Exhibit 10.1
MANAGEMENT AGREEMENT
THIS MANAGEMENT AGREEMENT (the "Agreement") is entered into this 29th day
of September, 2000, to be effective October 1, 2000, and is by and between
PAWN-ONE, INC. ("Manager"), and U.S. PAWN, INC. ("Owner"). Terms not otherwise
defined herein shall have the meanings ascribed to such terms in the AP
Agreement (as defined below).
WHEREAS, Owner is the operator of twelve pawn shops in Colorado and one
pawn shop in Wyoming (the "Business"); and
WHEREAS, Manager is the owner and operator of six pawn shops in Colorado;
and
WHEREAS, concurrently with the execution of this Management Agreement, the
parties entered into an Asset Purchase Agreement (the "AP Agreement") wherein
Pawn-One agreed to acquire certain of the assets of U.S. Pawn; and
WHEREAS, the closing of the AP Agreement is contingent upon the Owner
obtaining shareholder approval of the contemplated transaction and the Owner was
unable to obtain such approval prior to the effective date of this Agreement;
and
WHEREAS, in order to bridge the delay resulting from the shareholder
approval process, the parties desire to enter into this Agreement pursuant to
which Manager shall manage the day-to-day operations of Owner's Business as set
forth below.
NOW, THEREFORE, in consideration of the premises and the covenants set
forth herein, the parties hereto agree as follows:
1. APPOINTMENT AS MANAGER.
----------------------
1.1 Appointment. Owner hereby retains Manager to serve as the exclusive
general manager of its Business, to manage the day-to-day operations of the
Business. Manager accepts appointment by the Owner and agrees to perform the
management duties and obligations described herein to the best of its ability
and furnish the services of its organization for the proper and efficient
management and supervision of the operation of the Business.
1.2 Exclusions. Nothing contained herein shall be construed to place
Manager in control of Owner's corporate operations including, without
limitations, accounting, finance, tax and regulatory matters.
1.3 Duties of Manager for Seller's Owned Assets:
------------------------------------------------
-1-
<PAGE>
(A) Manager shall:
(i) use its best efforts to maximize the economic value of the
Business to Owner and shall exercise prudence and diligence
in performing its duties hereunder and those customarily
performed by professional managers of pawn shops. Manager
shall, in general, contract for and provide at prices and
terms most favorable to Owner all usual and customary
services provided in pawn shops similar to the Business,
however, Manager shall not enter into any contract with
respect to the Business that requires annual payments in
excess of $2,500.00 or that have a term greater than six (6)
months, or the expiration of the term of this Agreement,
whichever is less, without the prior written consent of
Owner;
(ii) comply with any and all laws, ordinances, rules or
regulations affecting the Business;
(iii)advise Owner promptly, with confirmation in writing, of the
service upon Manager of any summons, subpoena, or other like
legal document, including any notices, letters or other
communications setting out or claiming an actual or alleged
potential liability or material obligation of Owner;
(iv) keep Owner informed of the financial status of the Business;
(v) promptly cause the issuance or transfer, of any necessary
business licenses and permits for the Business;
(vi) cooperate with Owner and entities designated by Owner and
provide information regarding the Business to Owner and such
designees;
(vii)deposit all proceeds from the operation of the business in
Owner's designated accounts;
(viii) direct the day-to-day marketing, sales and loans for the
Business; and
(ix) assist the Owner, as reasonably requested, in the production
of such information as required for the Owner's accounting,
payroll and booking, corporate, tax and regulatory
requirements.
B. Risk of Loss
(i) Manager shall bear fifty percent (50%) of any loss during
the term of this Agreement for any shrinkage in Inventory
due to lost, stolen or misappropriated items as identified
by the parties through the use of the Inventory Analysis as
set forth below.
-2-
<PAGE>
(ii) In calculating the risk of loss Manager and Owner shall
utilize an Inventory Analysis that is produced by them,
mutually. Such Inventory Analysis shall be conducted by the
parties beginning on the Management Closing Date, on a store
by store basis, and the conduct of the Inventory Analysis
shall be made as expeditiously as possible. Manager's
responsibility for Inventory losses shall only be for that
period of time after the conduct of the Inventory Analysis
for each store.
1.4 Duties of Manager for Sellers Excluded Assets
---------------------------------------------
Manager shall have direct control of the Excluded Assets that are
not being transferred to the Manager at the Cash Closing
contemplated by the AP Agreement. Manager agrees that during the
term of this Agreement it shall use its best efforts to sell, for
the maritimum value and for the benefit of Owner, the Excluded
Assets, which shall be separately accounted for on the books and
records of both Manager and Owner.
1.5 Duties of Owner:
----------------
Owner shall:
(i) Promptly pay or cause to be paid all expenses incurred in
the day-to- day operation of the Business, including but not
limited to utilities, maintenance, security, advertising,
supplies and telephone, and Manager's compensation in
accordance with paragraph 6;
(ii) cause to be procured or procure such insurance of every kind
deemed advisable by Manager to protect Manager and Owner's
interest in the Business, and cause to be named in each such
policy of insurance, as co-insureds or additional insureds,
the Owner and Manager, as their respective interests may
appear.
(iii)deliver to Manager all materials, equipment, keys,
documents and records necessary to manage to the Business.
(iv) instruct all of its current personnel of the implementation
of this Agreement.
1.5 Authority of Manager to Act for Owner.
--------------------------------------
(A) In performance of Manager's duties hereunder, Manager shall have the
full and complete authority to act on behalf of Owner to perform all
of its duties as set forth herein.
-3-
<PAGE>
(B) Manager is further authorized to do any other things on behalf of
Owner consistent with this Agreement and necessary or
appropriate, in the judgement of the Manager, for the property
and profitable operation of the Business on behalf of Owner.
1.6 Expenses. All costs and expenses associated with operation of the
Business shall be the responsibility of Owner, which Owner shall cause
to be paid in the ordinary course of the operations of the Business.
Owner's failure to pay such obligations shall constitute a breach of
Owners obligation under this Agreement, and under the terms of the AP
Agreement.
1.7 Designated Managers. Manager shall designate those individuals from
its organization that will be responsible for the management of the
Business. A list of those individuals is attached hereto as Exhibit A.
Those individuals designated on Exhibit A shall be the employees of
Manager and not Owner and Manager shall be responsible for the wages
and salaries of those individuals. All other employees, agents or
subcontractors necessary for the operation and maintenance of the
Business shall be employees of Owner and not Manager, and Owner shall
be responsible for the wages and salaries of those individuals.
2. DUTY OF CARE. In accepting its appointments hereunder, Manager agrees:
------------
(A) to render diligent and competent service and care in performance
of its responsibilities hereunder; and
(B) to apply prudent and reasonable business practices to the
operations of Owners business enterprise.
3. INDEMNITY. Owner agrees to indemnify and hold harmless Manager from all
claims of damage or harm to any person or property which shall arise out of or
in connection with the operation and management of the Business to the same
extent Seller would indemnify its officers and employees for such operations
prior to the term of this Agreement in accordance with Owner's Articles of
Incorporation and By-Laws. Manager hereby agrees to indemnify and hold harmless
the Owner from and against any and all claims of damage or harm to any person or
property arising out of Manager's management of the Business during the term
hereof. The Manager shall carry insurance at its sole cost and expense, which
shall insure the Owner against the negligent acts of the Manager, its agents,
employees and representatives and upon the request for Owner shall provide
satisfactory evidence of such insurance.
4. REPORTS. During the term of this Agreement Manager and Owner shall meet, on
or before the 15th day of each month to discuss the operation of the Business
for the preceding month.
5. EMPLOYEES. Except as set forth on Exhibit B (with respect to certain
corporate officers of Owner), Manager shall investigate, hire, supervise and
discharge the personnel necessary to properly maintain and operate the Business.
Such personnel shall, in each case, be deemed employees of Owner and shall be
deemed employed solely at Owner's expense. Notwithstanding same, Owner shall
-4-
<PAGE>
have no right to directly supervise or direct such employees, or the manner or
method by which Manager or Manager's employees perform their responsibilities
under this Agreement.
6. COMPENSATION OF MANAGER.
-----------------------
6.1 Owner agrees to pay Manager and Manager agrees to accept, as full
compensation for management services and day-to-day operations to be
provided to Owner hereunder, the sum of $25,000.00 per month for the
first three (3) months of the six (6) month term of this Agreement and
the sum of $35,000.00 per month for the second three (3) months hereof
. Said sum shall be due and payable on the last day of each month that
such Management services are provided.
6.2 Should the term hereof end or begin on a day other than the first day
of the month, the fees provided for in Section 6 shall be apportioned
based on the actual number of days that the Manager was in control of
the Business during that month. Such apportioned payment shall be due
within three (3) business days of the last day of the apportioned
month.
7. REIMBURSEMENT. In the event Manager should advance any amounts from its own
funds, rather than from the funds of Owner, in payment of any of the obligations
of Owner set forth herein, including payroll obligations where the Manager and
the Owner have agreed upon such matters, and the Owner shall, upon request for
reimbursement, reimburse Manager for such expense within five (5) business days
of submission of same for reimbursement.
8. TERM OF AGREEMENT
-----------------
8.1 Term. The term of this Agreement shall begin on October 1, 2000 and
shall continue until the earlier of (a) the Cash Closing; (b) the
termination of the AP Agreement, (c) March 31, 20001; or (d)
termination in accordance with this Article.
8.2 Termination. This Agreement may be terminated as follows:
(A) If a petition for bankruptcy, reorganization or rearrangement is
filed under state or federal insolvency statutes by or against
either party, or either party shall make an assignment for the
benefit of creditors to take advantage of any insolvency act,
then the other party may terminate this Agreement upon ten (10)
days written notice to the bankrupt, insolvent or assigning
party.
(B) If either party shall default in any of its obligations hereunder
and such default shall continue for ten (10) days after written
notice from one party to the defaulting party designating such
default, then the party not in default may terminate this
Agreement upon five (5) days written notice to the defaulting
party.
8.3 After Termination.
-5-
<PAGE>
(A) Upon termination of this Agreement for whatever reason,
Manager shall immediately:
(i) deliver to Owner all materials, equipment, keys,
documents and records relating to the Business; and
(ii) assign to Owner any contracts relating to the operation
of the Business not otherwise in the name of Owner; and
(iii)furnish such other information and take such other
action as Owner shall reasonably require in order to
end Manager's duties hereunder.
(B) Upon termination of the Agreement for whatever reason, Owner
shall immediately:
(i) pay all fees due to the date of the termination; and
(ii) take full possession and control of the operations of
all of its stores.
9. EQUITABLE DEALING. Manager covenants and agrees that even though it shall
have either ownership interest in or managerial responsibility for other pawn
shops similar to the Business which may be considered competitive with the
Business, Manager shall always represent the Business fairly and deal with Owner
on a basis equitable in comparison to any such other similar Businesses.
10. MISCELLANEOUS PROVISIONS
10.1 Successors and Assigns. This Agreement shall inure to the benefit of
and be binding upon the parties hereto and their respective successors
at law; provided, however, Manager shall not be entitled to assign its
rights hereunder or delegate its duties hereunder unless approved in
writing by Owner. Manager's interest or duties under this Agreement
shall not be assigned or otherwise transferred or pass by operation of
law under any state or federal insolvency or bankruptcy act to any
trustee, receiver, assignee for the benefit of creditors, or any other
person whatsoever without Owner's prior written consent. Any purported
or attempted transfer in violation of the provisions of this paragraph
shall constitute a breach of a condition precedent to this Agreement
and shall automatically terminate this Agreement.
10.2 Independent Contractor. This Agreement is a management agreement only
and does not grant to Manager any ownership right or interest
whatsoever in the Business, the Assets or any other property of Owner
pertaining thereto. In its operations pursuant to this Agreement,
Manager is acting as an independent contractor and this Agreement is
not intended to and does not constitute or result in a partnership or
joint venture of any kind between Owner and Manager with respect to
the operation of the Business or any other matter.
-6-
<PAGE>
10.3 Notices. Any notice or other communication required or permitted to be
given to the parties hereto shall be deemed to have been given or
submitted (i) when delivered by hand, (ii) on the fifth day after such
notice is deposited in the mail in registered form, first class air
mail postage prepaid, addressed as follows:
If to Seller: U.S. Pawn, Inc.
7215 Lowell Blvd.
Westminster, CO 80030
Attn: Charles C. Van Gundy
With a copy to: Brent T. Slosky
Brownstein, Hyatt & Farber, P.C.
410 Seventeenth St., Twenty-Second Floor
Denver, CO 80202-4437
If to Buyer: Pawn-One, Inc.
5990 West 44th Ave.
Wheatridge, CO 80212
Attn: Todd Hills
With a copy to: Howard B. Gelt
Shughart, Thomson & Kilroy, P.C.
1050 17th Street, Suite 2350
Denver, Colorado 80265
10.4 Changes. No change or modification of this Agreement shall be valid or
binding upon the parties hereto, nor shall any waiver of any term or
condition in the future, unless such changes or modification or waiver
shall be in writing and signed by the parties hereto.
10.5 Entire Agreement. This Agreement represents the entire agreement of
the parties hereto with respect to the subject matter hereof, and all
prior discussions, representations, agreements, covenants and
warranties of the parties with respect to such subject matter are
merged herein.
10.6 Applicable Law and Consent to Jurisdiction. This Agreement shall be
governed in all respects by the laws of the State of Colorado. The
parties hereby irrevocably submit to binding arbitration before a
private arbitrator to be chosen by mutual agreement of the parties.
Any arbitration award shall final and binding, and judgment upon the
award rendered pursuant to such arbitration may be entered in any
court of proper jurisdiction. The Colorado Rules of Evidence and the
Colorado Rules of Civil Procedure shall apply to such proceeding. The
prevailing party in any action brought to enforce any provisions of
this Agreement shall be entitled to all costs of bringing such an
action including reasonable attorney's fees.
-7-
<PAGE>
10.7 Counterparts. This Agreement may be executed in multiple counterparts
each of which shall be deemed an original, but all of which together
shall constitute one and the same instrument.
IN WITNESS WHEREOF, the undersigned have duly executed this Agreement
effective as of the 1st day of October, 2000.
OWNER:
U.S. PAWN, INC.
By: /s/ Charles Van Gundy
--------------------------------
Name: Charles Van Gundy
Title: President
MANAGER:
PAWN-ONE, INC.
By: /s/ Todd Hills
--------------------------------
Name: Todd Hills
Title: President
-8-
