EXHIBIT 10.22
[Streamline Capital Corporation Letterhead]
December 5, 1997
Mr. ▇▇▇ ▇▇▇▇
President
Cost U Less, Inc.
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▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Dear ▇▇▇:
This letter sets forth the understanding and agreement (the Agreement") between
Cost U Less, Inc. ("Cost U Less" or the "Company") and Streamline Capital
Corporation ("Streamline") regarding the retention of Streamline as the
Company's investment banker in connection with the matters set forth below. It
is understood that the Company is currently seeking external growth capital and
is contemplating an initial public offering ("IPO") as its financing strategy.
In this regard, this letter sets forth the services proposed to be rendered by
Streamline and the related compensation payable to Streamline.
I. Corporate Finance Advisory Services
-----------------------------------
In connection with this Agreement, Streamline will provide the Company, on an
exclusive basis, the following investment banking services. A "Transaction"
upon which Streamline will be entitled to be compensated in the context of this
Agreement is defined below.
(A) Designing and implementing a process to solicit, coordinate and evaluate
proposals for any potential or actual IPO or other Transaction (as defined
below);
(B) Assisting the Company in connection with the preparation and dissemination,
as appropriate, of confidential information materials to be utilized in
approaching underwriters for any potential or actual IPO or other
Transaction;
(C) Assisting in the negotiation and implementation of, and review of proposals
in connection with, an IPO or other Transaction;
Cost U Less, Inc.
December 5, 1997
Page 2
(D) Assisting the Company in identifying and qualifying potential equity
underwriters and acting as the Company's exclusive representative (but
without the authority to bind or obligate the Company) in discussions with
potential underwriters ("Prospects");
(E) Assisting in all phases of the negotiation process, including establishment
of price, terms and structure of a contemplated IPO.
II. Compensation For Corporate Finance Advisory Services
----------------------------------------------------
Streamline's compensation pursuant to this Agreement will be as follows:
(A) Cost U Less shall pay Streamline, in the case of any completed IPO or other
Transaction, a transaction fee (the "Transaction Fee") payable in cash
immediately upon the closing of any transaction. Such Transaction Fee(s)
shall be equal to $75,000 (seventy-five thousand dollars).
(B) For purposes of this Agreement, a "Transaction" shall mean any Transaction
whereby external capital is invested into Cost U Less (or any affiliated
entities), whether in the form of debt, equity or a hybrid security with
characteristics of both debt and equity (i.e. subordinated debt with
warrants). A Transaction shall also mean any Transaction or series or
combination of Transactions whereby, directly or indirectly, all or part of
the business (or respective assets) of Cost U Less, are transferred for
consideration, including without limitation, a sale or exchange of capital
stock or assets, merger or consolidation, a leveraged buyout or any similar
transaction.
(C) In the event that the Company completes a transaction with The Warehouse
Group Limited, Streamline will only earn the Transaction Fee if it is
actively involved in advising the Company in such a Transaction. A new
engagement letter would be executed between Streamline and Cost U Less to
cover the scope of an assignment related to a potential Transaction with
The Warehouse Group Limited.
(D) If the Company completes a private placement for a minority equity interest
during the term of this Agreement with groups unaffiliated with potential
equity underwriters, Streamline would not be entitled to a Transaction Fee
unless it is directly involved in the equity offering.
Cost U Less, Inc.
December 5, 1997
Page 3
(E) The Transaction Fee shall be payable with respect to any Transaction
completed during (i) the term of this Agreement as defined in clause III or
(ii) the eighteen month period (the "Tail Period") following the term of
this Agreement with a Prospect (or affiliate thereof) (x) with which
Streamline has had discussions regarding a possible IPO or other
Transaction with Cost U Less or (y) which conducted an initial review or
relevant data concerning Cost U Less during the term of this Agreement.
III. Term of Agreement
-----------------
The Agreement will begin on the execution of this Agreement by both parties and
continue until the earlier to occur of (i) the completion of the IPO or other
Transaction; or (ii) twelve (12) months from the date of execution of this
Agreement. In the event a Transaction has not occurred by the end of the twelve
month period referred to above, the term of the Agreement shall continue on a
month-to-month basis unless terminated by either party on 30 days written
notice.
IV. Reimbursement For Out-of-Pocket Expenses
----------------------------------------
The Company shall reimburse Streamline for all reasonable and itemized out-of-
pocket expenses incurred by Streamline in connection with the performance of
services hereunder. Out-of-town travel expenses shall not be incurred without
the advance approval of Cost U Less.
V. Information Furnished by the Company
------------------------------------
In acting as the Company's exclusive agent, Streamline will assist the Company
in preparing confidential offering materials to be used in approaching potential
underwriters and capital sources. Streamline will necessarily rely on
information provided by the Company in the preparation of such materials,
including information regarding historical and projected performance in order to
accurately describe the Company to third parties. The Company will warrant the
accuracy and completeness of the information furnished to Streamline at the time
it is furnished, and will further advise Streamline during the period of the
assignment of all developments materially affecting the Company.
Recognizing that Streamline, in providing the services contemplated hereby, will
be acting as a representative of and relying on information provided by the
Company,
Cost U Less, Inc.
December 5, 1997
Page 4
Cost U Less agrees to indemnify and hold Streamline harmless against and from
any and all losses, claims, damages or liabilities, joint or several, to which
Streamline or its officers may become subject to in correction with Streamline's
appointment in respect to the Transaction and shall reimburse Streamline and its
officers for any legal fees and other expenses arising out of or in connection
with any action or claim arising out of this Agreement. The indemnification
provision provided for in this paragraph shall not be in force or effect if any
loss, claim, damage or liability that would give rise to any indemnification
provided for in this Agreement is found in a final judgment by a court to have
resulted from Streamline's willful misconduct or gross negligence in performing
the services set out in this Agreement.
V. Confidentiality
---------------
Streamline agrees to maintain the confidentiality of all non-public information
that it receives concerning the Company and its business, assets, operations or
financial condition and to disclose that information only as authorized by the
Company, or as required by law or a court of competent jurisdiction, so long as
such information remains non-public, and not to use such information for any
purpose other than in connection with performing services under this Agreement.
VI. Arbitration
-----------
This Agreement is governed and construed under the laws of the State of
California. Any controversy or claim arising our of or relating to this
Agreement, or the breach hereof, shall be conclusively settled by binding and
non-appealable arbitration in Santa Barbara California, in accordance with the
Commercial Arbitration Rules of the American Arbitration Association and
judgment upon the award rendered (which shall include an award of interest at
10% per annum and recovery of costs and reasonable attorney's fees by the
prevailing party) may be entered in any court having jurisdiction hereof.
VII. Miscellaneous
-------------
This Agreement contains all of the understandings between the parties hereto
with reference to the subject matter hereof. The Agreement cannot be modified
or changed except by a written instrument signed by each party hereto.
Cost U Less, Inc.
December 5, 1997
Page 5
Please confirm that the foregoing is in accordance with your understanding by
executing both copies of this letter and returning one copy to me.
Sincerely,
STREAMLINE CAPITAL
/s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Principal
APPROVED AND AGREED
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇ Date: 12/5/97
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Mr. ▇▇▇ ▇▇▇▇
President
Cost U Less, Inc.
March 12, 1998
▇▇. ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
Vice President and Chief Financial Officer
Cost-U-Less, Inc.
▇▇▇▇▇ ▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Dear ▇▇▇▇▇:
This letter shall constitute an Addendum to our Investment Banking Agreement
dated December 5, 1997 and addresses an expansion of Streamline Capital's
("Streamline") working relationship with Cost-U-Less ("Cost-U-Less" or the
"Company"). While Streamline's primary objective would still involve the
pursuit of expansion capital through an initial public offering (IPO),
Streamline would also explore the viability and structure of other potential
financing options which would form the basis of a contingent financing plan for
the Company. In the event that market conditions change adversely, the Company
would then be in a position to readily pursue other financing approaches,
including subordinated / mezzanine debt and private equity.
I. Corporate Finance Advisory Services
-----------------------------------
Streamline would propose to provide, on an exclusive basis, the following
investment banking services:
(A) Contacting certain mezzanine capital sources to explore the viability of
this financing route, including the related structure - pricing (including
the cost of capital and the potential equity / warrant component) and
terms.
(B) Streamline would assist the Company in devising and implementing the
optimal capital structure to facilitate various, respective financing
alternatives, including private equity, mezzanine capital and other hybrid
alternatives;
(C) Assisting in the negotiations with senior lenders regarding term debt and
working capital facilities if necessary, including the site specific
financing needs related to certain island store openings;
Cost U Less, Inc.
March 12, 1998
Page 7
(D) Performing the financial and strategic analysis necessary to facilitate the
integration of the financial and tax aspects of any potential or actual
Transaction;
(E) Providing strategic oversight for other corporate finance issues;
(F) Irrespective of the ultimate financing vehicle which the Company utilizes,
assisting in all phases of the negotiation process, including establishment
of price, terms and structure.
II. Proposed Compensation For Corporate Finance Advisory Services
-------------------------------------------------------------
Streamline's compensation for providing the aforementioned services would be as
follows:
(A) A monthly retainer fee of $6,000, with the initial payment due upon the
execution of this Agreement. The cumulative retainer will be refunded
against the Transaction Fee (discussed below) upon the consummation of a
Transaction ("Transaction" is defined in the Vestment Banking Agreement
between the Parties dated December 5, 1997).
(B) In addition to the retainer fee to be paid to Streamline pursuant to clause
(A) above, Cost-U-Less shall pay Streamline, in the case of any completed
Transaction(s) a transaction fee (the "Transaction Fee") payable in cash
immediately upon the closing of any transaction. The Transaction Fee for
the completion of an IPO has already been established as part of the
Agreement between the parties dated December 5, 1997, and will amount to a
fee of $75,000. Transaction Fee(s) shall be equal to five percent (5%) of
any equity capital or subordinated debt raised under the scope of this
assignment and two percent (2%) of any senior bank debt raised under the
scope of this assignment, including any acquisition or working capital
facilities. Senior bank debt transaction fees would not apply to any
existing bank debt facilities and only towards those transactions that
Streamline was directly responsible for identifying and directly engaged in
negotiating and closing.
(C) In the event that Streamline provides advisory services relating to a
potential Transaction or joint venture between the Company and The
Warehouse Group Limited (New Zealand), Streamline's possible role and
related compensation in
Cost U Less, Inc.
March 12, 1998
Page 8
such a Transaction or joint venture would be covered in a separate
engagement letter between the Parties.
III. Term of Agreement
-----------------
The term of the Agreement will begin on the execution of this Agreement and
continue until the earlier to occur of (i) the completion of the IPO or other
Transaction, or (ii) until September 30, 1998. In the event a Transaction has
not occurred by September 30, 1998, the term of the Agreement shall continue on
a month-to-month basis unless terminated by either party on 30 days written
notice. In the event of a completed IPO or other Transaction, the continuation
of an advisory relationship between Streamline and the company will be subject
to discussion between the Parties.
IV. Information Furnished by the Company
------------------------------------
In acting as the Company's exclusive agent, Streamline will assist the Company
in preparing confidential offering materials to be used in approaching potential
capital sources. Streamline will necessarily rely on information provided by
the Company in the preparation of such materials, including information
regarding historical and projected performance in order to accurately describe
the Company to third parties. The Company will warrant the accuracy and
completeness of the information furnished to Streamline at the time it is
furnished, and will further advise Streamline during the period of the
assignment of all developments materially affecting the Company.
Recognizing that Streamline, in providing the services contemplated hereby, will
be acting as a representative of and relying on information provided by the
Company, Cost-U-Less agrees to indemnify and hold Streamline harmless against
any from any and all losses, claims, damages or liabilities, joint or several,
to which Streamline or its officers may become subject to in connection with
Streamline's appointment in respect to the Transaction and shall reimburse
Streamline and its officers for any legal fees and other expenses arising out of
or in connection with any action or claim arising out of this Agreement. The
indemnification provision provided for in this paragraph shall not be in force
or effect if any loss, claim, damage or liability that would give rise to any
indemnification provided for in this Agreement is found in a final judgment by a
court to have resulted from Streamline's willful misconduct or negligence in
performing the services set out in this Agreement.
Cost U Less, Inc.
March 12, 1998
Page 9
V. Miscellaneous
-------------
This Agreement and the Agreement between the Parties dated December 5, 1997
contain all of the understandings between the parties hereto with reference to
the subject matter hereof. The Agreements cannot be modified or changed except
by a written instrument signed by each party hereto.
Please confirm that the foregoing is in accordance with your understandings by
executing both copies of this letter and returning one copy to me.
Sincerely,
STREAMLINE CAPITAL
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Principal
APPROVED AND AGREED
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ Date: 3/16/98
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▇▇. ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
Vice President and Chief Financial Officer
Cost U Less, Inc.
