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                                    FINANCO, INC.
                                  535 Madison Avenue
                               New York, New York 10022



                                   January 29, 1997


Prime Retail, L.P.
100 East Pratt Street, 19th Floor
Baltimore, MD 21202

    Attention:     Abraham Rosenthal
                   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.



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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. 


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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).



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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 Carl Levine, a furniture 
    industry consultant, to assist Financo hereunder, and Mr. Levine 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 
    
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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 

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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] 


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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/ Joshua Goldberg
                                       -----------------------------

                                  Its: Managing Director            
                                       -----------------------------


ACCEPTED AND AGREED TO:

PRIME RETAIL, L.P.

By: Prime Retail, Inc.,
    its General Partner


    By:  /s/  William H. Carpenter, Jr.
         ------------------------------

    Its: President                                
         ------------------------------