Retention and Severance Letter Agreement between Horizon Group Properties, Inc. and Andrew Pelmoter (April 26, 2001)

Summary

This agreement between Horizon Group Properties, Inc. and Andrew Pelmoter amends a prior retention letter and outlines the terms of Pelmoter’s continued employment. It provides for continued salary, a potential success bonus if the company’s property portfolio is sold, and severance benefits if Pelmoter is terminated (but not if he resigns). The agreement is effective through September 30, 2001, with specific conditions for bonus and severance eligibility. The company retains the right to terminate employment at any time, with exceptions for termination for cause.

EX-10.38 4 a2049341zex-10_38.txt EX-10.38 EXHIBIT 10.38 [LETTERHEAD OF HORIZON GROUP PROPERTIES, INC.] April 26, 2001 Mr. Andrew Pelmoter Horizon Group Properties, Inc. 5000 Hakes Drive Muskegon, MI 49441 Dear Andrew: This letter amends your retention letter dated November 1, 2000. While we engage in our efforts to maximize the value of our portfolio, we recognize that the employees could have concerns about their future with the company. Your efforts on behalf of the company have been important and will continue to be important as we embark on this new phase. Although I have discussed various possible scenarios which could have little, if any, impact on your position with the company (including a portfolio purchaser retaining our company as its leasing agent and manager, that only some of our properties are actually sold, and/or that we start another line of business which requires your expertise), there is no absolute guarantee or promise of continuing employment that I can give. In light of these circumstances and the company's desire that you remain fully committed to your efforts on its behalf, the company intends to both reward you for contributing to a successful transaction and afford you appropriate protection in the event of a transaction after which we cannot offer you continued employment. Accordingly, this letter sets forth the terms of your continued employment with the company: 1. SALARY AND DISCRETIONARY ANNUAL BONUS. You will continue your current salary, subject to discretionary increases according to our current company policy. 2. SUCCESS BONUS ON PORTFOLIO DISPOSITION. Provided that you have not resigned prior to the actual closing date of the sale of all or substantially all of your portfolio, you will receive a success bonus if and when the company sells all or substantially all of our portfolio (the "Success Bonus"). The Success Bonus shall be calculated on the following basis:

*cumulative based on one or a series of transaction The Success Bonus, if any, will be payable to you if you have not resigned prior to the final transaction closing date and shall be paid within thirty (30) days following the final transaction closing date. 3. SEVERANCE BENEFITS. In addition to the bonus above, if you are terminated by the company, you shall receive a severance payment equal to twelve (12) months salary not later than thirty (30) days after your termination. Additionally, if you are terminated by the company and if you elect COBRA insurance coverage after your termination, 25 the company will continue to pay the company's portion of your (and your family, if applicable) insurance coverage for twelve (12) months after your termination. After said twelve (12) month period, you will be solely liable for the payment of any and all COBRA insurance overage for as long as you elect to continue COBRA insurance coverage. No severance benefits shall be payable to you in the event of your resignation. 4. TERM OF THIS AGREEMENT. This letter agreement shall be valid and binding from the date of your execution through September 30, 2001. If your Success Bonus, if any, has become vested but has not yet been paid on or before September 30, 2001, it will be paid to you within thirty (30) days after the final transaction closing date. However, if all or substantially all of the portfolio has not been sold prior to October 1, 2001, no Success Bonus, if any, shall be payable. Further, if you are employed by the company on or after October 1, 2001, the severance benefits provided for in this letter agreement shall terminate and no longer be applicable in the event of a termination unless a change of control has occurred as identified in this section. Notwithstanding the above, the company may terminate an employee's employment for cause at any time if the employee (a) commits an act of fraud, embezzlement or misappropriation of company funds with respect to the company, (b) is convicted of a felony or (c) commits a material breach of any of his or her obligations as an employee of the company and the employee fails to correct such breach within thirty (30) days (or such shorter period of time as may be reasonable warranted) of receipt by the employee of written notice from the company specifying in reasonable detail the nature of such breach. Upon an employee's termination for cause, the company shall have no further obligation to pay the employee any salary or to provide the employee with any other employee benefits (including severance benefits) hereunder except for any salary and other benefits that have fully accrued and vested but have not been paid as of the effective date of such termination. Nothing contained in this letter agreement shall be construed, in any way, to limit or impair the company's right to terminate your employment at any time for any reason. Your signature on this letter constitutes your agreement to its terms and conditions. Please sign and retain this original and return one copy of the executed agreement to me. Very truly yours, /s/ Gary J. Skoien Gary J. Skoien APPROVED AND ACCEPTED BY: /s/ Andrew Pelmoter - ------------------------------------ --------------------------- ANDREW PELMOTER DATE 26