Document:

Exhibit 10.1

Amended and Restated
Voting Rights Agreement

 

This
AGREEMENT, amended and restated as of the 16th day of April, 2003,
by and among John R. Blouin (“Blouin”), Wells-Gardner Electronics Corporation,
an Illinois corporation (the “Company”), James Industries, Inc., an Illinois
corporation (“JI”), and James J. Roberts, Jr. individually and as trustee of
the James J. Roberts, Trust, UTA Dated 01-23-91 and the James J. Roberts,
Trust, UTA Dated 12-14-94 (collectively “Roberts”) (each of Blouin, JI and
Roberts, a “Shareholder”);

 

WHEREAS,
Roberts and Blouin own beneficially all of the outstanding Capital Stock of JI
and Roberts owns beneficially 672,698 of the issued and outstanding Common
Shares of the Company (which Common Shares, together with any Common Shares of
the Company hereafter acquired by Roberts or JI are hereinafter referred to as
“Roberts’ Common Shares”);

 

WHEREAS, all
of such Roberts’ Common Shares are pledged to various pledgees as collateral
for loans;

 

WHEREAS, the
Company and the Shareholders have heretofore entered into, and continue to be
parties to, that certain Sales Representative Agreement, dated December 9,
1998, as amended from time to time (the “Representative Agreement”);

 

WHEREAS, the
Company and the Shareholders have heretofore entered into that certain Voting
Rights Agreement dated August 30, 1999; and

 

WHEREAS, the
Company and the Shareholders deem it to be in their mutual best interest and in
the best interests of all of the Company’s shareholders that the certain Voting
Rights Agreement dated August 30, 1999 be amended and restated in its entirety
as set forth herein.

 

NOW,
THEREFORE, in consideration of the premises, mutual covenants and agreements
contained herein, the parties, intending to be legally bound, hereby amend and
restate that certain Voting Rights Agreement dated August 30, 1999 in its
entirety and hereby agree as follows:

 

1. Voting
For Directors.

(a)Until
Termination of the Representative Agreement (as hereinafter defined) the
Shareholders shall vote (and, if applicable, shall direct all pledgees to vote)
their Common Shares of the Company at every election of directors of the
Company, for the election of such slate of nominees as the nominating committee
of the Board of Directors (or if there is no nominating committee, then such
other committee, or the Board of Directors, as the case may be, performing such
function) shall designate.  Until
Termination of the Representative Agreement neither Roberts nor Blouin shall be
a nominee, stand for election or serve as a member of the Board of Directors.

 

(b)The
obligations of the parties under this paragraph 1 shall terminate with respect
to any Common Shares of the Company which they transfer in a bona fide sale or
exchange for value.

 

 

(c)The
obligations of each of the parties under this Agreement shall also be binding
upon any of their transferees, except as otherwise provided herein.

 

2. Death.  Within ninety (90) days after the death of
each Shareholder, the executor or administrator of any Shareholder’s estate and
the successor trustee of any party shall notify the Company of the provisions
of his will and the provisions of a trust, if any, governing the distribution
of that Shareholder’s Common Shares. 
Such executor or administrator and successor trustee and all
beneficiaries and heirs, devises and legatees of such party, shall be bound by
the provisions of paragraph 1 hereof.

 

3. Additional
Definition.  “Termination
of the Representative Agreement” shall be deemed to occur if such agreement
terminates under paragraph 14 thereof, except that in the event of a
termination of the Representative Agreement by the Company under paragraph
14(c) thereof, for purposes of this Agreement, Termination shall be deemed to
occur at the end of any additional period for which the Representative
Agreement had then been automatically renewed under paragraph 14(a) thereof.

 

4. Endorsement
on Stock Certificates. 
All certificates representing Common Shares shall be endorsed as
follows:

 

“The voting of
the shares represented hereby are subject to restrictions and agreements
contained in an agreement dated as of August 30, 1999 by and among
Wells-Gardner Electronics Corporation and certain of its shareholders, a copy
of which is on file with the Secretary of Wells-Gardner Electronics
Corporation.”

 

5. Termination
and Amendment.  Anything
to the contrary notwithstanding, this Agreement shall terminate and have no
further effect on the earlier of (a) any act or event which provides for
termination elsewhere in this Agreement or (b) the Termination of the
Representative Agreement.  In addition,
this Agreement shall terminate as to any Shareholder if such Shareholder or the
executor or administrator of the estate of a deceased Shareholder sells for
cash consideration all of the Common Shares owned by such Shareholder to an
entity or a person that is not an affiliate or member of the immediate family
of such Shareholder.  For purposes
hereof “affiliate” shall mean any person or entity that directly controls or is
controlled by or is under common control with any Shareholder and “immediate
family” shall mean a spouse, child, parent, sibling, lined descendent or
ancestor and includes any entity controlled by any of the foregoing.  This Agreement may be altered, amended or
terminated (except as otherwise provided herein) at any time only pursuant to
an agreement in writing, executed by or on behalf of the Company, JI and such
of the other parties hereto (or their successors).

 

2

 

6. Entire Agreement.  This
Agreement constitutes the entire agreement and final understanding of the
parties with respect to the subject matter hereof and supersedes and terminates
any and all prior voting agreements, prior and/or contemporaneous
communications and/or agreements between the parties, whether written or
verbal, express or implied, direct or indirect, relating in any way to the
subject matter hereof including, but not limited to the Voting Agreement dated
April 26, 1994, the Voting Rights Agreement dated February 29, 1996, Voting
Rights Agreement dated December 9, 1998 and the Voting Rights Agreement dated
August 30, 1999.

 

7. Notices.  All notices, offers and acceptances
hereunder shall be in writing and shall be deemed to be communicated (except as
otherwise provided herein) when delivered in person or deposited in the U.S.
mail, postage prepaid, by registered mail, addressed to the party concerned at
the address appearing on the Company’s records or at such other or additional
place as such party may designate by notice given in accordance with the
provisions hereof to the other parties.

 

8. Benefit.  This Agreement shall be binding as
provided herein upon the parties, their heirs, devisees, legatees,
beneficiaries, legal representatives, successors and assigns.

 

[Signature Page Follows]

 

3

 

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

 

	
  WELLS-GARDNER

  	
  JAMES
  INDUSTRIES, INC.

  
	
  ELECTRONICS
  CORPORATION

  	
   

  
	
   

  	
   

  
	
  By:

  	
   /s/ ANTHONY SPIER

  	
   

  	
  By:

  	
   /s/ JAMES J ROBERTS JR.

  	
   

  
	
   

  	
   

  
	
   

  	
  /s/ JAMES J
  ROBERTS JR.

  	
   

  
	
   

  	
  JAMES J.
  ROBERTS, JR.

  
	
   

  	
   

  
	
   

  	
  /s/ JAMES J
  ROBERTS JR.

  	
   

  
	
   

  	
  JAMES J.
  ROBERTS, JR., AS TRUSTEE

  OF THE JAMES J. ROBERTS TRUST

  UTA DATED 01-23-91

  
	
   

  	
   

  
	
   

  	
  /s/ JAMES J
  ROBERTS JR.

  	
   

  
	
   

  	
  JAMES J.
  ROBERTS, JR., AS TRUSTEE

  OF THE JAMES J. ROBERTS TRUST

  UTA DATED 12-14-94

  
	
   

  	
   

  
	
   

  	
  /s/ JOHN R.
  BLOUIN

  	
   

  
	
   

  	
  JOHN R.
  BLOUIN

  
							

 

4Exhibit 10.83

 

CONSTRUCTION AND TERM LOAN AGREEMENT

 

THIS CONSTRUCTION AND
TERM LOAN AGREEMENT (this “Agreement”) is made as of
April 24, 2003 by and between Horizon Group Properties, L.P., a Delaware
limited partnership (“Borrower”), and Amster Trading Company
Charitable Remainder Unitrust dated March 10, 2003 (“Lender”).

 

W I T N E S E T H:

 

WHEREAS,
Borrower has fee simple title to the property described on Exhibit A attached hereto (as
the description of such land on Exhibit A may be revised, the “Land”)
and commonly known as Phase II of Horizon Outlet Center - Tulare; and

 

WHEREAS,
Borrower wishes to borrow certain sums for the purpose of constructing the
Improvements; and

 

WHEREAS, at
the completion of the construction of the Improvements and upon the Note
Maturity Date, Borrower wishes to replace the Construction Loan with the Term
Loan; and

 

WHEREAS,
Lender is willing to make said Loans upon the terms and conditions hereinafter
set forth.

 

NOW,
THEREFORE, in consideration of the mutual representations, warranties,
covenants and agreements herein contained, the sufficiency of which is hereby
acknowledged, the parties hereto represent and agree as follows:

 

ARTICLE
I

 

INCORPORATION
AND DEFINITIONS

 

1.1           Incorporation.  The foregoing recitals and all exhibits
hereto are hereby made a part of this Agreement.

 

1.2           Definitions.  The following terms shall have the following
meanings in this Agreement:

 

Approved Budget:  A Construction Budget prepared by Borrower and approved by Lender
reflecting all costs (including without limitation Hard Costs and Soft Costs)
required to complete the Improvements, together with all related costs and
expenses, and allocating said cost by category and amount as shown on Exhibit D
hereto, and any and all amendments or supplements thereto approved in writing
by Lender.

 

Architect: 
Mangini and Associates, and any other architects or engineers retained
by Borrower in connection with the Project who are approved by Lender (such
approval not to be unreasonably withheld).

 

1

 

Architect’s Agreement:  The agreement between Borrower and Architect
relating to the design, construction, supervision and other services to be
rendered by Architect regarding the Improvements.

 

Assignment of Plans and Permits: That certain
Assignment of Plans, Specifications, Construction and Service Contracts,
Licenses and Permits of even date herewith executed by Borrower in favor of
Lender.

 

Assignment of Rents: That certain Assignment
of Rents and Leases of even date herewith executed by Borrower in favor of
Lender.

 

Available Funds:  As defined in Section 5.1 hereof.

 

Awards: 
As defined in the Deed of Trust.

 

Balance: 
As defined in Section 5.1 hereof.

 

	
  Borrower’s
  Counsel:

  	
  Ms. Beth
  Rubin, Schiff Hardin & Waite

  
	
   

  	
  6600 Sears
  Tower

  
	
   

  	
  Chicago,
  Illinois 60606-6473

  

 

Business Day or business day:  Any calendar day other than Saturday,
Sunday, or any day which is a legal holiday in, or in which banking
institutions are authorized or required by law or governmental action to close
in Chicago, Illinois.

 

Casualty: 
As defined in the Deed of Trust.

 

Completion Date: October 15, 2003.

 

Condemnation: 
As defined in the Deed of Trust.

 

Construction Contract:  The agreement that Borrower has entered into
or will enter into with the Contractor for the construction and equipping of
the Improvements and the furnishing of labor and materials for the Project.

 

Construction Draw:  The first disbursement of proceeds from the Loan used for Hard
Costs.

 

Construction Loan:  A loan in the original principal amount of up to THREE MILLION
ONE HUNDRED THOUSAND AND NO/100 Dollars ($3,100,000.00).

 

Construction Loan Opening:  The initial disbursement of Construction
Loan proceeds which shall be made at such time as all of the conditions and requirements
of this Agreement required to be performed by Borrower or other parties have
been satisfied or performed to Lender’s satisfaction.

 

Construction Loan Opening Date: The date of
the Construction Loan Opening.

 

Contractor: 
Webb and Sons.

 

2

 

Deed of Trust:  That certain Construction Deed of Trust, Security Agreement and
Fixture Financing Statement of even date herewith duly executed by Borrower,
covering all of the Borrower’s right, title and interest in the Project and
granting a first lien on the Project to secure the Obligations.

 

Default: 
Any of the events described in Article X hereof.

 

Default Rate: 
Five percent (5%) per annum plus the Interest Rate then in effect under
the Note.

 

Disbursement: 
Any disbursement of proceeds from the Loans.

 

Environmental Indemnity Agreement:  That certain Environmental Indemnity
Agreement of even date herewith executed by Borrower and Guarantor in favor of
Lender.

 

Environmental Reports:  That certain Phase I Environmental Site
Assessment of Horizon Outlet Center dated May 2, 1998, prepared by EMG under
Project No. 36305.

 

Extras: 
Any labor, material, or other item which when incorporated in the
Project will result in an increase in Hard Costs or Soft Costs.

 

Fund Control: Any fund control company
selected by Lender to handle the Disbursements.

 

Governmental Authority:  The United States of America, the State of
Delaware, any other state in which Borrower or any of its members, or any
person or entity which is a member of a member of Borrower, is organized or
which for any reason has jurisdiction over any of them, the Project, the County
of Tulare the City of Tulare the State of California and any political
subdivision of any of them, and any court, department, commission, board or
similar agency.

 

Guarantor: 
Horizon Group Properties, Inc., a Maryland corporation.

 

Guaranty: That certain Guaranty of Payment and
Performance of even date herewith made by Guarantor for the benefit of Lender.

 

Hard Costs: 
Any and all costs directly related to and incurred or to be incurred in
connection with the construction of the Improvements in accord with the Plans,
including without limitation, the cost of demolishing any existing improvements
and the cost of all labor, materials and equipment incurred pursuant to the
Construction Contract or any subcontract, but excluding any fees for
architectural or engineering services.

 

Improvements: 
A building which will consist of approximately 33,160 square feet  located on the Land.

 

Land: 
That certain real estate commonly known as Phase II of Horizon Outlet
Center - Tulare; and legally described in Exhibit A hereto, together with all
improvements located thereon and all easements and other rights appurtenant
thereto.

 

3

 

Leases: Each Lease between Borrower, as
landlord, and each tenant under such lease as shown on Exhibit E hereto, and any
other leases or licenses of any portion of the Project.

 

Legal Requirements:  Any law, statute, ordinance, order, rule or regulation of any
Governmental Authority and any requirements, terms or conditions contained in
any restrictions or restrictive covenants affecting the Land or the
Improvements, including without limitation zoning, building, environmental,
land use, noise abatement, occupational health and safety, sale or offer,
pollution control or other laws.

 

Lender’s Counsel:  Mr. Robert A. Fein, Ulmer & Berne LLP, Penton Media Building,
1300 East Ninth Street, Suite 900, Cleveland, Ohio 44114.

 

Loan Documents:  This Agreement, the Note, the Deed of Trust, Security Agreement,
Financing Statement and Fixture Filing, the Assignment of Rents, the Assignment
of Plans and Permits, the Guaranty, the Environmental Indemnity Agreement, and
all other documents referred to in Section 4.1 hereof, together with any and
all amendments, extensions, modifications or replacements thereof and any other
documents at any time given to evidence or secure the Loans.

 

Loan Expenses:  As defined in Section 2.4(d) hereof.

 

Loans: 
The Construction Loan and the Term Loan, as well as all indebtedness of
Borrower to Lender evidenced by or incurred under the Loan Documents.

 

Note: 
That certain Promissory Note of even date herewith from Borrower to
Lender in the original principal amount of the Construction Loan and the Term
Loan, as such proceeds are disbursed pursuant to this Agreement.

 

Note Maturity Date: August 1, 2009.

 

Obligations: 
All obligations of Borrower, whether monetary or otherwise, under the
Loan Documents.

 

Permits: 
As defined in Section 4.2(k) hereof.

 

Permitted Exceptions:  The title exceptions specified in Exhibit B
hereto.

 

Plans: 
Detailed plans and specifications for the construction of the Project
which have been approved by Lender, together with any changes made therein that
are permitted under the terms of this Agreement.  The initial Plans are referenced in Exhibit C hereto.

 

Proceeds: 
As defined in the Deed of Trust.

 

Prohibited Transfer:  As defined in Section 9.2 hereof.

 

Project: 
The Land and the Improvements.

 

4

 

Soft Costs: 
All costs incurred or to be incurred in connection with the Project
other than Hard Costs, including, without limitation, commissions, appraisal
fees, architectural and engineering fees, title and recording charges, special
counsel fees and costs, real estate tax and interest reserves, real estate
taxes and special assessments becoming due and payable during the term of the
Loans, the Loan Expenses and those costs (other than Hard Costs) set forth on
the Approved Budget.

 

Subcontractor:  Any person or entity having a subcontract or subcontracts with
the Contractor for the construction, equipping or supplying by such
Subcontractor of any portion of the Project.

 

Survey: 
As defined in Section 4.2(b) hereof.

 

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

 

Term Loan Opening:  The initial disbursement of Term Loan proceeds which shall be
made at such time as all of the conditions and requirements of this Agreement
required to be performed by Borrower or other parties have been satisfied or
performed to Lender’s satisfaction.

 

Term Loan Opening Date:  The date of the Term Loan Opening.

 

Title Insurer:  First American Title Insurance Company.

 

Title Policy: 
As defined in Section 4.2(a) hereof.

 

Transfer: 
As defined in Section 9.2 hereof.

 

ARTICLE
II

 

CONSTRUCTION
AND TERM LOANS

 

2.1           Agreement to Borrow and Lend.  Borrower agrees to borrow from Lender, and
Lender agrees to lend to Borrower, the original principal amount of the
Construction Loan and the Term Loan, subject to the terms and conditions of
this Agreement.

 

2.2           Construction
Loan.  The sum of up to THREE
MILLION ONE HUNDRED THOUSAND AND NO/100 Dollars ($3,100,000.00), which shall be
disbursed in accordance with the provisions of this Agreement.  The Construction Loan shall be evidenced by
the Note, and shall bear interest and be payable as set forth in the Note.

 

2.3           Conditions
Precedent to Construction Loan Disbursements.  No disbursement of Construction Loan proceeds shall be made by
Lender to Borrower at any time unless:

 

(a)           the
Loan is in Balance as provided in Section 5.1 hereof;

 

(b)           no
Default has occurred under this Agreement or any of the other Loan Documents,
and no event, circumstance or condition has occurred or exists that, with the

 

5

 

passage of time or the giving of notice, would constitute a Default
under this Agreement or any other Loan Document;

 

(c)           all
representations and warranties made by Borrower to Lender herein or in any
other Loan Document continue to be accurate in all material respects; and

 

(d)           all
conditions precedent to such disbursement have been satisfied.

 

2.4           Construction Loan Disbursements.  The proceeds of the Construction Loan shall
be disbursed as follows:

 

(a)           The
Construction Loan Opening shall be made at such time as all of the conditions
and requirements of this Agreement required to be performed by Borrower or
other parties prior to the Construction Loan Opening have been satisfied or
performed.

 

(b)           All
Disbursements of the proceeds from the Construction Loan, shall be made in
accordance with Article V hereof.

 

(c)           If
any Construction Loan proceeds are disbursed by Lender either to Fund Control
or into escrow, such proceeds shall be considered to be disbursed to Borrower
from the date of deposit with Fund Control or such escrow, as applicable, and
interest shall accrue on such proceeds from such date.

 

(d)           Borrower
shall pay, and hereby requests and authorizes Lender to make direct advances
from the Construction Loan proceeds for payment and reimbursement of, all
interest, charges, costs and expenses incurred by Lender in connection with the
Construction Loan, including without limitation:  (i) all interest due on the Construction Loan; (ii) all title
examination, survey, escrow, filing, search and recording fees and charges;
(iii) all fees and disbursements of architects, engineers and appraisers
engaged by Lender; (iv) all documentary stamp and other taxes and charges
imposed by law on the issuance or recording of any of the Loan Documents; (v)
all title, casualty, liability, performance or other insurance or bond
premiums; (vi) all reasonable fees and disbursements of Lender’s Counsel
related to the Construction Loan or the Term Loan ; and (vii) any amounts
required to be paid by Borrower under this Agreement or any of the other Loan
Documents after the occurrence of a Default (all of which indicated in this Section
2.4(d) are herein collectively referred to as the “Loan
Expenses”).

 

(e)           Disbursement
shall be made for payment of a specified cost of the Project in accordance with
the Approved Budget.  Borrower may
reallocate funds between line items of the Approved Budget, provided that such
reallocation will neither diminish the quality of the Project nor cause any
liens to attach to the Project that are superior to Lender’s lien.

 

2.5           Intentionally omitted.

 

2.6           Term Loan.  A loan in the original principal amount of
THREE MILLION ONE HUNDRED THOUSAND AND NO/100 Dollars ($3,100,000.00), which
shall be disbursed in

 

6

 

accordance with the provisions
of this Agreement.  The Term  Loan shall be evidenced by the Note, and
shall bear interest and shall be payable as set forth in the Note.

 

2.7           Conditions Precedent to Term Loan
Disbursement.  Provided the
following conditions have been satisfied, Lender agrees, in accordance with the
provisions of the Note and this Agreement, to extend to Borrower the Term Loan
at the Term Loan Opening:

 

(a)           no
Default has occurred under this Agreement or any of the other Loan Documents,
and no event, circumstance or condition has occurred or exists that, with the
passage of time or the giving of notice, would constitute a Default under this
Agreement or any other Loan Document;

 

(b)           all
representations and warranties made by Borrower to Lender herein or in any
other Loan Document continue to be accurate in all material respects; and

 

(c)           Borrower
has satisfied all of the conditions of Section 2.7 hereof.

 

2.8           Conditions Precedent to Term Loan
Opening.  As conditions precedent to
the Term Loan Opening, Borrower shall furnish the following to Lender at least
one (1) business day prior to the Term Loan Opening or at such time as is set
forth below, all of which must be satisfactory to Lender and Lender’s Counsel
in form, content and execution:

 

(a)           Title
Policy.  A title insurance policy in
the form of an ALTA Loan Policy (the “Term Loan Title Policy”) issued as of the
date of the Term Loan Opening by the Title Insurer to Lender in the principal
amount of the Note, insuring the Deed of Trust to be a valid first lien on the
Project, subject only to the Permitted Exceptions and shall contain such
customary endorsements as Lender or Lender’s Counsel shall reasonably require.

 

(b)           Survey.  A plat of survey (the “Term Loan Survey”) of the
Land made by a registered California land surveyor satisfactory to Lender, and
specifically showing the following issues: 
(i) the location of all buildings, fences and other improvements on the
Land, including the Project; (ii) the location of all visible or recorded
easements, water courses, drains, sewers, utility lines, public and private
roads, rights of way; (iii) if the Land is comprised of more than one parcel,
interior lines and other data sufficient to insure contiguity; (iv) the
locations of all adjoining streets and parking areas and (v) such additional
information which may be reasonably required by the Lender or the Title
Insurer.  The Term Loan Survey shall be
made in accordance with the current ALTA survey standards, shall be dated not
earlier than three (3) months prior to the Term Loan Opening, shall bear a
proper certificate by the surveyor regarding compliance with the standards
enumerated above, shall include the legal description of the Land, and shall
run in favor of Borrower, Lender and Title Insurer.

 

(c)           Insurance
Policies.  Insurance policies with
premiums prepaid in companies, forms, amounts and coverages customary for
developments similar to the Project.

 

(d)           Permits,
Licenses, Utilities and Tests.  Evidence
satisfactory to Lender that:

 

7

 

(i)            all governmental permits and licenses, including, without
limitation, a permanent certificate of occupancy issued by the appropriate
Governmental Authority authorizing occupancy and operation of the Project have
been issued and are in full force and all fees therefor have been fully paid
(excluding certificates of occupancy for individual tenant spaces which are
either not subject to a lease or for which tenants have taken delivery of the
space but not yet completed work which is an obligation of such tenant); and

 

(ii)           all utility, parking, access and other easements and
permits required for the use of the Project have been granted or issued.

 

(e)           Additional
Documents.  Such other documents and
materials as Lender or Lender’s Counsel may reasonably require.

 

ARTICLE
III

 

REPRESENTATIONS,
WARRANTIES AND COVENANTS

 

3.1           Representations and Warranties.  To induce Lender to execute and perform this
Agreement and make the Loans, Borrower hereby represents, warrants and
covenants to Lender as follows:

 

(a)           At
the Construction Loan Opening and the Term Loan Opening, and at all times
thereafter until the Loans have been paid in full, Borrower will have good and
merchantable fee simple title to the Land, subject only to the Permitted
Exceptions.

 

(b)           Borrower
is duly organized, validly existing and in good standing under the laws of the
State of Delaware and will, prior to the Term Loan Opening Date, become  qualified to transact business in the State
of California.  Borrower has full power
and authority to enter into this Agreement and to perform all of its duties and
obligations under this Agreement and under the other Loan Documents; and
Borrower is in full compliance in all material respects with all of the terms
and conditions of the Loan Documents.

 

(c)           This
Agreement, the Note, the Deed of Trust, the other Loan Documents, and any other
documents and instruments required to be executed and delivered by Borrower in
connection with the Loans, when executed and delivered, will constitute the
duly authorized, valid and legally binding obligations of the party required to
execute the same and will be enforceable strictly in accordance with their
respective terms.

 

(d)           The
execution, delivery and performance of this Agreement, the Note, the Deed of
Trust, the other Loan Documents, and any other documents or instruments to be
executed and delivered by Borrower pursuant to this Agreement or in connection
with the Loans and the construction, occupancy and use of the Project will
not:  (i) violate any provisions of law
or any applicable regulation, order, writ, injunction or decree of any
Governmental Authority or any other Legal Requirement; or (ii) conflict with,
be inconsistent with, or result in any breach or default of any of the terms or
provisions of any indenture,

 

8

 

mortgage, deed of trust, agreement or
contract of any kind to which Borrower is a party or by which it may be bound.

 

(e)           To
the best of Borrower’s knowledge, no condition, circumstance, event, agreement,
document, litigation or proceeding (or threatened litigation or proceeding or
basis therefor) exists that could (i) adversely affect the validity or priority
of the liens and security interests granted to Lender under the Loan Documents;
(ii) materially adversely affect the ability of Borrower to perform its
obligations under any of the Loan Documents, and including, without limitation,
the ability of Borrower to complete the Project on or before the Completion
Date; or (iii) constitute a Default under any of the Loan Documents.

 

(f)            The
Plans, the construction of the Project pursuant to the Plans, and the use and
occupancy of the Project when completed will not violate or conflict with any
Legal Requirement or any grant, easement, covenant, condition or restriction
pertaining to the Land or the Project.

 

(g)           All
financial statements submitted by Borrower to Lender in connection with the
Loans are true and correct in all material respects, and fairly present its
financial conditions and results of operations of Borrower.

 

(h)           This
Agreement and any and all financial statements, budgets, schedules, contracts,
certificates, rent rolls, reports, affidavits, agreements and other materials
submitted to Lender in connection with or in this Agreement by or on behalf of
Borrower fully and fairly state the matters with which they purport to deal.

 

(i)            Subject
only to payment of fees reflected in the Approved Budget, all utility and municipal
services required for the construction, occupancy and operation of the Project,
including, without limitation, water supply, storm and sanitary sewage disposal
systems, gas, electric and telephone facilities, are available for use at the
boundaries of the Land.

 

(j)            Commencing
on the Construction Loan Opening and on the date of each Disbursement
thereafter, all governmental permits and licenses then required by applicable
law to construct and to permit occupancy of the Project (upon its completion)
will have been issued and be in full force or, if the present stage of
construction of the Project does not allow such issuance, then such permits and
licenses will be issued upon substantial completion of construction of the
Project pursuant to the Plans (including any work required to be performed by
any tenant under the terms of its lease).

 

(k)           As
of the Construction Loan Opening, the Plans are or will be substantially
complete in all respects, containing all detail requisite for the Project,
which, when built and equipped in accordance therewith, will be ready for the
intended use thereof.

 

(l)            The
Loans are business loans and shall not be used for any personal, household or
family purposes.  The Loans do not, and
when disbursed will not, violate the provisions of any applicable usury laws
that may have jurisdiction over this transaction, Borrower, or any property
securing the Loans.

 

9

 

(m)          Except
as disclosed in the Environmental Reports, no Hazardous Material is currently
stored, buried, placed, held, located or disposed of on, under or at the Land
or any part thereof.

 

(n)           No
casualty has occurred with respect to the Project nor has any condemnation
proceeding been commenced or, to the best of Borrower’s knowledge,  threatened against the Project, the Land,
the Improvements or any part or portion thereof.

 

3.2           Continuation of Representations
and Warranties.  Borrower hereby
represents, warrants and covenants that the representations and warranties made
in Section
3.1 hereof shall, except as otherwise set forth in Section 3.1,
be and shall remain true and correct at the time of the Construction Loan
Opening, the Term Loan Opening, and at all times thereafter, so long as any
part of the Loans remains outstanding. 
Each request for a Disbursement shall constitute a reaffirmation that
such representations and warranties are true as of the date of such request and
will be true on the date of the Disbursement.  
In addition, Borrower’s request for the disbursement of the proceeds of
the Term Loan shall constitute a reaffirmation that such representations and
warranties are true as of the date of such request and will be true on the date
of the disbursement of the Term Loan proceeds.

 

ARTICLE
IV

 

CONDITIONS
TO LOAN OPENING

 

4.1           Loan, Organizational and Other
Loan Documents.  As a condition
precedent to the Construction Loan Opening, Borrower agrees that it will, in
addition to this Agreement, furnish the following Loan Documents to Lender at
least one (1) business day before the Construction Loan Opening, all of which
must be executed and satisfactory to Lender and Lender’s Counsel in form,
substance and execution, and dated of even date herewith:

 

(a)           The
Note.

 

(b)           The
Deed of Trust.

 

(c)           The
Assignment of Rents.

 

(d)           The
Assignment of Plans and Permits.

 

(e)           The
Guaranty.

 

(f)            The
Environmental Indemnity Agreement.

 

(g)           An
Assignment of General Contract assigning to Lender all of Borrower’s right,
title and interest in and to the Construction Contract.

 

(h)           Organizational
Documents.  Certified copies of the
documents creating Borrower including the Certificate of Limited Partnership
and any Limited Partnership Agreement.

 

10

 

(i)            Good
Standing and Authority to Transact Business Documents.  Good standing certificates issued by the
Secretary of State of Delaware for Borrower and certificates evidencing the
authority of Borrower to transact business in the State of California.

 

(j)            Authorization
Documents.  Certified copies of any
required partnership resolutions authorizing the execution and delivery of this
Agreement and the other Loan Documents 
for each corporation executing and delivering any of the Loan Documents.

 

(k)           Title
Commitment.  A title commitment for
issuance of an ALTA Construction Loan Policy issued by the Title Insurer in the
principal amount of the Note committing to insure the Deed of Trust as a valid
first lien on the Project subject only to Permitted Encumbrances, and
reflecting Borrower as fee owner of the Land, and committing to issue the
endorsements as set forth in Section 4.2(a).

 

(l)            Environmental
Reports.  The Environmental Reports.

 

(m)          Other.
Such other documents and instruments as Lender or Lender’s Counsel may
reasonably require.

 

4.2           Conditions to Construction Loan
Opening.  As conditions precedent to
the Construction Loan Opening, Borrower shall furnish the following to Lender
at least one (1) business day prior to the Construction Loan Opening or at such
time as is set forth below, all of which must be satisfactory to Lender and
Lender’s Counsel in form, content and execution:

 

(a)           Title
Policy.  A title insurance policy in
the form of an ALTA Construction Loan Policy (the “Title Policy”) issued as of
the date of the Construction Loan Opening by the Title Insurer to Lender in the
principal amount of the Note, insuring the Deed of Trust to be a valid first
lien on the Project, subject only to the Permitted Exceptions.  The Title Policy shall contain such
customary endorsements as Lender or Lender’s Counsel shall reasonably
require.  During the term of the
Construction Loan, Lender may require other endorsements to the Title Policy as
Lender shall deem reasonably necessary and at Borrower’s cost.

 

(b)           Intentionally
Deleted.

 

(c)           Insurance
Policies.  Insurance policies in
accordance with Section 1.03 of the Deed of Trust.

 

(d)           Documents
of Record.  Copies of all covenants,
conditions, restrictions, easements and matters of record that affect the Land.

 

(e)           Architect’s
Agreement:  A certified copy of the
Architect’s Agreement.

 

(f)            Construction
Contract.  A certified copy of the
Construction Contract.

 

(g)           Assignment
of Architect’s Agreement.  A written
agreement executed by Architect acknowledging that Borrower has granted to
Lender a security interest in

 

11

 

Borrower’s rights in the Plans and the
Architect’s Agreement, and agreeing to continue performance under the
Architect’s Agreement if Borrower defaults under this Agreement.

 

(h)           Assignment
of Construction Contract.  A written
agreement duly executed by the Contractor acknowledging Lender’s security
interest in Borrower’s rights under the Construction Contract, and agreeing to
continue performance under the Construction Contract in the event Borrower
defaults under this Agreement.

 

(i)            Assignment
of Plans and Permits.  An assignment
from Borrower to Lender of all licenses, permits, plans, specifications and
contracts relating to the Project as additional security for the Loans.

 

(j)            Plans.  One (1) complete set of final Plans,
including all changes to the date of submission thereof, certified by and
showing identification thereof by Contractor and substantially consistent with
any preliminary plans theretofore submitted to Lender, together with evidence
satisfactory to Lender that (i) the Plans are in full compliance with all Legal
Requirements; (ii) in the aggregate, the Construction Contract and subcontracts
contain all detail necessary to provide for all labor, material and equipment
required by the Plans; and (iii) all permits, licenses and governmental
approvals necessary for construction of the applicable Improvements have been
issued.

 

(k)           Permits,
Licenses, Utilities and Tests. 
Evidence satisfactory to Lender that:

 

(i)            all governmental permits and licenses (collectively, “Permits”)
including, without limitation, a building permit issued by the appropriate
Governmental Authority authorizing construction of the Project in accordance
with the Plans and including tap-on permits, required by applicable laws to
construct the Project have been issued and are in full force and all fees
therefor have been fully paid or, if the stage of construction of the Project
does not allow such issuance, such permits and licenses will be issued upon
substantial completion of the Project in accordance with the Plans;

 

(ii)           all utility, parking, access, construction, recreational
and other easements and permits required for the construction and use of the
Project have been granted or issued; and

 

(iii)          the Land will support the Improvements, as set forth in
that certain Geotechnical Engineering Investigation, Proposed Horizon Outlet
Center Expansion, Highway 99 and Prosperity Avenue, Tulare, California, dated
April 5, 1999, prepared by Krazan & Associates, Inc. under Project No.
052-99016.

 

(l)            Architect’s
Certificate.  A certificate from
Architect or other evidence satisfactory to Lender that:  (i) the Plans are, and that the Project will
be when completed in accordance therewith, in full compliance with all applicable
building, zoning and other laws and ordinances; (ii) in the aggregate, the
Construction Contract and all subcontracts contain all detail necessary to
provide for all labor, material and equipment required by the Plans;

 

12

 

and (iii) all permits, licenses and
governmental approvals necessary for construction of the Project have been
issued.

 

(m)          Construction
Contract.  Certified copies of the
Construction Contract.

 

(n)           Sworn
Statements.  A sworn statement from
Borrower and a sworn statement from Contractor setting forth a description of
all contracts (and any other parties as may be required by Title Insurer or
applicable mechanics’ lien laws) with respect to the Project containing the
names and addresses of the contractors under such contracts and any supplements
or amendments thereto, the nature of the work covered thereby, and the
aggregate amounts theretofore paid and thereafter to be paid to each contractor
thereunder.

 

(o)           Construction
Schedule.  A schedule setting forth
dates for commencement and completion of all phases of the Project, indicating
the time for performance of the work to be accomplished under the Construction
Contract and each subcontract.

 

(p)           Additional
Documents.  Such other documents and
materials as Lender or Lender’s Counsel may reasonably require.

 

ARTICLE
V

 

DISBURSEMENTS

 

5.1           Loan in Balance.  Anything in this Agreement to the contrary
notwithstanding, it is expressly understood and agreed that Borrower shall at
all times cause the Loans to be in Balance. 
The Loans shall be deemed to be in “Balance” only if total Available
Funds equal or exceed, in Lender’s reasonable judgment, the amount necessary to
pay for all unpaid costs incurred or to be incurred in the completion of the
construction, equipping and operation of the Project, including all Hard Costs,
Soft Costs and amounts to be paid as retainage to persons who have supplied
labor or materials to the Project, but excluding all marketing costs indicated
on the Approved Budget.  As used herein,
the term “Available
Funds” shall mean the amount of undisbursed proceeds under the
Loans, net of any accrued and unpaid interest on the Loans, plus any amounts
deposited by Borrower pursuant to the next sentence of this Section 5.1.
 Borrower agrees that if for any reason
the Loans are not in Balance, Borrower shall, within five (5) Business Days
after request by Lender, deposit with Lender cash in an amount that will place
the Loans in Balance.  Any such deposits
shall first be exhausted before any further disbursement of Loan proceeds is
made.  No interest shall be payable on
any such deposits.

 

5.2           Documents Required for
Disbursements.  Except as otherwise
provided herein, at least five (5) Business Days prior to, and as a condition
of, each Disbursement, Borrower shall furnish to Lender the following
documents:

 

(a)           Borrower’s
request specifying the amount of the requested Disbursement, directing Lender
to disburse said funds in accordance with this Agreement and certifying to
Lender that as of the date of such request: 
(i) the Loans are in Balance; (ii) the total amount of the request
includes the actual amount payable to Contractor, Subcontractors, Architect or

 

13

 

others who have performed work on the Project
and indicating what payment requests, if any, have been received by Borrower
but have not yet been approved by Borrower for payment; (iii) no Default, or
condition or event that, with the giving of notice or passage of time or both,
would constitute a Default, exists under this Agreement; (iv) the
representations and warranties contained in Article III hereof are true
and correct in all material respects; (v) Borrower has received no notice and
has no knowledge of any liens or claims of lien either filed or threatened
against the Project which would be superior to Lender’s lien, except those in
favor of Lender; (vi) all amounts shown as previous payments on the request
have been paid to the parties entitled to such payment; and (vii) all work and
materials theretofore furnished for the Project conform with the Plans in all
material respects, and Borrower has approved all such work and materials;

 

(b)           A
certificate as to completion and payment authorization, properly executed by Contractor
or Subcontractors seeking payment, or Architect;

 

(c)           Borrower shall furnish to Lender the
Contractor’s and Subcontractors’ sworn statements and waivers of lien covering
all work for which disbursement is to be made to the date specified therein,
all in compliance with all applicable mechanics’ lien laws and with the
requirements of Lender and  Fund
Control, together with such other supporting data as Lender or Fund Control may
reasonably require;

 

5.3           Payments Directly to
Subcontractors.  Payments for the
cost of construction and equipping of the Project shall be made directly to
those subcontractors, vendors, materialmen and suppliers owed funds in
connection therewith; provided, however, that Lender may, in its discretion,
make or cause to be made (through Fund Control or otherwise) payments for the
cost of construction of the Project directly to Contractor.

 

5.4           Escrow Payouts.  If elected by Lender, Disbursements of the
Construction Loan shall be made through the Fund Control.

 

5.5           Frequency of Payouts.  Subsequent to the Construction Loan Opening,
disbursements of the Construction Loan shall be made from time to time as
construction progresses, but not more frequently than twice in each calendar
month, and each such Disbursement shall be in an amount not less than
$10,000.00.

 

5.6           Consultants.  Lender shall have the right (but not the
duty) to employ such consultants to review and approve the Plans, the Approved
Budget and Borrower’s construction schedule, inspect the Project from time to
time to insure that the same is being duly constructed and equipped as herein
provided, approve any elements of a request for disbursement and perform such
other services as Lender may from time to time require.  The reasonable costs and disbursements of
such consultants shall be deemed a portion of the Loan Expenses.

 

5.7           Retainages.  Lender shall have no obligation to disburse
Construction Loan proceeds in excess of ninety percent (90%) of the value (as
certified by Architect) of the materials and labor incorporated in a line item
of the Project from time to time until such time as such line item is to be one
hundred percent (100%) completed. 
Notwithstanding the foregoing, upon final completion of

 

14

 

work of any Subcontractor and
delivery of final lien waivers, sworn statements, and such other items as
Lender or Fund Control may require, and subject to the other terms and
conditions of this Agreement, the balance due to such Subcontractor shall then
be disbursed to Borrower.

 

5.8           Stored Materials.  No disbursement for materials purchased by
Borrower but not yet installed or incorporated into the Project shall be made
without Lender’s prior approval of the conditions under which such materials
are purchased and stored.  In no event
shall any such disbursement be made unless the materials involved have been
delivered to the Land or stored in 
suitable storage.  Upon Lender’s
request, Borrower shall provide to Lender a copy of a bill of sale or other
evidence of title in Borrower.

 

5.9           Final Disbursement.  Lender will advance to Borrower the full
amount of the Construction Loan not theretofore disbursed and required to
complete the Project when the following conditions are complied with, provided
that such compliance shall have occurred prior to the Completion Date and that
no Default or event which, with the giving of notice, the passage of time or
both, would constitute a Default, then exist:

 

(a)           Borrower
or Architect certify in writing to Lender that the Project has been fully and
satisfactorily completed in accordance with the Plans;

 

(b)           Contractor
and all Subcontractors have supplied Lender and Fund Control with final sworn
statements and full and complete waivers of all mechanics’ lien claims or,
alternatively, a title indemnity agreement in form and substance satisfactory
to Lender and  Fund Control;

 

(c)           If
Lender so requests, Lender has received an endorsement to the Title Policy
insuring that the Deed of Trust is a valid first lien on the Project, subject
only to the Permitted Exceptions;

 

(d)           Borrower
shall have furnished a revised or recertified Survey of then current date
locating the completed Project, which Survey shall conform with the
requirements of Section 4.2(b) hereof; and

 

(e)           All
other requirements of this Agreement shall have been satisfied.

 

5.10         Expenses and Advances Secured by
Deed of Trust.  Any and all advances
or payments made by Lender hereunder from time to time, and any amounts
expended by Lender pursuant to this Agreement, the Note, the Deed of Trust or
any of the other Loan Documents, together with reasonable attorneys’ fees of
Lender’s Counsel and all other Loan Expenses shall, as and when advanced or
incurred, be secured and guaranteed by the Loan Documents to the same extent
and effect as if the terms and provisions of this Agreement were set forth
therein, whether or not the aggregate of such indebtedness exceeds the face
amount of the Note.

 

5.11         Acquiescence Not a Waiver.  To the extent that Lender may have
acquiesced in Borrower’s failure to comply with and satisfy any condition
precedent to the Construction Loan Opening, to any Disbursement or to any
disbursement of proceeds of the Loans, such acquiescence shall not constitute a
waiver by Lender of any condition precedent set forth in this Agreement, and

 

15

 

Lender may at any time
thereafter require Borrower to comply with and satisfy all conditions and
requirements of this Agreement.

 

5.12         Lender’s Action for Lender’s
Protection.  The authority herein
conferred upon Lender and any action taken by Lender or its agents or employees
in making inspections of the Project, procuring sworn statements and waivers of
lien and approving Plans shall be taken by Lender and its agents or employees
for Lender’s protection only, and neither Lender nor its agents or employees
shall be deemed to have assumed any responsibility to Borrower or any other
person or entity with respect to any such action herein authorized.

 

ARTICLE
VI

 

INTENTIONALLY
OMITTED

 

ARTICLE
VII

 

FURTHER
AGREEMENTS OF BORROWER

 

7.1           Loan Opening.  In the event all of the conditions precedent
to the Construction Loan Opening hereunder have not been performed on or before
the date of the Construction Loan Opening, Lender may, at its option at any
time thereafter and prior to the Construction Loan Opening, terminate this
Agreement and all of its obligations hereunder.

 

7.2           Construction of Project.  Borrower agrees that the Project will be
constructed in a good and workmanlike manner with materials of high quality, in
accordance with the Plans and applicable building, zoning and other laws and
ordinances and all Legal Requirements. 
Borrower further agrees that such construction of the Project will be
promptly commenced following the Construction Loan Opening Date and prosecuted
with due diligence and will be fully completed not later than the Completion
Date.  If Lender disapproves any portion
of the construction of the Project due to any variation from the Plans approved
by Lender or any other violation of the terms of this Agreement, Borrower
shall, within fifteen (15) days after such disapproval, commence to correct the
condition so disapproved, and thereafter shall diligently pursue such
correction until completion.

 

7.3           Changes in Plans and Contracts;
Extras.  Borrower agrees that no
material changes will be made in the Plans, no change will be made in the
Architect’s Agreement, Construction Contract or any subcontracts, and no extras
will be allowed to Contractor or any Subcontractor, except upon the written
approval of the same by Lender(which approval shall not be unreasonably
withheld), provided, however, that Borrower may make changes in the Plans or
allow such extras without first obtaining the approval of Lender thereof, if
(a) Borrower notifies Lender in writing of such change; (b) Borrower obtains
the approval of all parties to the contract proposed to be modified; (c) the
structural integrity of the Project is not impaired; (d) no substantial change
in architectural appearance is effected; (e) the cost of or reduction resulting
from no one such change or extra exceeds Twenty-Five Thousand and No/100
Dollars ($25,000.00) and the aggregate change in cost of all
such changes and extras does not exceed One Hundred Fifty Thousand and No/100
Dollars ($150,000.00); and (f) the Construction Loan remains in Balance.

 

16

 

7.4           Mechanics’ Liens and Taxes.  Borrower agrees that it will not suffer or
permit any mechanic’s lien claims to be filed or otherwise asserted against the
Project which would be senior to Lender’s liens or will pay the same in case of
the filing of any claims for lien or proceedings for the enforcement thereof,
and will pay all special assessments that are placed for collection and all
real estate taxes and assessments of every kind (regardless of whether the same
are payable in installments) upon the Project, before the same become
delinquent.  Borrower shall have the
right to contest in good faith and with reasonable diligence the validity of
any such lien, claim, tax or assessment, provided that if Lender so requests,
Borrower shall furnish Lender with a bond or other security satisfactory to
Lender in a sufficient amount, in Lender’s judgment, to pay in full such
contested lien, claim, tax or assessment and all penalties and interest that
might become due thereon.  If Borrower
fails promptly either to discharge or to contest claims, taxes, or assessments
asserted or give security or indemnity in the manner provided herein or in the
Deed of Trust, then Lender may (but shall not be required to) procure the
release and discharge of any such claim and any judgment or decree thereon and
in its sole discretion effect any settlement or compromise of the same, without
any inquiry into the validity thereof. 
Any amounts so expended by Lender, including premiums paid or security
furnished in connection with the issuance of any surety bonds, shall be deemed
to constitute a disbursement of Loan proceeds. 
Alternatively, Borrower may establish such title indemnity accounts with
Title Insurer as may be required by said company to insure Lender against any
loss or damage resulting from any claims for lien or unpaid taxes or
assessments.

 

7.5           Renewal of Insurance.  Borrower agrees to pay all premiums on all
insurance policies required under this Agreement and, not later than fifteen
(15) days before any policies of insurance expire, furnish to Lender
replacement or renewal insurance policies in companies, coverage and amounts
satisfactory to Lender, premiums prepaid, in accordance with the terms hereof.

 

7.6           Fixtures and Personal Property.  Except for a security interest granted to
Lender, Borrower agrees that Borrower is and shall remain the absolute owner of
all personal property, fixtures and equipment provided  by Borrower in connection with the
construction, equipping or operation of the Project, free and clear of all
liens, claims, encumbrances and security interests whatsoever.  Borrower shall, upon request, furnish Lender
with satisfactory evidence of such ownership.

 

7.7           Proceedings to Prevent
Construction.  If any proceedings
are filed or are threatened to be filed seeking to (a) enjoin or otherwise
prevent or declare invalid or unlawful the construction, occupancy or operation
of the Project or any portion thereof; (b) adversely affect the validity or
priority of the liens and security interests granted to Lender under the Loan
Documents; or (c) adversely affect the ability of Borrower to complete the
Project, then Borrower shall notify Lender of such proceedings and, within
three (3) business days following Borrower’s notice of such proceedings, resist
the entry or seek the stay of any temporary or permanent injunction that may be
entered, and vigorously contest and use its best efforts to bring about a
favorable and speedy disposition of all such proceedings.

 

7.8           Defaults Under Contracts.  Borrower shall not suffer or permit any
breach or default to occur under the Architect Agreement, Construction Contract
or any subcontracts, and shall promptly notify Lender of any default
thereunder.

 

17

 

7.9           Furnishing
Information.  Borrower shall:

 

(a)           cooperate
with Lender in arranging for inspections by representatives of Lender of the
progress of construction from time to time;

 

(b)           furnish
to Lender annual financial statements of Borrower within ninety (90) days after
the end of each calendar year and such other information from Borrower, as
Lender may, from time to time, reasonably request;

 

(c)           promptly
notify Lender of a Default;

 

(d)           permit
Lender or any of its agents or representatives to have access to and to examine
all books and records regarding the Project at any time or times hereafter
during business hours; and

 

(e)           provide
Lender with copies and abstracts from any and all of such books and records.

 

7.10         Recordation of
First Amendment to Declaration of Covenants, Conditions and Restrictions.  Promptly upon Borrower’s sale of that
certain parcel of real estate located in Tulare, California and more
particularly described on Exhibit F attached hereto and made a part
hereof (the “Galaxy Parcel”), Borrower shall cause that certain First Amendment
to Declaration of Covenants, Conditions and Restrictions, a copy of which is
attached hereto as Exhibit G (“Declaration”) to be recorded in
the Tulare County, California Clerk’s Office.

 

7.11         Further Assurances.  Borrower shall, upon request by Lender from
time to time, execute and deliver such documents as may be necessary to perfect
and maintain perfected as valid liens upon the Project the liens granted to
Lender pursuant to this Agreement, and to fully consummate the transactions
contemplated by this Agreement.

 

ARTICLE
VIII

 

CASUALTY
AND CONDEMNATION

 

8.1           Application of Insurance Proceeds
and Condemnation Awards.  The
proceeds of any insurance policies resulting from any loss or damage to any
portion of the Project resulting from fire, vandalism, malicious mischief, or
any other casualty, and any awards, judgments or claims resulting from the exercise
of the power of condemnation or eminent domain, shall be applied either to
rebuild and restore the Project, or toward the repayment of the Loans, in
accordance with the terms of the Deed of Trust.

 

18

 

ARTICLE
IX

 

ASSIGNMENTS,
SALE AND ENCUMBRANCES

 

9.1           Lender’s Right to
Assign.  Lender may grant
participations in, sell, assign, negotiate, pledge or otherwise hypothecate
this Agreement or any of its rights and security hereunder or under the Note,
the Deed of Trust and the other Loan Documents to any bank, participant or
financial institution, and in case of such assignment, Borrower hereby agrees
that all rights and remedies shall be enforceable against Borrower by such
bank, participant or financial institution with the same force and effect and
to the same extent as the same would have been enforceable by Lender.

 

9.2           Prohibition of Transfers.  Borrower shall not, without the prior
written consent of Lender, create, consent to, suffer or permit any Prohibited
Transfer (as defined in the Deed of Trust) in violation of  the Deed of Trust.

 

ARTICLE
X

 

DEFAULTS
AND REMEDIES

 

10.1         Defaults.  The occurrence and continuance of any one or
more of the following shall constitute a “Default” as such term is used herein:

 

(a)           any
default occurs in (i) the due and punctual payment of principal or interest
under the Note when and as the same becomes due, or (ii) the payment of any
other amount owed to Lender under any of the Loan Documents and in either event
such default in not cured within ten (10) days after such payment is due;

 

(b)           except
as otherwise provided herein, any failure of Borrower to observe or perform any
of the covenants of Borrower either: (i) under the terms of this Agreement, and
such default is not cured within thirty (30) days after the date on which
notice of the nature of such failure is given by Lender of Borrower (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 a Default if and so long as Borrower has commenced to cure
such default within such thirty (30) day period and thereafter is proceeding to
cure such default continuously and diligently in Lender’s reasonable judgment
and such default, in any event, is cured not later than ninety (90) days after
the occurrence of such default); or (ii) under the terms of any of the other
Loan Documents, and such default is not cured within the applicable cure
period, if any;

 

(c)           any
representation, statement, report or certificate contained herein or in any
other Loan Document is not true and correct in any material respect or is
materially deceptive;

 

(d)           all
or a substantial part of the assets of Borrower is attached, seized, subjected
to a writ or distress warrant or levied upon, unless such attachment, seizure,
writ, warrant or levy is vacated within thirty (30) days;

 

19

 

(e)           Borrower
is enjoined, restrained or in any way prevented by court order from performing
any of their respective obligations hereunder or under the other Loan
Documents, or from conducting all or a substantial part of its business
affairs, or a proceeding seeking such relief is not dismissed within sixty (60)
days of being filed or commenced;

 

(f)            a
notice of lien, levy or assessment is filed of record with respect to all or
any part of the property of Borrower by the federal government or any other
Governmental Authority, unless diligently contested in accordance herewith;

 

(g)           failure
by Borrower to deposit with Lender funds required to maintain the Loans in
Balance within the time and in the manner herein required;

 

(h)           Borrower:

 

(i)            files a voluntary petition in bankruptcy or for
arrangement, reorganization or other relief under any chapter of the Federal
Bankruptcy Code or any similar law, state or federal, now or hereafter in
effect, or admits in writing its bankruptcy or inability to pay its debts as
they mature, or makes an assignment for the benefit of creditors, or consents
to the appointment of a receiver or trustee or liquidator of all or the major
part of its property or the Project; or

 

(ii)           fails, within sixty (60) days after the filing against
said entity of any involuntary proceedings under the Federal Bankruptcy Code or
any similar law, state or federal, now or hereafter in effect, to cause such
proceedings to be dismissed; or

 

(iii)          fails, within sixty (60) days following the entry of any
order appointing a receiver, trustee, or liquidator for it or for all or a
major part of its property or the Project, to cause such order be vacated; or

 

(iv)          is adjudicated bankrupt.

 

10.2         Remedies Conferred Upon Lender.  Upon the occurrence and continuance of any
Default, Lender, in addition to all remedies conferred upon Lender by law and
by the terms of the Note, the Deed of Trust and the other Loan Documents, may
pursue any one or more of the following remedies concurrently or successively,
it being the intent hereof that none of such remedies shall be to the exclusion
of any others:

 

(a)           Take
possession of the Project and complete the construction and equipping thereof
and do anything required, necessary or advisable in Lender’s reasonable
judgment to fulfill the obligations of Borrower hereunder, including the rights
to avail itself of or procure performance of any of the Architect’s Agreement,
Construction Contract and subcontracts, to let any contracts with the same
Contractor, subcontractors or others, and to employ watchmen to protect the Project
from injury.  Without restricting the
generality of the foregoing and for the purposes aforesaid, Borrower hereby
authorizes Lender in Lender’s own name and Borrower hereby appoints and
constitutes Lender as Borrower’s lawful attorney-in-fact with full power of
substitution in the premises to perform any or all of the following
actions:  to complete construction and
equipping of the Project in the name of Borrower; to

 

20

 

use unadvanced Loan proceeds or to advance
funds in excess of the face amount of the Note to complete the Project; to make
changes in the Plans that are necessary or desirable to complete the Project;
to retain or employ new contractors, subcontractors, architects, engineers and
inspectors; without inquiring into and without respect to the validity thereof,
to pay, settle or compromise all existing bills and claims that may be liens
against the Project or any portion thereof, or as may be necessary or desirable
for the completion of the construction and equipping of the Project or for the
clearance of title to the Land; to prosecute and defend actions or proceedings
in connection with the Project; and to do any and every act that Borrower might
do in its own behalf and with respect to the Project, such appointment as
attorney-in-fact being a power coupled with an interest that cannot be revoked.

 

(b)           Withhold
further disbursement of the Construction Loan proceeds.

 

(c)           Declare
the Note to be due and payable forthwith, without presentment, demand, protest
or other notice of any kind, all of which are hereby expressly waived.

 

(d)           Exercise
or pursue any other remedy or cause of action permitted at law or in equity or
under this Agreement or any of the other Loan Documents, including without limitation
foreclosure of the Deed of Trust.

 

10.3         Right of Lender to Make Advances.  In the event Borrower fails to perform any
of its covenants or agreements contained herein or in any of the other Loan
Documents, Lender may, in the event of a Default or sooner if reasonably
required to protect its security in the case of an event that would mature into
a Default with the passage of time, but shall not be required to, perform any
of such covenants and agreements, and any amounts expended by Lender in so doing
or pursuant to Section 10.2 hereof, as well as any other amounts advanced by
Lender pursuant to this Agreement, shall be deemed advanced by Lender under an
obligation to do so regardless of the identity of the person or persons to whom
such funds are disbursed.  Any and all
amounts advanced by Lender to complete the Project or to protect its security
for the Loans are obligatory advances hereunder and shall constitute additional
indebtedness payable on demand and evidenced and secured by the Loan Documents.

 

10.4         Attorneys’ Fees.  Borrower shall pay the reasonable fees and
costs incurred by Lender’s Counsel following the occurrence and continuance of
a Default in connection with the administration and enforcement of this
Agreement and the Loan Documents.  Without
limiting the generality of the foregoing, if at any time or times after the
Construction Loan Opening Lender reasonably employs counsel for advice or other
representation with respect to any matter concerning Borrower, the Project,
this Agreement or any of the other Loan Documents, or to protect, take
possession of or liquidate all or any part of the Project or to attempt to
enforce or protect any security interest or lien or other right contained
herein or under any of the other Loan Documents, then in any such event all
reasonable attorneys’ fees arising from such services and any expenses, costs
and charges relating thereto, shall constitute additional indebtedness owed by
Borrower to Lender payable on demand and evidenced and secured by the Loan Documents.

 

21

 

10.5         No Waiver.  No failure by Lender to exercise, or delay
by Lender in exercising, any right, power or privilege hereunder shall operate
as a waiver thereof, nor shall any single or partial exercise of any right,
power or privilege hereunder preclude any other or further exercise thereof, or
the exercise of any other right, power or privilege.

 

10.6         Default Rate.  From and after the date of any Default,
interest on funds outstanding hereunder shall accrue at the Default Rate until
such Default is cured.  The failure of
Lender to charge interest at the Default Rate shall not be evidence of the
absence of a Default or waiver of a Default by Lender.

 

ARTICLE
XI

 

MISCELLANEOUS

 

11.1         Time Is of the Essence.  Borrower agrees that time is of the essence
of all of its covenants under this Agreement.

 

11.2         Prior Agreements.  This Agreement and the other Loan Documents,
and any other documents or instruments executed pursuant thereto or
contemplated thereby, shall represent the entire agreement between the parties
hereto with respect to the transactions described herein, and shall supersede
all prior negotiations, representations or agreements pertaining thereto,
either oral or written.  This Agreement
and any provision hereof may not be modified or amended in any manner other
than by a written amendment executed by all parties hereto.

 

11.3         Disclaimer by Lender.  Lender shall not be liable to any
contractor, supplier, laborer, architect, engineer or any other party for
services performed or materials supplied in connection with construction of the
Project.  Borrower is not and shall not
be an agent of Lender for any purposes, and Lender is not a venture partner with
Borrower in any manner whatsoever.

 

11.4         Indemnification.  To the fullest extent permitted by law,
Borrower hereby agrees to protect, indemnify, defend and save harmless Lender
and its directors, officers, shareholders, parent, affiliates, agents and
employees, and the successors and assigns of each of the foregoing, from and
against any and all liability, expense or damage of any kind or nature and from
any suits, claims or demands, including reasonable legal fees and expenses on
account of any matter, whether in suit or not, arising out of this Agreement or
any of the other Loan Documents or in connection herewith or therewith unless
such suit, claim or damage is caused by the gross negligence or intentional
misconduct of Lender or its directors, officers, shareholders, parent,
affiliates, agents and employees. 
Borrower shall pay, and hold Lender harmless from, any and all claims of
any brokers, finders or agents claiming a right to any fees in connection with
arranging the financing contemplated hereby. 
Borrower represents and warrants that no brokerage commission or
finder’s fees are to be paid in connection with the Loans.

 

11.5         Erection of Sign.  Upon the request of Lender, Borrower shall
permit Lender, at Lender’s sole cost and expense, to erect a sign on the Land
indicating that financing for the Project has been supplied by Lender.

 

22

 

11.6         Captions.  The captions and headings of various
articles and sections of this Agreement and exhibits hereto are for convenience
only and are not to be considered as defining or limiting in any way the scope
or intent of the provisions hereof.

 

11.7         Inconsistent Terms and Partial
Invalidity.  In the event of any
inconsistency among the terms hereof, Lender may elect which terms shall govern
and prevail.  In the event of any
inconsistency between the terms of this Agreement and the terms of any other
Loan Documents, the terms of this Agreement shall govern, except that in the
event of any inconsistency between the terms of the Environmental Indemnity
Agreement and the terms of this Agreement, the terms of the Environmental
Indemnity Agreement shall govern.  The
whole or partial invalidity, illegality or unenforceability of any provision
hereof at any time, whether under the terms of then applicable law or otherwise,
shall not affect the validity, legality or enforceability of such provision at
such time except to the extent of such invalidity, illegality or
uninforceability, or of any other provision hereof.

 

11.8         Gender and Number.  Any word herein that is expressed in the
masculine or neuter gender shall be deemed to include the masculine, feminine
and neuter genders.  Any word herein
that is expressed in the singular or plural number shall be deemed, whenever
appropriate in the context, to include the singular and the plural.

 

11.9         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 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:

 

If to Lender:

 

Amster Trading Company Charitable Remainder

Unitrust dated March 10, 2003

23811 Chagrin Boulevard Suite 200

Beachwood, OH 44122

 

with a copy to:

 

Ulmer & Berne LLP

Penton Media Building

1300 East Ninth Street, Suite 900

Cleveland, Ohio 44114

Attention:  Robert A. Fein, Esq.

 

If to
Borrower:

 

Horizon Group Properties, L.P.

77 West Wacker Drive Suite 4200

Chicago, IL 60601

Attention:  Gary J Skoien

 

23

 

with a copy to:

 

Schiff Hardin & Waite

6600 Sears Tower

Chicago, Illinois 60606

Attention:  David A. Grossberg,
Esq.

 

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

 

11.10       Governing Law.  This Agreement shall be construed and
enforced in accordance with the internal laws of the State of Illinois without
regard to principles of conflicts of law. 
The enforcement of the Deed of Trust and the Assignment of Rents shall
be governed by the construed in accordance with the laws of the state wherein
the Land is located with respect to all matters of title to the Land and with
respect to all provisions necessary to creation, perfection, priority or
enforcement of the liens thereunder, and in all other respects the enforcement
of such Loan Documents, except as otherwise expressly provided therein, shall be
governed and construed in accordance with the internal laws of the State of
Illinois, without regard to principles of conflicts of law.

 

11.11       Force Majeure.  In the event that Borrower is unable to
complete construction of the Project on or before the Completion Date or to
meet any other deadline set forth in this Agreement due to fire, flood, riots,
war, acts of God or similar causes beyond Borrower’s reasonable control, then,
provided that the Construction Loan is in Balance, the Completion Date or other
deadline shall be extended by the number of days by which the performance by
Borrower of its duties hereunder is delayed as a result of said cause(s).

 

11.12       Counterpart.  This Agreement may be executed in any number
of counterparts, each of which shall constitute an original, and all of which,
when taken together, shall constitute one and the same instrument.

 

11.13      VENUE. TO THE MAXIMUM EXTENT
PERMITTED BY LAW, BORROWER HEREBY AGREES THAT ALL ACTIONS OR PROCEEDINGS
ARISING IN CONNECTION WITH THIS AGREEMENT SHALL BE TRIED AND DETERMINED ONLY IN
THE STATE OR FEDERAL COURT 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 SECTION 11.13.

 

11.14      WAIVER OF JURY TRIAL.  TO THE MAXIMUM EXTENT PERMITTED BY LAW, EACH
OF BORROWER AND LENDER HEREBY 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 AGREEMENT, OR IN ANY WAY CONNECTED WITH, RELATED TO OR
INCIDENTAL TO THE DEALINGS OF BORROWER AND LENDER WITH RESPECT TO THIS
AGREEMENT,

 

24

 

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, EACH OF BORROWER AND LENDER 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 BORROWER OR LENDER MAY FILE A COPY OF
THIS AGREEMENT WITH ANY COURT OR OTHER TRIBUNAL AS WRITTEN EVIDENCE OF THE
CONSENT OF EACH OF BORROWER AND LENDER TO THE WAIVER OF ITS RIGHT TO TRIAL BY
JURY.

 

11.15.      Daleville, Somerset, Tulare Outlet
Centers, L.P.  Daleville, Somerset,
Tulare Outlet Centers, L.P. (“DST”), an affiliate of Borrower, owns
certain real property adjacent to the Project (the “DST Property”).  The DST Property is encumbered by a deed of
trust between DST and Morgan Guaranty Trust Company of New York (“Morgan
Guaranty”), which secures a loan made by Morgan Guaranty to DST in
the amount of Nine Million Three Hundred Twenty Five Thousand and No/100
Dollars ($9,325,000.00) (the “Morgan Guaranty Loan”), as evidenced by a
Fixed Rate Note dated July 9, 1999, made by DST to the order of Morgan Guaranty
in the principal amount of the Morgan Guaranty Loan.  At this time, DST and Morgan Guaranty are negotiating the
restructure of the Morgan Guaranty Loan. 
In this regard, in the event the current payment default under the
Morgan Guaranty Loan (the “Morgan Default”) is not cured within ninety
(90) days of the date hereof, or, if at any time during the term of the Loan
Borrower does not own or control, directly or indirectly, fifty percent (50%)
of the DST Property, Borrower and Lender hereby agree as follows (collectively
referred to as the “Replacement Terms”):

 

(a)           Effective as of the
ninety-first (91st) day after the date hereof, the then current
interest rate shall be equal to the greater of: (i) the LIBOR Rate plus three
hundred (300) basis points or (ii) ten percent (10%) per annum;

 

(b)           The Note Maturity
Date shall be changed to April 1, 2006; and

 

(c)           Borrower’s monthly
payment obligations under the Note shall be equal to the greater of: (i) the
scheduled monthly payments under the Note or (ii) all net cash flow from the
Project shall be paid by Borrower to Lender on each Payment Date.  Such payments shall be applied by Lender
first to the payment of principal and interest then due under the Note, and the
excess, if any, to the then outstanding principal balance of the Loan.

 

As used herein, (i) “net cash
flow” shall mean the monthly gross income of the Project minus the monthly
operating expenses for the Project; (ii) “gross income” shall mean all income
received by Borrower each month with respect to the Project, and (iii)
“operating expenses” shall mean all expenses and obligations of every kind
incurred by Borrower each month in the normal course of business with respect
to the Project, including, but not limited to, expenses for taxes, insurance,
repairs, replacements, capital improvements, leasing commissions, maintenance,
management fees, salaries, advertising expenses, professional fees, wages and
utilities, and such other expenses and obligations as are incurred or which
become due and payable in connection with disbursements relating to the
Project, but excluding principal and interest payable with respect to the Loan.

 

25

 

Notwithstanding
the foregoing, if at anytime within two hundred seventy-five (275) days
following the expiration of the ninety (90) day period referenced above, DST
cures the Morgan Default and provides Lender evidence thereof reasonably
acceptable to Lender, then the Replacement Terms shall immediately be of no
further force or effect and the original terms of this Agreement and the other
Loan Documents shall for all intents and purposes thereafter control without
further action of the parties.

 

11.16.      Delivery of Director’s Resolutions of
Guarantor.  On or before May 31,
2003, Borrower agrees to use its best efforts to cause Guarantor, in its
capacity as general partner of Borrower, to cause its board of directors to
adopt Resolutions (the “Resolutions”) which, among other things, contain
authorizations substantially in accordance with the draft resolutions attached
to this Agreement as Exhibit H. 
Promptly following the adoption of such Resolutions, Guarantor agrees to
deliver a certified copy of the Resolutions to Lender.

 

11.17       Substitution of New Legal Description
of the Land. The legal description of the Land attached as Exhibit A
to this Loan Agreement is a metes and bounds description of the Land (the
“Metes and Bounds Legal Description”). 
The Land will, upon the completion of 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 I attached to this
Loan Agreement (the “Platted Legal Description”).  Borrower shall cause the Reconfiguration to be completed by the
Term Loan Period Commencement Date (as defined in the Note), and, upon completion
of the Reconfiguration, the parties shall enter into a modification agreement
of the Deed of Trust reasonably acceptable to Lender (the “Modification of Deed
of Trust”), which shall provide that the Metes and Bounds Description shall be
deleted from the Deed of Trust and replaced with the Platted Legal Description
which shall thereafter for all purposes be subject to the Deed of Trust.  Lender agrees that, upon Borrower’s
completion of the Reconfiguration, Lender 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. 
Lender’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 the 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 the Deed of Trust.

 

[SIGNATURES ON FOLLOWING PAGE]

 

26

 

The parties
have caused this Agreement to be executed as of the day and year first above
written.

 

	
   

  	
  BORROWER:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  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

  
	
   

  	
   

  	
   

  
	
   

  	
  LENDER:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  AMSTER TRADING COMPANY CHARITABLE

  REMAINDER UNITRUST DATED MARCH 10, 2003

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
     /s/ Howard M. Amster

  	
   

  
	
   

  	
   

  	
  Howard M. Amster, Trustee

  
								

 

Schedule of Exhibits

 

	
  Exhibit A

  	
  Metes and Bounds Legal Description of
  Current Land

  
	
  Exhibit B

  	
  Permitted Exceptions

  
	
  Exhibit
  C

  	
  Plans

  
	
  Exhibit D

  	
  Approved Budget

  
	
  Exhibit E

  	
  Leases

  
	
  Exhibit F

  	
  Metes and Bounds Legal Description of
  Galaxy Parcel

  
	
  Exhibit G

  	
  First Amendment to Declaration of
  Covenants, Conditions and Restrictions 

  
	
  Exhibit H

  	
  Draft of Resolutions

  
	
  Exhibit I

  	
  Platted Legal Description

  

 

 

27

 

EXHIBIT
A

 

METES
AND BOUNDS LEGAL DESCRIPTION OF THE LAND

 

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.

 

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

 

28

 

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.

 

29

 

EXHIBIT B

 

PERMITTED
EXCEPTIONS

 

1.             General and special
taxes and assessments for the fiscal year 2003-2004, a lien not yet due or
payable.

 

2.             The lien of
supplemental taxes, if any, assessed pursuant to Chapter 3.5 commencing with
Section 75 of the California Revenue and Taxation Code.

 

3.             The terms and
provision contained in document entitled “Amended Development Agreement” recorded
September 1, 1999 as Instrument No. 1999-0067258 in the Official Records of
Tulare County, California.

 

4.             Covenants,
conditions, restrictions and easements in the document recorded September 2,
1999, as Instrument No. 1999-0067908 in the Official Records of Tulare County,
California.

 

30

 

EXHIBIT C

 

PLANS

 

31

 

EXHIBIT D

 

APPROVED
BUDGET

 

32

 

EXHIBIT E

 

LEASES

 

1.             Lease
between Horizon Group Properties, L.P. and Nike Retail Services, Inc., dated
October 29, 2002;

 

2.             Lease between
Horizon Group Properties, L.P. and Nine West Group, Inc., dated December 18,
2002;

 

3.             Lease between
Horizon Group Properties, L.P. and K B Toy of California, dated January 9,
2003;and

 

4.             Lease between
Horizon Group Properties, L.P. and Party Concepts, Inc., dated February 19,
2003.

 

33

 

EXHIBIT
F

 

LEGAL
DESCRIPTION OF GALAXY PARCEL

 

That portion of Parcel 4 and the ‘REMAINDER’ parcel of PM 4406 recorded
in Book 45 of Parcel Maps at Page 11, T.C.R. situated in Section 35, Township
19 South, Range 24 East, Mount Diablo Base and Meridian, in the City of Tulare,
County of Tulare, State of California, more particularly described as follows:

 

PARCEL
1

 

COMMENCING at the northwesterly corner of
said ‘REMAINDER’ parcel;

thence S 30°45’35”
E 486.95 feet along the westerly line thereof;

thence N 59°41’05”
E 84.72 feet to the TRUE POINT OF BEGINNING;

thence N 59°41’05” E 128.26 feet;

thence S 30°18’55” E 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 S 19°28’07” 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 S 30°18’55” E 2.47 feet;

thence S 59°41’05” W 129.43 feet;

thence N 30°18’55” W 40.83 feet;

thence S 59°41’05” W 5.33 feet;

thence N 30°18’55” W 51.33 feet;

thence S 59°41’05” W 6.33 feet;

thence N 30°18’55” W 140.00 feet;

thence N 59°41’05” E 6.33 feet;

thence N 30°18’55” W 51.33 feet;

thence N 59°41’05” E 12.67 feet;

thence N 30°18’55” W 46.00 feet to the POINT
OF BEGINNING.

 

CONTAINING APPROXIMATELY  1.06 acres.

 

34

 

EXHIBIT
G

 

FIRST
AMENDMENT TO DECLARATION OF COVENANTS, CONDITIONS AND

RESTRICTIONS

 

35

 

EXHIBIT H

 

DRAFT
RESOLUTIONS

 

WHEREAS, Horizon Group
Properties, Inc. (the “Corporation”) is the sole general partner of Horizon
Group Properties, L.P., a Delaware limited partnership (the “Partnership”); and

 

WHEREAS, the Corporation, in
its capacity as the sole general partner of the Partnership, has the authority
to incur indebtedness on behalf of the Partnership and to grant a mortgage
and/or deed of trust against property of the Partnership; and

 

WHEREAS, the Board of Directors
of the Corporation determined that it was appropriate: (a) for the Partnership
to finance the construction of a building to be used for retail purposes on
certain real property located in Tulare, California and more particularly
described in Appendix A hereto 
with secured loan (the “Loan”) from Amster Trading Company Charitable
Remainder Unitrust dated March 10, 2003 (“Lender”), to the Partnership in the
amount of up to three million one hundred thousand dollars ($3,100,000) on
terms and conditions set forth in a certain Construction and Term Loan
Agreement dated April 24, 2003 between Lender and the Partnership (the “Loan
Agreement”) and various other Loan Documents (as defined in the Loan
Agreement); and (b) for the Corporation to guaranty repayment of the Loan in
accordance with the terms and conditions of the Guaranty (as defined in the
Loan Agreement); and

 

WHEREAS, on April 24, 2003: (a)
the Corporation, in its capacity as general partner of the Partnership, duly
and validly executed each of the Loan Documents to which the Partnership is a
party and (b) the Corporation duly and validly executed, on its own behalf,
each of the Loan Documents to which the Corporation is a party.

 

NOW THEREFORE BE IT RESOLVED,
that the Corporation, in its capacity as general partner of the Partnership,
hereby ratifies, affirms and approves: (a) the Loan, (b) the execution,
delivery and performance of the Loan Documents to which the Partnership is a
party, and (c) the execution, delivery and performance of the Loan Documents to
which the Corporation is a party.

 

BE IT FURTHER RESOLVED, that each of the
Chairman of the Board, Chief Executive Officer and President, the Senior Vice
President/Chief Financial Officer, Assistant Secretary, and the Vice President
of Finance of the Corporation be, and each one of them acting alone is, hereby
authorized and directed in the name of and or on behalf of the Corporation to
take such further actions with respect to the Loan as is requested by Lender.

 

36

 

Appendix
A

 

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.

 

37

 

EXHIBIT
I

 

PLATTED LEGAL
DESCRIPTION

 

38

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