Exhibit 10.10--Form of Working Capital Agreement by and between the Company
and Prime Retail, Inc.
WORKING CAPITAL AGREEMENT
This Working Capital Agreement (the "Agreement") is entered into this
15th day of June, 1998 by and between Prime Retail, Inc., a Maryland
corporation ("Prime"), Prime Retail, L.P., a Delaware limited partnership
("Prime L.P."), Horizon Group Properties, Inc., a Maryland corporation
("HGP") and Horizon Group Properties, L.P., a Delaware limited partnership
("HGP LP").
WHEREAS, the transactions contemplated by that certain Amended and
Restated Agreement of Merger dated as of February 1, 1998 (the "Merger
Agreement") by and among Prime Retail, Inc., a Maryland corporation, Prime
Retail, L.P., a Delaware limited partnership, Horizon Group, Inc. a Michigan
corporation ("Horizon"), Sky Merger Corp., a Maryland corporation ("Sky
Merger"), HGP, HGP LP and Horizon/▇▇▇▇ Outlet Centers Limited Partnership, a
Delaware limited partnership ("Horizon Partnership"), will be consummated
concurrently herewith;
WHEREAS, the parties hereto wish to set forth their understanding with
respect to various working capital and other matters in connection with the
consummation of the transactions contemplated by the Merger Agreement and the
Contribution Agreement (as defined in the Merger Agreement);
NOW, THEREFORE, in consideration of good and valuable consideration, the
receipt and sufficiency of which is hereby acknowledged, the parties hereto
do hereby agree as follows:
1. WORKING CAPITAL FACILITY. HGP LP has assumed from Horizon
Partnership the obligations (the "Obligations") outstanding under or
otherwise existing pursuant to or as set forth in that certain Business Loan
Agreement dated as of August 1, 1996 (such agreement, as amended prior to the
date hereof, and the documents executed in connection therewith, the "Loan
Agreement") by and between Huntington National Bank and Horizon Partnership.
The Loan Agreement matures on August 1, 1998. HGP LP agrees to use its best
efforts to refinance the Obligations as soon as possible following the
Closing Date (as defined in the Merger Agreement); provided, however, any
such refinancing shall be on terms and conditions reasonably acceptable to
HGP LP. In the event that such Obligations are not refinanced prior to the
maturity date of the Loan Agreement, Prime and/or Prime LP agrees to enter
into a two year term loan with HGP LP pursuant to which Prime and/or Prime LP
will make available to HGP LP up to $4,000,000 in aggregate principal amount
of indebtedness, upon terms and conditions substantially the same as those
set forth in the Loan Agreement; provided that the interest rate shall be 10%
per annum and the loan will be repayable prior to the maturity date thereof
from the proceeds of (i) a sale of the outlet center in Algondones, New
Mexico to the extent it is not used to repay another obligation on which
Prime is contingently liable or (ii) a completion of an equity offering by
HGP or HGP LP.
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2. (a) WORKING CAPITAL ADJUSTMENT. The parties hereto understand and
agree that a definitive amount of Working Capital (as hereinafter defined) is
to be transferred to HGP, HGP LP and the other Horizon Entities (as
hereinafter defined) in connection with the transfer of the properties listed
on APPENDIX A hereto (the "Contributed Properties") and pursuant to the terms
of the Merger Agreement and the Contribution Agreement. Such working capital
is in consideration of, among other things, the assumption by the Horizon
Entities, of the known and unknown liabilities of the Contributed Properties
in connection with the Formation Transactions (as hereinafter defined). The
parties hereto agree that the amount of Working Capital to be transferred, in
the aggregate, to the Horizon Entities is $545,000 and that such amount shall
be calculated and adjusted as set forth herein. On the date hereof, Prime
shall transfer cash to HGP and fund the reserves set forth on the Settlement
Sheet attached hereto. The cash funding occurring on the date hereof is
seventy-five percent (75%) of the amount of cash anticipated to be required
to be made to HGP to comply with the working capital adjustment set forth
herein.
(b) PREPARATION OF FINAL STATEMENTS. As promptly as practicable
after the date hereof and in any event not later than forty-five (45) days
hereafter, HGP shall prepare and deliver to Prime an unaudited statement of
assets and liabilities of each of the Contributed Properties as of the date
hereof (the "Final Statements"). The delivery of the Final Statements shall
not create any presumption as to the accuracy or completion thereof. The
Final Statements shall be prepared in a manner consistent with Section 2(e)
hereof and in accordance with GAAP. Prime and its representatives and
auditors shall be afforded the opportunity to review all underlying financial
records and work papers pertaining to the preparation of the Final Statements
and HGP shall permit Prime and its representatives full access to the books
and records in HGP's possession relating to the Contributed Properties to
permit Prime to review the Final Statements. The aggregate Current Assets
and Current Liabilities of the Contributed Properties as shown on the Final
Statements prepared by HGP shall be final and binding for purposes of this
Agreement unless Prime shall give written notice to HGP of disagreement with
the values thereon involving more than $25,000 in the aggregate within thirty
(30) business days following its receipt of the Final Statements, specifying
in reasonable detail the nature and extent of such disagreement. If Prime
objects to the Final Statements and the parties are unable to resolve such
dispute within fifteen (15) days after HGP's receipt of such notice, the
dispute shall be submitted for determination to Ernst & Young. Such public
accounting firm shall review and decide the issues that are the subject of
such dispute as specified in such notice as soon as possible after such
submission and in any event within fifteen (15) days. The decision of such
accounting firm shall be set forth in writing and delivered to Prime and HGP.
The decision of such accounting firm shall be final and binding Prime and
HGP. The fees and costs of such public accounting firm shall be borne
equally by Prime and HGP.
(c) PAYMENTS. If the aggregate amount of Working Capital of the
Contributed Properties, as reflected on the Final Statements, shall exceed
$545,000, then the excess shall be paid in cash by HGP to Prime. If the
aggregate amount of Working Capital of the Contributed Properties, as
reflected on the Final Statements, shall be less than $545,000, then the
shortfall shall be paid in cash by Prime to HGP.
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(d) FEES AND EXPENSES. Prime and HGP shall each pay their own
costs incurred in preparing and/or reviewing the Final Statements, including
the fees and expenses of their auditors.
(e) DEFINITION OF CURRENT ASSETS AND CURRENT LIABILITIES.
APPENDIX B sets forth a hypothetical balance sheet of a Contributed Property
setting forth, for illustrative purposes only, the line items and categories
of assets and liabilities which shall be deemed to constitute "Current
Assets" and "Current Liabilities." For purposes of this Agreement, Current
Assets and Current Liabilities shall refer to items and categories of assets
and liabilities so identified on said APPENDIX B, together with other items
of a similar nature which may be reflected on the Final Statements and shall
include without limitation, as a type of current assets, the escrows being
funded by Prime on the date hereof and shall include as a type of current
liability, real estate taxes and accrued capital items such as tenant
improvement allowances and leasing commission for transactions entered into
prior to the date hereof. For the purposes hereof, (i) "Working Capital"
shall mean Current Assets Less Current Liabilities and (ii) "HGP Entities"
shall mean, collectively, HGP, HGP LP and the respective corporations,
limited liability companies and limited partnerships owned directly or
indirectly by HGP after giving effect to the consummation of all of the
transactions contemplated by the Merger Agreement (the "Formation
Transactions"). The parties agree that the matters set forth in Schedule 2.8
of the disclosure letter attached to the Merger Agreement and prepared by
Horizon Group, Inc. (other than that disclosed in numbered paragraph ten
thereof) shall be the obligations of Prime.
The parties agree that the benefits and obligations set forth in
the in the Guarantee and Indemnity Agreement among the parties hereto dated
the date hereof and the underlying indebtedness owed to third parties
referenced therein shall not be included as Current Assets or Current
Liabilities.
3. CONTROL. The parties understand and agree that to the extent of
any inconsistencies between this Agreement and the Merger Agreement or this
Agreement and the Contribution Agreement, the terms and provisions of this
Agreement shall control.
4. MODIFICATION OR AMENDMENT. The parties hereto may modify or amend
this Agreement by written agreement executed and delivered by authorized
officers of the respective parties.
5. COUNTERPARTS. For the convenience of the parties hereto, this
Agreement may be executed in separate counterparts, each such counterpart
being deemed to be an original instrument, and which counterparts shall
together constitute the same agreement.
6. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED
IN ACCORDANCE WITH, THE LAWS OF THE STATE OF MARYLAND, REGARDLESS OF THE LAWS
THAT MIGHT OTHERWISE GOVERN UNDER APPLICABLE PRINCIPLES OF CONFLICT OF LAWS
THEREOF.
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7. NOTICES. Any notice, request, instruction or other document to be
given hereunder by any party to the other shall be in writing and shall be
deemed to have been duly given (i) on the date of delivery if delivered by
facsimile (upon confirmation of receipt) or personally, (ii) on the first
business day following the date of dispatch if delivered by Federal Express
or other reputable next-day courier service or (iii) on the third business
day following the date of mailing if delivered by registered or certified
mail, return receipt requested, postage prepaid. All notices hereunder shall
be delivered as set forth below, or pursuant to such other instructions as
may be designated in writing by the party to receive such notice.
If to HGP or HGP LP:
Horizon Group Properties, Inc.
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇. ▇▇▇▇▇▇
Fax: No.: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
Winston & ▇▇▇▇▇▇
▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
Fax No.: (▇▇▇) ▇▇▇-▇▇▇▇
If to Prime or Prime LP:
Prime Retail, Inc.
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▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
C. ▇▇▇▇ ▇▇▇▇▇▇▇▇▇
Fax No.: (▇▇▇) ▇▇▇-▇▇▇▇
With a copy to:
Winston & ▇▇▇▇▇▇
▇▇ ▇. ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Fax No.: (▇▇▇) ▇▇▇-▇▇▇▇
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8. ASSIGNMENT. Nothing contained in this Agreement or the agreements
referred to herein (except as otherwise expressly set forth therein) is
intended to confer on any person or entity other than the parties hereto and
their respective successors and permitted assigns any benefit, rights or
remedies under or by reason of this Agreement and such other agreements.
9. JOINT AND SEVERAL LIABILITY. The obligations of HGP and HGP LP on
the one hand and Prime and Prime LP on the other hand shall be joint and
several.
10. ENFORCEMENT. The parties agree that irreparable damage would occur
in the event that any of the provisions of this Agreement were not performed
in accordance with their specific terms or were otherwise breached. It is
accordingly agreed that the parties shall be entitled to an injunction or
injunctions to prevent breaches of this Agreement and to enforce specifically
the terms and provisions of this Agreement in any federal court located in
Maryland this being in addition to any other remedy to which they are
entitled at law or in equity. In addition, each of the parties hereto (a)
consents to submit itself (without making such submission exclusive) to the
personal jurisdiction of any federal court located in Maryland in the event
any dispute arises out of this Agreement or any of the transactions
contemplated by this Agreement and (b) agrees that it will not attempt to
deny or defeat such personal jurisdiction by motion or other request for
leave from any such court.
[signature page follows]
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IN WITNESS WHEREOF the parties hereto have executed this instrument as
of the date and year first above written.
HORIZON GROUP PROPERTIES, INC.
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇
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Its: President
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HORIZON GROUP PROPERTIES, L.P.
By: Horizon Group Properties, Inc.
Its: General Partner
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇
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Its: President
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PRIME RETAIL, INC.
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, ▇▇.
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Its: President
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PRIME RETAIL, L.P.
By: Prime Retail, Inc.
Its: General Partner
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, ▇▇.
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Its: President
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