FINANCO, INC.
000 Xxxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
January 29, 1997
Prime Retail, L.P.
000 Xxxx Xxxxx Xxxxxx, 00xx Xxxxx
Xxxxxxxxx, XX 00000
Attention: Xxxxxxx Xxxxxxxxx
Prime Retail, Inc.
Chief Executive Officer
Dear Sirs:
This will set forth the understanding and agreement between Financo, Inc.,
a Delaware corporation ("Financo") and Prime Retail, L.P. (the "Company")
as follows:
1. The Company hereby engages Financo as the Company's sole and
exclusive agent for the purpose of (a) assisting the Company in
developing a Discount Furniture Outlet (as described below) (herein
referred to as the "Concept"); (b) advising the Company concerning
alternatives for development of the Concept, including funding; (c)
identifying opportunities for an investment in the Concept, either
directly or through an investment in the Company (an "Investment", as
defined in paragraph 3 below); (d) advising the Company concerning
opportunities for such an Investment, whether or not identified by
Financo; and (e) as requested by the Company, participating on the
Company's behalf in negotiations concerning such an Investment. The
Company may refuse to discuss or negotiate an Investment with any party
for any reason whatsoever and may terminate negotiations with any party
at any time. The Company shall have the right to effect the
transactions contemplated hereby through another entity formed (in whole
or in part) by the Company or to assign any and all of its rights and
obligations under this Agreement to any third party, provided that the
Company shall remain liable for payment of any Success Fee (as defined
in paragraph 6(b)) and reimbursable expenses of Financo payable
hereunder.
For the purposes of this Agreement, the preliminary description of the
Concept is as follows:
Discount Furniture Outlet. This retail store's merchandise
categories would include nationally recognized name brand furniture and
accessories, including case goods, upholstery, mattresses, rugs,
lighting and decorative and wall accessories. The store would offer
both stock and special order products at approximately 25% to 50% off
retail. The store size would possibly range between 25,000 and 40,000
gross square feet.
Prime Retail, L.P.
January 29, 1997
Page 2
2. Financo hereby accepts the engagement described in paragraph 1 and, in the
connection, agrees to:
(a) assist in the preparation of a business plan/descriptive
memorandum concerning the Concept, including descriptive
information on the Company, which plan/memorandum shall not be made
available to or used in discussions with prospective investors in
the Concept until both it and its use for that purpose have been
approved by the Company;
(b) develop, update and review with the Company on an ongoing
basis a list of parties which might be interested in investing in
the Concept (the "List") and contact only parties on the List that
the Company consents to in advance; and
(c) consult with and advise the Company concerning opportunities for
effecting an Investment that have been identified by Financo or
others and, if so requested by the Company, participate on the
Company's behalf in negotiations for an Investment.
3. For the purposes of this Agreement, an "Investment" shall mean any
transaction constituting the purchase by a third party of any security
(including without limitation equity, debt or convertible securities,
and any warrants or options to purchase the same) issued for the purpose
of financing of the Concept or any material loan made by a third party
solely relating to the financing of the Concept.
4. The Company shall (a) furnish to Financo the names of all parties,
if any, with whom it has had, prior to the date hereof, or has, at any
time during the term of Financo's engagement hereunder, discussion or
contacts concerning an Investment (such parties' names shall be hereby
deemed to have been added to the List); and (b) make available to
Financo all information concerning the business, assets, operations and
financial condition of the Company that Financo reasonably requests, and
which the Company reasonably believes is necessary, for Financo to
perform its obligations hereunder. The Company recognizes and confirms
that, in advising the Company and in completing its engagement
hereunder, Financo is using and relying on information, data, and
material furnished to it by the Company and other parties. It is
understood that, in performing under this Agreement, Financo may assume
and rely upon the accuracy and completeness of, but has not assumed any
responsibility for independent verification of, such information, data
and material so furnished.
5. Financo shall be engaged hereunder from the date hereof until this
Agreement is terminated in accordance with the terms set forth below.
Subject to the provisions of paragraphs 6 through 11, which shall
survive any termination of this Agreement and/or the completion of
Financo's engagement hereunder, either party may terminate Financo's
engagement hereunder at any time by giving the other party at least 10
business days' prior written notice.
Prime Retail, L.P.
January 29, 1997
Page 3
Within 10 business days after the effective date of any termination, Financo
will deliver to the Company a copy of the List as then constituted.
6. As total and complete compensation for the services rendered by Financo
hereunder, the Company shall pay Financo as follows:
(a) A retainer of $50,000 for the Concept development project
contemplated herein shall be paid to Financo by the Company (the
"Retainer Fee") upon execution of this Agreement. A Retainer Fee
shall be credited against any success fee paid relating to the
creation/funding of the Concept, pursuant to paragraph 6(b) below.
In the event Financo terminates this Agreement pursuant to the
terms of paragraph 5 above within 45 days of the date hereof,
Financo shall remit the Retainer Fee paid hereunder to the Company,
less any unreimbursed out-of-pocket expenses incurred by Financo
prior thereto.
(b) If either:
(i) an Investment occurs either (A) during the term of this Agreement
or prior to the termination of this Agreement by Financo, or (B)
at any time during a period of 12 months following the effective
date of the Company's termination of Financo's engagement
hereunder where the investor is a party either named on the List
or with whom the Company had material discussions concerning an
Investment during the term of Financo's engagement hereunder; or
(ii) the Concept based on a business plan prepared by Financo and the
Company is developed/created by the Company on its own or in
concert with another party and is implemented either (A) during
the term of this Agreement or prior to the termination of this
Agreement by Financo or (B) at any time during a period of 18
months following the effective date of the Company's termination
of Financo's engagement hereunder (such implementation to be
evidenced by the earlier of (x) the execution of an agreement with
a third party concerning the Concept, (y) the consummation of a
funding for the Concept, or (z) the opening by the Company of an
outlet store based on the Concept);
then the Company shall (1) pay Financo a fee equal to $250,000 (the
"Success Fee") and (2) grant Financo, free and clear of any
encumbrances, 10 year options (the "Financo Options") to acquire five
percent of the "fully-diluted number of shares" (as defined below) of
common stock outstanding at the time of the exercise of Financo Options
of the "ConceptCo" (as defined below).
Prime Retail, L.P.
January 29, 1997
Page 4
A "ConceptCo" shall mean whatever entity is created to fund and hold
the Concept. The "fully Diluted number of shares" of common stock of a
ConceptCo shall mean (i) the number of shares of common stock
outstanding at the time of the exercise of Financo Options, plus
(ii) the number of shares of common stock of ConceptCo that would
be issued if you assume the exercise or conversion (or the like) of
any and all options (including the Financo Options), warrants,
convertible securities or the like that have been issued by
ConceptCo and are still outstanding at the time of Financo's
exercise of its Financo Options. The Financo Options shall expire
ten years from the date of their delivery to Financo, and the
aggregate exercise price of all Financo Options shall equal five
percent (5%) of the dollar value of the total equity value of
ConceptCo immediately after the Investment or initial funding of
the ConceptCo. If the Concept is financed by a direct investment
in the Company -- instead of through the capitalization of a
separate entity -- then the Financo Options shall be issued as
options to purchase interests in the Company, where the aggregate
exercise price would be as stated above, but where the percentage
of the Company acquirable through such exercise would be determined
by the ratio of the exercise price to the public market price of
the Company's publicly-traded securities at the time of such
exercise.
(c) Compensation which is payable to Financo pursuant to this paragraph 6
shall be paid by the Company to Financo at the closing of an
Investment, and in the case of the cash portion of the fee, by wire
transfer or check payable in immediately available funds.
The Company and Financo each represents that neither has made any
agreement with any brokers, representatives or other persons pursuant to
which such persons would have an interest in compensation due from the
Company to Financo in connection with any transaction contemplated
herein; provided that Financo has retained Xxxx Xxxxxx, a furniture
industry consultant, to assist Financo hereunder, and Xx. Xxxxxx will be
compensated solely by Financo.
7. The Company shall reimburse Financo, on a monthly basis in arrears, for
Financo's reasonable out-of-pocket expenses incurred in connection with or
arising out of Financo's activities under or contemplated by this Agreement
during such preceding month; provided that any such out-of-pocket expense
that is individually in excess of $1500 shall require the approval of the
Company. Out-of-pocket expenses shall include, but not be limited to, travel
and lodging expenses, outside database charges, overtime or outside word
processing charges, communication charges, courier services and other
necessary and reasonable expenses.
8. Financo will act under this Agreement as an independent contractor
with duties solely to the Company. The Company expressly acknowledges
that the Company's engagement of
Prime Retail, L.P.
January 29, 1997
Page 5
Financo is not intended to confer rights upon any person not a party
hereto, including shareholders, employees or creditors of the Company,
as against Financo, Financo's affiliates or their respective directors,
officers, agents and employees or each other person, if any, controlling
Financo or any of its affiliates. No one other than the senior officers
of the Company is authorized to rely upon this engagement of Financo or
any statements by or advice or conduct of Financo. Except as otherwise
required by applicable law, (i) any advice to be provided by Financo
under this Agreement shall not be disclosed publicly or made available
to third parties by the Company without prior written approval of
Financo, except as provided in the next sentence and (ii) all
confidential or proprietary information furnished by the Company to
Financo shall not be disclosed publicly or made available to third
parties by Financo without prior written approval of the Company.
Notwithstanding the foregoing, the Company may disclose written
materials, reports or other written work product of Financo ("Written
Work Product") to third parties if, and only if, (A) such Written Work
Product is identified as being confidential and such third party
specifically agrees to maintain the confidentiality of the contents of
such Written Work Product and the identity of Financo, (B) the Company
shall be responsible for insuring that such Written Work Product shall
have attached thereto a disclaimer (whose content shall be determined by
Financo in its sole reasonable discretion) that shall state, inter alia,
that Financo makes no representation as to the accuracy or completeness
of any information contained in the Written Work Product and that the
recipient may not rely in any manner on the contents of such Written
Work Product, and (C) the Company shall provide prompt written notice to
Financo identifying the name of any such third party to whom the Company
delivers Written Work Product.
9. Financo agrees that Financo shall have no right to place advertisements in
financial and other newspapers and journals, describing its services to the
Company hereunder, without the prior written consent of the Company.
10. This Agreement shall be deemed to have been made in the State of New
York. This Agreement and all controversies arising from or relating to
performance under this Agreement shall be governed by and construed in
accordance with the laws of the State of New York, without giving effect
to such State's rules concerning conflicts of laws. The Company hereby
irrevocably consents to personal jurisdiction and venue in any federal
court located within the County of New York, New York for the purposes
of any suit, action or other proceeding arising out of this Agreement or
any of the agreements or transactions contemplated hereby, which is
brought by or against the Company, and hereby agrees that all claims in
respect of any such suit, action or proceeding may be heard and
determined in any such court. The Company hereby consents to the
service of process of any of the aforementioned courts in any such suit,
action or proceeding by the mailing of copies thereof by registered or
certified mail, postage prepaid, to the Company at its address set forth
above, such service to become effective ten (10) days after mailing.
ANY RIGHT TO TRIAL BY JURY WITH RESPECT TO ANY CLAIM OR ACTION ARISING
OUT OF
Prime Retail, L.P.
January 29, 1997
Page 6
THIS AGREEMENT OR CONDUCT IN CONNECTION WITH THIS ENGAGEMENT IS HEREBY
WAIVED.
11. This letter shall constitute the entire agreement between the
parties hereto. This Agreement shall remain in full force and effect
following completion or termination of Financo's engagement hereunder
and shall be binding upon and inure to the benefit of any successors,
assigns, heirs and personal representatives of the Company and Financo.
This Agreement may be executed via facsimile transmission and may be
executed in separate counterparts, each of which shall be deemed to be
an original and all of which together shall constitute a single
instrument. This Agreement may not be amended or modified except in
writing. The foregoing Agreement shall be in addition to any rights
that Financo may have at common law or otherwise.
[signature page follows]
Prime Retail, L.P.
January 29, 1997
Page 7
If the foregoing correctly sets forth the understanding and agreement between
Financo and the Company, please sign in the space indicated below.
FINANCO, INC.
By: /s/ Xxxxxx Xxxxxxxx
-----------------------------
Its: Managing Director
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ACCEPTED AND AGREED TO:
PRIME RETAIL, L.P.
By: Prime Retail, Inc.,
its General Partner
By: /s/ Xxxxxxx X. Xxxxxxxxx, Xx.
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Its: President
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