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                                  EXHIBIT 10.72

                        ENVIRONMENTAL INDEMNITY AGREEMENT

     THIS ENVIRONMENTAL INDEMNITY AGREEMENT (this "AGREEMENT") is made as of the
___ day of July, 2002 by LAUGHLIN HOLDINGS LLC, a Delaware limited liability
company ("LAUGHLIN MEZZANINE BORROWER"), MEDFORD HOLDINGS LLC, a Delaware
limited liability company ("MEDFORD MEZZANINE BORROWER"), and WARRENTON HOLDINGS
LLC, a Delaware limited liability company ("WARRENTON MEZZANINE BORROWER"; and
Warrenton Mezzanine Borrower, together with Laughlin Mezzanine Borrower and
Medford Mezzanine Borrower, each a "BORROWER" and collectively, "BORROWERS"),
and HORIZON GROUP PROPERTIES, INC., a Maryland corporation, and HORIZON GROUP
PROPERTIES, L.P., a Delaware limited partnership, each having an office at 77
West Wacker Drive, Suite 4200, Chicago, Illinois 60601 (each, a "NON-BORROWER
INDEMNITOR" and, collectively, the "NON-BORROWER INDEMNITORS"; and together with
Borrowers, each an "INDEMNITOR" and collectively, "INDEMNITORS"), in favor of
UBS WARBURG REAL ESTATE INVESTMENTS INC., having an office at 1285 Avenue of the
Americas, 11th Floor, New York, New York 10019 ("INDEMNITEE") and the other
Indemnified Parties (defined below).

                                    RECITALS

     A.   Pursuant to a certain Mezzanine Loan Agreement (as the same may be
amended, modified or supplemented from time to time, the "MEZZANINE LOAN
AGREEMENT") dated the date hereof by and among Borrowers and Indemnitee,
Indemnitee has made a loan to (i) Laughlin Mezzanine Borrower in the principal
amount of up to $1,750,000.00 (the "LAUGHLIN MEZZANINE LOAN") (ii) Medford
Mezzanine Borrower in the principal amount of up to $1,000,000.00 (the "MEDFORD
MEZZANINE LOAN"), and (iii) Warrenton Mezzanine Borrower in the principal amount
of up to $750,000.00 (the "WARRENTON MEZZANINE LOAN"; and the Warrenton
Mezzanine Loan, together with the Laughlin Mezzanine Loan and the Medford
Mezzanine Loan, collectively, the "LOAN");

     B.   Capitalized terms not otherwise defined herein shall have the meanings
set forth in the Mezzanine Loan Agreement;

     C.   Laughlin Mezzanine Borrower is the sole equity member of Laughlin
Outlet Center LLC ("LAUGHLIN OWNER"), and Laughlin Owner is the owner of the
Laughlin Property. Medford Mezzanine Borrower is the sole equity member of
Medford Outlet Center LLC ("MEDFORD OWNER"), and Medford Owner is the owner of
the Medford Property. Warrenton Mezzanine Borrower is the sole equity member of
Warrenton Outlet Center LLC ("WARRENTON OWNER"; and Warrenton Owner, together
with Laughlin Owner and Medford Owner, each an "OWNER" and collectively, the
"OWNERS"), and Warrenton Owner is the owner of the Warrenton Property; and the
Warrenton Property, together with the Laughlin Property and the Medford
Property, each and "INDIVIDUAL PROPERTY" and collectively, the "PROPERTIES";

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     D.   Each Indemnitor acknowledges receipt and approval of copies of the
Mezzanine Loan Documents;

     E.   Each Non-Borrower Indemnitor acknowledges that it owns, either
directly or indirectly, a beneficial interest in each Borrower and, as a result
of such beneficial interest, will receive substantial economic and other
benefits from Indemnitee making the Loan to Borrowers;

     F.   Indemnitee is unwilling to make the Loan unless Indemnitors agree to
provide the indemnification, representations, warranties, covenants and other
matters described in this Agreement for the benefit of the Indemnified Parties;

     G.   Indemnitors are entering into this Agreement to induce Indemnitee to
make the Loan.

                                    AGREEMENT

     NOW THEREFORE, in consideration of the premises and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
Indemnitors hereby represent, warrant, covenant and agree for the benefit of the
Indemnified Parties as follows:

     1.   ENVIRONMENTAL REPRESENTATIONS AND WARRANTIES. Except as otherwise
disclosed by that/those report (s) listed on SCHEDULE I attached hereto and made
a part hereof in respect of each Individual Property delivered to Indemnitee
(referred to below as the "ENVIRONMENTAL REPORT(S)"), a copy of which has been
provided to Indemnitee, (a) there are no Hazardous Substances (defined below) or
underground storage tanks in, on or under any Individual Property, except those
that are both (i) in compliance with all Environmental Laws (defined below) and
with permits issued pursuant thereto and (ii) fully disclosed to Indemnitee in
writing pursuant to the Environmental Report(s); (b) there are no past, present
or, to Indemnitor's best knowledge, threatened Releases (defined below) of
Hazardous Substances in, on, under or from any Individual Property which have
not been fully remediated in accordance with Environmental Laws; (c) to
Indemnitor's best knowledge, there is no threat of any Release of Hazardous
Substances migrating to any Individual Property; (d) there is no past or present
non-compliance with Environmental Laws, or with permits issued pursuant thereto,
in connection with any Individual Property which has not been fully remediated
in accordance with Environmental Laws; (e) none of Indemnitors know of, and
neither of the Indemnitors nor any Owner has received, any written or oral
notice or other communication from any Person (including, but not limited to,
any Governmental Authority) relating to Hazardous Substances or Remediation
(defined below) thereof, of possible liability of any Person pursuant to any
Environmental Laws, other environmental conditions in connection with any
Individual Property, or any actual or, to Indemnitor's best knowledge, potential
administrative or judicial proceedings in connection with any of the foregoing;
and (f) Indemnitors have truthfully and fully provided to Indemnitee, in
writing, any and all information relating to conditions in, on, under or from
each Individual Property that is known to any Indemnitor or any Owner and that
is contained in the files and records of any Indemnitor, or any Owner including,
but not limited, to any reports relating to Hazardous Substances in, on, under
or from any Individual Property and/or to the environmental condition of any
Individual Property.

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     2.   ENVIRONMENTAL COVENANTS. Indemnitors covenant and agree that: (a) all
uses and operations on or of each Individual Property, whether by any of the
Indemnitors, any Owner or any other Person, shall be in compliance with all
Environmental Laws and permits issued pursuant thereto; (b) there shall be no
Releases of Hazardous Substances in, on, under or from any Individual Property;
(c) there shall be no Hazardous Substances in, on, or under any Individual
Property, except those that are both (i) in compliance with all Environmental
Laws and with permits issued pursuant thereto and (ii) fully disclosed to
Indemnitee in writing; (d) Indemnitors shall keep and shall cause Owners to keep
each Individual Property free and clear of all liens and other encumbrances
imposed pursuant to any Environmental Law, whether due to any act or omission of
any of the Indemnitors or any other Person (the "ENVIRONMENTAL LIENS"); (e)
Indemnitors shall, at their sole cost and expense, fully and expeditiously
cooperate in all activities pursuant to PARAGRAPH 3 of this Agreement,
including, but not limited to, providing all relevant information and making
knowledgeable Persons available for interviews; (f) Indemnitors shall, at their
sole cost and expense, perform any appropriate environmental site assessment or
other appropriate investigation of environmental conditions in connection with
any Individual Property, pursuant to any reasonable written request of
Indemnitee which request shall state the basis for Indemnitee's belief that
there has been a Release of Hazardous Substances or violation of any
Environmental Law (including, but not limited to, sampling, testing and analysis
of soil, water, air, building materials and other materials and substances
whether solid, liquid or gas), and share with Indemnitee the reports and other
results thereof, and Indemnitee and the other Indemnified Parties shall be
entitled to rely on such reports and other results thereof; (g) Indemnitors
shall, at their sole cost and expense, comply with all reasonable written
requests of Indemnitee to (i) effectuate Remediation of any condition
(including, but not limited to, a Release of a Hazardous Substance) in, on,
under or from any Individual Property to the extent required by any
Environmental Law or any directive from any Governmental Authority; (ii) comply
with any Environmental Law; (iii) comply with any directive from any
Governmental Authority; and/or (iv) take any other reasonable action necessary
or appropriate for protection of human health or the environment; (h) none of
the Indemnitors shall do or allow any tenant or other user of any Individual
Property to do any act that materially increases the dangers to human health or
the environment, poses an unreasonable risk of harm to any Person (whether on or
off such Individual Property), impairs or may impair the value of such
Individual Property or the Collateral, is contrary to any requirement of any
insurer, constitutes a public or private nuisance, constitutes waste or violates
any covenant, condition, agreement or easement applicable to such Individual
Property; and (i) Indemnitors shall immediately notify Indemnitee in writing of
(A) any presence or Release or threatened Release of Hazardous Substances in,
on, under, from or, to Indemnitor's best knowledge, migrating towards any
Individual Property; (B) any non-compliance with any Environmental Laws related
in any way to any Individual Property; (C) any actual or, to Indemnitor's best
knowledge, potential Environmental Lien; (D) any required or proposed
Remediation of environmental conditions relating to any Individual Property;
and/or (E) any written or oral notice or other communication of which any
Indemnitor becomes aware from any source whatsoever (including, but not limited
to, any Governmental Authority) relating in any way to Hazardous Substances or
Remediation thereof, possible liability of any Person pursuant to any
Environmental Law, other environmental conditions in connection with any
Individual Property or any actual or potential administrative or judicial
proceedings in connection with anything referred to in this Agreement.

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     3.   INDEMNIFIED RIGHTS/COOPERATION AND ACCESS. In the event the
Indemnified Parties have reason to believe that there has been a Release of
Hazardous Substances on, or any Remediation is required in connection with any
condition on, any Individual Property that does not, in the reasonable
discretion of the Indemnified Parties, (a) endanger any tenants or other
occupants of such Individual Property or their guests or the general public, or
(b) materially and adversely affect the value of such Individual Property, upon
reasonable notice from the Indemnitee, Indemnitors shall, at Indemnitors' sole
cost and expense, promptly cause an engineer or consultant satisfactory to the
Indemnified Parties to conduct any appropriate environmental assessment or audit
(the scope of which shall be determined in the sole and absolute discretion of
the Indemnified Parties) and take any appropriate samples of soil, groundwater
or other water, air or building materials or any other invasive testing
requested by Indemnitee and promptly deliver to Indemnitee the results of any
such assessment, audit, sampling or other testing; PROVIDED, HOWEVER, if such
results are not delivered to Indemnitee within a reasonable period or if the
Indemnified Parties have reason to believe that there has been a Release of
Hazardous Substances on, or any Remediation is required in connection with any
condition on, such Individual Property that, in the sole judgment of the
Indemnified Parties, endangers any tenant or other occupant of such Individual
Property or their guests or the general public or may materially and adversely
affect the value of such Individual Property, upon reasonable notice to
Indemnitors (which may be given verbally), the Indemnified Parties and any other
Person designated by the Indemnified Parties, including, but not limited to, any
receiver, any representative of any Governmental Authority and/or any
environmental consultant, shall have the right, but not the obligation, to enter
upon such Individual Property at all reasonable times to upon reasonable prior
notice, except in an emergency as determined in the Indemnified Parties' sole
discretion, assess any and all aspects of the environmental condition of such
Individual Property and its use, including, but not limited to, conducting any
environmental assessment or audit (the scope of which shall be determined in the
sole and absolute discretion of the Indemnified Parties) and taking samples of
soil, groundwater or other water, air or building materials and reasonably
conducting other invasive testing. Indemnitors shall cooperate with and provide
the Indemnified Parties and any such Person designated by the Indemnified
Parties with access to such Individual Property.

     4.   INDEMNIFICATION. Indemnitors covenant and agree, at their sole cost
and expense, to protect, defend, indemnify, release and hold Indemnified Parties
harmless from and against any and all Losses (defined below) imposed upon, or
incurred by, or asserted against, any Indemnified Parties and directly or
indirectly arising out of or in any way relating to any one or more of the
following: (a) any presence of any Hazardous Substances in, on, above or under
any Individual Property; (b) any past, present or threatened Release of
Hazardous Substances in, on, above, under or from any Individual Property; (c)
any activity by any of the Indemnitors, any Person affiliated with any of the
Indemnitors and/or any tenant or other user of any Individual Property in
connection with any actual, proposed or threatened use, treatment, storage,
holding, existence, disposition or other Release, generation, production,
manufacturing, processing, refining, control, management, abatement, removal,
handling, transfer or transportation to or from any Individual Property of any
Hazardous Substances at any time located in, under, on or above such Individual
Property; (d) any activity by any of the Indemnitors, any Person affiliated with
any of the Indemnitors and/or any tenant or other user of any Individual
Property in connection with any actual or proposed Remediation of any Hazardous
Substances at any time located in, under, on or above such Individual Property,
whether or not such Remediation is voluntary or pursuant to court or
administrative order, including, but not

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limited to, any removal, remedial or corrective action; (e) any past, present or
threatened non-compliance or violation of any Environmental Law (or of any
permit issued pursuant to any Environmental Law) in connection with any
Individual Property or operations thereon, including, but not limited to, any
failure by any of the Indemnitors, any Person affiliated with any of the
Indemnitors and/or any tenant or other user of such Individual Property to
comply with any order of any Governmental Authority in connection with any
Environmental Laws; (f) the imposition, recording or filing or the threatened
imposition, recording or filing of any Environmental Lien encumbering any
Individual Property; (g) any administrative processes or proceedings or judicial
proceedings in any way connected with any matter addressed in this Agreement;
(h) any past, present or threatened injury to, destruction of or loss of natural
resources in any way connected with any Individual Property, including, but not
limited to, costs to investigate and assess such injury, destruction or loss;
(i) any acts of any of the Indemnitors, any Person affiliated with any of the
Indemnitors and/or any tenant or other user of any Individual Property in
arranging for the disposal or treatment, or arranging with a transporter for
transport for the disposal or treatment, of Hazardous Substances at any facility
or incineration vessel containing such or similar Hazardous Substances; (j) any
acts of any of the Indemnitors, any Person affiliated with any of the
Indemnitors and/or any tenant or other user of any Individual Property in
accepting any Hazardous Substances for transport to disposal or treatment
facilities, incineration vessels or sites from which there is a Release or a
threatened Release of any Hazardous Substance which causes the incurrence of
costs for Remediation; (k) any personal injury, wrongful death or property or
other damage arising under any statutory or common law or tort law theory,
including, but not limited to, damages assessed for private or public nuisance
or for the conducting of an abnormally dangerous activity on or near any
Individual Property; and (l) any misrepresentation or inaccuracy in any
environmental related representation or warranty or material breach or failure
to perform any of the environmental related covenants or other environmental
related obligations pursuant to this Agreement, the Mezzanine Loan Agreement or
any or all of the Pledges.

     5.   DUTY TO DEFEND AND ATTORNEYS' AND OTHER FEES AND EXPENSES. Upon
written request by any Indemnified Party, Indemnitors shall defend such
Indemnified Party(ies) against any claim for which indemnification is required
hereunder (if requested by any Indemnified Party, in the name of the Indemnified
Party), by attorneys and other professionals reasonably approved by the
Indemnified Parties. Notwithstanding the foregoing, any Indemnified Parties may,
in their sole and absolute discretion, engage their own attorneys and other
professionals to defend or assist them, and, at the option of Indemnified
Parties, their attorneys shall control the resolution of any claim or
proceeding, providing that no compromise or settlement shall be entered without
Indemnitors' consent, which consent shall not be unreasonably withheld. Upon
demand, Indemnitors shall pay or, in the sole and absolute discretion of the
Indemnified Parties, reimburse, the Indemnified Parties for the payment of the
reasonable fees and disbursements of attorneys, engineers, environmental
consultants, laboratories and other professionals in connection therewith.

     6.   DEFINITIONS. As used in this Agreement, the following terms shall have
the following meanings: The term "Environmental Laws" means any present and
future federal, state and local laws, statutes, ordinances, rules, regulations
and the like, as well as common law, relating to protection of human health or
the environment, relating to Hazardous Substances and/or relating to liability
for or costs of other actual or threatened danger to human health or the
environment. The

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term "ENVIRONMENTAL LAWS" includes, but is not limited to, the following
statutes, as amended, any successor thereto, and any regulations promulgated
pursuant thereto, and any state or local statutes, ordinances, rules,
regulations and the like addressing similar issues: the Comprehensive
Environmental Response, Compensation and Liability Act; the Emergency Planning
and Community Right-to-Know Act; the Hazardous Substances Transportation Act;
the Resource Conservation and Recovery Act (including, but not limited to,
Subtitle I relating to underground storage tanks); the Solid Waste Disposal Act;
the Clean Water Act; the Clean Air Act; the Toxic Substances Control Act; the
Safe Drinking Water Act; the Occupational Safety and Health Act; the Federal
Water Pollution Control Act; the Federal Insecticide, Fungicide and Rodenticide
Act; the Endangered Species Act; the National Environmental Policy Act; and the
River and Harbors Appropriation Act. The term "Environmental Laws" also
includes, but is not limited to, any present and future federal, state and local
laws, statutes, ordinances, rules, regulations and the like, as well as common
law, conditioning transfer of property upon a negative declaration or other
approval of a Governmental Authority of the environmental condition of any
Individual Property; requiring notification or disclosure of Releases of
Hazardous Substances or other environmental condition of a property to any
Governmental Authority or other Person, whether or not in connection with any
transfer of title to or interest in such Individual Property; imposing
conditions or requirements in connection with environmental permits or other
authorization for lawful environmental activity; relating to nuisance, trespass
or other causes of action related to any environmental activity on any
Individual Property; and relating to wrongful death, personal injury or property
or other damage in connection with any environmental condition or use of any
environmental activity on any Individual Property.

     The term "HAZARDOUS SUBSTANCES" includes, but is not limited to, any and
all substances (whether solid, liquid or gas) defined, listed or otherwise
classified as pollutants, hazardous wastes, hazardous substances, hazardous
materials, extremely hazardous wastes or words of similar meaning or regulatory
effect under any present or future Environmental Laws or that have a negative
impact on human health or the environment, including, but not limited to,
petroleum and petroleum products, asbestos and asbestos-containing materials,
polychlorinated biphenyls, lead, radon, radioactive materials, flammables and
explosives, but excluding substances of kinds and in amounts ordinarily and
customarily used or stored in similar properties for the purposes of cleaning or
other maintenance or operations and otherwise in compliance with all
Environmental Laws.

     The term "INDEMNIFIED PARTIES" includes Indemnitee, any Person who is or
will have been involved in the origination of the Loan, any Person who is or
will have been involved with the servicing of the Loan, any Person in whose name
the encumbrances created by the Pledges or the Financing Statements is or will
have been recorded, Persons who may hold or acquire or will have held a full or
partial interest in the Loan (including, but not limited to, Investors (as
hereinafter defined) and/or prospective Investors, as well as custodians,
trustees and other fiduciaries who hold or have held a full or partial interest
in the Loan for the benefit of third parties), as well as the respective
directors, officers, shareholders, partners, members, employees, agents,
servants, representatives, contractors, subcontractors, affiliates,
subsidiaries, participants, successors and assigns of any and all of the
foregoing (including, but not limited to, any other Person who holds or acquires
or will have held a participation or other full or partial interest in the Loan,
the Collateral or any Individual Property, whether during the term of the Loan
or as a part of, or following a

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foreclosure of, the Loan and including, but not limited to, any successors by
merger, consolidation or acquisition of all or a substantial portion of
Indemnitee's assets and business).

     The term "LEGAL ACTION" means any claim, suit or proceeding, whether
administrative or judicial in nature.

     The term "LOSSES" includes any losses, damages, costs, fees, expenses,
claims, suits, judgments, awards, liabilities (including, but not limited to,
strict liabilities), obligations, debts, diminutions in value, fines, penalties,
charges, costs of Remediation (whether or not performed voluntarily), amounts
paid in settlement, foreseeable and unforeseeable consequential damages,
litigation costs, reasonable fees of attorneys, engineers and environmental
consultants and investigation costs (including, but not limited to, costs for
sampling, testing and analysis of soil, water, air, building materials and other
materials and substances, whether solid, liquid or gas), of whatever kind or
nature, and whether or not incurred in connection with any judicial or
administrative proceedings, actions, claims, suits, judgments or awards.

     The term "RELEASE" with respect to any Hazardous Substance includes, but is
not limited to, any release, deposit, discharge, emission, leaking, leaching,
spilling, seeping, migrating, injecting, pumping, pouring, emptying, escaping,
dumping, disposing or other movement of Hazardous Substances.

     The term "REMEDIATION" includes, but is not limited to, any response,
remedial, removal, or corrective action in compliance with Environmental Laws or
any directive of any Governmental Authority; any activity to clean up, detoxify,
decontaminate, contain or otherwise remediate any Hazardous Substance in
compliance with Environmental Laws or any directive of any Governmental
Authority; any actions to prevent, cure or mitigate any Release of any Hazardous
Substance; any action to comply with any Environmental Laws or with any permits
issued pursuant thereto; any inspection, investigation, study, monitoring,
assessment, audit, sampling and testing or laboratory or other analysis or
evaluation relating to any Hazardous Substances or to anything referred to
herein.

     7.   UNIMPAIRED LIABILITY. The liability of Indemnitors under this
Agreement shall in no way be limited or impaired by, and each Indemnitor hereby
consents to and agrees to be bound by, any amendment or modification of the
provisions of any or all of the Mezzanine Notes, the Mezzanine Loan Agreement,
any or all of the Pledges or any other Mezzanine Loan Document to or with
Indemnitee by any or all of the Borrowers or any Person who succeeds any or all
of the Borrowers or any Person as owner of any Individual Property or the
Collateral. In addition, the liability of Indemnitors under this Agreement shall
in no way be limited or impaired by (i) any extensions of time for performance
required by any or all the Mezzanine Notes, the Mezzanine Loan Agreement, the
Pledges or any of the other Mezzanine Loan Documents, (ii) any sale or transfer
of all or part of any Individual Property, or any sale or other assignment by
any Non-Borrower Indemnitor of its direct or indirect ownership interest(s) in
any or all of the Borrowers, (iii) except as provided herein, any exculpatory
provision in any or all of the Mezzanine Notes, the Mezzanine Loan Agreement,
any or all of the Pledges or any of the other Mezzanine Loan Documents limiting
Indemnitee's recourse to the Collateral or to any other security for the
Mezzanine Notes, or limiting Indemnitee's rights to a deficiency judgment
against any of the Indemnitors, (iv) the accuracy or

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inaccuracy in any material respect of the representations and warranties made by
any or all of the Borrowers under any or all of the Mezzanine Notes, the
Mezzanine Loan Agreement, any or all of the Pledges or any of the other
Mezzanine Loan Documents or herein, (v) the release of any of the Indemnitors
(including, if applicable, any or all of the Borrowers) or any other Person from
performance or observance of any of the agreements, covenants, terms or
conditions contained in any of the other Mezzanine Loan Documents, by operation
of law, Indemnitee's voluntary act, or otherwise, (vi) the release or
substitution in whole or in part of any security for any or all of the Mezzanine
Notes, or (vii) Indemnitee's failure to record or file the Financing Statements
(or Indemnitee's improper recording or filing of any thereof) or to otherwise
perfect, protect, secure or insure any security interest or lien given as
security for any or all of the Mezzanine Notes; and, in any such case, whether
with or without notice to any of the Indemnitors and with or without
consideration.

     8.   ENFORCEMENT. The Indemnified Parties may enforce the obligations of
Indemnitors without first resorting to or exhausting any security or collateral
or without first having recourse to any or all the Mezzanine Notes, the
Mezzanine Loan Agreement, any or all of the Pledges or any other Mezzanine Loan
Documents or any of the Collateral, through foreclosure proceedings or
otherwise, PROVIDED, HOWEVER, that nothing herein shall inhibit or prevent
Indemnitee from suing on any or all of the Mezzanine Notes, foreclosing on the
Collateral, or exercising any other rights and remedies thereunder. This
Agreement is not collateral or security for the Obligations of Borrowers
pursuant to the Mezzanine Loan Agreement, unless Indemnitee expressly elects in
writing to make this Agreement additional collateral or security for such
Obligations of Borrowers pursuant to the Mezzanine Loan Agreement, which
Indemnitee is entitled to do in its sole and absolute discretion. It is not
necessary for an Event of Default to have occurred pursuant to and as defined in
the Pledges or the Mezzanine Loan Agreement for Indemnified Parties to exercise
their rights pursuant to this Agreement. Notwithstanding any provision of the
Mezzanine Loan Agreement to the contrary, the obligations of each Indemnitor
pursuant to this Agreement are exceptions to any non-recourse or exculpation
provision of the Mezzanine Loan Agreement; and each Indemnitor expressly
acknowledges and agrees that it is fully and personally liable for such
obligations, and such liability is not limited to the original or amortized
principal balance of the Loan or the value of the Collateral.

     9.   SURVIVAL. The obligations and liabilities of Indemnitors under this
Agreement shall fully survive indefinitely, notwithstanding any termination,
satisfaction, assignment of, or foreclosure on, the Collateral.

     10.  INTEREST. Any amounts payable to any Indemnified Parties under this
Agreement shall become immediately due and payable on demand and, if not paid
within ten (10) days of such demand therefor, shall bear interest at the Default
Rate.

     11.  WAIVERS.

          (a)  Each Indemnitor hereby waives and relinquishes (i) any right or
claim of right to cause a marshaling of any Indemnitor's assets or to cause
Indemnitee or any other Indemnified Party to proceed against any of the security
for the Loan before proceeding under this Agreement against any Indemnitor; (ii)
all rights and remedies accorded by applicable law to indemnitors or

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guarantors generally, including any rights of subrogation which any Indemnitor
may have, PROVIDED that the indemnity provided for hereunder shall neither be
contingent upon the existence of any such rights of subrogation nor subject to
any claims or defenses whatsoever which may be asserted in connection with the
enforcement or attempted enforcement of such subrogation rights, including,
without limitation, any claim that such subrogation rights were abrogated by any
acts of Indemnitee or any other Indemnified Party; (iii) the right to assert a
counterclaim, other than a mandatory or compulsory counterclaim, in any action
or proceeding brought against or by Indemnitee or any other Indemnified Party;
(iv) notice of acceptance hereof and of any action taken or omitted in reliance
hereon; (v) presentment for payment, demand of payment, protest or notice of
nonpayment or failure to perform or observe, or other proof, or notice or
demand; and (vi) all homestead exemption rights against the obligations
hereunder and the benefits of any statutes of limitations or repose.
Notwithstanding anything to the contrary contained herein, each Indemnitor
hereby agrees to postpone the exercise of any rights of subrogation with respect
to any collateral securing the Obligations until the Obligations shall have been
paid in full.

          (b)  EACH INDEMNITOR HEREBY AGREES NOT TO ELECT A TRIAL BY JURY OF ANY
ISSUE TRIABLE OF RIGHT BY JURY, AND FOREVER WAIVES ANY RIGHT TO TRIAL BY JURY
FULLY TO THE EXTENT THAT ANY SUCH RIGHT SHALL NOW OR HEREAFTER EXIST, WITH
REGARD TO THIS AGREEMENT, ANY OR ALL OF THE MEZZANINE NOTES, ANY OR ALL OF THE
PLEDGES OR THE OTHER MEZZANINE LOAN DOCUMENTS, OR ANY CLAIM, COUNTERCLAIM OR
OTHER ACTION ARISING IN CONNECTION THEREWITH. THIS WAIVER OF RIGHT TO TRIAL BY
JURY IS GIVEN KNOWINGLY AND VOLUNTARILY BY EACH INDEMNITOR AND IS INTENDED TO
ENCOMPASS INDIVIDUALLY EACH INSTANCE AND EACH ISSUE AS TO WHICH THE RIGHT TO A
TRIAL BY JURY WOULD OTHERWISE ACCRUE. THE INDEMNIFIED PARTIES ARE HEREBY
AUTHORIZED TO FILE A COPY OF THIS PARAGRAPH IN ANY PROCEEDING AS CONCLUSIVE
EVIDENCE OF THIS WAIVER BY EACH INDEMNITOR.

     12.  SUBROGATION. Each Indemnitor hereby agrees that it shall take any and
all reasonable actions, including the institution of legal action against third
parties, necessary or appropriate to obtain reimbursement, payment or
compensation from such Persons responsible for the presence of any Hazardous
Substances at, in, on, under or near any Individual Property or otherwise
obligated by law to bear the cost. The Indemnified Parties shall be and hereby
are subrogated to all of each Indemnitor's rights now or hereafter in such
claims.

     13.  INDEMNITORS' REPRESENTATIONS AND WARRANTIES. Each Indemnitor
represents and warrants that:

     (a)  it has the full power and authority to execute and deliver this
Agreement and to perform its obligations hereunder; the execution, delivery and
performance of this Agreement by such Indemnitor has been duly and validly
authorized; and all requisite action has been taken by such Indemnitor to make
this Agreement valid and binding upon such Indemnitor, enforceable in accordance
with its terms;

                                       516
<Page>

     (b)  its execution of, and compliance with, this Agreement is in the
ordinary course of business of such Indemnitor and will not result in the breach
of any term or provision of the charter, by-laws, partnership, operating or
trust agreement or other governing instrument of such Indemnitor or result in
the breach of any term or provision of, or conflict with or constitute a default
under, or result in the acceleration of any obligation under, any agreement,
indenture or loan or credit agreement or other instrument to which such
Indemnitor, the Collateral or any Individual Property is subject, or result in
the violation of any law, rule, regulation, order, judgment or decree to which
such Indemnitor, the Collateral or any Individual Property is subject;

     (c)  to the best of such Indemnitor's knowledge, there is no action, suit,
proceeding or investigation pending or threatened against it which, either in
any one instance or in the aggregate, may result in any material adverse change
in the business, operations, financial condition, properties or assets of such
Indemnitor, or in any material impairment of the right or ability of such
Indemnitor to carry on its business substantially as now conducted, or in any
material liability on the part of such Indemnitor, or which would draw into
question the validity of this Agreement or of any action taken or to be taken in
connection with the obligations of such Indemnitor contemplated herein, or which
would be likely to impair materially the ability of such Indemnitor to perform
under the terms of this Agreement;

     (d)  it does not believe, nor does it have any reason or cause to believe,
that it cannot perform each and every covenant contained in this Agreement;

     (e)  to the best of such Indemnitor's knowledge, no approval,
authorization, order, license or consent of, or registration or filing with, any
Governmental Authority or other Person, and no approval, authorization or
consent of any other Person, is required in connection with this Agreement; and

     (f)  this Agreement constitutes a valid, legal and binding obligation of
such Indemnitor, enforceable against it in accordance with the terms hereof.

     14.  NO WAIVER. No delay by any Indemnified Party in exercising any right,
power or privilege under this Agreement shall operate as a waiver of any such
privilege, power or right.

     15.  NOTICE OF LEGAL ACTIONS. Each party hereto shall, within five (5)
Business Days of receipt thereof, give written notice to the other parties
hereto of (i) any notice, advice or other communication from any Governmental
Authority or any source whatsoever with respect to Hazardous Substances on, from
or affecting any Individual Property, and (ii) any legal action brought against
such party or related to any Individual Property, with respect to which
Indemnitors may have liability under this Agreement. Such notice shall comply
with the provisions of SECTION 19 hereof.

     16.  EXAMINATION OF BOOKS AND RECORDS. The Indemnified Parties and their
accountants and other representatives shall, at reasonable times and upon
reasonable written notice, have the right to examine the records, books and
management and other papers of each Indemnitor which reflect upon its financial
condition, at the Properties or at the office regularly maintained by such
Indemnitor where the books and records are located. The Indemnified Parties and
their accountants and other

                                       517
<Page>

representatives shall have the right to make copies and extracts from the
foregoing records and other papers. In addition, at reasonable times and upon
reasonable written notice, the Indemnified Parties and their accountants and
other representatives shall have the right to examine and audit the books and
records of each Indemnitor pertaining to the income, expenses and operation of
the Properties during reasonable business hours at the office of such Indemnitor
where the books and records are located.

     17.  TRANSFER OF LOAN.

     (a)  Indemnitee may, at any time, sell, transfer or assign any or all of
the Mezzanine Notes, the Mezzanine Loan Agreement, any or all of the Pledges,
this Agreement and the other Mezzanine Loan Documents, and any or all servicing
rights with respect thereto, or grant participations therein or issue mortgage
pass-through certificates or other securities evidencing a beneficial interest
in a rated or unrated public offering or private placement (the "SECURITIES").
Indemnitee may forward to each purchaser, transferee, assignee, servicer,
participant or investor in such Securities or any credit rating agency rating
such Securities (each of the foregoing entities hereinafter referred to as an
"INVESTOR") and each prospective Investor all documents and information which
Indemnitee now has or may hereafter acquire relating to each Indemnitor, the
Collateral and any Individual Property, whether furnished by any Indemnitor or
otherwise, as Indemnitee determines necessary or desirable. Each Indemnitor
agrees to cooperate with Indemnitee in connection with any transfer made or any
Securities created pursuant to this Section, including, without limitation, the
delivery of an estoppel certificate required in accordance with the Mezzanine
Loan Agreement and such other reasonable documents as may be reasonably
requested by Indemnitee. Each Indemnitor shall also furnish, and each Indemnitor
hereby consents to Indemnitee furnishing, to such Investors or such prospective
Investors, any and all information concerning the financial condition of such
Indemnitor and any and all information concerning the Collateral, any Individual
Property and the Leases as may be requested by Indemnitee, any Investor or any
prospective Investor in connection with any sale, transfer or participation
interest.

     (b)  Upon any transfer or proposed transfer contemplated above and by
Section 9.1 of the Mezzanine Loan Agreement, at Indemnitee's request, each
Indemnitor shall provide an estoppel certificate to any Investor or any
prospective Investor in such form, substance and detail as Indemnitee, such
Investor or such prospective Investor may reasonably require.

     18.  TAXES. Each Indemnitor has filed all federal, state, county, municipal
and city income and other tax returns required to have been filed by it and has
paid all taxes and related liabilities which have become due pursuant to such
returns or pursuant to any assessments received by it. No Indemnitor has any
knowledge of any basis for any additional assessment in respect of any such
taxes and related liabilities for prior years.

     19.  NOTICES. All notices, demands, requests, consents, approvals or other
communications (any of the foregoing, a "NOTICE") required, permitted or desired
to be given hereunder shall be in writing and shall be sent by telefax (with
answer back acknowledged) or by registered or certified mail, postage prepaid,
return receipt requested, or delivered by hand or by reputable overnight
courier, addressed to the party to be so notified at its address hereinafter set

                                       518
<Page>

forth, or to such other address as such party may hereafter specify in
accordance with the provisions of this SECTION 19. Any Notice shall be deemed to
have been received: (a) three (3) days after the date such Notice is mailed, (b)
on the date of sending by telefax if sent during business hours on a Business
Day (otherwise on the next Business Day), (c) on the date of delivery by hand if
delivered during business hours on a Business Day (otherwise on the next
Business Day), and (d) on the next Business Day if sent by an overnight
commercial courier, in each case addressed to the parties as follows:

If to Lender:        UBS Warburg Real Estate Investments Inc.
                     1285 Avenue of the Americas
                     11th Floor
                     New York, New York 10019
                     Attention: Andrew B. Cohen
                     Fax No. (212) 713-4631

with a copy to:      Brown Raysman Millstein Felder & Steiner LLP
                     900 Third Avenue
                     New York, New York 10022
                     Attention: Jeffrey B. Steiner, Esq.
                     Fax No. (212) 895-2900

and with a copy to:  Wachovia Bank, National Association
                     8739 Research Drive, URP4
                     Charlotte, North Carolina  28288-1075
                     Attn: David Tucker
                     Fax No.: (704) 593-7735]
                     or any successor Servicer of the Loan

If to Borrower:      c/o Horizon Group Properties, Inc.
                     77 West Wacker Drive, Suite 4200
                     Chicago, Illinois 60601
                     Attn: Mr. David Tinkham
                     Fax No.: (312) 917-8440

With a copy to:      c/o Horizon Group Properties Inc.
                     5000 Hakes Drive
                     Muskegon, MI 49441
                     Attention: Ms. Terri Springstead
                     Fax No.: (231) 798-5100

And with a copy to:  Schiff Hardin & Waite
                     7300 Sears Tower
                     Chicago, Illinois 60606
                     Attn: David A. Grossberg, Esq.
                     Fax No.: (312) 258-5700

                                       519
<Page>

If to Non-Borrower
Indemnitor:          c/o Horizon Group Properties, Inc.
                     77 West Wacker Drive, Suite 4200
                     Chicago, Illinois 60601
                     Attn: Mr. David Tinkham
                     Fax No.: (312) 917-8440

With a copy to:      c/o Horizon Group Properties Inc.
                     5000 Hakes Drive
                     Muskegon, MI 49441
                     Attention: Ms. Terri Springstead
                     Fax No.: (231) 798-5100

And with a copy to:  Schiff Hardin & Waite
                     7300 Sears Tower
                     Chicago, Illinois 60606
                     Attn: David A. Grossberg, Esq.
                     Fax No.: (312) 258-5700

Any party may change the address to which any such Notice is to be delivered by
furnishing ten (10) days' written notice of such change to the other parties in
accordance with the provisions of this SECTION 19. Notices shall be deemed to
have been given on the date set forth above, even if there is an inability to
actually deliver any Notice because of a changed address of which no Notice was
given or there is a rejection or refusal to accept any Notice offered for
delivery. Notice for any party may be given by its respective counsel.
Additionally, Notice from Lender may also be given by Servicer.

     20.  DUPLICATE ORIGINALS; COUNTERPARTS. This Agreement may be executed in
any number of duplicate originals and each duplicate original shall be deemed to
be an original. This Agreement may be executed in several counterparts, each of
which counterparts shall be deemed an original instrument and all of which
together shall constitute a single Agreement. The failure of any party hereto to
execute this Agreement, or any counterpart hereof, shall not relieve the other
signatories from their obligations hereunder.

     21.  NO ORAL CHANGE. This Agreement, and any provisions hereof, may not be
modified, amended, waived, extended, changed, discharged or terminated orally or
by any act or failure to act on the part of any Indemnitor or any Indemnified
Party, but only by an agreement in writing signed by the party or parties
against whom enforcement of any modification, amendment, waiver, extension,
change, discharge or termination is sought.

     22.  HEADINGS, ETC. The headings and captions of various paragraphs of this
Agreement are for convenience of reference only and are not to be construed as
defining or limiting, in any way, the scope or intent of the provisions hereof.

                                       520
<Page>

     23.  NUMBER AND GENDER/SUCCESSORS AND ASSIGNS. All pronouns and any
variations thereof shall be deemed to refer to the masculine, feminine, neuter,
singular or plural as the identity of the Person or Persons referred to may
require. Without limiting the effect of specific references in any provision of
this Agreement, the term "Indemnitor" shall be deemed to refer to each and every
Person constituting an Indemnitor from time to time, as the sense of a
particular provision may require, and to include the heirs, executors,
administrators, legal representatives, successors and permitted assigns of each
Indemnitor, all of whom shall be bound by the provisions of this Agreement. Each
reference herein to Indemnitee shall be deemed to include its successors and
assigns. This Agreement shall inure to the benefit of the Indemnified Parties
and their respective successors, permitted assigns, heirs and legal
representatives forever. The Indemnified Parties shall have the right to assign
or transfer their rights under this Agreement in connection with any assignment
of the Loan and the Mezzanine Loan Documents. Any assignee or transferee of
Indemnitee (and the other Indemnified Parties) shall be entitled to all the
benefits afforded to Indemnitee (and the other Indemnified Parties) under this
Agreement. No Indemnitor shall have the right to assign or transfer its rights
or obligations under this Agreement without the prior written consent of
Indemnitee, as provided in the Mezzanine Loan Agreement, and any attempted
assignment without such consent shall be null and void.

     24.  RELEASE OF LIABILITY. Any one or more parties liable upon or in
respect of this Agreement may be released without affecting the liability of any
party not so released.

     25.  RIGHTS CUMULATIVE. The rights and remedies herein provided are
cumulative and not exclusive of any rights or remedies which Indemnitee has
under any or all of the Mezzanine Notes, any or all of the Pledges, the
Mezzanine Loan Agreement or the other Mezzanine Loan Documents or would
otherwise have at law or in equity.

     26.  INAPPLICABLE PROVISIONS. If any provision of this Agreement is held to
be illegal, invalid or unenforceable under present or future laws effective
during the term of this Agreement, such provision shall be fully severable and
this Agreement shall be construed and enforced as if such illegal, invalid or
unenforceable provision had never comprised a part of this Agreement, and the
remaining provisions of this Agreement shall remain in full force and effect and
shall not be affected by the illegal, invalid or unenforceable provision or by
its severance from this Agreement, unless such continued effectiveness of this
Agreement, as modified, would be contrary to the basic understandings and
intentions of the parties as expressed herein.

     27.  GOVERNING LAW; JURISDICTION; SERVICE OF PROCESS.

          (a)  THIS AGREEMENT WAS NEGOTIATED IN THE STATE OF NEW YORK, AND MADE
BY EACH INDEMNITOR AND ACCEPTED BY INDEMNITEE IN THE STATE OF NEW YORK, AND THE
PROCEEDS OF THE MEZZANINE NOTES WERE DISBURSED FROM THE STATE OF NEW YORK, WHICH
STATE THE PARTIES AGREE HAS A SUBSTANTIAL RELATIONSHIP TO THE PARTIES AND TO THE
UNDERLYING TRANSACTION RELATED HERETO, AND IN ALL RESPECTS, INCLUDING, WITHOUT
LIMITING THE GENERALITY OF THE FOREGOING, MATTERS OF CONSTRUCTION, VALIDITY AND
PERFORMANCE, THIS

                                       521
<Page>

AGREEMENT AND THE OBLIGATIONS ARISING HEREUNDER SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO
CONTRACTS MADE AND PERFORMED IN SUCH STATE (WITHOUT REGARD TO PRINCIPLES OF
CONFLICT LAWS) AND ANY APPLICABLE LAW OF THE UNITED STATES OF AMERICA, EXCEPT
THAT AT ALL TIMES THE PROVISIONS FOR THE CREATION, PERFECTION AND ENFORCEMENT OF
THE LIENS AND SECURITY INTERESTS CREATED PURSUANT TO THE MEZZANINE LOAN
DOCUMENTS WITH RESPECT TO ANY INDIVIDUAL PROPERTY SHALL BE GOVERNED BY, AND
CONSTRUED ACCORDING TO, THE LAW OF THE STATE, COMMONWEALTH OR DISTRICT IN WHICH
SUCH INDIVIDUAL PROPERTY IS LOCATED, IT BEING UNDERSTOOD THAT, TO THE FULLEST
EXTENT PERMITTED BY THE LAW OF SUCH STATE, COMMONWEALTH OR DISTRICT, THE LAW OF
THE STATE OF NEW YORK SHALL GOVERN THE CONSTRUCTION, VALIDITY AND ENFORCEABILITY
OF ALL MEZZANINE LOAN DOCUMENTS AND ALL OF THE OBLIGATIONS ARISING HEREUNDER AND
THEREUNDER. TO THE FULLEST EXTENT PERMITTED BY LAW, EACH INDEMNITOR HEREBY
UNCONDITIONALLY AND IRREVOCABLY WAIVES ANY CLAIM TO ASSERT THAT THE LAW OF ANY
OTHER JURISDICTION GOVERNS THIS AGREEMENT AND/OR THE OTHER MEZZANINE LOAN
DOCUMENTS, AND THIS AGREEMENT AND THE OTHER MEZZANINE LOAN DOCUMENTS SHALL BE
GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK
PURSUANT TO SECTION 5-1401 OF THE NEW YORK GENERAL OBLIGATIONS LAW.

          (b)  ANY LEGAL SUIT, ACTION OR PROCEEDING AGAINST INDEMNITEE OR ANY
INDEMNITOR ARISING OUT OF OR RELATING TO THIS AGREEMENT MAY, AT INDEMNITEE'S
OPTION, BE INSTITUTED IN ANY FEDERAL OR STATE COURT IN THE CITY OF NEW YORK,
COUNTY OF NEW YORK, PURSUANT TO SECTION 5-1402 OF THE NEW YORK GENERAL
OBLIGATIONS LAW, AND EACH INDEMNITOR WAIVES ANY OBJECTIONS WHICH IT MAY NOW OR
HEREAFTER HAVE BASED ON VENUE AND/OR FORUM NON CONVENIENS OF ANY SUCH SUIT,
ACTION OR PROCEEDING, AND EACH INDEMNITOR HEREBY IRREVOCABLY SUBMITS TO THE
JURISDICTION OF ANY SUCH COURT IN ANY SUIT, ACTION OR PROCEEDING. EACH
INDEMNITOR DOES HEREBY DESIGNATE AND APPOINT:

               SCHIFF HARDIN & WAITE
               150 EAST 52ND STREET
               SUITE 2700
               NEW YORK, NEW YORK 10022
               ATTENTION:  DAVID A. GROSSBERG, ESQ. (CHICAGO OFFICE)

AS ITS AUTHORIZED AGENT TO ACCEPT AND ACKNOWLEDGE ON ITS BEHALF SERVICE OF ANY
AND ALL PROCESS WHICH MAY BE SERVED IN ANY SUCH SUIT, ACTION OR PROCEEDING IN
ANY FEDERAL OR STATE COURT IN NEW YORK,

                                       522
<Page>

NEW YORK, AND AGREES THAT SERVICE OF PROCESS UPON SAID AGENT AT SAID ADDRESS AND
WRITTEN NOTICE OF SAID SERVICE MAILED OR DELIVERED TO SUCH INDEMNITOR IN THE
MANNER PROVIDED HEREIN SHALL BE DEEMED IN EVERY RESPECT EFFECTIVE SERVICE OF
PROCESS UPON SUCH INDEMNITOR IN ANY SUCH SUIT, ACTION OR PROCEEDING IN THE STATE
OF NEW YORK. EACH INDEMNITOR (I) SHALL GIVE PROMPT NOTICE TO INDEMNITEE OF ANY
CHANGED ADDRESS OF ITS AUTHORIZED AGENT HEREUNDER, (II) MAY AT ANY TIME AND FROM
TIME TO TIME DESIGNATE A SUBSTITUTE AUTHORIZED AGENT WITH AN OFFICE IN NEW YORK,
NEW YORK (WHICH SUBSTITUTE AGENT AND OFFICE SHALL BE DESIGNATED AS THE PERSON
AND ADDRESS FOR SERVICE OF PROCESS AND WHICH SUBSTITUTE AGENT SHALL AT ALL TIMES
BE THE SAME AGENT AS AUTHORIZED BY BORROWER UNDER THE MEZZANINE LOAN AGREEMENT),
PROVIDED THERE SHALL ALWAYS BE THE SAME AUTHORIZED AGENT FOR ALL INDEMNITORS AND
(III) SHALL PROMPTLY DESIGNATE SUCH A SUBSTITUTE IF ITS AUTHORIZED AGENT CEASES
TO HAVE AN OFFICE IN NEW YORK, NEW YORK OR IS DISSOLVED WITHOUT LEAVING A
SUCCESSOR PROVIDED THERE SHALL ALWAYS BE THE SAME AUTHORIZED AGENT FOR ALL
INDEMNITORS. NOTHING CONTAINED HEREIN SHALL AFFECT THE RIGHT OF THE INDEMNIFIED
PARTIES TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR TO COMMENCE
LEGAL PROCEEDINGS OR OTHERWISE PROCEED AGAINST INDEMNITORS IN ANY OTHER
JURISDICTION.

     28.  MISCELLANEOUS.

          (a)  Wherever pursuant to this Agreement (i) Indemnitee (or any other
Indemnified Party) exercises any right given to it to approve or disapprove any
matter, (ii) any arrangement or term is to be satisfactory to Indemnitee (or any
other Indemnified Party), or (iii) any other decision or determination is to be
made by Indemnitee (or any other Indemnified Party), the decision of Indemnitee
(or such other Indemnified Party) to approve or disapprove such matter, all
decisions that arrangements or terms are satisfactory or not satisfactory to
Indemnitee (or such other Indemnified Party) and all other decisions and
determinations made by Indemnitee (or such other Indemnified Party), shall be in
the sole and absolute discretion of Indemnitee (or such other Indemnified Party)
and shall be final and conclusive, except as may be otherwise expressly and
specifically provided herein.

          (b)  Wherever pursuant to this Agreement it is provided that any
Indemnitor pay any costs and expenses, such costs and expenses shall include,
but not be limited to, reasonable legal fees and disbursements of Indemnitee and
the other Indemnified Parties, whether incurred by retained outside law firms,
or as reimbursements for the expenses of in-house legal staff, or otherwise.

     29.  JOINT AND SEVERAL LIABILITY. The obligations and liabilities of the
Indemnitors hereunder are joint and several.

                                       523
<Page>

     30.  RECITALS. The recitals hereof are a part hereof, form a basis for this
Agreement and shall be considered PRIMA facie evidence of the facts and
documents referred to therein.

                                       524
<Page>

     IN WITNESS WHEREOF, this Agreement has been executed by Indemnitors and is
effective as of the day and year first above written.

                                        LAUGHLIN HOLDINGS LLC,
                                        a Delaware limited liability company

                                        By:
                                            ------------------------------------
                                            Name:
                                            Title:

                                        MEDFORD HOLDINGS LLC,
                                        a Delaware limited liability company

                                        By:
                                            ------------------------------------
                                            Name:
                                            Title:

                                        WARRENTON HOLDINGS LLC,
                                        a Delaware limited liability company

                                        By:
                                            ------------------------------------
                                            Name:
                                            Title:

                                        HORIZON GROUP PROPERTIES, INC.,
                                        a Maryland corporation

                                        By:
                                            ------------------------------------
                                            Name:
                                            Title:

                                        HORIZON GROUP PROPERTIES, L.P.,
                                        a Delaware limited partnership

                                        By: Horizon Group Properties, Inc., a
                                            Maryland corporation, its General
                                            Partner

                                            By:
                                               ---------------------------------
                                            Name:
                                            Title:

                                       525
<Page>

                                   SCHEDULE I

                              ENVIRONMENTAL REPORTS

Laughlin Property:   Phase I Environmental Site Assessment prepared by Aaron &
                     Wright Technical Services Inc. and dated April 18, 2002

Medford Property:    Phase I Environmental Site Assessment prepared by Aaron &
                     Wright Technical Services Inc. and dated April 19, 2002

Warrenton Property:  Phase I Environmental Site Assessment prepared by Aaron &
                     Wright Technical Services Inc. and dated April 19, 2002

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Exhibit 10.1  

 
  SEPARATION AGREEMENT AND GENERAL RELEASE    
  

        This Separation Agreement and General Release (this "Agreement") is entered into by and between Mark Komorowski ("Employee") and Wells-Gardner Electronics
Corporation (the "Company") as of June 1, 2002 to set forth the terms, conditions and obligations of each party with respect to the termination of the employment relationship between Employee
and the Company. 

        Whereas,
the parties acknowledge that the Company has requested that Employee terminate his employment relationship with the Company and the Employment Agreement dated
September 3, 1998 between the Company and Employee (the "Employment Agreement"); 

        Whereas,
the parties mutually agree that their joint interests would be furthered by an amicable separation; and 

        Whereas,
concurrently herewith and as a condition to signing this Agreement, Employee and the Company are entering into a Sales Representative Agreement (the "Sales Representative
Agreement"); 

        Now
therefore, for good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties agree as follows: 

        1.    Termination of Employment.    Termination of (i) the employment relationship between Employee and the
Company and its affiliates and subsidiaries and (ii) the Employment Agreement shall be effective as of June 1, 2002 (the "Termination Date"). Employee shall resign from his position as
an officer and employee of the Company and any of its affiliates and subsidiaries effective as of the Termination Date. 

        2.    Consideration.    As consideration for Employee's entering into this Agreement, the Company agrees: 

	a)
	Employee
shall receive from the Company a lump sum cash payment equal to the sum of (i) and (ii) below, payable on the next regular payday following expiration of the
revocation period described in Paragraph 11 below:

	(i)
	accrued
but unused pay vacation for 116 hours (such gross amount equal to $6,692); and

	(ii)
	the
balance payable to Employee under the Company's 2000 deferred bonus plan (such gross amount equal to $6,900). 

	b)
	From
the Termination Date until the earlier of the occurrence of a Default Event (as defined below) or May 31, 2003 (the "Severance Period"), the Company shall continue to pay
to Employee:

	(i)
	Employee's
current salary, payable on the Company's regularly scheduled paydays in the aggregate amount of $120,000; and

	(ii)
	Employee's
current auto allowance, payable on the Company's regularly scheduled paydays in the aggregate amount of $13,500. 

A
"Default Event" shall occur upon the determination by the Company that Employee has: 

	(i)
	committed
an act or acts that may jeopardize any gaming license applied for or held by the Company; or

	(ii)
	committed
a breach of this Agreement; provided that, if such breach if curable and Employee cures such breach during the thirty (30) days
following the issuance of written 

 

notice of the breach by the Company to Employee, a Default Event shall not be deemed to have occurred. 

	 	c)	Effective as of the Termination Date, title to and ownership of the Sony PCG-C1MVP laptop and HP 1200 printer used by Employee prior to the Termination Date shall transfer to Employee.
	

 	

d)	

(i)	
 	

During the Severance Period, the Company shall continue to provide life, medical and dental (but not long term disability) plans (the "Company Plans") as previously selected by Employee, for Employee and such of Employee's dependents for whom the
Company provided such benefits on the Termination Date; provided Employee shall be responsible for Employee's share of the cost of coverage and benefits on the same basis as prior to the Termination Date. Such benefits will be continued only to the
extent permissible under the terms of such Company Plans.
	

 	

 	

(ii)	
 	

If any of the Company Plans do not permit continued participation by Employee and Employee's family after termination of employment, then, during the Severance Period, the Company will reimburse Employee for the cost of obtaining comparable coverage
from a third-party insurer, provided, however, that the amount of such reimbursement will not exceed the amount that would have been paid by the Company for coverage under the Company Plans during the Severance Period had Employee's employment not
been terminated.
	

 	

 	

 	
 	

If during the Severance Period, and subject to (iii) below, Employee is reemployed by another employer (other than self employed), the rights of Employee and Employee's family to receive benefits under any Company Plan, or reimbursement for any
third-party coverage, will terminate on the date Employee and Employee's family become eligible to receive comparable benefits from such employer.
	

 	

 	

(iii)	
 	

If, at the termination of the Severance Period, Employee is receiving medical and/or dental benefits from a Company Plan, the Company will continue to provide such medical and/or dental benefits to Employee and/or Employee's family pursuant to COBRA.
For such purpose, the termination of the Severance Period will be considered the date of the "qualifying event" as such term is defined by COBRA and the cost of continued coverage during the COBRA period will be determined pursuant to COBRA and paid
entirely by Employee.
	

 	

 	

(iv)	
 	

If the Company's Plans do not provide for continued medical and/or dental benefit coverage during the Severance Period, then the Termination Date will be considered the date of the qualifying event for COBRA purposes. In such case, Employee may
either elect to continue such coverage pursuant to COBRA or obtain comparable third-party coverage as described in Paragraph 2(b)(ii). If Employee elects COBRA coverage, then during the Severance Period, Employee will be charged the amount that
such Employee would have paid for such coverage had such Employee remained employed by the Company, and after the end of such Severance Period and for the remainder of the COBRA period, the cost of such coverage will be determined pursuant to COBRA
and paid entirely by Employee.
	

 	

 	

(v)	
 	

Employee's active participation in all other employee benefits plans and programs maintained by the Company shall be determined in accordance with the terms of such plans and programs.

	e)
	All
outstanding stock options granted to Employee as set forth on Attachment A hereto (to the extent not already vested) shall become
100% vested and exercisable on the day after the expiration of the revocation period described in Paragraph 11 below. Such vested stock 

2

 

options
will continue to be exercisable until the earlier of such stock options' expiration date or June 1, 2003. Stock options not exercised by June 1, 2003 shall expire and be of no
further force or effect. The options shall continue to be governed by the terms and conditions of their respective Stock Option Agreements, as amended by this Paragraph 2(e). 

	f)
	Amounts
paid to Employee pursuant to this Paragraph 2 shall be subject to applicable withholding taxes as may be required pursuant to federal, state or local law, or by
agreement with or consent of Employee. 

        3.    Confidentiality.    

	a)
	Employee
recognizes and acknowledges that certain knowledge and information which he has acquired or developed relating to the Business (as defined below), including pricing and
quotation techniques, costs, developments, activities or products of the Business or the business affairs of any person or entity doing business with the Business, including, but not limited to,
customer and vendor lists, cost and selling and service prices for specific customers, customers' needs and requirements, and all inventions, ideas, discoveries, creations, developments, improvements,
designs and processes so acquired (hereinafter collectively referred to as "Confidential Information") are the valuable property of the Company and its affiliates and subsidiaries and shall be held by
Employee in confidence and trust for the sole benefit of the Company and its affiliates and subsidiaries. "Business" shall mean the business of designing, manufacturing, marketing, selling,
distributing and servicing gaming machines, parts for gaming machines, video display products and other related products for a variety of markets including, but not limited to, gaming machine
manufacturers, casinos, coin-operated video game manufacturers and other display integrators.

	b)
	Employee
agrees not to use, disclose, divulge or publish, without the prior written consent of Company, at any time during the term hereof or thereafter, any Confidential Information;
provided, however, that Confidential Information shall not include (a) information which is known to the public or is generally known within the industry of businesses comparable to the
Business (other than as a result of Employee's violation of this covenant) or (b) information which Employee is required to disclose pursuant to law or order of a court having jurisdiction over
Employee (provided that Employee offers the Company an opportunity to obtain an appropriate protective order or administrative relief against disclosure of such Confidential Information).

	c)
	Employee
also agrees that except as may be specifically required by law, Employee will not in any manner disclose or communicate any part of this Agreement to any other person except
Employee's
current spouse, Employee's accountant or financial advisor to the limited extent needed for that person to prepare Employee's tax returns, or Employee's attorney. Before any such authorized
disclosure, Employee will inform each such person to whom disclosure is to be made that every term of this Agreement is confidential and obtain such person's agreement to maintain the confidentiality
of the entire Agreement. 

        4.    Return of Company Property.    By signing this Agreement, Employee affirms that he has returned to the Company
all of its property that was or is in his possession, custody or control, including but not limited to all keys, company credit cards, access cards, equipment, computers, hardware, software, programs
diskettes, data, notes, papers, books, files, documents, records, policies, client and customer information and lists, marketing information, design information, pricing information, blueprints,
specifications, plans, data base information, mailing lists, and any other property or information that Employee had relating to the Company and/or its customers, employees, plans, strategies,
inventions, policies, or practices (whether those materials are in paper or computer-stored form). Employee affirms that he has not retained any such property or information in any form, 

3

 

and that he will not give copies of such property information or disclose their contents to any other person. 

        5.    Restricted Activities.    Employee agrees that during the term of this Agreement, he will not, directly or
indirectly, be in any manner engaged in, connected with (as a shareholder, employee, independent contractor or otherwise) or employed by (or act as an independent contractor or other representative
for) any person, firm or corporation which is engaged in a business which, anywhere inside or outside the United States or Canada, (i) is competitive with the Company or a successor or
affiliate thereof or (ii) promotes, sells, markets, licenses, distributes or advertises products whether existing or under development, which are similar to or competitive with the Products (as
defined in the Sales Representative Agreement) anywhere; provided, however, that this subsection shall not be deemed to limit Employee's right to (i) own less than 10% of the common stock of a
publicly held corporation whose shares are traded on a recognized stock exchange or over-the-counter or (ii) pursue independently of the Company an opportunity presented
by Employee to the Company but affirmatively rejected by the Company during the one-year period following such rejection. 

        6.    Employees.    During the term of this Agreement, Employee shall not, directly or indirectly, (i) solicit
for employment and/or hire or offer employment to any individual who is or was an employee of the Company within 90 days of the date of this Agreement and who becomes an employee of the Company
or its subsidiaries at any time during the term of this Agreement, or (ii) encourage any Company employee to terminate his or her relationship with the Company or its subsidiaries. 

        7.    Customers.    During the term of this Agreement, except in furtherance of the Representative's sales
representatives duties under the Sales Representative Agreement, Employee shall not solicit any person who is or was a customer or client of the Company, or its subsidiaries and who becomes a customer
or client of the Company or its subsidiaries at any time during the term of this Agreement, for the purpose of (i) engaging in, or assisting any person or entity in engaging in, the Business,
or (ii) soliciting
or encouraging any customer, client of the Company, or its subsidiaries to terminate or otherwise alter his, hers or its relationship or prospective relationship with the Company or its subsidiaries. 

        8.    Release of Claims And Agreement Not To Sue.    a) As consideration for the obligations undertaken by the
Company pursuant to this Agreement and the Sales Representative Agreement, Employee, for himself, his successors, administrators, heirs or assigns, hereby fully releases, waives and fully discharges
the Released Parties (defined to include the Company, its subsidiaries and affiliates, predecessors, successors, and assigns, and their respective officers, directors, agents and employees, whether
past, present or future) from any and all claims, causes of action, suits, demands, damages, judgments or liabilities, of any nature, including attorney's fees and costs, known or unknown, absolute or
contingent, arising from or relating to Employee's employment or separation from employment. This release includes, without limitation, any and all claims for breach of contract (including the
Employment Agreement), wrongful discharge or impairment of economic opportunity, any claims under common law or at equity, claims of defamation or intentional infliction of emotional harm, claims of
any tort, claims for reimbursements or commissions, and any and all rights and discrimination claims Employee may have arising under any and all federal, state or local laws or regulations. Employee
agrees not to sue or to file any claims or actions against the Released Parties with respect to claims covered by this release and affirms that no such claims or actions are currently pending. 

	b)
	As
consideration for the obligations undertaken by Employee pursuant to this Agreement, the Company, for itself, its successors and assigns, hereby fully releases, waives and fully
discharges Employee from any and all claims, causes of action, suits, demands, damages, judgments or liabilities, of any nature, including attorney's fees and costs, known or unknown, absolute or
contingent, arising from or relating to Employee's employment or separation from employment unless such claims, causes of action, suits, demands, damages, judgments or 

4

 

liabilities
resulted from Employee's acts or omissions which were (i) grossly negligent, (ii) fraudulent or (iii) intentionally harmful. 

        9.    No Disparagement or Encouragement.    Each party agrees not to do anything, and not to make any oral, electronic
or written statement to any person (including without limitation any employee, client, customer, supplier, vendor of the Company or the press), that disparages or places in a false or negative light
the other party (and in the case of the Company, any of its past or present officers, employees, business, products, services or its relationships); provided, however, that nothing herein shall limit
or prohibit either party from cooperating in any truthful manner with any governmental authority or agency or responding truthfully under oath in a legal proceeding. Employee will not encourage any
person to file a lawsuit, charge, claim, or complaint against any of the Released Parties. Employee will not assist any person who has filed a lawsuit, charge, claim, or complaint against any
of the Released Parties unless Employee is required to render such assistance pursuant to a lawful subpoena or other legal obligation. If Employee is served with any such legal subpoena or becomes
subject to any such legal obligation, Employee will provide prompt written notice to the Company in which Employee shall enclose a copy of the subpoena and any other documents describing the legal
obligation. 

        10.    No Reinstatement or Reemployment.    Employee agrees not to apply for employment or otherwise seek to be hired,
rehired, employed, reemployed, or reinstated by the Company or its affiliates and subsidiaries. 

        11.    Revocation Period.    Employee has the right to revoke this Agreement for up to seven (7) days after
Employee signs it. In order to revoke this Agreement, Employee must sign and send a written notice of the decision to do so, addressed to Chief Executive Officer, Wells-Gardner Electronics
Corporation, 9500 West 55th Street, Suite A, McCook, Illinois 60525 and that written notice must be received by the Company no later than the eighth (8th) day after Employee signs this
Agreement. If Employee revokes this Agreement, Employee will not be entitled to any of the consideration from the Company described in Paragraph 2 above. 

        12.    No Admission.    This Agreement does not constitute an admission by any of the Released Parties and the Company
specifically denies that any action or failure to act by any of the Released Parties was wrongful, unlawful, or susceptible of causing any damages or injury to Employee. This Agreement does not
constitute an admission by Employee and the Employee specifically denies that any action or failure to act by Employee was wrongful, unlawful, or susceptible of causing any damages or injury to the
Company. 

        13.    Severability.    Employee acknowledges and agrees that the Restrictive Covenants (as defined below) are
reasonable, necessary and valid in duration and geographical scope and in all other respects. If any court determines that any of the Restrictive Covenants, or any part thereof, is invalid or
unenforceable, the remainder of the Restrictive Covenants shall not be affected thereby and shall be given full effect without regard to the invalid portions. Notwithstanding the foregoing, Employee
agrees that if Employee brings a lawsuit, claim, charge, or complaint against the Company, and a court of competent jurisdiction finds that a release or waiver of claims or rights by Employee in
Paragraph 8 above is illegal, void or unenforceable, Employee will upon request by the Company promptly sign a release or waiver that is legal and enforceable. 

        14.    Rights and Remedies Upon Breach.    If Employee breaches, or threatens to commit a breach of, any of the
covenants set forth in Paragraphs 5, 6 or 7 of this Agreement (the "Restrictive Covenants"), the Company shall have the right and remedy to have the Restrictive Covenants specifically enforced by any
court of competent jurisdiction, including immediate temporary injunctive relief without bond and without the necessity of showing actual monetary damages. It is agreed that each party shall be
entitled to an injunction or injunctions to prevent breaches of this Agreement and to specifically enforce the terms and provisions thereof in any action instituted in any court of the 

5

 

United States or any state thereof having subject matter jurisdiction, in addition to and not in lieu of, any other remedy to which such party may be entitled, at law or in equity. 

        15.    Agreement Inadmissible as Evidence.    This Agreement, its execution, and its implementation may not be used as
evidence, and shall not be admissible in any proceeding except one claiming a violation of this Agreement. 

        16.    Entire Agreement.    The parties hereby terminate the Employment Agreement dated September 3, 1998,
including the restrictive covenants for noncompetition contained therein. This Agreement sets forth the full understanding and agreement of the parties and supersedes any and all other understandings
or agreements, written or oral. 

        17.    Governing Law and Jurisdiction.    This Agreement shall be governed by and construed in accordance with laws
and judicial decisions of the State of Illinois, without regard to its principles of conflicts of laws. 

        18.    Knowing and Voluntary Waiver.    Employee specifically agrees as follows: 

	a)
	Employee
is knowingly and voluntarily entering into this Agreement;

	b)
	Employee
acknowledges that the Company is providing benefits in the form of payments and compensation, to which Employee would not otherwise be entitled, as part of the consideration
for Employee's entering into this Agreement;

	c)
	Employee
is hereby advised by the Company to consult with an attorney before signing this Agreement;

	d)
	Employee
understands that he has a period of forty-five (45) days from the date a copy of this Agreement is provided to Employee in which to consider and sign the
Agreement (during which the offer will remain open), and that Employee has an additional seven (7) days after signing this Agreement within which to revoke acceptance of the Agreement; and,

	e)
	If
during the seven (7) day revocation period Employee should revoke acceptance of the Agreement, then this Agreement shall be void. 

        19.    Counterparts.    This Agreement may be executed in counterparts, each of which shall be deemed to be an
original, but all of which together shall constitute one and the same instrument. 

	WELLS-GARDNER ELECTRONICS CORPORATION	 	MARK E. KOMOROWSKI
	

	

 	
 	

 
	By:	/s/  ANTHONY SPIER      
	 	/s/  MARK E. KOMOROWSKI      

	

Its: CEO	
 	

 
	

Dated: 6/3/02	
 	

Dated: 6/3/02

6

 
Attachment A

Stock Options of Employee  

	Grant Date
	 	Number of Shares
	 	Exercise Price

	2/18/97	 	18,233	 	$	3.07
	6/16/98	 	18,233	 	 	3.80
	1/4/99	 	4,559	 	 	2.15
	2/16/00	 	13,892	 	 	3.34
	2/7/01	 	13,230	 	 	2.37
	2/11/02	 	12,600	 	 	2.66

7

QuickLinks

SEPARATION AGREEMENT AND GENERAL RELEASE

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