
registrations, licenses and permits (whether governmental, administrative or
otherwise) necessary to the conduct of its own business.  Without limiting the generality of the
foregoing, all oral and written communications, including, without limitation,
letters contracts, statements and applications, have been made solely in the
name of the Company, if they relate solely to the Company.

The Company has
recognized at all times that it owns no interest in the property of either of
the Members and has not represented that it owns an interest in the property of
either of the Members.

All transactions, if any,
between the Company and either of the Members have been duly authorized and
documented, and have been recorded accurately in the appropriate books and
records of the Company.  All such
transactions have been fair to each party, have constituted exchanges for fair
consideration and for fair and reasonably equivalent value, have been based on
commercially reasonable terms, and have been made in good faith, without any
intent to hinder, delay, or defraud creditors of either of the parties.

The Company’s capitalization
has been adequate in light of its business and purpose.  The Company has not engaged in a business
for which the property of such entity represents an inadequate amount of
capital.

The Company has acted
solely through its Managers and Officers or its duly authorized agents or
representatives in the conduct of its business, and has not permitted either of
the Members to act on its behalf, except as may be permitted by the terms of
the Company Agreement and by the laws of any state in which it is conducting
business and organized.

The Company has not
commingled its assets or liabilities with those of either of the Members.  The Company has kept its assets and
liabilities separately identifiable and distinguishable from the assets and
liabilities of any other entity.

The Company has not
transferred any assets to either of the Members, nor has the Company made any
contributions, payments or distributions to either of the Members, except as
authorized by the Company Agreement and all applicable federal and state
law.  To the extent distributions or
payments have been made to either of the Members, such distributions and/or
payments have been properly authorized and documented in the books and records
of the Company.  The Company has not
permitted either of the Members to transfer any of its assets or make any
contributions to the Company, except as authorized by the Company Agreement and
all amendments thereto.

The Company has not
financed the operations of either of the Members, and the Company has not permitted
either of the Members to finance the operations of the Company, except as
authorized by the Company Agreement. 
The Company has not executed or assumed any document purporting to
guarantee payment of any note or purporting to guarantee the performance of any
document executed or assumed by either of the Members.  The Company has not held itself, its assets
or its creditworthiness out as being available for payment of either of the
Members’ liabilities.  The Company has
not made any representations to any creditors of either of the Members to
induce 

 

11

 

them to rely on
the assets or the credit of the Company and to the Company’s knowledge, no
creditor is relying on the assets or the credit of the Company with respect to
liabilities of either of the Members.

The Company has not made
any representations to any of its own creditors to induce them to rely on the
assets or the credit of either of the Members with respect to liabilities of
the Company, and to the Company’s knowledge, no creditor is relying on the
assets or the credit of either of the Members with respect to liabilities of
the Company.

To the extent the Company
has accounts (bank, investment or otherwise) and employees, as required, the
Company has maintained its own accounts and employees separately and apart from
any accounts or employees of either of the Members.  The Company has maintained a sufficient number of employees, as
and if required, in light of its business operations.

The Company has not
represented that either of the Members owns an interest in the property of the
Company.  All property owned by the
Company has been owned in the name of the Company and all documents of title to
any property have reflected the ownership of the Company.

None of the Company’s
liabilities have been paid from the funds of either of the Members, and the
Company has not paid liabilities of the Member from its funds.

The Company has not
pledged any of its assets for the benefit of either of the Members.

When the Company was
formed, it satisfied all of the requirements of organization of the state in
which it was formed.

The Company has not
acquired any of the obligations of either of the Members, and the Company has
not permitted either of the Members to acquire any obligations of the Company
or to buy or hold evidence of indebtedness issued by the Company except as
permitted under the Company Agreement.

The Company has not made
loans to either of the Members, except to the extent permitted by the Company
Agreement.  To the extent loans have
been made to either of the Members, such loans have been properly authorized
and documented in the books and records of the Company.  The Company has not bought or held evidence
of indebtedness issued by either of the Members.

The Company has allocated
fairly and reasonably any overhead expenses shared with either of the Members,
including paying for office space and activities performed by any employee of
the Company.

The Company has not
acquired an interest in the ownership of either of the Members.

The Company has had
indices of separateness from any other person or entity such as bank accounts,
if any, and employees, as and if required.

 

12

 

The Company has held
itself out as a separate entity and has not identified itself as a division of
either of the Members as a division of the Company.  The Company has corrected any known misunderstanding regarding
its separate identity.

The Company has not made
or controlled decisions regarding the day-to-day operations or business of
either of the Members and has not acted on behalf of either of the
Members.  The Company has not
voluntarily merged, consolidated or convened into or with either of the
Members.

 

13

 

Exhibit
1-B

Retail Partners Limited
Partnership (the “Company”) makes the following representations and
warranties concerning the Company’s conduct:

The Company is a limited
partnership formed under the laws of the State of Illinois and operated
pursuant to its partnership agreement and all amendments thereto (as amended,
the “Partnership Agreement”). 
The Company has observed all applicable legal formalities and procedures
required by the Partnership Agreement, the laws of the State of Illinois and
the laws of any other state or jurisdiction, to the extent it has done business
outside the United States, in which the Company has done business, as such
formalities, procedures and law relate to the separateness of the Company from any
other person or entity.  The Company has
maintained its existence in good standing and/or in full force and effect under
the laws of the State of Illinois, as well as in any other state or
jurisdiction in which it is so required. 
The Company has been qualified and authorized to do business in each
state in which the conduct of its business so requires.

The Company has acted
solely in accordance with and has complied with the provisions of the
Partnership Agreement as such provisions relate to separateness of the Company
from any other person or entity.

The business of the
Company has been conducted by its Partner(s) and Officer(s) (the “Partners
and Officers”), or any authorized substitutes for such persons or entities
as permitted by the Partnership Agreement and all applicable state law.  The Partners and Officers have duly
authorized all of the actions heretofore taken by the Company to the extent
such actions are required to be authorized by the Partners and the
Officers.  The Partners and Officers, when
acting in such capacity, have acted in the best interests of the Company,
consistent with their fiduciary duties to the Company to the extent such duties
are created by applicable state law. 
The business of its partners or any of their respective affiliates (the
“Partners”) has not been conducted by the Company.

The Company has
maintained company and financial books and records separate from those of the
Partners.

The financial statements
of the Company have been prepared and maintained using the same method of
accounting used for the preparation of income tax returns or in accordance with
generally accepted accounting principles. 
The Company’s financial statements have not been prepared or maintained
on a consolidated basis with those of any of the Partners. The Company has
maintained financial statements separate from the financial statements of any
of the Partners, showing its assets and liabilities separate and apart from
those of any of the Partners and accurately portraying the financial condition,
assets and liabilities of the Company. 
No assets or liabilities of any of the Partners have been set forth on
the financial statements of the Company.

The Company has conducted
its business solely in its own name and in accordance with the provisions of the
Partnership Agreement and all amendments thereto.  The Company has entered into its own contracts in its own name
and has used its own name for purposes of obtaining any required registrations,
licenses and permits (whether governmental, administrative or otherwise)
necessary to the conduct of its own business. 
Without limiting the generality of the foregoing, all 

 

14

 

oral and written
communications, including, without limitation, letters contracts, statements
and applications, have been made solely in the name of the Company, if they
relate solely to the Company.

The Company has
recognized at all times that it owns no interest in the property of any of the
Partners and has not represented that it owns an interest in the property of
any of the Partners.

All transactions, if any,
between the Company and any of the Partners have been duly authorized and
documented, and have been recorded accurately in the appropriate books and
records of the Company.  All such
transactions have been fair to each party, have constituted exchanges for fair
consideration and for fair and reasonably equivalent value, have been based on
commercially reasonable terms, and have been made in good faith, without any
intent to hinder, delay, or defraud creditors of any of the parties.

The Company’s
capitalization has been adequate in light of its business and purpose.  The Company has not engaged in a business
for which the property of such entity represents an inadequate amount of capital.

The Company has acted
solely through its Partners and Officers or its duly authorized agents or
representatives in the conduct of its business, and has not permitted any of
the Partners to act on its behalf, except as may be permitted by the terms of
the Partnership Agreement and by the laws of any state in which it is
conducting business and organized.

The Company has not
commingled its assets or liabilities with those of any of the Partners.  The Company has kept its assets and
liabilities separately identifiable and distinguishable from the assets and
liabilities of any other entity.

The Company has not
transferred any assets to any of the Partners, nor has the Company made any
contributions, payments or distributions to any of the Partners, except as
authorized by the Partnership Agreement and all applicable federal and state
law.  To the extent distributions or
payments have been made to any of the Partners, such distributions and/or
payments have been properly authorized and documented in the books and records
of the Company.  The Company has not
permitted any of the Partners to transfer any of its assets or make any
contributions to the Company, except as authorized by the Partnership Agreement
and all amendments thereto.

The Company has not financed
the operations of any of the Partners, and the Company has not permitted any of
the Partners to finance the operations of the Company, except as authorized by
the Partnership Agreement.  The Company
has not executed or assumed any document purporting to guarantee payment of any
note or purporting to guarantee the performance of any document executed or
assumed by any of the Partners.  The
Company has not held itself, its assets or its creditworthiness out as being
available for payment of any of its Partners’ liabilities.  The Company has not made any representations
to any creditors of any of the Partners to induce them to rely on the assets or
the credit of the Company and to the Company’s knowledge, no creditor is
relying on the assets or the credit of the Company with respect to liabilities
of any of the Partners.

 

15

 

The Company has not made
any representations to any of its own creditors to induce them to rely on the
assets or the credit of any of the Partners with respect to liabilities of the
Company, and to the Company’s knowledge, no creditor is relying on the assets
or the credit of any of the Partners with respect to liabilities of the
Company.

To the extent the Company
has accounts (bank, investment or otherwise) and employees, as required, the
Company has maintained its own accounts and employees separately and apart from
any accounts or employees of any of the Partners.  The Company has maintained a sufficient number of employees, as
and if required, in light of its business operations.

The Company has not
represented that any of the Partners owns an interest in the property of the
Company.  All property owned by the
Company has been owned in the name of the Company and all documents of title to
any property have reflected the ownership of the Company.

None of the Company’s
liabilities have been paid from the funds of any of the Partners, and the
Company has not paid liabilities of the Partners from its funds.

The Company has not
pledged any of its assets for the benefit of any of the Partners.

When the Company was
formed, it satisfied all of the requirements of organization of the state in
which it was formed.

The Company has not
acquired any of the obligations of any of the Partners, and the Company has not
permitted any of the Partners to acquire any obligations of the Company or to
buy or hold evidence of indebtedness issued by the Company except as permitted
under the Partnership Agreement.

The Company has not made
loans to any of the Partners, except to the extent permitted by the Partnership
Agreement.  To the extent loans have
been made to any of the Partners, such loans have been properly authorized and
documented in the books and records of the Company.  The Company has not bought or held evidence of indebtedness
issued by any of the Partners.

The Company has allocated
fairly and reasonably any overhead expenses shared with any of the Partners,
including paying for office space and activities performed by any employee of
the Company.

The Company has not
acquired an interest in the ownership of any of the Partners.

The Company has had
indices of separateness from any other person or entity such as bank accounts,
if any, and employees, as and if required.

The Company has held
itself out as a separate entity and has not identified itself as a division of
any of the Partners.  The Company has
corrected any known misunderstanding regarding its separate identity.

 

16

 

The Company has not made
or controlled decisions regarding the day-to-day operations or business of any
of the Partners and has not acted on behalf of any of the Partners.  The Company has not voluntarily merged,
consolidated or convened into or with any of the Partners.

 

17

 

Exhibit
1-C

Retail Partners, Inc.
(the “Company”) makes the following representations and warranties
concerning the Company’s conduct:

The Company is a
corporation formed under the laws of the State of Illinois and operated
pursuant to its organizational documents and all amendments thereto (as
amended, the “Articles”).  The
Company has observed all applicable legal formalities and procedures required
by the Articles, the laws of the State of Illinois and the laws of any other
state or jurisdiction, to the extent it has done business outside the United
States, in which the Company has done business, as such formalities, procedures
and law relate to the separateness of the Company from any other person or
entity.  The Company has maintained its
existence in good standing and/or in full force and effect under the laws of
the State of Illinois, as well as in any other state or jurisdiction in which
it is so required.  The Company has been
qualified and authorized to do business in each state in which the conduct of
its business so requires.

The Company has acted
solely in accordance with and has complied with the provisions of the Articles
as such provisions relate to separateness of the Company from any other person
or entity.

The business of the
Company has been conducted by its directors and officers (the “Directors and
Officers”), or any authorized substitutes for such persons or entities as
permitted by the Articles and all applicable state law.  The Directors and Officers have duly
authorized all of the actions heretofore taken by the Company to the extent
such actions are required to be authorized by the Directors and the
Officers.  The Directors and Officers,
when acting in such capacity, have acted in the best interests of the Company,
consistent with their fiduciary duties to the Company to the extent such duties
are created by applicable state law. 
The business of its equity holders or any of their respective affiliates
(the “Equityholders”) has not been conducted by the Company.

The Company has
maintained company and financial books and records separate from those of the
Equityholders.

The financial statements
of the Company have been prepared and maintained using the same method of
accounting used for the preparation of income tax returns or in accordance with
generally accepted accounting principles. 
The Company’s financial statements have not been prepared or maintained
on a consolidated basis with those of any of the Equityholders. The Company has
maintained financial statements separate from the financial statements of any
of the Equityholders, showing its assets and liabilities separate and apart
from those of any of the Equityholders and accurately portraying the financial
condition, assets and liabilities of the Company.  No assets or liabilities of any of the Equityholders have been
set forth on the financial statements of the Company.

The Company has conducted
its business solely in its own name and in accordance with the provisions of
the Articles and all amendments thereto. 
The Company has entered into its own contracts in its own name and has
used its own name for purposes of obtaining any required registrations,
licenses and permits (whether governmental, administrative or otherwise)
necessary to 

 

18

 

the conduct of its
own business.  Without limiting the
generality of the foregoing, all oral and written communications, including,
without limitation, letters contracts, statements and applications, have been
made solely in the name of the Company, if they relate solely to the Company.

The Company has
recognized at all times that it owns no interest in the property of any of the
Equityholders and has not represented that it owns an interest in the property
of any of the Equityholders.

All transactions, if any,
between the Company and any of the Equityholders have been duly authorized and
documented, and have been recorded accurately in the appropriate books and
records of the Company.  All such transactions
have been fair to each party, have constituted exchanges for fair consideration
and for fair and reasonably equivalent value, have been based on commercially
reasonable terms, and have been made in good faith, without any intent to
hinder, delay, or defraud creditors of any of the parties.

The Company’s
capitalization has been adequate in light of its business and purpose.  The Company has not engaged in a business
for which the property of such entity represents an inadequate amount of
capital.

The Company has acted
solely through its Directors and Officers or its duly authorized agents or
representatives in the conduct of its business, and has not permitted any of
the Equityholders to act on its behalf, except as may be permitted by the terms
of the Articles and by the laws of any state in which it is conducting business
and organized.

The Company has not
commingled its assets or liabilities with those of any of the
Equityholders.  The Company has kept its
assets and liabilities separately identifiable and distinguishable from the
assets and liabilities of any other entity.

The Company has not
transferred any assets to any of the Equityholders, nor has the Company made
any contributions, payments or distributions to any of the Equityholders,
except as authorized by the Articles and all applicable federal and state
law.  To the extent distributions or
payments have been made to any of the Equityholders, such distributions and/or
payments have been properly authorized and documented in the books and records
of the Company.  The Company has not
permitted any of the Equityholders to transfer any of its assets or make any
contributions to the Company, except as authorized by the Articles and all
amendments thereto.

The Company has not
financed the operations of any of the Equityholders, and the Company has not
permitted any of the Equityholders to finance the operations of the Company,
except as authorized by the Articles. 
The Company has not executed or assumed any document purporting to
guarantee payment of any note or purporting to guarantee the performance of any
document executed or assumed by any of the Equityholders.  The Company has not held itself, its assets
or its creditworthiness out as being available for payment of any of the
Equityholders ‘ liabilities.  The
Company has not made any representations to any creditors of any of the
Equityholders to induce them to rely on the assets or the credit of the Company
and to the Company’s knowledge, no creditor is relying on the assets or the
credit of the Company with respect to liabilities of any of the Equityholders.

 

19

 

The Company has not made
any representations to any of its own creditors to induce them to rely on the
assets or the credit of any of the Equityholders with respect to liabilities of
the Company, and to the Company’s knowledge, no creditor is relying on the
assets or the credit of any of the Equityholders with respect to liabilities of
the Company.

To the extent the Company
has accounts (bank, investment or otherwise) and employees, as required, the
Company has maintained its own accounts and employees separately and apart from
any accounts or employees of any of the Equityholders.  The Company has maintained a sufficient
number of employees, as and if required, in light of its business operations.

The Company has not
represented that any of the Equityholders owns an interest in the property of
the Company.  All property owned by the
Company has been owned in the name of the Company and all documents of title to
any property have reflected the ownership of the Company.

None of the Company’s
liabilities have been paid from the funds of any of the Equityholders, and the
Company has not paid liabilities of the Equityholder from its funds.

The Company has not
pledged any of its assets for the benefit of any of the Equityholders.

When the Company was
formed, it satisfied all of the requirements of organization of the state in
which it was formed.

The Company has not
acquired any of the obligations of any of the Equityholders, and the Company
has not permitted any of the Equityholders to acquire any obligations of the
Company or to buy or hold evidence of indebtedness issued by the Company except
as permitted under the Articles.

The Company has not made
loans to any of the Equityholders, except to the extent permitted by the
Articles.  To the extent loans have been
made to any of the Equityholders, such loans have been properly authorized and
documented in the books and records of the Company.  The Company has not bought or held evidence of indebtedness
issued by any of the Equityholders.

The Company has allocated
fairly and reasonably any overhead expenses shared with any of the
Equityholders, including paying for office space and activities performed by
any employee of the Company.

The Company has not
acquired an interest in the ownership of any of the Equityholders.

The Company has had
indices of separateness from any other person or entity such as bank accounts,
if any, and employees, as and if required.

 

20

 

The Company has held
itself out as a separate entity and has not identified itself as a division of
any of the Equityholders as a division of the Company.  The Company has corrected any known
misunderstanding regarding its separate identity.

The Company has not made
or controlled decisions regarding the day-to-day operations or business of any
of the Equityholders and has not acted on behalf of any of the Equityholders
..  The Company has not voluntarily merged,
consolidated or convened into or with any of the Equityholders.

 

21

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