Environmental Indemnity Agreement

ENVIRONMENTAL INDEMNITY AGREEMENT





THIS ENVIRONMENTAL INDEMNITY AGREEMENT (this " Agreement "), dated as of April 24, 2003 is entered into and delivered, jointly and severally, by HORIZON GROUP PROPERTIES, L.P. , a Delaware limited partnership (" Borrower ") and HORIZON GROUP PROPERTIES, INC. , a Maryland corporation (" Guarantor ") to and for the benefit of AMSTER TRADING COMPANY CHARITABLE REMAINDER UNITRUST DATED MARCH 10, 2003 (" Lender ").



R E C I T A L S :



A. Pursuant to the terms and conditions of a certain Construction and Term Loan Agreement, dated of even date herewith, between Borrower and Lender (as amended, modified, replaced or restated from time to time, the " Loan Agreement "), Lender has agreed to make certain Loans (as defined below) to Borrower.





B. The loans to be made pursuant to the Loan Agreement will consist of: (i) a term loan of Three Million One Hundred Thousand Dollars ($3,100,000) (the " Term Loan ") and (ii) a construction loan of up to Three Million One Hundred Thousand Dollars ($3,100,000) (the " Construction Loan ") (the Construction Loan and the Term Loan are collectively referred to herein as the " Loans ").



C. As a condition precedent to Lender92s extension of the Loans to Borrower and in consideration therefor, Lender has required, among other things, the execution and delivery of: (i) this Agreement by Borrower and Guarantor, (ii) that certain Promissory Note, dated of even date herewith, from Borrower to Lender in the original principal amount of Three Million One Hundred Thousand Dollars ($3,100,000)(as amended, modified, replaced or restated from time to time, the " Note "), (iii) that certain Construction Deed of Trust, Security Agreement and Fixture Filing Financing Statement, dated of even date herewith, among Borrower, as trustor, First American Title, as trustee, and Lender, as beneficiary, encumbering the real property, improvements and personalty described therein (" Property ") (as amended, modified, replaced or restated from time to time, the " Deed of Trust "), and (iv) various other Loan Documents (as defined in the Loan Agreement).



D. Guarantor: (i) is the general partner of Borrower and has a financial interest in Borrower, (ii) understands that Lender will not make the Loans to Borrower unless Guarantor executes and delivers this Agreement to Lender, and (iii) has agreed to execute and deliver this Agreement.





E. Capitalized terms used and not specifically defined herein shall bear the same meaning as established in the Loan Agreement.



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NOW, THEREFORE , to induce Lender to extend the Loans to Borrower and in consideration of the foregoing premises and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Indemnitors (as defined below) hereby covenant and agree for the benefit of Lender and the other Indemnified Parties (as defined below), as follows:



1. Environmental Matters.





(a.) Definitions . For purposes of this Agreement the following terms have the following meanings:





" Environmental Laws " means any and all federal, state and local laws (whether under common law, statute, rule, regulation or otherwise), requirements under permits or other authorizations issued with respect thereto, and other orders, decrees, judgments, directives or other requirements of any governmental authority relating to or imposing liability or standards of conduct (including disclosure or notification) concerning protection of human health or the environment or Hazardous Substances or any activity involving Hazardous Substances, all as previously and in the future to be amended.





" Hazardous Substance " means, but is not limited to, any substance, chemical, material or waste (A) the presence of which causes a nuisance or trespass of any kind; (B) which is regulated by any federal, state or local governmental authority because of its toxic, flammable, corrosive, reactive, carcinogenic, mutagenic, infectious, radioactive, or other hazardous property or because of its effect on the environment, natural resources or human health and safety, including, but not limited to, petroleum and petroleum products, asbestos-containing materials, polychlorinated biphenyls, lead and lead-based paint, radon, radioactive materials, flammables and explosives; or (C) which is designated, classified, or regulated as being a hazardous or toxic substance, material, pollutant, waste (or a similar such designation) under any federal, state or local law, regulation or ordinance, including under any Environmental Law such as the Comprehensive Environmental Response Compensation and Liability Act (42 U.S.C. a7 9601 et seq .), the Emergency Planning and Community Right-to-Know Act (42 U.S.C. a711001 et seq .), the Hazardous Substances Transportation Act (49 U.S.C. a71801 et seq .), or the Clean Air Act (42 U.S.C. a77401 et seq .).





" Indemnified Parties " means and includes Lender, its parent, subsidiaries, and affiliated companies, assignees of any of Lender92s interest in the Loans or the Loan Documents, any servicer or originator of the Loans, and the officers, directors, employees, agents and contractors of any of the foregoing parties.



" Indemnitors " means Borrower and Guarantor, jointly and severally.





" Loan Documents " shall have the meaning set forth in the Loan Agreement.





" Release " means any release, deposit, discharge, emission, leaking, leaching, spilling, seeping, migrating, injecting, pumping, pouring, emptying, escaping, dumping, disposing or other movement of Hazardous Substances.



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" Reports " means the environmental studies and reports identified on Exhibit A attached hereto and made a part hereof.





(b) Environmental Representations and Warranties . Except as otherwise fully disclosed by Indemnitors to Indemnified Parties in writing detailing any exceptions to the following environmental representations and warranties or fully disclosed to Indemnified Parties in the Reports, Indemnitors hereby represent and warrant to Indemnified Parties that, to the best of their knowledge, as of the date hereof:





(i) neither the Property nor any operations of Borrower thereon or in connection therewith are in violation of any Environmental Laws or any permit or other authorization issued pursuant thereto;



(ii) no Hazardous Substances are, or to Indemnitors92 knowledge and belief, have been handled, generated, stored, processed or otherwise managed on or at the Property except for those substances used by Borrower or tenants under leases at the Property in the ordinary course of their businesses and in compliance with all Environmental Laws;



(iii) there are not, to Indemnitors92 knowledge, any past or present Releases of Hazardous Substances in, on, under or from the Property;



(iv) the Property is not subject to any private or governmental lien or judicial or administrative notice or action relating to Hazardous Substances;



(v) there are no existing or closed underground storage tanks or other underground storage receptacles for Hazardous Substances on the Property;



(vi) Borrower has received no notice of, and to Borrower92s knowledge, there exists no investigation, action, proceeding or claim by any agency, authority or unit of government or by any third party which could result in any liability, penalty, sanction or judgment under any Environmental Laws with respect to any condition, use or operation of the Property or any of Borrower92s operations, nor does Borrower know of any basis for such a claim;



(vii) to Indemnitors92 knowledge, there has been no claim by any party that any use, operation or condition of the Property or any of Borrower92s operations has caused any nuisance or any other liability or adverse condition on any other property nor does Borrower know of any basis for such a claim;



(viii) there are no agreements, consent orders, decrees, judgments, license or permit conditions or other orders or directives of any federal, state or local court, governmental agency or authority or agreements, whether settlement agreements or otherwise, with any third parties relating to the ownership, use, operation, sale, transfer or conveyance of the Property that require any change in the present condition of the Property or any work, repairs, construction, containment, clean up,





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investigations, studies, removal or other remedial action or capital expenditures with respect to the Property.





(c) Environmental Covenants . Borrower covenants and agrees that Borrower: (i) shall keep or cause the Property to be kept free from Hazardous Substances (except those substances used by Borrower or tenants under leases at the Property in the ordinary course of their businesses and in compliance with all Environmental Laws); (ii) shall not install or use any underground storage tanks, shall not itself engage in and shall expressly prohibit all tenants of space in the Improvements from engaging in the use, generation, handling, storage, production, processing or management of Hazardous Substances, except in the ordinary course of their businesses and in compliance with all Environmental Laws; (iii) shall not itself cause, shall take all action reasonably necessary, and shall expressly prohibit the Release of Hazardous Substances at, on, under, or from the Property; shall itself comply and shall expressly require all tenants and any other persons who may come upon the Property to comply with all Environmental Laws; (iv) shall keep the Property free and clear of all liens and other encumbrances imposed pursuant to any Environmental Law, whether due to any act or omission of Borrower or any other person or entity (" Environmental Liens "); (v) shall comply and take actions reasonably necessary to cause all occupants of the Property to comply with the recommendations of any qualified environmental engineer or other expert that apply or pertain to the Property; and, (vi) without limiting the generality of the foregoing, during the term of this Agreement, shall not use any construction materials which contain asbestos nor install in the Improvements on the Property or permit to be installed in the Improvements on the Property, any materials which contain asbestos.





(d) Notice and Access . Indemnitors shall promptly notify Indemnified Parties in writing if Indemnitors knows, knows or believes there is or are (i) any Hazardous Substances, other than those used by Borrower or tenants under leases at the Property in the ordinary course of their businesses and in compliance with all Environmental Laws, present on the Property; (ii) any Release of Hazardous Substances in, on, under, from or migrating towards the Property; (iii) any non-compliance with Environmental Laws related in any way to the Property; (iv) any actual or threatened Environmental Liens; (v) any investigation or action or claim, whether threatened or pending, by any governmental agency or third party pertaining to the Release of Hazardous Substances in, on, under, from, or migrating towards the Property; and (vi) any installation of wells, piping, or other equipment at the Property to investigate, remediate or otherwise address any Release of Hazardous Substances at, on, in or in the vicinity of the Property. Indemnitors shall promptly, at Indemnitors92s sole cost and expense, take all actions as are required by Environmental Laws with respect to any Hazardous Substances or other environmental condition at, on or under the Property or other affected property, including all investigative, monitoring, removal, containment and remedial actions in accordance with all applicable Environmental Laws, including the payment, at no expense to Indemnified Parties, of all clean-up, administrative and enforcement costs of applicable governmental agencies which may be asserted against the Property in all instances as necessary to comply with all applicable Environmental Laws (collectively, " Completion of the Clean-up "). In the event Indemnitors fail to do so, Indemnified Parties may, but shall not be obligated or have any duty to, cause the Completion of the Clean-up of the Property. Indemnitors hereby grant to Indemnified Parties and their agents and employees access to the Property as provided in Section 1(f) below, and a lice ...