<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON FEBRUARY 20, 1997.
REGISTRATION NO. 333-19901
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- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------------------
PRE-EFFECTIVE AMENDMENT NO. 1
TO
FORM SB-2
REGISTRATION STATEMENT
UNDER
SECURITIES ACT OF 1933
--------------------------
PREMIER CONCEPTS, INC.
(Name of small business issuer in its Charter)
<TABLE>
<S> <C> <C>
COLORADO 5699 84-1186026
(State or other jurisdiction (Primary Standard Industrial (IRS Employer
of Classification Code Number) Identification
incorporation or organization) Number)
</TABLE>
3033 S. PARKER ROAD, SUITE 120,
AURORA, COLORADO 80014
(303) 338-1800
(Address, including zip code, and telephone number, including
area code, of Registrant's principal executive offices)
SISSEL B. GREENBERG, PRESIDENT
3033 S. PARKER ROAD, SUITE 120
AURORA, COLORADO 80014
(303) 338-1800
(Name, address, including zip code, and telephone number of agent for service of
process)
--------------------------
COPIES TO:
CLIFFORD L. NEUMAN, ESQ. SAMUEL E. WING, ESQ.
NATHAN L. STONE, ESQ. JONES & KELLER, P.C.
Neuman & Cobb 1625 Broadway
1507 Pine Street Denver, Colorado 80202
Boulder, Colorado 80302 (303) 573-1600
(303) 449-2100
--------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO PUBLIC:
As soon as practicable after the effective date of the Registration Statement.
--------------------------
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. /X/
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. / /
If this Form is a post-effective amendment filed pursuant to Rule 462 under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. / /
--------------------------
CALCULATION OF REGISTRATION FEE TABLE ON FOLLOWING PAGE.
--------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
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<PAGE>
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
PROPOSED MAXIMUM
PROPOSED MAXIMUM AGGREGATE
TITLE OF EACH CLASS OF AMOUNT TO OFFERING PRICE OFFERING PRICE AMOUNT OF
SECURITIES TO BE REGISTERED BE REGISTERED PER SHARE (1)(2) (1)(2) REGISTRATION FEE
<S> <C> <C> <C> <C>
Common Stock, $.002 par value (3)..... 1,265,000 $4.25 $5,376,250 $1,835.88
Class A Common Stock Purchase Warrants
(4).................................. 1,265,000 $.15 $189,750 $65.43
Common Stock, $.002 Par Value,
Underlying A Warrants (5)............ 632,500 $6.375 $4,032,187.50 $1,390.41
Representative's Common Stock, $.002
par value (6)........................ 110,000 $5.10 $561,000 $193.45
Representative's Class A Warrants
(7).................................. 110,000 $.18 $19,800 $6.83
Common Stock, $.002 par value (8)..... 55,000 $6.375 $350,625 $120.91
Selling Shareholders' Common Stock,
$.002 par value issuable upon
conversion of preferred stock (9).... 102,041 $3.125 (11) $318,878.12 $109.96
Class A Common Stock Purchase Warrants
(10)................................. 483,334 $.15 (11) $72,500.10 $25.00
Common Stock, $.002 Par Value (12).... 241,667 $6.375 $1,540,627.10 $531.25
TOTAL:............................ $12,461,617 $4,297.12
</TABLE>
(1) Pursuant to Rule 416, the Registration Statement also relates to an
indeterminate number of additional shares of Common Stock issuable upon the
exercise of warrants pursuant to anti-dilution provisions contained therein,
which shares of Common Stock are registered hereunder.
(2) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457.
(3) Consists of Common Stock offered in the offering and issuable upon exercise
of the Underwriters' Over-Allotment Option.
(4) Consists of Class A Warrants offered in the offering and Class A Warrants
issuable upon exercise of the Underwriters' Over-Allotment Option.
(5) Consists of shares of Common Stock issuable upon exercise of the Class A
Common Stock Purchase Warrants, including the Warrants issuable upon
exercise of the Underwriters' Over-Allotment Option.
(6) Consists of Common Stock issuable upon exercise of the Representative's
Share Options.
(7) Consists of Class A Warrants issuable upon exercise of the Representative's
Warrant Options.
(8) Consists of Common Stock issuable upon exercise of the Class A Warrants
issuable upon exercise of the Representative's Warrants.
(9) Consists of Common Stock offered by the Selling Shareholders issuable upon
conversion of Series A Convertible Preferred Stock.
(10) Consists of Class A Warrants reoffered by certain Selling Shareholders.
(11) Based upon the average bid and ask prices of the Common Stock being offered
by the Selling Shareholders in accordance with Rule 457(c).
(12) Consists of Common Stock issuable upon exercise of the Class A Warrants
reoffered by the Selling Shareholders.
<PAGE>
EXPLANATORY NOTE
This Registration Statement contains two forms of prospectus; one to be used
in connection with the Offering of up to 1,100,000 Shares of the Company's $.002
par value Common Stock ("Shares") and 1,100,000 Class A Warrants ("A Warrants")
("Offering Prospectus"), and one to be used in connection with the sale of
Common Stock by certain selling shareholders (the "Selling Shareholders'
Prospectus"). The Offering Prospectus and the Selling Shareholders' Prospectus
will be identical in all respects except for the alternate pages for the Selling
Shareholders' Prospectus included herein and labeled "Alternate Page for Selling
Shareholders' Prospectus."
<PAGE>
PREMIER CONCEPTS, INC.
CROSS-REFERENCE INDEX
<TABLE>
<CAPTION>
ITEM NO. AND HEADING IN FORM SB-2 REGISTRATION STATEMENT LOCATION IN PROSPECTUS
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<C> <S> <C>
1. Forepart of the Registration Statement and Outside
Front Cover Page of Prospectus..................... Forepart of Registration Statement and Outside Front
Cover Page of Prospectus
2. Inside Front and Outside Back Cover Pages of
Prospectus......................................... Inside Front and Outside Back Cover Pages of
Prospectus
3. Summary and Risk Factors............................. Prospectus Summary; Risk Factors
4. Use of Proceeds...................................... Use of Proceeds
5. Determination of Offering Price...................... Front Cover Page; Underwriting
6. Dilution............................................. Dilution
7. Selling Securityholders.............................. Selling Shareholder Prospectus--Selling Shareholders
and Plan of Distribution
8. Plan of Distribution................................. Underwriting; Selling Shareholder Prospectus--
Selling Shareholders and Plan of Distribution
9. Legal Proceedings.................................... Legal Proceedings
10. Directors, Executive Officers, Promoters and
Controlling Persons................................ Management
11. Security Ownership of Certain Beneficial Owners and
Management......................................... Security Ownership of Management and Principal
Shareholders
12. Description of Securities............................ Description of Securities
13. Interest of Named Experts and Counsel................ Legal Matters; Experts
14. Disclosure of SEC Position on Indemnification for
Securities Act Liabilities......................... Management--Indemnification and Limitation on
Liability of Directors
15. Organization Within Last Five Years.................. The Company; Business--Overview
16. Description of Business.............................. Prospectus Summary; Risk Factors; Business
17. Management's Discussion and Analysis or Plan of
Operation.......................................... Management's Discussion and Analysis of Financial
Condition and Results of Operations; Business;
Financial Statements
18. Description of Property.............................. Business
19. Certain Relationships and Related
Transactions....................................... Certain Transactions
20. Market for Common Equity and Related Stockholder
Matters............................................ Market for Common Stock
21. Executive Compensation............................... Management--Executive Compensation
22. Financial Statements................................. Financial Statements
23. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure................ Business--Changes in Independent Public Accountants
</TABLE>
<PAGE>
SUBJECT TO COMPLETION, DATED FEBRUARY , 1997
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
<PAGE>
PROSPECTUS
PREMIER CONCEPTS, INC.
1,100,000 SHARES OF COMMON STOCK
1,100,000 CLASS A COMMON STOCK PURCHASE WARRANTS
Premier Concepts, Inc. (the "Company") is offering 1,100,000 shares of
Common Stock and 1,100,000 Class A Common Stock Purchase Warrants ("Warrants"),
which must be purchased together in this offering on the basis of one share of
Common Stock and one Warrant. The Common Stock and Warrants will trade
separately thereafter. Two Warrants entitle the holder to purchase one share of
Common Stock at a price of $ ("Warrant Exercise Price") during the
three-year period commencing on the date of this Prospectus and the Warrants may
be redeemed by the Company under certain circumstances. See "Description of
Securities."
It is currently anticipated that the combined offering prices of the Common
Stock and Warrants will be between $3.75 and $4.25, with $.10 allocated to the
Warrants. For a discussion of the factors considered in determining the initial
public offering prices, see "Underwriting."
Although the Company is a publicly-held corporation, the present market for
its Common Stock is limited and sporadic. On February 18, 1997, the closing bid
and ask prices of the Common Stock on the Electronic Bulletin Board System under
the trading symbol PMRCA were $2.625 and $4.250, respectively, as adjusted for a
one-for-five reverse stock split which was effective on December 20, 1996. There
is presently no trading market for the Warrants. Application has been made to
have the Common Stock and Warrants approved for quotation on the Nasdaq SmallCap
Market ("Nasdaq SmallCap") under the symbols "FAUX" and "FAUXW," respectively,
subject to completion of this offering.
Concurrently with the commencement of this offering, 102,041 shares of
Common Stock and 483,334 Warrants may be offered by certain Selling Shareholders
subject to certain lock-up and prospectus delivery requirements (the "Selling
Shareholders' Offering"). The Company will not receive any of the proceeds from
the sale of securities by the Selling Shareholders.
------------------------
THIS OFFERING INVOLVES A HIGH DEGREE OF RISK. SEE "RISK FACTORS" AT PAGE 7.
---------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE COMMISSION
OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF
THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
<TABLE>
<CAPTION>
PRICE TO UNDERWRITING PROCEEDS TO
PUBLIC DISCOUNT (1) COMPANY (2)
<S> <C> <C> <C>
Per Share....................................... $ $ $
Per Warrant..................................... $ $ $
Total (3)....................................... $ $ $
</TABLE>
(1) The Company has agreed to pay the Representative of the Underwriters (the
"Representative") a non-accountable expense allowance and to issue options
to the Representative to acquire the Representative's Securities as defined
in "Underwriting--Representative's Securities." The Company also has agreed
to indemnify the Underwriters against certain liabilities, including
liabilities under the Securities Act of 1933, as amended (the "Securities
Act"). See "Underwriting."
(2) Before deducting offering expenses remaining to be paid by the Company from
proceeds of this offering of approximately $375,000 including the
non-accountable expense allowance to the Representative. See "Underwriting."
(3) The Company has granted the Underwriters options for 45 days from the date
of this Prospectus to purchase up to an additional 165,000 shares of Common
Stock and 165,000 Warrants on the same terms as set forth above solely to
cover over-allotments, if any. If the over-allotment options are exercised
in full, the total Price to Public, Underwriting Discount and Proceeds to
Company will be $5,060,000, $506,000 and $4,554,000 respectively, assuming a
combined offering price for the Common Stock and Warrants of $4.00. See
"Underwriting."
The Common Stock and Warrants are being offered by the Underwriters, on a
firm commitment basis, subject to prior sale, when, as and if delivered to and
accepted by the Underwriters, and subject to their right to reject any order, in
whole or in part, and certain other conditions. It is expected that delivery of
the certificates representing the Common Stock and Warrants will be made on or
about , 1997.
COHIG & ASSOCIATES, INC.
The date of this Prospectus is , 1997.
<PAGE>
PROSPECTUS SUMMARY
THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY THE MORE DETAILED
INFORMATION AND FINANCIAL STATEMENTS, INCLUDING THE RELATED NOTES THERETO,
APPEARING ELSEWHERE IN THIS PROSPECTUS. UNLESS OTHERWISE INDICATED, ALL
INFORMATION WITH REGARD TO THE COMMON STOCK OF THE COMPANY IN THIS PROSPECTUS,
INCLUDING SHARE AND PER SHARE INFORMATION, GIVES EFFECT TO (I) A ONE-FOR-FIVE
(1-FOR-5) REVERSE STOCK SPLIT EFFECTED BY THE COMPANY ON DECEMBER 20, 1996, (II)
THE CONVERSION OF 416,670 SHARES OF SERIES A CONVERTIBLE PREFERRED STOCK INTO
102,041 SHARES OF COMMON STOCK.
THE COMPANY
Premier Concepts, Inc. ("Premier" or the "Company"), operating under the
name "Impostors," believes that its 35 retail stores make it one of the nation's
largest specialty chain retailers of faux jewelry. Specializing in the marketing
and retailing of high-end fashion and reproduction jewelry that has the
appearance, but not the cost, of fine jewelry, the Company sells products that
emulate fine jewelry and classic pieces originally designed by famous jewelers
such as Tiffany & Co.-Registered Trademark-, Cartier-Registered Trademark-,
Bulgari-Registered Trademark- and Harry Winston. The Company's product line also
includes replicas of jewelry owned by Princess Diana, The Duchess of Windsor,
Elizabeth Taylor and other celebrities. The Company's faux jewelry is created
with layered gold, cubic zirconia and Austrian crystal to simulate the look of
fine jewelry. Also, the Company offers an extensive collection of 14 karat gold
jewelry with synthetic stones. In June 1996, the Company introduced a new
collection of genuine sterling silver featuring semi-precious and synthetic
stones. The Company's products are purchased principally from several domestic
vendors and from vendors in China, England, Hong Kong, Italy, Korea, Spain,
Taiwan and Thailand.
The 35 currently operating Impostors retail stores are designed to match the
elegant look of the Company's products and to provide customers with the feeling
of shopping in an upscale, fine jewelry environment. The Company's stores are
located in shopping malls and tourist locations, meaning stores where more than
50% of sales are made to non-residents. Currently, the Company has stores in
Southern California, Northern California, the states of Arizona, Colorado,
Florida, Louisiana, Maryland, Missouri, New Jersey and Washington and in the
Washington, D.C. area. During the period from August 30, 1996 to February 15,
1997, the Company opened nine stores located in Colorado, Florida, Nevada and
New Jersey, resulting in the current 35 locations. In addition, the Company has
entered into leases for three new retail stores in Southern California, Florida,
and Washington, D.C, which are scheduled to open over the next four months.
The Company believes that it has an opportunity to become a leader in the
specialty retailing segment of the national and international market for faux
and reproduction jewelry and related accessory items through a combination of
internal growth and acquisitions. Its plans include expansion of retail store
locations, development of new marketing channels including multimedia and direct
mail, and the marketing of its high-end jewelry reproductions and store concept
internationally through licensing and distribution arrangements.
The Company was organized on July 15, 1988 under the laws of the State of
Colorado.
2
<PAGE>
THE OFFERING
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<S> <C>
Securities offered by the Company..... 1,100,000 shares of Common Stock and 1,100,000 Warrants. Two
Warrants will entitle the holder to purchase one share of
Common Stock at the Warrant Exercise Price during the
three-year period commencing on the date of this Prospectus.
The Warrants will be redeemable under certain circumstances.
See "Description of Securities."
Common Stock outstanding before
offering............................ 559,916 shares (1)(2)(3)(4)
Common Stock outstanding after
offering............................ 1,659,916 shares (1)(2)(3)(4)(5)
Use of proceeds....................... To lease, equip and stock with inventory new retail locations,
for debt reduction, to remodel existing store locations, to
develop new marketing channels, and working capital. See "Use
of Proceeds."
Proposed NASDAQ SmallCap symbols:
Common Stock........................ "FAUX"
Warrants............................ "FAUXW"
</TABLE>
- --------------------------
(1) Does not include (i) 230,000 shares of Common Stock reserved for issuance
upon exercise of options which may be granted under the Company's 1993 Stock
Incentive Plan, 196,000 of which are subject to outstanding and unexercised
options having a weighted average exercise price of $2.33 per share, and of
which 70,000 options are subject to future vesting, (ii) 60,250 shares of
Common Stock reserved for issuance upon exercise of outstanding Class C
Common Stock Purchase Warrants ("C Warrants") at a price of $10.00 per
share, (iii) 12,000 shares of Common Stock reserved for issuance pursuant to
the exercise of other outstanding options and warrants having a weighted
average exercise price of $2.50 per share, and (iv) 60,000 shares of Common
Stock reserved for issuance pursuant to the exercise of options which may be
granted under the Company's 1995 Employee Stock Purchase Plan ("1995 ESPP").
(2) On June 24, 1996, the Company completed the sale of 416,670 shares of Series
A Convertible Preferred Stock ("Convertible Preferred Stock") and 208,335
Class B Warrants (the "Bridge Offering"), realizing net proceeds of
$225,000. Does not include 102,041 shares of Common Stock reserved for
issuance on the date of this Prospectus pursuant to the automatic conversion
of the Convertible Preferred Stock, or 41,667 shares of Common Stock
reserved for issuance upon exercise of the outstanding Warrants. See
"Description of Securities--Series A Convertible Preferred Stock".
(3) Does not include shares reserved for issuance upon the conversion of the 12%
Convertible Promissory Notes (the "Convertible Notes"). On December 27,
1996, the Company completed a bridge financing (the "Bridge Note Financing")
consisting of $1,120,000 in Convertible Notes and 200,000 Class B Warrants,
realizing net proceeds of $1,041,600. The Company utilized $624,325 of these
proceeds to redeem from certain securityholders 189,023 of the Company's
Common Stock and 32,500 Class C Warrants. The principal balance of the
Convertible Notes is convertible after April 1, 1997, at the option of the
holder, into shares of the Company's Common Stock at a conversion value of
$2.80 per share, subject to adjustment under certain circumstances. Each
Class B Warrant entitles the holder to purchase one share of the Company's
Common Stock at an exercise price of $5.00 per share and will be
automatically exchanged for two Warrants upon the effective date of the
Registration Statement of which this Prospectus forms a part. See
"Description of Securities--12% Convertible Promissory Notes."
(4) The Bridge Note Financing was undertaken to permit the Company to redeem
certain securities owned by former shareholders in order to facilitate this
offering and the Company's application for NASDAQ listing. The Company has
agreed and intends to utilize a portion of the proceeds of the offering to
retire the Convertible Notes. See "Use of Proceeds."
(5) Assumes no exercise of Warrants and Representative's Securities to be sold
by the Company in this offering.
3
<PAGE>
The information contained in this Prospectus relates solely to the issuance
of up to 1,100,000 shares of Common Stock and 1,100,000 Warrants and additional
Common Stock and Warrants included in the Over-Allotment Options granted to the
Underwriters. The shares of Common Stock and Warrants are being offering and
sold to the public through the Underwriters on the terms set forth in
"Underwriting."
A separate resale Prospectus may also be used in connection with the sale by
certain securityholders of up to 102,041 shares of Common Stock and 483,334
Warrants. See "Concurrent Offering." Any sales of these securities will be made
only in accordance with Prospectus delivery requirements described in the resale
Prospectus.
RISK FACTORS
This offering involves a high degree of risk and immediate substantial
dilution. Prospective investors should carefully consider the matters set forth
under "Risk Factors" and "Dilution".
SUMMARY FINANCIAL DATA
Set forth below is selected summary financial data with respect to the
Company. Financial information for the period ended January 29, 1995, for the
year ended January 28, 1996, and as of and for the nine months ended October 29,
1995 and October 27, 1996, is derived from the financial statements included
elsewhere in this Prospectus and is qualified by reference to such financial
statements and the notes related thereto. In February 1995, the Company adopted
its new fiscal year to begin January 30, 1995 and end January 28, 1996; and
thereafter the fiscal year will end on the last Sunday of each January of each
successive year.
<TABLE>
<CAPTION>
NINE MONTHS ENDED
PERIOD ENDED YEAR ENDED --------------------------
JANUARY 29, JANUARY 28, OCTOBER 29, OCTOBER 27,
1995 (1) 1996 1995 1996
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
STATEMENTS OF OPERATIONS DATA:
Total revenues........................................... $8,335,790 $ 9,069,840 $ 6,231,250 $ 6,287,910
Operating (loss)......................................... (886,667) (37,298) (417,264) (138,297)
Income from discontinued operations...................... 141,237 270,441 177,830 16,177
Net income (loss)........................................ (1,038,726) 114,219 (350,118) (108,496)
Net income (loss) available to common shareholders....... (1,038,726) 114,219 (350,118) (116,496)
Net income (loss) per common share....................... (2.93) .23 (.77) (.15)
Weighted average number of common shares outstanding
(2).................................................... 354,600 495,800 454,851 748,939
STATISTICAL DATA:
Store revenues........................................... $8,178,054 $ 8,957,344 $ 6,187,408 $ 6,263,579
Store gross margin....................................... 5,509,955 6,337,334 4,271,700 4,436,239
Store operating expenses................................. 4,850,747 4,906,077 3,597,412 3,567,700
Store operating profit................................... 659,237 1,431,257 674,288 868,538
Corporate overhead operating expenses.................... 1,430,884 1,518,416 1,069,974 971,923
Gross margin percentage.................................. 66.4% 70.3% 68.7% 70.6%
Comparable same store sales (2).......................... 7,448,884 8,186,449 5,605,465 5,794,447
Comparable same store sales growth (2)................... N/A 9.9% N/A 3.4%
Comparable same store sales per square foot (2).......... 520.68 572.24 391.83 405.04
</TABLE>
4
<PAGE>
<TABLE>
<CAPTION>
AS OF OCTOBER 27, 1996
------------------------------------------
ACTUAL PROFORMA (3) AS ADJUSTED(4)
------------ ------------ --------------
<S> <C> <C> <C>
BALANCE SHEET DATA:
Total assets....................................................... $ 3,469,379 $3,965,054 $ 6,105,054
Total liabilities.................................................. 2,310,671 3,430,671 2,060,671
Working capital.................................................... 279,803 697,078 2,837,078
Stockholders' equity............................................... 1,158,708 534,383 4,044,383
</TABLE>
- ------------------------
(1) Due to the Company's change in fiscal year, the Company's financial
statements are reported for the year ending December 31, 1994 ("Fiscal
1994"), a one month period ending January 29, 1995, and the year ending
January 28, 1996 ("Fiscal 1996"). The Impostors acquisition was completed on
February 24, 1994, and accordingly results of operations for the period
ended December 31, 1994 reflect only ten months of Impostors' operations.
Prior to the Impostors acquisition, which includes the period from January
1, 1994 through February 23, 1994 (approximately two months), the Company
had no significant operating activity. Therefore, for purposes of
comparison, the one-month period from January 1, 1995 through January 29,
1995 has been combined with Fiscal 1994 and therefore represents thirteen
(13) months of combined operations but only eleven (11) months of operations
of Impostors. This combined period is referred to as "the period ended
January 29, 1995."
(2) Includes only the 24 stores open for the entire periods being compared. For
the purpose of comparable same store sales only, the period ended January
29, 1995 includes 12 months of sales. However, the financial statement data
for the same period includes only 11 months of Impostors operations, as the
retail chain was acquired in late February, 1994.
(3) Adjusted to give effect to (i) the sale by the Company of $1,120,000 in
Convertible Notes realizing net proceeds of $1,041,600, and (ii) the use of
$624,324 of those proceeds to redeem 189,023 shares of Common Stock and
32,500 Class C Warrants.
(4) Adjusted to reflect net proceeds from the sale by the Company in this
offering of 1,100,000 shares of Common Stock and 1,100,000 Warrants at the
assumed initial offering prices of $3.90 per share and $.10 per Warrant and
the utilization of $1,370,000 of the net proceeds therefrom to retire the
Convertible Notes and other liabilities in the amount of $250,000. See "Use
of Proceeds." The "As Adjusted" information does not include the exercise of
the Warrants, the Underwriters' Over-Allotment Options or the options to
acquire the Representative's Securities. See "Use Of Proceeds,"
"Capitalization" and "Underwriting."
5
<PAGE>
THE COMPANY
The Company was incorporated on July 14, 1988 under the laws of the State of
Colorado under the name Protron Systems, Inc. In April, 1991, under the
corporate name of Silver State Holding, Inc., the Company completed a small
initial public offering in connection with its business involving the purchase
and sale of real estate in the Colorado Springs, Colorado area. In March 1993,
following the sale of all the real estate, the Company acquired two gaming
properties in Central City, Colorado in a series of transactions in which it
issued, in the aggregate, 205,800 shares of Common Stock and changed its name to
Silver State Casinos, Inc. In September 1993, the Company exchanged its interest
in those properties for 2,500,000 shares of common stock of Global Casinos,
Inc., a Utah corporation. Between September 1993 and March 1994, the Company had
no material operations. The Company has no continuing involvement or interest in
any of the prior businesses.
In March, 1994, the Company acquired from American Fashion Jewels, Inc.,
d.b.a. Impostors, and its affiliates (collectively "AFJ"), substantially all of
the assets and properties utilized in connection with the operation of the chain
of 27 Impostors retail jewelry stores and changed its name to Premier Concepts
Inc. In a parallel transaction, the Company acquired certain additional leases
utilized in connection with the operation of the retail businesses. Impostors'
assets consisted of cash, accounts receivable, inventory, leasehold
improvements, equipment, furniture, fixtures, leases, licenses, contracts,
trademarks and registrations thereof, trade names, servicemarks and
registrations thereof, and other miscellaneous assets having a book value of
approximately $3,700,000. In consideration of the assets, the Company assumed
and agreed to pay certain current and long-term liabilities, including certain
bankruptcy administrative claims, post-petition liabilities, priority claims,
notes payable and other accounts payable in the aggregate amount of
approximately $3,147,000, and issued to the unsecured creditors of AFJ an
aggregate of 27,500 shares of Common Stock. See Note 2 to Financial Statements.
AFJ opened its first reproduction jewelry store in San Francisco, California
in 1985. By 1988, Impostors had grown to ten corporate owned stores, with nine
additional stores operating as Impostors licensees. Impostors began selling
franchises in 1989, adding two additional corporate stores and 36 franchise
locations. By 1991, the chain had grown to 43 corporate stores and 69
franchises, for a total of 112 locations. In 1992, AFJ began to experience
problems in its relationships with franchisees. Many franchisees were not paying
for the merchandise purchased from Impostors, or were purchasing merchandise
from unauthorized sources. As a result, management began to terminate its
relationships with certain franchisees for failure to comply with the terms of
the franchise agreements. By the end of January, 1993, 12 franchisees had filed
suits seeking in excess of $2,000,000 in damages. The amount of resources and
management time devoted to defending the lawsuits interfered with operations and
the Company's ability to raise new capital. On May 28, 1993, AFJ and its
affiliates filed four Chapter 11 cases in the United States Bankruptcy Court for
the Northern District of California, which cases were later consolidated for
joint administration. The Company's acquisition of "Impostors" was confirmed by
the Bankruptcy Court on March 3, 1994. Concurrently with the Company's purchase
of the 27 then operating Impostors stores, the Company also acquired three
additional reproduction jewelry stores from Mirage Concepts, Inc. in exchange
for 20,000 shares of its Common Stock. Those stores were located in California
and Arizona. See Note 2 to Financial Statements.
The Company currently operates 35 Impostors stores, has executed leases for
three additional stores scheduled to open over the next four months, and has
plans to open a total of six to eight new stores in the next 12 months. See "Use
of Proceeds" and "Business--Expansion Strategy."
The Company's principal offices are located at 3033 S. Parker Road, Suite
120, Aurora, Colorado 80014. Its telephone number at that address is (303)
338-1800.
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RISK FACTORS
THE SECURITIES OFFERED HEREBY ARE SPECULATIVE AND INVOLVE A HIGH DEGREE OF
RISK. PROSPECTIVE INVESTORS SHOULD CAREFULLY CONSIDER THE POSSIBILITY OF THE
LOSS OF THEIR ENTIRE INVESTMENT IN THE COMPANY'S SECURITIES AND, ALONG WITH EACH
OF THE FOLLOWING FACTORS, CONSIDER THE INFORMATION SET FORTH ELSEWHERE IN THIS
PROSPECTUS.
RISK FACTORS RELATED TO THE BUSINESS OF THE COMPANY
BANKRUPTCY OF PREDECESSOR. The Impostors operations were acquired by the
Company in 1994 out of a Chapter 11 bankruptcy proceeding by American Fashion
Jewels, Inc. ("AFJ"), the prior owner of Impostors. In its eight-year operating
history prior to the 1993 bankruptcy petition, AFJ had incurred substantial
debts, operating losses and unliquidated liabilities to numerous franchisees.
While the Company closed most of the unprofitable stores acquired from AFJ and
believes that it has defined and adopted an operating strategy which can lead to
profitable and successful operations, the Company has experienced operating
losses from its Impostors operations and there can be no assurance that the
Company's efforts to achieve profitability will be any more successful than
those of AFJ. See "Management's Discussion and Analysis of Financial Condition
and Results of Operations" and Financial Statements.
LACK OF PROFITABLE OPERATING HISTORY. For the year ended December 31, 1994,
the month ended January 29, 1995, the fiscal year ended January 28, 1996, and
for the nine months ended October 27, 1996, the Company reported operating
losses of $683,641, $203,026, $37,298 and $138,297, respectively. At October 27,
1996, the Company had an accumulated deficit of $1,824,527. There can be no
assurance that operating costs and expenses will not continue to out-pace
revenues, or that the Company will not continue to experience losses due to
increased operating costs and expenses and/or reduced revenues. See Financial
Statements.
OPERATING LEASES; RISK OF LONG-TERM COMMITMENTS. The commercial leases
covering the Company's existing 35 retail locations, combined with the three
additional leases the Company has executed for new stores, in the aggregate,
represent approximately $13 million in future fixed rental payments. In
addition, all of the Company's store leases have provisions requiring additional
payments for operating expenses, real estate taxes and additional rent based
upon a percentage of sales. There can be no assurance that store revenues will
be sufficient to cover the Company's unconditional future rent obligations under
these leases. Further, the Company's leases expire at various dates from 1996 to
2007, and upon expiration, there can be no assurance that the Company will be
able to renegotiate lease terms that are favorable to the Company, or, failing
renegotiation, locate suitable replacement facilities. In October 1995, the
Company's Rodeo Drive lease, which was a month-to-month lease, expired without
renewal due to the landlord's desire to remodel the building. For the 11 month
period ended January 29, 1995, the Rodeo Drive store had contributed $97,287 to
the Company's operating income. In addition, the Company's largest store in
Union Square, San Francisco expires in the year 2001. During Fiscal 1996, this
store contributed $245,626 to the Company's total net store contribution and was
one of the five stores that contributed, in the aggregate, 52% of the total net
store contribution (store revenues less direct store expenses). The loss of the
Union Square store or one or more of the other established retail locations
could have a material adverse effect on the Company and its operations. Further,
the Company's office lease was personally guaranteed by four of the members of
the Company's Board of Directors at the time it was executed. See "Certain
Transactions--Lease Guarantee" and Notes 5 and 6 to Financial Statements.
Additionally, the Company plans to lease and open six to eight additional
retail stores over the next 12 months, of which three locations are already
under lease commitment. While the Company has developed criteria utilized in
identifying new store sites, the Company has no way of predicting with certainty
whether any new location will support a profitable retail store. As a result,
the Company's expansion activities represent a substantial risk that the Company
will commit itself to new leases for locations which will prove to be
unprofitable. See "Business--Business Strategy."
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ADDITIONAL CAPITAL REQUIREMENTS; POSSIBLE ADDITIONAL DILUTION. It is
probable that the Company will require additional capital in the future to
finance its business activities. The Company's future plans include remodeling
the Company's existing stores and leasing, equipping and stocking new retail
locations during fiscal 1997. The Company also plans to heighten its
merchandizing efforts through the various home shopping networks and the
development and marketing of the Company's product catalogue. It is likely that
proceeds from this offering will be below the funding necessary for the Company
to fully develop its business strategy. Additional capital, to the extent
needed, may be obtained through borrowings or by additional equity financing.
Future equity financing may occur through the sale of either unregistered common
stock in exempt offerings or through the public offering of registered equity
securities. In any case, such additional equity financing may result in
additional dilution to investors. The Company has no arrangements for the
acquisition of additional capital, and there can be no assurance that any
additional capital, funding or revenues can be satisfactorily arranged. See
"Business," "Use of Proceeds," and "Risk Factors Related to the Offering."
SEASONALITY; FLUCTUATIONS IN CAPITAL DEMANDS. The Company's business is
highly seasonal with its mall locations generating nearly 20% of their business
during the Christmas holiday season. The Company's 17 tourist locations are less
sensitive to the effect of the holiday season, however, on a store-by-store
basis, they do experience fluctuations based upon such factors as seasonal
economic conditions, transportation costs and other factors effecting tourism in
their particular locations. This seasonality results in higher demand for
working capital at certain times of the year. Also, interim operating results
are not necessarily indicative of the Company's results of operations or
financial conditions on an annualized basis. The Company cannot accurately
predict the potential adverse effect of seasonality on its business, and there
can be no assurance that the Company can acquire or develop additional retail
locations in counter-seasonal locales or cultivate innovative marketing
campaigns which will balance out the potential adverse consequences. See
"Business--Seasonality."
MANAGEMENT'S LACK OF VOTING INFLUENCE. The Company's President, Sissel B.
Greenberg, owns only 2,300 shares of Common Stock, which represents less than 1%
of the total issued and outstanding shares. All of the Company's officers and
directors as a group own only 5,200 shares, or less than 1% of the total
outstanding shares of Common Stock. Even giving effect to the exercise of their
outstanding options, the Company's officers and directors as a group will
exercise voting control over only 4.5% of the Company's outstanding shares of
Common Stock following completion of this offering. As a result of this lack of
voting influence as shareholders, there can be no assurance that the Company's
officers and directors will be able to implement the plans and strategies
described in this Prospectus. Further, it is possible that shareholders with
greater voting influence could initiate actions which could be adverse to those
plans or hostile to current management. See "Security Ownership of Management
and Principal Shareholders."
LIMITED LIQUIDITY AND CAPITAL RESOURCES. The operation of numerous retail
locations is very capital intensive, particularly during the holiday season. In
the past, the Company has operated on limited capital resources and has depended
primarily on funds generated from stock sales and short-term loans from its
shareholders and other short-term funding sources to make up any working capital
shortfalls. There can be no assurance that funds necessary for operations can be
generated from future stock sales and short-term loans from related parties
and/or other investors. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations."
RISK OF LEVERAGE AND DEFAULT. All of the Company's assets are encumbered by
debt, the service of which requires a substantial portion of the net cash flow
generated by the Company's operations. Of the proceeds of this offering,
$1,220,000 has been allocated to reduce the Company's secured debt including
retiring the Convertible Notes. Future losses from operations may impair the
Company's ability to service its remaining debt and retire it in accordance with
its terms. Should the Company default under any of its secured debt, a creditor
could foreclose against the Company's assets and effectively force the cessation
of the Company's business. See "Use of Proceeds" and Note 4 to Financial
Statements. Further, the Company's
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leveraged position impairs its ability to obtain additional financing to fund
working capital requirements, capital expenditures or other purposes, renders
the Company more vulnerable to extended economic downturn, restricts the
Company's ability to make acquisitions or otherwise exploit business
opportunities, and limits the Company's flexibility to respond to changing
economic conditions.
NEW BUSINESS AND LIMITED RETAILING EXPERIENCE. The Company has only been
engaged in the business of marketing and retailing high-end fashion and
reproduction jewelry since March, 1994. Certain of the Company's management does
not have prior retailing experience. As a result, the Company has only limited
experience in the merchandizing of fashion and reproduction jewelry, and there
can be no assurance that its intended activities will be successful or result in
profitable operations. It is also impossible to predict what effect, if any,
fluctuations in the United States or worldwide economy will have on such
industry. See "The Company" and "Business."
DEPENDENCE UPON MANAGEMENT. The Company's future success depends in a large
part on the continued service of its President, Sissel B. Greenberg, and to a
lesser extent on its marketing, sales and promotional personnel, as well as on
its ability to continue to attract, motivate and retain highly qualified
employees. Although the Company provides employees with the opportunity to
acquire equity in the Company pursuant to Incentive Stock Options granted under
the Company's 1993 Stock Incentive Plan, its key employees may nevertheless
voluntarily terminate their employment with the Company at any time. The loss of
the services of key personnel could have a material adverse effect upon the
Company's operations and marketing efforts. While the Company has a written
employment contract with its President, Sissel B. Greenberg, which expires on
June 20, 1999, there can be no assurance of her continued service to the
Company. The Company does not have key person life insurance covering its
management personnel or other key employees. See "Management."
COMPETITION. The Company faces significant competition from numerous
organizations throughout the country, and world-wide, which offer fashion and
reproduction jewelry, many of which possess significantly greater resources than
the Company and in many cases greater retailing expertise. Indirectly, the
Company competes against retailers of fashion jewelry on the low end and fine
jewelry on the upper end of the jewelry market. Within the faux jewelry
industry, the Company competes against department stores, some of whom have
significantly greater resources and retailing experience than the Company, as
well as other businesses which function exclusively as specialty retailers of
faux jewelry. The Company competes against these specialty retailers not only in
its sources of supply but also in locations for its retail stores. The Company
may suffer a competitive disadvantage due to its limited resources and lack of
retailing experience. See "Business--Competition."
RISK OF INFRINGEMENT. A significant portion of the Company's products
represent jewelry designs or concepts copied or inspired by fine jewelry
developed and sold by famous designers. While most jewelry designs are not
protected by copyright or trademark law, on occasion a particular design may be
subject to a design copyright or trademark registration obtained by the original
designer. Due to the magnitude of the number of the Company's products, it is
impracticable for the Company to research each jewelry design that it purchases
for resale to determine whether or not there may exist a copyright or trademark
registration preventing its unauthorized copy. While the Company has developed
certain merchandizing and purchasing methodologies which minimize the risk,
there can be no assurance that from time to time the Company will not
inadvertently infringe upon the intellectual property rights of third parties.
Under these circumstances, the Company may be subject to liability to the owner
of the design copyright or trademark to disgorge the Company's profits earned
from sales of the particular product, or in the alternative, liability for
statutory damages under copyright laws. See "Business--Intellectual Property."
NO PROPRIETARY ADVANTAGE. Neither the design nor concept of any of the
Company's jewelry is subject to protection by the Company under applicable
copyright, trademark or trade secret laws. As a result, the Company holds no
proprietary advantage over others competing in the faux jewelry markets. See
"Business--Intellectual Property."
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NO FIRM CONTRACTS FROM SUPPLIERS OR MANUFACTURERS. The Company does not
have any written contracts with any of its suppliers or manufacturers or
commitments from any of its suppliers or manufacturers to continue to sell
products to the Company. As a result, there is a risk that any of the Company's
suppliers or manufacturers may discontinue selling their products to the Company
for any reason. Although the Company believes that it could establish alternate
sources for most of its products, any delay in locating and establishing
relationships with other sources could result in product shortages and back
orders for the product, with a resulting loss of revenues to the Company. See
"Business--Suppliers and Vendors."
LICENSING AND OTHER GOVERNMENTAL REGULATION. For each retail location
operated by the Company, it is necessary for the Company to apply for and obtain
certificates of authority, permits and other licenses from state and local
governmental authorities permitting and/or controlling the Company's operation
of one or more retail stores in the particular state and/or municipality. Each
governmental jurisdiction has its own regulatory requirements which can impose
additional reporting requirements and costs. While the Company has been able to
obtain all necessary certificates, permits and licenses in the past, there can
be no assurance that future changes in governmental regulation or the adoption
of more stringent requirements may not have a material adverse impact upon the
Company's future operations. See "Business-- Properties."
EXPANSION INTO FOREIGN MARKETS. Although the Company intends to expand its
wholesale distribution into foreign markets, there can be no assurance that the
Company can open markets on a timely basis or that such new markets will prove
to be profitable. Significant regulation and legal barriers must be overcome
before marketing can begin in any foreign market. Also, before marketing has
commenced, it is difficult to assess the extent to which the Company's products
and sales techniques will be successful in any given country. In addition to
significant regulatory barriers, the Company may also expect problems relating
to entering new markets with different cultural bases and legal systems from
those encountered in the past. See "Business--Marketing and Distribution."
Moreover, expansion of the Company's operations into new markets may entail
substantial working capital and capital requirements associated with regulatory
compliance. The Company intends to spend a portion of the proceeds of this
offering for the purpose of expansion into foreign markets. See "Use of
Proceeds."
EFFECT OF EXCHANGE RATE FLUCTUATIONS. The Company intends to expand its
activities in foreign countries, both with respect to inventory purchases and
retail sales. As a result, exchange rate fluctuations may have a significant
effect on its sales, costs and gross margins. Further, if exchange rates
fluctuate dramatically, it may become uneconomical for the Company to establish
or continue purchasing or selling activities in certain countries. See
"Business--Other Marketing and Distribution Channels."
CONFLICTS OF INTEREST AND RELATED PARTY TRANSACTIONS. The Company has
entered into certain transactions with its former and current officers,
directors and principal shareholders relating to the issuance of securities and
an office lease. There was the potential for conflicts of interest from these
transactions. The Board of Directors has determined that any future transactions
with officers, directors or principal shareholders will be approved by the
disinterested directors and will be on terms no less favorable than could be
obtained from an unaffiliated third party. See "Certain Transactions" and
"Security Ownership of Management and Principal Shareholders."
LIMITATION OF DIRECTORS' LIABILITY. The Company's Articles of Incorporation
provide, as permitted by Colorado law, that its directors shall have no personal
liability for certain breaches of their fiduciary duties to the Company. This
provision may reduce the likelihood of derivative litigation against directors
and may discourage shareholders from bringing a lawsuit against directors for a
breach of their duty. In addition, the Company's Bylaws provide for mandatory
indemnification of directors and officers to the fullest extent permitted by
Colorado law. See "Management."
MANAGEMENT OF GROWTH. If the Company is successful in increasing demand for
the Company's products, of which there can be no assurance, growth of the
Company could create certain additional risks.
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Rapid growth can be expected to place a substantial burden on the Company's
management resources and financial controls. The Company's ability to manage its
growth effectively will require the Company to continue to implement and refine
its operational, financial and information management systems and to train,
motivate and manage its employees. The Company's ability to attract and retain
qualified personnel will have a significant affect on the Company's ability to
establish and maintain its position in the market, and failure of the Company to
manage its growth effectively could have material adverse effects on the
Company's results of operations. See "Management."
RISK FACTORS RELATED TO THIS OFFERING
OFFERING PRICES ARBITRARILY DETERMINED. The offering price of the Common
Stock and Warrants and the Warrant Exercise Price and other terms of the
Warrants being offered hereby were determined by negotiation between the Company
and the Representative and are not necessarily related to the Company's assets,
book value or financial condition, and may not be indicative of the actual value
of the Company. See "Underwriting."
BROAD DISCRETION IN APPLICATION OF PROCEEDS; UNSPECIFIED ACQUISITIONS. Of
the approximate $3,585,000 net proceeds from this offering, $1,500,000 will be
used for store openings, some of which have been recently completed, $1,370,000
will be used to retire the $1,120,000 in Convertible Notes and to repay certain
short-term debt of $250,000, $250,000 for store remodeling, and $100,000 for
development of new marketing channels. The remainder will be used for working
capital and other general corporate purposes. The net proceeds allocated to the
development of new stores and marketing is subject to change depending upon a
number of factors, including future revenue growth, the amount of cash generated
by the Company's operations and the availability of desirable locations.
Management believes that the availability of proceeds from this offering would
enhance the Company's ability to expand its business more rapidly by taking
advantage of opportunities to acquire additional retail locations, or even
competitive or complementary businesses, on a favorable basis. Although the
Company is not currently a party to any agreement or understanding with respect
to any prospective acquisition, it has explored and continues to evaluate
possible opportunities that complement the Company's business. Accordingly the
Company's management will have broad discretion concerning the exact nature of
the application of net proceeds of this offering. See "Use of Proceeds."
DILUTION. At October 27, 1996, giving retroactive effect to (i) the sale of
the Convertible Notes, (ii) the Company's redemption and cancellation of 189,023
shares of Common Stock and 32,500 Class C Warrants for a total consideration of
$624,325 and (iii) the conversion of the Convertible Preferred Stock into
102,041 shares of Common Stock, the Company had a proforma net tangible book
value of $231,908 or $.35 per share based upon 661,957 Common Stock shares
outstanding. Net tangible book value per share is determined by dividing the
number of outstanding shares of Common Stock into the net tangible book value of
the Company (total assets less total liabilities and intangible assets). After
giving effect to the sale of 1,100,000 shares of Common Stock and 1,100,000
Warrants by the Company in this offering and receipt of the estimated net
proceeds therefrom, the adjusted net tangible book value at October 27, 1996
would have been $3,953,451 or $2.38 per share of Common Stock. This represents
an immediate increase of $2.03 per share to current shareholders and an
immediate dilution of $1.62 per share or 40.5% to the investors in this
offering.
NEED FOR CURRENT PROSPECTUS AND STATE BLUE SKY REGISTRATIONS. Holders of
the Warrants will have the right to exercise the Warrants for the purchase of
shares of Common Stock only if there is a current and effective Registration
Statement and Prospectus covering the Warrants and the shares of Common Stock
issuable upon their exercise, and only if the shares are qualified for sale
under the securities laws of the applicable state or states. While the Company
has undertaken plans to do so, there can be no assurance that a current
Registration Statement and Prospectus will be in effect when any of the Warrants
are attempted to be exercised. Although the Company will seek to qualify for
sale the shares of Common Stock
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underlying the Warrants in those states in which the securities are to be
offered, no assurance can be given that such qualification will occur. The
Warrants may be deprived of any value if a Prospectus covering the shares
issuable upon the exercise thereof is not kept effective and current, or if such
underlying shares are not, or cannot be, registered in the applicable states.
See "Description Of Securities."
POTENTIAL ADVERSE EFFECT OF WARRANT REDEMPTION. The Warrants may be
redeemed by the Company, after 12 months from the date of this Prospectus, at a
price of $0.05 per Warrant upon 45 days' notice, mailed after the closing bid
price of the Common Stock has equaled or exceeded 150% of the then current
Warrant Exercise Price (initially $ per share), for a period of 20 or more
of the 30 consecutive trading days immediately preceding such notice.
Warrantholders shall have exercise rights until the close of the business day
preceding the date fixed for redemption. Redemption of the Warrants could force
the holders to exercise the Warrants and pay the Exercise Price at a time when
it may be disadvantageous for holders to do so, to sell the Warrants at the then
current market price when they might otherwise wish to hold the Warrants, or to
accept the redemption price, which is likely to be substantially less than the
market value of the Warrants at the time of redemption. The Warrants may not be
redeemed or exercised unless a Registration Statement pursuant to the Securities
Act covering the underlying shares of Common Stock is current and such shares
have been qualified for sale, or there is an exemption from applicable
qualification requirements, under the securities laws of the state of residence
of the holder of the Warrant. See "Description Of Securities."
UNDERWRITERS' INFLUENCE ON THE MARKET. A significant number of the shares
of Common Stock and Warrants may be sold to customers of the Underwriters. Such
customers may subsequently engage in transactions for the sale or purchase of
such securities through or with the Underwriters. Although they have no legal
obligation to do so, the Underwriters from time to time in the future may make a
market in and otherwise effect transactions in the Company's securities. To the
extent the Underwriters do so, they may be a dominating influence in any market
that might develop and the degree of participation by the Underwriters may
significantly affect the price and liquidity of the Company's securities. Such
market making activities, if commenced, may be discontinued at any time or from
time to time by the Underwriters without obligation or prior notice. Depending
on the nature and extent of the Underwriters' market making activities and
retail support of the Company's securities at such time, the Underwriters'
discontinuance could adversely affect the price and liquidity of the Company's
securities.
LACK OF DIVIDENDS. No cash dividend was paid for the fiscal year ended
January 28, 1996, and the Company does not intend to declare or pay any
dividends on its outstanding shares of Common Stock in the foreseeable future.
In March 1994, the Company distributed to its shareholders of record, pro rata,
2,409,700 shares of the common stock of Global Casinos, Inc. previously acquired
by the Company in its disposition of two casino properties. See "Dividends."
LIMITED PUBLIC TRADING MARKET FOR THE COMPANY'S COMMON STOCK. While there
currently exists in the over-the-counter market a limited and sporadic public
trading market for the Company's Common Stock, there can be no assurance that
such a market will improve in the future, even if the Company's securities are
approved for listing on NASDAQ. There can be no assurances that an investor will
be able to liquidate his investment without considerable delay, if at all. If a
more active market does develop, the price may be highly volatile. Factors
discussed herein may have a significant impact on the market price of the shares
offered. Moreover due to the relatively low price of the Company's securities,
many brokerage firms may not effect transactions in the Company's Common Stock.
See "Description Of Securities."
RISKS OF PRICE AND VOLUME FLUCTUATIONS. The over-the-counter markets for
securities such as the Company's Common Stock and Warrants historically have
experienced extreme price and volume fluctuations during certain periods. These
broad market fluctuations and other factors, such as new product developments
and trends in the Company's industry and the investment markets generally, as
well as economic conditions and quarterly variations in the Company's results of
operations, may adversely affect the market price of the Company's Common Stock.
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POSSIBLE LOSS OF NASDAQ LISTING. In order to continue to be listed on
NASDAQ, the Company must satisfy certain maintenance standards which relate to
the Company's assets, capital surplus and public trading price of its
securities. As a result, there can be no assurance that the Company's securities
will continue to be listed on NASDAQ. If the Company's Common Stock and Warrants
are delisted from NASDAQ, trading, if any, in those securities would thereafter
be conducted in the over-the-counter market on an electronic bulletin board
established for securities that do no meet NASDAQ listing requirements, or in
what are commonly referred to as the "pink sheets." As a result, an investor
would find it substantially more difficult to dispose of, or to obtain accurate
quotations as to the price of the Company's securities, and depending upon
several factors including future market price of the Common Stock, the Company's
securities could become subject to the "penny stock" rules. See "Risk
Factors--The Securities Enforcement and Penny Stock Reform Act of 1990."
THE SECURITIES ENFORCEMENT AND PENNY STOCK REFORM ACT OF 1990. The
Securities Enforcement and Penny Stock Reform Act of 1990 requires additional
disclosure, relating to the market for penny stocks, in connection with trades
in any stock defined as a penny stock. The Commission recently adopted
regulations that generally define a penny stock to be any equity security that
has a market price of less than $5.00 per share, subject to certain exceptions.
Such exceptions include any equity security listed on NASDAQ and any equity
security issued by an issuer that has (i) net tangible assets of at least
$2,000,000, if such issuer has been in continuous operation for three years,
(ii) net tangible assets of at least $5,000,000, if such issuer has been in
continuous operation for less than three years, or (iii) average annual revenue
of at least $6,000,000, if such issuer has been in continuous operation for less
than three years. Unless an exception is available, the regulations require the
delivery, prior to any transaction involving a penny stock, of a disclosure
schedule explaining the penny stock market and the risks associated therewith.
See "Certain Market Information."
Although the Common Stock and Warrants are anticipated to be approved for
quotation on the Nasdaq SmallCap Market, there can be no assurance that they
will remain eligible to be included on Nasdaq. In the event that the Company's
Common Stock and Warrants were no longer eligible for quotation on Nasdaq, the
Common Stock and Warrants could become subject to rules adopted by the
Commission regulating broker-dealer practices in connection with transactions in
"penny stocks." Those disclosure rules applicable to penny stocks require a
broker-dealer, prior to a transaction in a penny stock not otherwise exempt from
the rules, to deliver a standardized list disclosure document prepared by the
Securities and Exchange Commission. That disclosure document advises an investor
that investments in penny stocks can be very risky and that the investor's
salesperson or broker is not an impartial advisor but rather paid to sell the
shares. It contains an explanation and disclosure of the bid and offer prices of
the security, any retail charges added by the dealer to those prices ("markup"
or "markdown"), and the amount of compensation or profit to be paid to or
received by the salesperson in connection with the transaction. The disclosure
contains further admonitions for the investor to exercise caution in connection
with an investment in penny stocks, to independently investigate the security as
well as the salesperson with whom the investor is working, and to understand the
risky nature of an investment in the security. Further, the disclosure includes
information regarding the market for penny stocks, explanations regarding the
influence that marketmakers may have upon the market for penny stocks and the
risk that one or two dealers may exercise domination over the market for such
security and therefore control and set prices for the security not based upon
competitive forces. The broker-dealer must also provide the customer with
certain other information and must make a special written determination that the
penny stock is a suitable investment for the purchaser and receive the
purchaser's written agreement to the transaction. Further, the rules require
that following the proposed transaction the broker provide the customer with
monthly account statements containing market information about the prices of the
securities. These disclosure requirements may have the effect of reducing the
level of trading activity in the secondary market for a stock that becomes
subject to the penny stock rules. If the Company's Common Stock or Warrants
became subject to the penny stock rules, many brokers may be unwilling to engage
in transactions in the Company's
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securities because of the added disclosure requirements, thereby making it more
difficult for purchasers of Common Stock and Warrants in this offering to
dispose of their securities.
SHARES ELIGIBLE FOR FUTURE SALE. As of January 4, 1997, 559,916 shares of
the Company's Common Stock, were issued and outstanding, 502,735 of which are
"restricted securities" and under certain circumstances may, in the future, be
sold in compliance with Rule 144 adopted under the Securities Act. Of these
restricted shares, 244,409 shares are being registered for resale by the Company
in a separate Registration Statement which is expected to go effective thirty
days after the date of this Prospectus. Further, concurrently with this
offering, 102,041 shares of Common Stock and 483,334 Warrants are being
registered for sale under the Securities Act for certain selling shareholders.
In general, under Rule 144, subject to the satisfaction of certain other
conditions, a person, including an affiliate of the Company, who has
beneficially owned restricted shares of Common Stock for at least two years is
entitled to sell, within any three-month period, a number of shares that does
not exceed the greater of 1% of the total number of outstanding shares of the
same class, or if the Common Stock is quoted on NASDAQ or a stock exchange, the
average weekly trading volume during the four calendar weeks immediately
preceding the sale. A person who presently is not and who has not been an
affiliate of the Company for at least three months immediately preceding the
sale and who has beneficially owned the shares of Common Stock for at least
three years is entitled to sell such shares under Rule 144 without regard to any
of the volume limitations described above.
The Company has outstanding options and Class C Warrants exercisable to
purchase, in the aggregate, 256,250 shares of Common Stock at a weighted average
exercise price of $4.13 per share. The Company also has outstanding Warrants
exercisable to purchase 241,667 shares of Common Stock at a price of $ per
share, which warrants are being registered concurrently with this offering. In
addition, the Company is authorized to issue an additional 34,000 options under
the Company's 1993 Stock Incentive Plan ("Incentive Plan") and an additional
60,000 options under its Employee Stock Purchase Plan ("ESPP"). The Company
plans to register for sale under the Securities Act all shares issuable upon
exercise of options granted under either the Incentive Plan or ESPP. Following
completion of the offering covered by this Prospectus, assuming no exercise of
the Underwriter's Over-Allotment Option, the Company will have outstanding
Warrants exercisable to purchase, in the aggregate, 791,667 shares of Common
Stock at a price of $ per share, including Warrants issuable upon exercise
of the option granted to the Representative. See also "Options to
Representative" below. The Company has undertaken to register for sale under the
Securities Act all shares issuable upon exercise of those Warrants. No
prediction can be made as to the effect, if any, that sales of shares of Common
Stock or the availability of such shares for sale will have on the market prices
prevailing from time to time. Nevertheless, the possibility that substantial
amounts of Common Stock may be sold in the public market may adversely affect
prevailing market prices for the Common Stock and could impair the Company's
ability to raise capital in the future through the sale of equity securities.
Actual sales or the prospect of future sales of shares of Common Stock under
Rule 144 may have a depressive effect upon the price of the Common Stock and the
market therefor.
RIGHTS TO ACQUIRE SHARES. A total of 256,250 shares of Common Stock have
been reserved for issuance upon exercise of outstanding options and warrants,
all but 70,000 of which are currently exercisable. In addition, there are
outstanding Warrants exercisable to purchase an aggregate of 241,667 shares of
Common Stock. The exercise prices of these options and warrants range between
$1.875 per share and $10.00 per share, with a weighted average exercise price of
approximately $4.13 per share. During the terms of the outstanding options and
warrants, the last of which expire in 2003, the holders thereof will have the
opportunity to profit from an increase in the market price of the Company's
Common Stock with resulting dilution to the holders of the Common Stock. The
existence of such options and warrants may adversely affect the terms on which
the Company can obtain additional financing, and the holders of such options and
warrants can be expected to exercise or convert those securities at a time when
the Company, in all likelihood, would be able to obtain additional capital by
offering shares of its Common Stock on
14
<PAGE>
terms more favorable to the Company than those provided by the exercise or
conversion of such options or warrants.
AUTHORIZATION OF PREFERRED STOCK. The Company's Articles of Incorporation,
as amended, authorize the issuance of up to 20,000,000 shares of preferred
stock, $.10 par value. The Board of Directors has been granted the authority to
fix and determine the relative rights and preferences of preferred shares, as
well as the authority to issue such shares, without further stockholder
approval. As a result, the Board of Directors could authorize the issuance of a
series of preferred stock which would grant to holders preferred rights to the
assets of the Company upon liquidation, the right to receive dividend coupons
before dividends would be declared to common stockholders, and the right to the
redemption to such shares, together with a premium, prior to the redemption of
Common Stock. Common stockholders have no redemption rights. In addition, the
Board could issue large blocks of voting stock to fend against unwanted tender
offers or hostile takeovers without further shareholder approval. The ability of
the Board to issue one or more series of preferred stock without further
stockholder approval could have the effect of delaying, deterring or preventing
a change in control of the Company or otherwise making it more difficult for a
person to acquire control of the Company. Further, the ability of the Board to
so issue one or more series of Preferred Stock could have a depressive effect on
the market price of the Company's Common Stock. See "Description Of Securities."
AUTHORIZATION OF ADDITIONAL SHARES. The Company's Articles of
Incorporation, as amended, authorized the issuance of up to 850,000,000 shares
of Common Stock, of which 559,916 shares are outstanding on the date of this
Prospectus. The Company's Board of Directors has the authority to issue
additional shares of Common Stock and to issue options and warrants to purchase
shares of the Company's Common Stock without shareholder approval. Future
issuance of Common Stock could be at values substantially below the offering
price in the offering and therefore could represent further substantial dilution
to investors in the offering. In addition, the Board could issue large blocks of
voting stock to fend off unwanted tender offers or hostile takeovers without
further shareholder approval. The Company has outstanding options and warrants
exercisable to purchase in the aggregate up to 231,250 shares of Common Stock at
an average exercise price of $4.31 per share. Exercise of the options will have
a further dilutive effect on existing shareholders and investors in the
offering. See "Description Of Securities."
OPTIONS TO REPRESENTATIVE. In connection with this offering, the Company
will sell to the Representatives, for a nominal cost, options (the
"Representative's Securities") to purchase up to 110,000 shares of Common Stock
and 110,000 Warrants. The Representative's Securities will be exercisable
commencing one year after the date of this Prospectus and for four years
thereafter, at an exercise price of 120% of the initial public offering prices
of the Common Stock and of the Warrants. Holders of the Representative's
Securities are given the opportunity to profit from a rise in the market price
of the Common Stock with a resulting dilution of the interest of shareholders.
Furthermore, the Company will grant certain registration rights with regards to
the Representative's Securities and such registration could result in
substantial expense to the Company. See "Underwriting--Representative's
Securities."
15
<PAGE>
USE OF PROCEEDS
The proceeds to the Company from the offering, net of expenses of the
offering remaining to be paid, estimated to be $375,000, will be approximately
$3,585,000, assuming a combined offering price of a share of Common Stock and a
Warrant of $4.00. Management anticipates that the proceeds will be applied with
the following priority during the next 12 month period:
<TABLE>
<CAPTION>
DESCRIPTION OF USE AMOUNT PERCENT
- ------------------------------------------------------------------------------ ------------ -----------
<S> <C> <C>
Opening new retail locations(1)............................................... $ 1,500,000 41.8%
Debt reduction(2)............................................................. 1,370,000 38.2%
Remodeling existing retail locations(3)....................................... 250,000 7.0%
Development of marketing channels(4).......................................... 100,000 2.8%
Working capital(5)............................................................ 365,000 10.2%
------------ -----------
$ 3,585,000 100.00%
------------ -----------
------------ -----------
</TABLE>
- ------------------------
(1) During the next 12 months, the Company intends to open six to eight new
retail locations. The cost to open a new store will range between $100,000
and $200,000 depending on location and size. The cost of opening a new store
includes leasehold improvements, equipment and fixtures, and initial
inventory buildup. The Company is currently targeting tourist and upscale
locations in existing and new markets. To date, the Company has executed
three additional leases in California, Florida, and Washington, D.C.
Management has also engaged in negotiations with several potential lessors
in Arizona, Florida, Massachusetts, Nevada, New Jersey and New York and
shortly after the offering, expects to have identified a "target list" of
possible additional locations for expansion. Any funds not used to open new
stores will be allocated to working capital. Includes approximately $400,000
of costs already incurred by the Company in connection with recently opened
new store locations.
(2) Consists of repayment of the $1,120,000 in Convertible Notes and $200,000 in
short-term notes, of which $100,000 is collateralized by the Company's
assets, and $50,000 of selected accounts payable. The short term notes to be
retired consist of a $100,000 note which bears 12% interest which was due in
January, 1996, the $60,000 balance due on a note which, together with 12%
interest was due in January 1996, and a $35,500 note which bears interest at
12% per annum which was due on December 31, 1996. All of the foregoing note
holders have agreed to forebear from taking action on the notes pending
completion and payment from the proceeds of this offering. See "Description
of Securities--12% Convertible Promissory Notes."
(3) The Company's merchandising strategy focuses on high-quality designer
influenced products and an upscale shopping environment. To this end, the
Company has launched a campaign to enhance the appearance of its existing
stores. The Company intends to allocate a portion of the proceeds to remodel
up to six stores over the next 12 months.
(4) Over the next 12 months, the Company plans to enhance and upgrade its
internet website, pursue wholesale opportunities in the international
marketplace, establish arrangements with home shopping networks and complete
the Company's product catalogue. The development of these additional
marketing channels is expected to cost approximately $100,000 over the next
12 months.
(5) The proceeds allocated to working capital will be applied, to the extent
necessary, to the Company's current operations. See "Management's Discussion
and Analysis of Financial Condition and Results of Operations." A portion of
those proceeds may also be used for additional store remodelings in the
future. Further, as it is an inherent part of the Company's strategic plan
to achieve long-term growth and profitable operations through, in part,
acquisitions, a portion of the proceeds allocated to working capital may be
used in connection the acquisition of one or more stores or chain of stores.
While the Company regularly evaluates acquisition and business combination
opportunities, there are no
16
<PAGE>
substantive negotiations, arrangements, agreements or understandings with
respect to any potential acquisition.
The amounts set forth above represent the Company's present intentions for
the use of the proceeds from this offering. However, actual expenditures could
vary considerably depending upon many factors, including, without limitation,
changes in the economic conditions, unanticipated complications, delays and
expenses, or problems relating to the development of additional retail
locations. Any reallocation of the net proceeds of the offering will be made at
the discretion of the Board of Directors but will be in furtherance of the
Company's strategy to achieve growth and profitable operations through the
development of additional retail locations. The Company's working capital
requirements are a function of its future sales growth and expansion, neither of
which can be predicted with any reasonable degree of certainty. As a result, the
Company is unable to precisely forecast the period of time for which proceeds of
this offering will meet its working capital requirements. The Company may need
to seek funds through loans or other financing arrangements in the future, and
there can be no assurance that the Company will be able to make such
arrangements in the future should the need arise.
Pending use of the net proceeds of the offering, the funds will be invested
temporarily in certificates of deposit, short-term government securities or
similar investments. Any income from these short-term investments will be used
for working capital.
17
<PAGE>
DILUTION
At October 27, 1996, giving retroactive effect to (i) the sale of the
Convertible Notes, (ii) the Company's repurchase of 189,023 shares of Common
Stock and 32,500 Class C Warrants for a total consideration of $624,325 and
(iii) the conversion of the Convertible Preferred Stock into 102,041 shares of
Common Stock, the Company had a proforma net tangible book value of $231,908 or
$.35 per share based upon 661,957 Common Stock shares outstanding. Net tangible
book value per share is determined by dividing the number of outstanding shares
of Common Stock into the net tangible book value of the Company (total assets
less total liabilities and intangible assets). After giving effect to the sale
of 1,100,000 shares of Common Stock and 1,100,000 Warrants by the Company in
this offering at prices of $3.90 and $.10, respectively, and receipt of the
estimated net proceeds therefrom, the adjusted net tangible book value at
October 27, 1996 would have been $3,953,451 or $2.38 per share of Common Stock.
This represents an immediate increase of $2.03 per share to current shareholders
and an immediate dilution of $1.62 per share or 40.5% to the investors in this
offering. The following table illustrates the per share dilution, assuming all
1,100,000 shares of Common Stock and Warrants are sold in this offering:
<TABLE>
<S> <C> <C>
Assumed public offering price per share of Common Stock and Warrant (1)...... $ 4.00
Net tangible book value per share of Common Stock before offering (2)...... $ .35
Increase per share of Common Stock attributable to new investors........... $ 2.03
---------
Adjusted net tangible book value per share of Common Stock after offering
(2)(3)(4)................................................................... $ 2.38
-----
Dilution of net tangible book value per share of Common Stock to new
investors (2)(3)(4)......................................................... $ 1.62
-----
-----
Dilution per share of Common Stock as a percentage of offering price
(2)(3)(4)................................................................... 40.5%
-----
-----
</TABLE>
- --------------------------
(1) Includes the price of the Warrant.
(2) Assumes that all the consideration paid by investors in the Bridge Offering
and Bridge Note Financing is allocated to the Convertible Preferred Stock
and Convertible Notes, respectively. Also assumes conversion of all shares
of Convertible Preferred Stock into 102,041 shares of Common Stock.
(3) Additional dilution to new investors will also result if shares of Common
Stock are issued upon exercise of outstanding warrants and options available
for grant under the Company's 1993 Stock Incentive Plan, which have exercise
prices of less than the offering price per share paid for shares of the
Company's Common Stock purchased in this offering. Further, warrants and
options are outstanding to purchase an aggregate of 256,250 shares of Common
Stock at a weighted average exercise price of $4.13 per share, as well as
Warrants exercisable to purchase an additional 241,667 shares of Common
Stock at a price of $ per share.
(4) Assumes no exercise of Warrants or Representative's Securities.
As of the date of this Prospectus the Company has sold the outstanding
661,957 shares of Common Stock, giving effect to the conversion of 416,670
shares of Convertible Preferred Stock into 102,041 shares of Common Stock, for a
total purchase price of $2,358,910, at an average cost per share of
approximately $3.50. On December 27, 1996, the Company completed the redemption
of 189,023 of its Common Stock shares from certain shareholders, which reduced
the net number of shares sold by the Company to 661,957. This compares to a
purchase price of $4.00 per share of Common Stock and Warrant for investors in
this offering. Upon completion of this offering, assuming the maximum number of
shares are sold, and after deduction of expenses of the offering, investors will
have contributed 59.8% of the capital of the Company for which they will have
received 62.4% of the Common Stock.
18
<PAGE>
CAPITALIZATION
The following table sets forth the capitalization of the Company as of
October 27, 1996 (i) on a historical basis, (ii) proforma giving effect to the
sale of the Convertible Notes and redemption and cancellation of 189,023 shares
of Common Stock and (iii) as adjusted to give effect to the conversion of the
Convertible Preferred Stock, the sale of the securities offered hereby and the
initial application of the estimated net proceeds therefrom. See "Use of
Proceeds." This section should be read in conjunction with the financial
statements and notes to the financial statements which are contained elsewhere
in this Prospectus.
<TABLE>
<CAPTION>
OCTOBER 27, 1996
------------------------------------------------
AS
ACTUAL PRO FORMA(1) ADJUSTED(1)(2)(3)(4)
------------- ------------- ------------------
<S> <C> <C> <C>
Long term debt....................................... $ 691,104 $ 1,811,104 $ 691,104
Stockholders' equity
Preferred Stock, $.10 par value, 20,000,000 shares
authorized; 416,670 shares outstanding, 416,670
outstanding pro forma(1); none outstanding as
adjusted......................................... 41,667 41,667 --
Common Stock, $.002 par value, 850,000,000 shares
authorized; 748,939 shares issued and
outstanding; 559,916 shares outstanding pro
forma(1) 1,761,957 as adjusted.(2)............... 1,498 1,120 3,524
Additional paid-in capital......................... 2,940,070 2,316,123 5,865,386
Accumulated deficit.................................. (1,824,527) (1,824,527) (1,824,527)
Total stockholders' equity (3)....................... 1,158,708 534,383 4,044,383
------------- ------------- ------------------
Total capitalization................................. $ 1,849,812 $ 2,345,487 $ 4,735,487
------------- ------------- ------------------
------------- ------------- ------------------
</TABLE>
- ------------------------
(1) Adjusted to give effect to (i) the sale of the Convertible Notes in the
Bridge Note Financing and (ii) the redemption and cancellation of 189,023
Shares of Common Stock (the "Pro Forma Adjustments").
(2) Adjusted to give effect to (i) the Pro Forma Adjustments, (ii) the sale of
1,100,000 Shares of Common Stock and 1,100,000 Warrants offered hereby for
gross proceeds of $3,960,000, (iii) reduced by estimated expenses of the
offering of $450,000, of which $75,000 have already been paid by the Company
and (iv) the repayment of the $1,120,000 in Convertible Notes.
(3) Does not include (i) 230,000 shares of Common Stock reserved for issuance
upon exercise of options which may be granted under the Company's 1993 Stock
Incentive Plan, 196,000 of which are subject to outstanding and unexercised
options having a weighted average exercise price of $2.33 per share, and of
which 70,000 options are subject to future vesting, (ii) 60,250 shares of
Common Stock reserved for issuance upon exercise of outstanding Class C
Common Stock Purchase Warrants ("C Warrants") at a price of $10.00 per
share, (iii) 12,000 shares of Common Stock reserved for issuance pursuant to
the exercise of other outstanding options and warrants having a weighted
average exercise price of $2.50 per share, (iv) 60,000 shares of Common
Stock reserved for issuance pursuant to the exercise of options which may be
granted under the Company's 1995 Employee Stock Purchase Plan ("1995 ESPP"),
and (v) 241,667 shares of Common Stock reserved for issuance upon exercise
of outstanding Warrants.
(4) Assumes no exercise of Warrants and Representative's Securities to be sold
by the Company in this offering.
19
<PAGE>
DIVIDENDS
No cash dividend was paid for the last two fiscal years. In March 1994,
following completion of a rights offering, the Company distributed to its
shareholders of record, PRO RATA, 2,409,700 shares of the common stock of Global
Casinos, Inc. previously acquired by the Company in its disposition of two
casino properties.
While no decision with regard to the payment of dividends in the future has,
to date, been made, the Company does not, as of the date of this Prospectus,
intend to declare or pay any dividends on its outstanding shares of Common Stock
in the foreseeable future. Future dividend policy is subject to the discretion
of the Board of Directors, and is dependent upon a number of factors including
future earnings, capital requirements and the financial condition of the
Company. The rights of Common Stock shareholders to dividends shall be subject
to the rights and preferences of Preferred Stock shareholders, if any, at the
time the dividend is declared.
20
<PAGE>
CERTAIN MARKET INFORMATION
PRICE RANGE OF COMMON STOCK
The outstanding shares of Common Stock are traded over-the-counter and
quoted on the OTC Electronic Bulletin Board on a limited and sporadic basis
under the symbol "PMRCA." The reported high and low bid and asked prices for the
Common Stock are shown below for the period through February 18, 1997. The
prices presented are bid and asked prices which represented prices between
broker-dealers and do not include retail mark-ups and mark-downs or any
commission to the broker-dealer. The prices do not necessarily reflect actual
transactions.
<TABLE>
<CAPTION>
BID(1) ASK(1)
-------------------------- --------------------------
HIGH LOW HIGH LOW
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
1994
First Quarter...................................... $ 7.50 $ 6.25 $ 10.00 $ 10.00
Second Quarter..................................... 7.50 7.50 10.00 10.00
Third Quarter...................................... 7.50 7.50 10.00 10.00
Fourth Quarter..................................... 5.00 5.00 10.00 10.00
1995
First Quarter...................................... (2) (2) (2) (2)
Second Quarter..................................... $ 5.00 $ 5.00 $ 10.00 $ 10.00
Third Quarter...................................... 5.00 1.25 10.00 3.75
Fourth Quarter..................................... 3.75 1.875 8.125 6.25
1996
First Quarter...................................... $ 2.50 $ 1.875 $ 8.125 $ 4.375
Second Quarter..................................... 2.50 1.875 4.375 4.375
Third Quarter...................................... 3.44 2.50 5.94 4.06
Fourth Quarter (through February 18, 1997)......... 3.44 2.50 4.50 4.06
</TABLE>
- ------------------------
(1) All prices have been adjusted to give retroactive effect to a one-for-five
reverse stock split which was effective on December 20, 1996.
(2) No trading activity during the period.
The bid and ask prices of the Company's Common Stock on February 18, 1997
were $2.625 and $4.250, respectively, as quoted on the OTC Electronic Bulletin
Board and as adjusted for the reverse stock split referred to above. As of
February 18, 1997 there were approximately 630 shareholders of record of the
Company's Common Stock.
21
<PAGE>
SELECTED FINANCIAL DATA AND STATISTICAL DATA
Set forth below is selected summary financial data with respect to the
Company. Financial information for the period ended January 29, 1995, for the
year ended January 28, 1996, and as of and for the nine months ended October 29,
1995 and October 27, 1996, is derived from the financial statements included
elsewhere in this Prospectus and is qualified by reference to such financial
statements and the notes related thereto. In February 1995, the Company adopted
its new fiscal year to begin January 30, 1995 and end January 28, 1996; and
thereafter the fiscal year will end on the last Sunday of each January of each
successive year.
<TABLE>
<CAPTION>
NINE MONTHS ENDED
PERIOD ENDED YEAR ENDED --------------------------
JANUARY 29, JANUARY 28, OCTOBER 29, OCTOBER 27,
1995 (1) 1996 1995 1996
------------- ------------ ------------ ------------
<S> <C> <C> <C> <C>
STATEMENTS OF OPERATIONS DATA:
Total revenues........................................... $ 8,335,790 $ 9,069,840 $ 6,231,250 $ 6,287,910
Operating (loss)......................................... (886,667) (37,298) (417,264) (138,297)
Income from discontinued operations...................... 141,237 270,441 177,830 16,177
Net income (loss)........................................ (1,038,726) 114,219 (350,118) (108,496)
Net income (loss) available to common shareholders....... (1,038,726) 114,219 (350,118) (116,496)
Net income (loss) per common share....................... (2.93) .23 (.77) (.15)
Weighted average number of common shares outstanding
(2).................................................... 354,600 495,800 454,851 748,939
STATISTICAL DATA:
Store revenues........................................... $ 8,178,054 $ 8,957,344 $ 6,187,408 $ 6,263,579
Store gross margin....................................... 5,509,955 6,337,334 4,271,700 4,436,239
Store operating expenses................................. 4,850,747 4,906,077 3,597,412 3,567,700
Store operating profit................................... 659,237 1,431,257 674,288 868,538
Corporate overhead operating expenses.................... 1,430,884 1,518,416 1,069,974 971,923
Gross margin percentage.................................. 66.4% 70.3% 68.7% 70.6%
Comparable same store sales (2).......................... 7,448,884 8,186,449 5,605,465 5,794,447
Comparable same store sales growth (2)................... N/A 9.9% N/A 3.4%
Comparable same store sales per square foot (2).......... 520.68 572.24 391.83 405.04
</TABLE>
<TABLE>
<CAPTION>
AS OF OCTOBER 27, 1996
------------------------------------------
ACTUAL PROFORMA(3) AS ADJUSTED(4)
------------ ------------ --------------
<S> <C> <C> <C>
BALANCE SHEET DATA:
Total assets........................................................ $ 3,469,379 $ 3,965,054 $ 6,105,054
Total liabilities................................................... 2,310,671 3,430,671 2,060,671
Working capital..................................................... 279,803 697,078 2,837,078
Stockholders' equity................................................ 1,158,708 534,383 4,044,383
</TABLE>
- ------------------------
(1) Due to the Company's change in fiscal year, the Company's financial
statements are reported for the year ending December 31, 1994 ("Fiscal
1994"), a one month period ending January 29, 1995, and the year ending
January 28, 1996 ("Fiscal 1996"). The Impostors acquisition was completed on
February 24, 1994, and accordingly results of operations for the period
ended December 31, 1994 reflect only ten months of Impostors' operations.
Prior to the Impostors acquisition, which includes the period from January
1, 1994 through February 23, 1994 (approximately two months), the Company
had no significant operating activity. Therefore, for purposes of
comparison, the one-month period from January 1, 1995 through January 29,
1995 has been combined with Fiscal 1994 and therefore
22
<PAGE>
represents thirteen (13) months of combined operations but only eleven (11)
months of operations of Impostors. This combined period is referred to as
"the period ended January 29, 1995."
(2) Includes only the 24 stores open for the entire periods being compared. For
the purpose of comparable same store sales only, the period ended January
29, 1995 includes 12 months of sales. However, the financial statement data
for the same period includes only 11 months of Impostors operations, as the
retail chain was acquired in late February, 1994.
(3) Adjusted to give effect to (i) the sale by the Company of $1,120,000 in
Convertible Notes realizing net proceeds of $1,041,600, and (ii) the use of
$624,325 of those proceeds to redeem 189,023 shares of Common Stock and
32,500 Class C Warrants.
(4) Adjusted to reflect net proceeds from the sale by the Company in this
offering of 1,100,000 shares of Common Stock and 1,100,000 Warrants at the
assumed initial offering prices of $3.90 per share and $.10 per Warrant and
the utilization of $1,370,000 of the net proceeds therefrom to retire the
Convertible Notes and other liabilities in the amount of $250,000. See "Use
of Proceeds." The "As Adjusted" information does not include the exercise of
the Warrants, the Underwriters' Over-Allotment Options or the options to
acquire the Representative's Securities. See "Use Of Proceeds,"
"Capitalization" and "Underwriting."
23
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The following discussion and analysis should be read in conjunction with the
Financial Statements and Notes thereto appearing elsewhere in this report.
RETAIL FISCAL YEAR
The method of financial reporting is a fifty-two to fifty-three (52-53) week
fiscal year ending on the last Sunday in January of each year. Likewise,
reporting quarters end on the Sunday closest to the calendar end of April, July
and October. Each reporting quarter contains 13 weeks of operations.
LIQUIDITY AND CAPITAL RESOURCES
Approximately 20% of the Company's business is generated during the
Christmas holiday season. The Company's cash position will therefore be the
highest at the end of December as compared to any other month of the year, and
tends to decrease during the first, second, and third quarters of the fiscal
year. On June 24, 1996, the Company successfully completed a bridge financing in
which it sold an aggregate of 416,670 shares of Series A Convertible Preferred
Stock and 208,335 Class B Warrants, realizing net proceeds of $225,000. These
proceeds were primarily used to finance the remodeling projects for the St.
Louis and Tucson locations, to partially finance the completion of a new store
in the Park Meadows Mall in Denver, Colorado, and to purchase various fixtures
and equipment associated with improvements for other existing locations. The
Company's net accounts payable and other accrued liabilities increased
approximately $542,000 during the nine months ended October 27, 1996. The bridge
financing funds and increases in accounts payable have been largely used to
finance new store construction and existing store remodels that were completed
during the first nine months of fiscal 1997, to purchase fixtures and equipment,
to finance the $194,000 increase in inventories for the Christmas holiday season
and anticipated new store openings in the fourth quarter, to finance offering
costs, net losses, and to reduce notes payable. As a result, the Company's cash
position decreased by $279,579 from $327,198 at January 28, 1996 to $47,619 at
October 27, 1996.
During the first nine months of fiscal 1997, the Company continued its
efforts to liquidate its common stock position in Global Casinos, Inc.
Therefore, marketable securities decreased from $45,113 at January 28, 1996 to
$7,006 at October 27, 1996. Management intends to liquidate its remaining
securities holdings as allowed by the general market conditions.
During the nine months ended October 27, 1996, the Company invested $475,185
in property and equipment. Approximately $240,000 of this investment represents
leasehold improvements and investments in equipment and fixtures in connection
with new store projects completed in Denver, Colorado, Bellevue, Washington, and
six new stores recently opened in Florida and New Jersey. Approximately $157,000
of this investment represents leasehold improvements and investments in
equipment and fixtures in connection with three existing locations remodeled in
San Mateo, California, St. Louis, Missouri, and Tucson, Arizona. Approximately
$68,000 represents investments in corporate office improvements and purchases of
furniture and fixtures in connection with the relocation of the corporate office
in January, 1996. The remaining approximately $10,000 represents minor
improvements and maintenance of other existing store locations.
Therefore, property and equipment, net of $783,520 in accumulated
depreciation, increased $276,822 from $977,727 at January 28, 1996, to
$1,254,549 at October 27, 1996. At January 28, 1996, the Company's trademark
assets were $104,900, net of accumulated amortization, which represented the
goodwill associated with the Impostors trademark and other intellectual property
acquired as part of the purchase of the Impostors' assets in February, 1994. The
Company's trademark asset is being amortized over a 10 year period, and had an
amortized book value of $90,933 at October 27, 1996.
24
<PAGE>
As of October 27, 1996, the Company had total outstanding liabilities of
$2,310,671 compared to $1,994,590 at January 28, 1996, representing an increase
of $316,081 which was due to an increase in current liabilities of $349,478,
from $1,178,567 at January 28, 1996 to $1,528,045 at October 27, 1996. This
increase was primarily the result of an increase in net accounts payable of
approximately $715,000 which was used to help finance offering costs, store
remodelings and net losses from operations and to reduce notes payable. Also,
management continued its efforts to purchase larger quantities of inventories to
maintain favorable inventory costs and to increase inventory levels to
accommodate the opening of Park Meadows, and the new store openings which
occurred in the months of November and December, and the normal inventory
build-up for the Christmas holiday season. As a result of the foregoing, working
capital decreased by $403,369, from $683,172 at January 28, 1996 to $279,803 at
October 27, 1996. See "Subsequent Events" below.
The amount borrowed from related parties was $74,420 at October 27, 1996
which reflects a reduction of $24,459, from the January 28, 1996 figure of
$98,879. During the nine month period, the Company also reduced other short and
long term notes by $174,900, which resulted in other notes payable of $963,866
as of October 27, 1996 compared to $1,138,766 at January 28, 1996. As of October
27, 1996, the Company was in arrears in the payment of two notes totaling, in
the aggregate, approximately $150,000. Management has been in discussions with
the two noteholders and plans to retire these two notes with the proceeds from
this offering.
The largest portion of the Company's long-term debt is comprised of a
$635,000 promissory note, which note carries interest at the rate of 10% per
annum and is payable in monthly interest payments of approximately $5,300 and is
due February 22, 1998. The note is secured by the Company's assets.
As a result of the Company's net loss for the nine months of $108,496, the
accumulated deficit increased from $1,716,031 at January 28, 1996 to a deficit
of $1,824,527 at October 27, 1996. However, due to the Company realizing
$225,000 from the Bridge Offering in June, 1996, stockholders' equity increased
in the nine months from $1,042,204 at January 28, 1996 to $1,158,708 at October
27, 1996.
Net cash provided by operating activities for the period ended October 27,
1996 was $316,692, compared to net cash used by operating activities of $113,852
for the nine months ended October 29, 1995. The primary changes in cash flow
generated by operations in the nine month periods ended October 27, 1996, and
October 29, 1995 reflects the increase in accounts payable and other accrued
liabilities of $506,254 and $515,607 for the two periods respectively. The
improvement in cash generated by operations was principally due to lower
overhead costs and a resulting reduction in the operating loss for the period,
and the Company's reduced position of investments in securities holdings.
During the nine months ended October 27, 1996, the Company invested $475,185
in capital equipment, which reflects the investments in leasehold improvements,
furniture and equipment discussed above. During the period, management continued
its efforts to sell its holdings of Global Casinos common stock, which resulted
in proceeds of $50,564.
Net cash used in financing activities for the nine months ended October 27,
1996 and October 29, 1995 was $171,650 and $57,166 respectively. The majority of
the change was the result of reduced payments on notes payable in 1996 as
compared to 1995 in the amount of $128,683, and $211,542 of deferred offering
costs incurred in connection with the proposed public financing discussed above.
The foregoing resulted in a decrease in the Company's cash position of
$91,140, from $138,759 at October 29, 1995 to $47,619 at October 27, 1996.
At January 28, 1996, the Company had a net operating loss carryforward
("NOL") for federal tax purposes of approximately $680,000 that may be utilized
to offset future profits. Due to the public offering, the usage of the NOL may
be limited in any one period under Section 382 of the Internal Revenue Code.
25
<PAGE>
As mentioned above, during the months of August, September, October,
November and December, the Company opened six additional retail locations. These
locations are at the Park Meadows Mall in Denver, Colorado, the Coastland Center
in Naples, Florida, Sawgrass Mills in Sunrise, Florida, Bayside Marketplace in
Miami, Florida, Menlo Park in Edison, New Jersey, and Garden State Plaza in
Paramus, New Jersey. In addition, the Company has executed six additional leases
to open new locations in the first quarter of fiscal 1998. These stores will be
located in Miami, Florida, Orange County, California, two locations in Ft.
Lauderdale, Florida, Washington DC, and Las Vegas, Nevada. Other sites are
currently being evaluated. Depending on location and size, the opening of a new
retail location represents an aggregate capital commitment of approximately
$100,000-$200,000 which includes leasehold improvements, furniture, fixture,
equipment and inventory.
The Company intends to use the proceeds from this offering to retire
$1,120,000 in Convertible Notes and $250,000 in other long- and short-term
obligations. The balance of offering proceeds will be used to fund the growth of
its retail chain and take advantage of other distribution opportunities such as
direct mail, home shopping and internet distribution. However, since the
Company's ability to achieve profitability in the future depends, to a large
extent, upon realizing economies from expansion without proportionate increases
in general and administrative expenses, the largest use of the proceeds from the
financing will be utilized to expand the number of stores to 42 within the next
12 months.
The Company believes the proceeds from this offering, along with cash flow
generated by operations will be sufficient to meet the Company's capital needs
over the next 12 months. However, if the Company is unsuccessful in securing the
contemplated financing, its ability to pursue additional opportunities for
distribution and retail store expansion will be significantly impaired and the
results of operations for future periods may be adversely affected.
SUBSEQUENT EVENTS
On December 27, 1996, the Company consummated the sale of $1,120,000 in
Convertible Promissory Notes and 200,000 Class B Warrants, realizing net
proceeds of $1,041,600. From the net proceeds, the Company utilized $624,325 to
redeem from certain former securityholders an aggregate of 189,023 shares of
Common Stock and 32,500 Class C Warrants. The Convertible Notes bear interest at
the rate of 12% per annum, payable quarterly and are convertible into shares of
Common Stock commencing April 1, 1997, at the option of the holder, at a
conversion value of $2.80 per share. However, if (i) the Company fails to
complete a public offering of its securities by June 30, 1997 or (ii) the
principal balance of the Convertible Notes is not retired by the Company by
their Maturity Date, the conversion value is reduced to $1.00 per share. The
Company has agreed to retire the Convertible Notes from the proceeds of this
offering. Unless earlier converted or retired, the Convertible Notes mature and
become due and payable on December 26, 1999. The obligation of the Company to
repay the Convertible Notes is secured by a subordinated security agreement
covering all of the Company's tangible and intangible assets.
The Company used the remaining proceeds from the Bridge Note Financing to
pay the accrued cost incurred in the Company's opening of five new stores during
the fourth quarter, and for working capital. The proceeds of the Bridge Note
Financing were not sufficient to meet all of the Company's capital commitments
for its six additional new stores which have opened recently or are scheduled to
open over the next four months. Those capital commitments will require
additional financing which the proceeds of this offering have been allocated to
satisfy. See "Use of Proceeds."
RESULTS OF OPERATIONS
REPORTING PERIODS AND COMPARABILITY
Due to the Company's change in fiscal year, the Company's financial
statements are reported for the year ending December 31, 1994 ("Fiscal 1994"),
the one month period ending January 29, 1995, and the year ending January 28,
1996 ("Fiscal 1996"). The Impostors acquisition was completed on February 24,
26
<PAGE>
1994, and accordingly results of operations for the period ended December 31,
1994 reflect only ten months of Impostors' operations. Prior to the Impostors
acquisition, which includes the period from January 1, 1994 through February 23,
1994 (approximately two months), the Company had no significant operating
activity. Therefore, for purposes of comparison, the one-month period from
January 1, 1995 through January 29, 1995 has been combined with Fiscal 1994 and
therefore represents 13 months of combined operations but only 11 months of
operations of Impostors. This combined period is referred to in the following
discussion as "the period ended January 29, 1995."
The following table sets forth for the periods indicated, the percentage
relationship between selected items in the Statements of Operations to revenues:
<TABLE>
<CAPTION>
PERIOD ENDED JANUARY FISCAL YEAR ENDED NINE MONTHS ENDED NINE MONTHS ENDED
29, 1995 JANUARY 28, 1996 OCTOBER 29, 1995 OCTOBER 27, 1996
--------------------- --------------------- --------------------- ---------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues................... $8,335,790 100% $9,069,840 100% $6,231,250 100% $6,287,910 100%
Cost of goods sold......... 2,797,607 33.6% 2,690,658 29.7% 1,950,456 31.3% 1,847,986 29.4%
Gross margin............... 5,538,183 66.4% 6,379,182 70.3% 4,280,785 68.7% 4,439,924 70.6%
Operating expenses......... 6,424,850 77.0% 6,416,480 70.7% 4,698,049 75.4% 4,578,221 72.8%
Operating loss............. (886,667) (10.6)% (37,298) (0.4)% (417,264) (6.7)% (138,297) (2.2)%
Other income (expenses),
net...................... (344,296) (4.1)% 2,186 nil (219,684) (3.5)% 3,624 nil
Income (loss) before
discontinued
operations............... (1,179,963) (14.2)% (156,222) (0.2)% (527,948) (8.5)% (124,673) (2.0)%
Net income (loss) available
to common shareholders... (1,038,726) (12.5)% 114,219 1.3% (350,118) (5.6)% (116,496) (1.9)%
Net income (loss) per
common share............. (2.93) .23 (.77) (.15)
</TABLE>
RESULTS OF OPERATIONS--NINE MONTHS ENDED OCTOBER 27, 1996 COMPARED TO NINE
MONTHS ENDED OCTOBER 29, 1995
Retail revenues for the period ended October 29, 1995 were $6,187,408 which
reflects revenues from 29 retail locations. The Company's retail revenues for
the nine months ended October 27, 1996, which represent revenues from 26 retail
locations, and one additional store which opened on August 31, 1996 at the Park
Meadows Mall in Denver, Colorado, were $6,263,579 an increase of $76,171.
Wholesale sales were $23,950 and $42,381 for the nine months ended October 27,
1996, and October 29, 1995 respectively. Comparable same store sales (24 stores)
were $5,794,447 for the nine months ended October 27, 1996 compared to
$5,605,465 for the same period in 1995, an increase of 3.4%. Management's
attributes this increase to a continued improvement in the Company's merchandise
assortment and strategy, which included the introduction of a genuine sterling
silver line of products in May, 1996. As well, the Company's remodeled locations
are benefitting from an improved store design.
Although management expects that same store sales may increase marginally in
the future, it is anticipated that any material future increase in total sales
will depend upon the Company's ability to expand its number of stores. The
Company expects that over the next twelve months planned store expansions will
not require a proportionate increase in corporate overhead.
For the nine months ended October 27, 1996, cost of goods sold was
$1,847,986 and the gross margin was $4,439,924, or approximately 70.6%. For the
nine months ended October 29, 1995, cost of goods sold was $1,905,465 and the
gross margin was $4,280,705 or approximately 68.7%. Included in cost of goods
sold are estimates for inventory shrinkage of $62,500 and $134,600 for the nine
months ended October 27, 1996 and October 29, 1995, respectively. The Company
attributes the improvement in gross margin percentage to adjustments to the
shrinkage reserve rate, and less sales promotional activity and capitalizing on
buying opportunities offering lower merchandise costs.
Selling, general and administrative expenses were $4,365,891 for the nine
months ended October 27, 1996, compared to $4,453,164 for the period ended
October 29, 1995. The majority of these expenses were comprised of personnel
expenses, which amounted to $2,034,254 and $2,115,045 for the nine months
27
<PAGE>
ended October 27, 1996 and October 29, 1995, respectively, and occupancy costs
of $1,468,886 and $1,468,587 respectively. Depreciation and amortization expense
was $212,330 for the nine months ended October 27, 1996, and $252,992 for the
nine months ended October 29, 1995, representing a reduction of $40,662 due to a
reduced depreciable asset base.
Included in total selling, general and administrative expenses are corporate
overhead expenses of $971,923, and $1,069,974 for the nine months ended October
27, 1996, and October 29, 1995 respectively, a decrease of approximately
$98,000, or 9.2%. The Company attributes the decrease in overhead expenses to
lower personnel and occupancy costs realized by the relocation of the corporate
offices from California to Colorado in January, 1996.
As a result of the foregoing, the Company's operating loss for the nine
months ended October 27, 1996 was $138,297. This compares with a loss from
operations for the nine months ended October 29, 1995 of $417,264, an
improvement of approximately $278,000 over the comparable nine month period.
Net interest expense was $79,350 and $97,968 for the nine months ended
October 27, 1996, and October 29, 1995, respectively. The Company's gain on
investments of $12,458 for the period ended October 27, 1996 relates to the
Company's holdings of common stock in Global Casinos, Inc. During the nine
months ended October 27, 1996, the Company sold most of its holdings of these
securities and management intends to liquidate its remaining holdings of Global
common stock as allowed by general market conditions. For the period ended
October 29, 1995, the Company reported loss of $150,471 on its investment in
tradable securities.
For the nine months ended October 27, 1996, other income, net of other
expenses, was $70,517. Of this amount, approximately $19,000 represented license
fees from three former franchisees operating five locations, who executed
license agreements with the Company that entitles them to use the Impostors
trademark for one year. These license agreements, which require an annual
license fee of $5,000, will expire in January and February of 1997. The Company
may renew these agreements at its discretion. Other income also includes a gain
of approximately $25,000 which represents a final settlement of a recorded
liability and funds held in escrow that were used to satisfy certain liabilities
to unsecured creditors of the predecessor company, and approximately $28,000 in
gains realized in settlements with former franchisees.
For the nine months ended October 29, 1995, other income, net of other
expenses, was $28,755, which included a gain of $72,000 representing income from
a settlement with a former franchisee, which receivable had been previously
written off in fiscal 1995.
Income from discontinued operations, net of income tax benefit, was $16,177
and $177,830 for the nine months ended October 27, 1996 and October 29, 1995,
respectively. The income from discontinued operations reflects negotiated
settlements with creditors relating to the Company's previous gaming operations.
Based on the foregoing, the Company reported a net loss available to common
shareholders for the nine months ended October 27, 1996 of $116,496, which
translates to a net loss per share, after income from discontinued operations,
of $.15 based on 748,939 weighted average shares outstanding. This compares with
a reported net loss available to common shareholders for the nine months ended
October 29, 1995 of $350,118 or $.77 per common share, based on 454,851 weighted
average shares outstanding as of that date. Future profitability will depend
upon the Company's ability to expand its number of store locations, generate
favorable lease cost/sales ratios and control overhead expenses, and take
advantage of other distribution opportunities.
Other than the foregoing, management knows of no trends, or other demands,
commitments, events or uncertainties that will result in, or that are reasonably
likely to result in, a material impact on the income and expenses of the
Company.
28
<PAGE>
RESULTS OF OPERATIONS--FISCAL 1996 COMPARED TO PERIOD ENDED JANUARY 29, 1995
The Company's revenues increased from $8,335,790 for the period ended
January 29, 1995 to $9,069,840 for the year ended January 28, 1996 ("Fiscal
1996"). During fiscal 1996, the Company's same store sales increased by 9.9%, or
approximately $738,000. On a percentage basis, sales improved most significantly
in the first quarter ended April 1, 1995, mainly due to higher inventory levels
and a refocus in the Company's merchandising strategy, from less
fashion-oriented merchandise to more fine jewelry looks.
The Company closed four stores during Fiscal 1996 and one store during the
period ended January 29, 1995 due to unprofitable operations. One additional
location, Rodeo Drive, was also closed due to the landlord's termination of a
month-to-month lease. In October 1995, the Company opened a new location in the
Tucson Mall in Tucson, Arizona, and in November 1995, the Company opened a new
store in Bellevue Square, Bellevue, Washington. During the year ended January
28, 1996, the sales per store ranged from approximately $197,000 to
approximately $1,460,000 for the highest sales volume store. A majority of the
retail stores generated between $250,000 and $450,000 in annual sales. During
the same period, store contributions (store revenues less direct store
expenses), ranged from a negative contribution of approximately $19,000 to a
positive contribution of $246,000, averaging $52,000 per store. The Company
believes that existing stores have potential for further improvements in sales
and contribution through the continuation of a focused merchandise mix as well
as from a higher inventory turn rate. In addition, the Company remodeled and
updated the overall look of the stores at the Stoneridge Mall in Northern
California to reflect a more contemporary look and color scheme. In March 1996,
the Company's store in the St. Louis Galleria in St. Louis, Missouri was
remodeled and relocated to an improved location in the mall. The Company's
remodeling efforts will continue to the extent that funds are available and the
expected sales increases justifies the capital investment.
Approximately $111,000 of the Company's sales in Fiscal 1996 represented
sales to wholesale clients, while the comparable amount for the period ended
January 29, 1995 was $154,954. The Company's wholesale business was primarily to
former franchisees that signed licensee agreements with the Company allowing the
licensees a continued use of the Impostors' mark. In March 1996, these licensee
agreements expired, and management has offered to renew these agreements on a
case-by-case-basis. As of the date of this report, three of these agreements,
representing five stores, have been renewed for an annual licensee fee of $5,000
per store.
For the year ended January 28, 1996, cost of goods sold was 29.7% compared
to 33.6% for the period ended January 29, 1995. The gross margin percentage
therefore improved by approximately 4% from 66.4% for the period ended January
29, 1995 to 70.3% for the year ended January 28, 1996. Approximately 3% of the
gross margin increase resulted from the relatively higher discounts obtained on
merchandise where the Company bought larger quantities. The Company's gross
margin also improved from an increase in the amount of products purchased from
the Pacific Rim, which normally offers a lower merchandise cost than if the same
products were bought from domestic vendors. In addition, less promotional
activity without erosion in sales in Fiscal 1996 compared to the period ended
January 29, 1995 generated overall improved gross margins in most product
categories. Gross margin incorporates the costs of shrinkage and freight, which
for Fiscal 1996 were approximately $52,000 and $51,000 respectively and
approximately $146,000 and $31,000 respectively in Fiscal 1995. 1% of the total
4% gross margin improvement therefore resulted from an approximate $94,000
reduction shrinkage in Fiscal 1996 as compared to Fiscal 1995.
Operating expenses were essentially unchanged at $6,416,480 for the year
ended January 28, 1996 compared to $6,424,850 for the period ended January 29,
1995. The majority of these expenses were comprised of salaries and wages which
amounted to $2,470,000 in Fiscal 1996 compared to approximately $2,467,000 for
the period ended January 29, 1995. Occupancy costs were $1,974,000 compared to
$1,914,000 for the period ended January 29, 1995. Depreciation an amortization
was $337,070 for the year ended January 28, 1996, compared to $341,809 for the
period ended January 29, 1995.
29
<PAGE>
As part of management's efforts to reduce the Company's overhead expenses,
in January 1996, the Company relocated its corporate headquarters from San
Francisco, California to Denver, Colorado. Management believes this relocation
will result in lower occupancy costs and will position the Company to realize
efficiencies in overhead personnel.
As a result of the foregoing, the Company improved its results from
operations by $849,369, or 96%, from an operating loss of $886,667 for the
period ended January 29, 1995, to an operating loss of $37,298 for the year
ended January 28, 1996. The Company reduced its notes and loans outstanding,
which resulted in a decrease in interest expense of $49,296, or approximately
31%, from $157,476 for the period ended January 29, 1995 to $108,180 for the
year ended January 28, 1996. The net loss on marketable securities, which
primarily related to the Company's holdings of common stock in Global Casinos,
Inc. increased by $35,680, from a loss of $146,963 at January 29, 1995 to a loss
of $182,643 at January 28, 1996. The loss on the marketable securities includes
an unrealized loss of $93,232, reflecting a decrease in the market value of the
Global Casinos, Inc. shares at January 28, 1996 as compared to the investment
cost basis of these shares at January 29, 1995.
Income from discontinued operations of $270,441, net of income tax benefit
of $161,000 for the year ended January 28, 1996 represented negotiated
settlements of approximately $209,000 with certain creditors and a reduction in
accounts payable of approximately $222,000 which related to claims associated
with the Company's operations prior to the Impostors acquisition. The reduction
of accounts payable of approximately $222,000 was based upon management's
estimates of amounts which may ultimately be paid, but the Company has not
received formal releases from the creditors. At December 31, 1994, income from
discontinued operations was $141,237, net of income tax benefit of $51,000,
representing negotiated settlements with certain creditors related to the
Company's prior business activities.
Based on the foregoing, at January 28, 1996, the Company reported an
improvement in net income from a net loss of $1,038,726 for the period ended
January 29, 1995 to a net income of $114,219 for the year ended January 28,
1996, which, based on average shares outstanding 495,800, translate to a net
income per share, after discontinued operations of $.23. This compares to a net
loss for the period ended January 29, 1995 of $2.93 per share based on weighted
average shares outstanding of 354,600. Inflation and changing prices have not
had a material impact on the Company's prices, net sales and revenues and income
from continuing operations, and are not expected to have a material impact in
the future.
RESULTS OF OPERATIONS--ONE MONTH ENDED JANUARY 29, 1995
Revenues for the one month period were $543,377. Cost of goods sold was
$228,076 resulting in a gross margin of $315,301, or 58%. The margin percentage
reflects management's effort to reduce inventories and also the reduction in
margin that resulted from a "going out of business sale" in connection with the
closing of two stores in February and March, 1995.
Operating expenses of $518,327 which included personnel expenses of $231,802
and occupancy expenses of $174,592, resulted in an operating loss of $203,026
for the one-month period. Also included in operating expenses was depreciation
of $29,663 and general administrative expenses of $82,270. Interest expense was
$11,899.
As a result of the foregoing, the Company reported a net loss for the
one-month period ended January 29, 1995 of $214,784, or $.49 per share on
434,200 weighted average shares outstanding. Management's attributes a
significant portion of this loss to the two store closings in the first calendar
quarter in 1995.
Net cash used in operating activities of $410,030 was the result of a
significant reduction in accounts payable of $435,030, which was partially
offset by cash provided by a $201,735 reduction in merchandise inventories.
30
<PAGE>
Payments on notes payable were $18,008. As a result of the foregoing, the
Company's cash position decreased by $428,038, from $599,202 at January 1, 1995
to $171,164 at January 29, 1995.
IMPAIRMENT OF LONG-LIVED ASSETS
In March 1996, the Financial Accounting Standards Board issued a statement
entitled "Accounting for Impairment of Long-Lived Assets." In the event that
facts and circumstances indicate that the cost of assets or other assets may be
impaired, an evaluation of recover ability would be performed. If an evaluation
is required, the estimated future in discounted cash flows associated with the
asset would be compared to asset's carrying amount to determine if a write-down
to market value or discounted cash flow value is required. Adoption of FAS 121
had no effect on the unaudited October 27, 1996, financial statements.
STOCK-BASED COMPENSATION
In October 1995, the Financial Accounting Standards Board issued a new
statement titled "Accounting for Stock-Based Compensation" (FAS 123). The new
statement is effective for fiscal years beginning after December 15, 1995. FAS
123 encourages, but does not require, companies to recognize compensation
expense for grants of stock, stock options, and other equity instruments to
employees based on fair value. Companies that do not adopt the fair value
accounting rules must disclose the impact of adopting the new method in the
notes to the financial statements. Transactions in equity instruments with
non-employees for goods or services must be accounted for on the fair value
method. The Company has elected not to adopt the fair value accounting
prescribed by FAS 123 for employees, and will be subject only to the disclosure
requirements prescribed by FAS 123.
Other than what has been discussed above, management knows of no trends, or
other demands, commitments, events or uncertainties that will result in, or that
are reasonably likely to result in a material impact on the income and expenses
of the Company.
31
<PAGE>
BUSINESS
OVERVIEW
Operating under the name "Impostors," Premier Concepts, Inc. (the "Company")
specializes in the marketing and retailing of high-end reproduction jewelry
("faux jewelry") and 14 karat gold jewelry with cubic zirconia and other
synthetic stones. Through its national chain of 35 currently operating retail
stores, the Company sells jewelry that emulates classic fine jewelry as well as
pieces designed by famous jewelers such as Tiffany & Co.-Registered Trademark-,
Cartier-Registered Trademark-, Bulgari-Registered Trademark- and Harry Winston.
The Company's product line also includes replicas of jewelry owned by Princess
Diana, The Duchess of Windsor, Elizabeth Taylor and other celebrities. The
Company's faux jewelry is created with layered gold, cubic zirconia and Austrian
crystal to simulate the look of fine jewelry. In June 1996, the Company
introduced a new collection of genuine sterling silver jewelry featuring
semi-precious and synthetic stones. The Company's products are purchased from
several domestic vendors and from vendors in China, England, Hong Kong, Italy,
Korea, Spain, Taiwan and Thailand.
The Impostors stores are designed to match the elegant look of the Company's
products and to provide customers with the feeling of shopping in an upscale,
fine jewelry environment. The Company's stores are located in shopping malls and
tourist locations. Currently, the Company's stores are located in Southern
California, Northern California, the states of Arizona, Colorado, Florida,
Louisiana, Maryland, Missouri, Nevada, New Jersey, Washington and in the
Washington, D.C. area. The largest and most visible store is located in the
prime retail area of San Francisco's Union Square. During the period from August
30, 1996, to February 15, 1997 the Company opened nine additional retail
locations, bringing the current total to 35 stores. In addition, the Company has
entered into leases for three new retail stores in California, Florida, and
Washington, D.C., scheduled to open over the next four months.
BUSINESS STRATEGY
In March 1994, the Company acquired out of bankruptcy substantially all of
the assets and assumed certain liabilities associated with the operation of a
nationwide chain of 27 faux jewelry stores which were then operating under the
trademark "Impostors." In the months following the Company's entry into the faux
jewelry industry, results of operations continued to deteriorate principally due
to the continuing burden of excessive operating and overhead expenses,
pre-petition and post-petition bankruptcy liabilities, the unprofitability of
certain stores, as well as the continuation of ineffective marketing and
merchandizing strategies. In June 1994, the Company hired a new president,
Sissel B. Greenberg, who immediately began implementing a transition plan
calculated to reverse the negative impacts of the Company's predecessor's
ineffective business strategy. In furtherance of the turnaround effort, the
Company has reduced overhead by moving its corporate offices from San Francisco
to Denver, closed five stores due to unprofitable operations, and one store due
to an expired lease, reduced debt through negotiated settlements, opened three
new stores and implemented a new merchandizing strategy. These actions have
reduced the Company's operating loss from $886,667 for the 13-month period ended
January 29, 1995 to an operating loss of $37,298 for the fiscal year ended
January 28, 1996, and from an operating loss of $417,264 for the nine months
ended October 29, 1995 to an operating loss of $138,297 for the nine months
ended October 27, 1996.
With its turnaround strategy in place, Premier believes that it has an
opportunity to become a leader in the specialty retailing segment of the market
for faux and reproduction jewelry and related accessory items through a
combination of internal growth and acquisitions. Its plans include adding new
stores and remodeling existing stores, development of new marketing channels
including multimedia and direct mail, and the marketing of its high-end jewelry
reproductions and store concept internationally through licensing and
distribution arrangements.
32
<PAGE>
PRINCIPAL PRODUCTS
Since inception, Impostors' merchandising strategy has evolved through
several phases. Initially, the concept was based on the marketing and retailing
of jewelry representing faux copies of expensive fine and designer jewelry.
However, in 1993, when AFJ filed for Chapter 11 protection, Imposters redirected
its focus to present the merchandise in a theme oriented style and focusing on
more trendy fashion jewelry. Price points were significantly lowered for a
day-in, day-out value. A significant decline in revenues and margins resulted
from this program. As part of the turnaround plan, the merchandise has been
refocused to designer and fine jewelry inspired faux jewelry, with more emphasis
on 14 karat gold and most recently, genuine sterling silver.
The Company's products are comprised of approximately 60% fine jewelry
reproductions and emulations of merchandise inspired by classic designers such
as Cartier-Registered Trademark-, Tiffany & Co.-Registered Trademark-,
Bulgari-Registered Trademark- and Harry Winston, and approximately 40% of 14
karat gold featuring cubic zirconia and other synthetic stones. The jewelry
ranges from solitaire rings and faux pearl necklaces to earrings, pendants and
bracelets. Since the Company's products are set in layered 18 karat gold over
jewelers bronze or 18 karat gold over sterling silver, the jewelry can be
offered at substantially less cost than the original pieces. The use of cubic
zirconia and other laboratory grown stones offers a more affordable product by
emulating the look and feel of expensive gemstone jewelry. The Company recently
introduced a collection of genuine sterling silver with semi-precious and
synthetic stones.
The Company offers approximately 3,000 different jewelry items, with none
representing more than 10% of the Company's total annual sales. As a group, 14
karat gold items constitute the largest classification, representing 40% of
total inventory. Throughout the year, individual stores offer between 1,000 and
2,000 different pieces, with certain specialty items being added from time to
time for seasonal or other marketing purposes.
Most of the Company's products are selected by the Company from existing
inventory offered by vendors. However, from time to time the Company purchases
exclusive items that are manufactured under special order for the Company.
Because the Company's products are high-quality emulations of classic fine
jewelry designs that change little from year to year, the Company has not
experienced problems associated with inventory obsolescence.
REMODELING AND EXPANSION STRATEGY
The Company has developed a new interior design to match the elegant look of
its products and to provide its customers with the feeling of shopping in a
high-end, fine jewelry environment. During 1995, the Company completed one
interior remodel of an existing store in San Francisco, California. During 1996,
the Company completed three remodelings. In addition, the Company's new stores
will incorporate its new interior design.
The Company plans to remodel six additional stores over the next 12 months,
at an average estimated cost of $40,000 per store. See "Use of Proceeds."
Additional remodeling activity will depend upon the availability of working
capital from future operations, of which there can be no assurance. The Company
also plans to open six to eight new Impostors stores in existing and new markets
over the next 12 months. During the period from August 30, 1996 to February 15,
1997, the Company opened nine additional retail stores and three more are
planned in California, Florida and Washington, D.C., and are scheduled to open
over the next four months. Other potential real estate sites in Florida,
Massachusetts, Nevada and New York are currently being evaluated, although to
date no leases covering additional new locations have been executed.
In selecting and evaluating new sites, the Company has developed criteria
which consider local population demographics, customer base, sales per square
foot of other retailers in the area, and most significantly, location. The
Company focuses on centers and malls with a heavy tourist trade. Absent a high
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tourist component, a regional mall would be considered only if the location
offered is in a high traffic area with a mix of other fashion tenants. The
Company also plans to pursue opportunities in casinos and high-profile hotels.
The Company develops financial projections for any new proposed site and will
reject any location where it believes break-even operations cannot be achieved
within a three- to six-month period. The opening of a new retail location
represents an aggregate capital requirement of approximately $100,000 to
$200,000, depending on location and size, which includes initial leasehold
expenses and improvements, purchases of furniture, fixtures and equipment and
initial inventory costs.
Since the Company's inventory, accounting and information systems are highly
automated, it believes that it has the present capacity to handle the
accounting, informational and inventory tracking needs for up to 100 stores.
Current management could manage an additional eight stores with minimum
increases in overhead costs, with further additions requiring increased
management and other staffing.
In addition to developing its own new store locations, the Company is
continually investigating the possibility of acquiring companies in similar
lines of business, including faux jewelry, fine jewelry and accessories.
Potential candidates include small retail chains, companies currently engaged in
multimedia faux jewelry sales, as well as former Impostors franchisees. While
the Company continually investigates such acquisition opportunities, there are
no substantive negotiations, arrangements, agreement or understandings with
respect to any potential acquisition.
OTHER MARKETING AND DISTRIBUTION CHANNELS
Currently, over 98% of the Company's revenues are derived from its retail
store sales. The Company also has limited sales nationally and internationally
through distributors and wholesalers. The Company frequently receives inquiries
from overseas businesses regarding the development of wholesale and retail
distribution of its concept and products in Europe as well as the Orient. Prior
to this offering, the Company has had no resources to focus on this
international demand and products have been sold in limited amounts to accounts
in Australia, Chile, Italy and Taiwan. The Company plans to increase its
international business by hiring additional persons and/or agents to represent
its line of products internationally, and may use a portion of the offering
proceeds for investments in inventory to service any increase in its
international business, although no proceeds of this offering have been
specifically allocated for this purpose. The ability of the Company to fully
develop the potential offered by the international marketplace depends upon both
overcoming legal obstacles and the availability of additional working capital
from future operations, of which there can be no assurance.
The Company plans to develop a catalogue which initially will be distributed
through its retail stores located in tourist areas. Depending on the results of
the in-store distribution, the Company may decide to broaden the catalogue
distribution through direct mailings to new potential customers. The Company has
also explored possible multimedia distribution of its jewelry. In October, 1996,
the Company completed the development of its internet Home Page. Additionally,
the Company has initiated discussions to market its concept and products to the
home shopping networks, and intends, through an independent producer, to develop
a "Concept Program" around its theme of designer inspired and faux jewelry. Part
of this process includes the licensing of a spokesperson, who may be a
celebrity, to add credibility and entertainment to the Company's product line.
The Company expects to have developed its Concept Program within six to eight
months following the completion of this offering, which will then be presented
to primarily domestic home shopping networks. Approximately $100,000 has been
budgeted for the development of these additional marketing channels. See "Use of
Proceeds."
MARKET AND CUSTOMERS
The Impostors' niche bridges the markets between costume and fine jewelry by
offering high-quality reproductions of classic and designer fine jewelry and
also a collection of 14 karat gold and sterling silver with cubic zirconia,
semi-precious and synthetic stones. The Company's faux jewelry distinguishes
itself
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from traditional fashion jewelry by the quality of the metals, stones and
craftsmanship utilized in the design and manufacturing process. While costume
jewelry is typically price-pointed in the $5 to $30 range, the majority of the
Company's faux jewelry is priced in the $30 to $100 range. The 14 karat gold
collection has pricepoints between $45 to $1,000, with the majority in the $100
to $400 range.
The market for the Company's products is to a large extent defined by a
knowledgeable customer's desire to have the look, feel and design of classic
fine jewelry and expensive diamond and gemstone jewelry, without the cost. The
Company targets women between the ages of 30 and 60 who are either purchasing
jewelry reproductions in place of or to complement expensive fine jewelry, or
professional women who want the look of fine jewelry but are unwilling or unable
to pay the fine jewelry price tag. The Company expects this market to continue
to grow in accordance with the expected increases in the number of women
entering the professional workplace. The Company also expects to benefit from
the maturation of the baby boomer generation who, according to the United States
Census Bureau, will have reached the age of 45 by the year 2000. It has been the
Company's experience that the vast majority of its retail customers are women
purchasing for themselves rather than men purchasing for others.
SUPPLIERS AND VENDORS
The Company purchases its products from vendors who have an established
history of manufacturing high quality jewelry products. These vendors offer a
standard product line through catalogues and trade shows, and also will
manufacture certain products specially for the Company, for which the Company
will typically be given a 12 to 18 month exclusivity for that item by the
vendor. The Company's relationship with its vendors of high-quality product is
considered a component of its strategic advantage over other competitors. The
Company works closely with its vendors to constantly upgrade the quality of its
products.
The Company's products are currently being purchased 80% from domestic
vendors and 20% from vendors in England, Hong Kong, Italy, Korea, Spain, Taiwan
and Thailand. Most of the inventory is purchased from vendors' existing
inventory and designs, while some is manufactured under special order. Orders
from foreign vendors take 6 to 8 weeks to fill, with U.S. vendors delivering in
approximately 3 to 4 weeks. Most domestic vendors offer the Company terms of
payment of between 30 and 60 days and some offer up to 90 days, while many
international vendors require either prepayment or payment prior to shipment.
The Company continually investigates new sources of merchandise in order to
maximize profit margins and expects to concentrate future purchases to a larger
degree from vendors in the Pacific Rim. The Company considers the identity of
its sources of supply to be proprietary to the extent that a product's quality,
source and price bear directly upon the Company's competitive advantage. The
Company does not rely on any single source of supply and could readily obtain
product from new suppliers should any given source become unavailable. The
Company has not experienced any difficulty in obtaining merchandise and does not
anticipate any future problems or restriction of availability.
COMPETITION
Because the Company's products address a market niche for the look and feel
of fine jewelry without the cost, it experiences both indirect and direct
competition from others. Indirect competition comes from costume and fashion
jewelry at the low end and fine jewelry on the upper end, with the Company's
faux jewelry and 14 karat gold with synthetic stones bridging the gap. The
Company believes its products are superior both in design and quality to jewelry
offered by traditional fashion jewelry retailers. Conversely, the Company's
advantage over expensive fine gemstone and diamond jewelry is one of cost
without a commensurate sacrifice in appearance or durability.
The Company competes directly with vendors and other retailers of faux
jewelry and indirectly with specialty retailers of accessories and related
items. Department stores typically offer lower-end costume and fashion jewelry,
or on occasion will offer higher-end faux jewelry designed by their own
exclusive designers. While some department stores will have a limited offering
of faux jewelry, the Company's
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exclusive emphasis on this specialty market niche is designed to attract the
customer who has already decided to purchase faux jewelry rather than either
costume jewelry or the high cost genuine piece of fine jewelry. However, the
Company is not alone in this marketing approach, as there exist a few other
chains of retailers offering faux jewelry in a directly competitive manner. The
Company is aware of only one other business, N. Landau Hyman, that has a
comparable number of specialty retail stores that focus on the sale of faux
jewelry. Other specialty retailers who focus on the sale of faux jewelry include
Elegant Illusions which has approximately 13 faux jewelry stores, Mystique which
has 4 stores in Florida, and Diamond Essence which has 3 retail stores in New
York and Chicago and a direct marketing catalogue concentrating exclusively on
14 karat gold jewelry with faux gemstones. The Company's advantage, if any, over
these other retailers lies in its relationships with its vendors, some of which
it considers to be highly proprietary, economies of scale offered by the
Company's ability to purchase large quantities of inventory from vendors who
have certain minimum quantity requirements, and in its store locations.
Nevertheless, in order for the Company to continue to be competitive, it must
maintain and expand its desirable store locations and continue to develop its
strong vendor relations, neither of which can be assured.
INTELLECTUAL PROPERTY
Copyrights, trademarks and trade secrets are the principal protection for
the Company's products, services and reputation. The Company owns federally
registered trademarks for the following names: Impostors-Registered Trademark-,
Impostors De Classique Copy Jewels-Registered Trademark-, Impostors Copy
Jewels-Registered Trademark-, Elegant Pretenders-Registered Trademark-, and The
Latest In Faux-Registered Trademark-. All of the trademarks are considered by
the Company to be valuable property rights. The protection afforded by these
intellectual property rights and the law of trade secrets is believed by the
Company to be adequate protection for its products and or services.
As a reseller of emulations and copies of fine designer jewelry, the Company
must avoid infringing any copyrights or trademarks claimed by the original
designer. A copyright protects the manner of expression of a piece of a jewelry
rather than the idea or concept behind making it. As the Company's products do
not purport to be exact copies, but rather emulations inspired by other designs,
the Company believes that the sale of faux jewelry does not PER SE violate the
copyright interest of others. Nevertheless, if a particular jewelry design is
subject to copyright protection, that copyright expires after 75 years, if owned
by a corporation, or after 50 years after the creator's death, if an individual.
Prior to 1988, in order for a designer to claim copyright protection to a piece
of jewelry, a copyright notice would have to have been affixed to the original
piece. Thus, any jewelry sold in the United States before 1988 without a
copyright notice is considered to be in the public domain. However, fine jewelry
designed and sold in the United States after 1988 could be subject to copyright
protection without the necessity of a copyright notice on the original piece. As
a result, the Company has no effective way of determining if a particular piece
of fine jewelry is subject to copyright protection claimed by its original
designer. It is, therefore, important for the Company to ensure that its
products do not purport to be exact copies of an original, but only inspired by
the original designs.
Although infrequent, it is possible for a designer to claim trademark
protection if it can establish that the customer realizes that a particular
piece of jewelry comes from a particular manufacturer. In order to be claimed,
however, a registered trademark indication must usually be placed on the
original piece. The Company takes meticulous precaution to avoid advertising and
marketing strategies that might lead to confusion in the minds of its customers
as to the source or origins of its emulation jewelry.
The Company has developed and adopted methodologies designed to prevent its
infringement of the intellectual property rights of third parties; however,
there can be no assurance that it will not be subject to claims for inadvertent
infringement from time to time. While there have been only four instances of
claimed infringement in the past, when the Company has received notice of
inadvertent infringement, it has been its policy to voluntarily cease and desist
selling the particular product. As an average store has more than 1,000
different items of jewelry on display and offered for sale, the Company has not
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experienced, and does not expect to experience, any material adverse effects on
its revenues in these instances.
LICENSE ARRANGEMENTS
The Company has granted a total of three licenses to former Impostors
franchisees granting to them the right to use the Impostors trademark in a total
of five retail locations for a period of one year. Each license requires the
payment of $5,000 per store per year, and is renewable annually at the
discretion of the Company. It is not expected that these license arrangements
will represent a material portion of the Company's future activity.
EMPLOYEES AND CONSULTANT
The Company currently has 110 full-time and 120 part-time employees, of
which 17 are employed in the Company's corporate offices. In addition, the
Company typically hires additional part-time employees during the peak holiday
season. Each retail store is staffed by a manager and assistant manager, as well
as one or more sales personnel. The Company also has four area managers and one
regional manager (for the East Coast). Store managers are hired and supervised
by area managers. All management and staff personnel are employed directly by
the Company.
The Company believes that it currently has sufficient management to add
eight additional stores over the next 12 months. Further store expansions will
require additions to management and staff on a case-by-case basis. The success
of future expansion will depend to a large extent on the Company's ability to
attract, motivate and retain highly-qualified personnel.
As President and Chief Executive Officer, Ms. Greenberg serves under a
written employment agreement expiring on June 20, 1999. She receives a base
salary of $7,500 per month, which will increase to $10,833 per month the earlier
of June 20, 1997 or the completion of this offering. She is also eligible to
participate in the Company's Incentive Stock Option Plan ("ISOP"). Ms. Greenberg
was granted incentive stock options pursuant to the ISOP exercisable to
purchase, in the aggregate, 40,000 shares of Common Stock of the Company at an
exercise price of $1.875 per share, all of which are fully vested, and incentive
stock options exercisable to purchase an additional 45,000 shares of common
stock at a price of $2.50 per share, of which 10,000 are vested, 10,000 will
vest ratably over two (2) years ending March, 1998, 15,000 will vest on June 20,
1997 and 10,000 will vest on June 20, 1998.
In January 1996, the Company hired Todd Huss as its Chief Financial Officer.
Mr. Huss brings with him nearly 10 years of experience as a licensed certified
public accountant, primarily with KPMG Peat Marwick and nearly five years
experience in the retail industry as Controller/Chief Financial Officer.
Effective February 1996, the Company retained Jack Brandon, the former
Vice-President of a 200 store portrait studio retail chain. It is expected that
Mr. Brandon will devote approximately 30 to 40 hours per month on behalf of the
Company, exclusive of his services as a director. Mr. Brandon also provides
construction oversight services for new Impostor locations and remodels. Fees
for these services are paid on a job-by-job basis, which have averaged
approximately $4,000 per month.
SEASONALITY
The Company's business is highly seasonal with its mall locations generating
20% of revenues during the Christmas holiday season. The Company's 15 tourist
locations experience fluctuations, based upon such factors as seasonality,
economic conditions and other factors effecting tourism in their particular
locations.
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PROPERTIES
The Company currently maintains executive offices at 3033 S. Parker Road,
Suite 120, Aurora, Colorado 80014. The offices consist of approximately 5,000
square feet which the Company holds under a 5-year lease expiring in the year
2001, for a rental of $5,150 per month. The lease is guaranteed by four of the
Company's current and former directors. The opening of the Company's executive
offices represented the culmination of a strategic plan to close its executive
offices in San Francisco, California to reduce operating expenses. The Company
expects the move to represent substantial savings over the next several years.
The Company's 38 current and committed retail locations are or will be
operated under commercial leases with expiration dates ranging from 1997 to
2007. Store size varies from 310 to 1,200 square feet with annual sales ranging
from $220,000 to $1,500,000. Each lease requires the payment of a minimum base
rent and additional payments for operating expenses, taxes, insurance, in some
cases, and additional rent based upon a percent of gross sales. The Company
monitors on a daily basis sales, margin and inventory turn-over for each store
location. This information is used not only to develop criteria for additional
store expansions but also to determine acceptable parameters for lease renewals
as they arise. In the ordinary course of business, the Company is continually
engaged in discussions with its various commercial landlords over issues that
arise from time to time under the leases. All of the Company's existing
commercial retail leases are in full force and effect as of the date of this
Prospectus.
LEGAL PROCEEDINGS
The Company from time-to-time is involved in commercial disputes in the
ordinary course of business with vendors, landlords and other parties which on
occasion become the subject matter of litigation. At the present time, the
Company is not a party to any legal proceedings outside of the ordinary course
of business or which would have a material adverse impact upon the Company's
operations or properties.
During 1995 and 1996, the Company received requests for information from the
U.S. Securities and Exchange Commission ("SEC") related to an investigation
begun by the SEC during 1994 into various matters, including certain
transactions in securities by a former officer and director of the Company. The
Company has fully complied with all requests. The Company has been informed that
the SEC staff intends to recommend to the Commission that an action be brought
against certain persons including three of the Company's former shareholders and
two of its former directors. Although there can be no assurance, the Company's
present management does not believe that this investigation of the activities of
these persons will have a direct material impact on the Company or its business
operations.
CHANGES IN INDEPENDENT PUBLIC ACCOUNTANTS
On February 16, 1995 the Company's Board of Directors approved a change in
the Company's independent accountant. The change was effective February 16,
1995.
The independent accountant who was previously engaged as the principal
accountant to audit the Company's financial statements was Schumacher & Bruce.
None of Schumacher & Bruce's reports for the years ended December 31, 1993 and
1992 on the financial statements of the Company contained any adverse opinion or
disclaimer of opinion, or was qualified or was modified as to uncertainty, audit
scope or accounting principles except the following: The report of Schumacher &
Bruce dated June 9, 1994 accompanying the audited balance sheet of the Company
as of December 31, 1993 and the related statements of operations, changes in
stockholders' (deficit), and cash flows for the years ended December 31, 1993
and 1992 was qualified assuming that the Company would continue as a going
concern. There have not been any disagreements between the Company and
Schumacher & Bruce on any matter of accounting principle or practice, financial
statement disclosure, or auditing scope or procedure during the past two years
and through the date of the change in certifying accountants.
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The Company retained the accounting firm of Hein + Associates LLP to serve
as the Company's independent accountant to audit the Company's financial
statements. This engagement was effective February 16, 1995. Prior to its
engagement as the Company's independent accountant, Hein + Associates LLP had
not been consulted by the Company either with respect to the application of
accounting principles to a specific transaction or the type of audit opinion
that might be rendered on the Company's financial statements.
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MANAGEMENT
DIRECTORS, EXECUTIVE OFFICERS AND KEY EMPLOYEES
The name, position with the Company, age of each Director or executive
officer of the Company is as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
- ------------------------------------- ----------- -----------------------------------------------------------
<S> <C> <C>
Sissel B. Greenberg.................. 38 President, Chief Executive Officer and Director
William Nandor....................... 54 Director
Jack Brandon......................... 67 Director
Simona Katz Yuffa.................... 37 Director
Todd Huss............................ 44 Chief Financial Officer, Secretary, Treasurer
</TABLE>
SISSEL B. GREENBERG, President and Chief Executive Officer since July 1994
and a Director since March, 1995. From April, 1992 to July, 1994, Ms. Greenberg
was employed as Senior Financial Analyst in the investment banking department of
Chatfield Dean & Company, a national broker/dealer based in Denver, Colorado.
Her duties included evaluating companies for funding of equity capital, mergers
and acquisition, workout plan analysis and preparation. Ms. Greenberg was
actively involved in firm projects which raised in excess of $80,000,000 for
small capitalization companies. From December, 1989 to April, 1992, Ms.
Greenberg worked as a business consultant for small public companies in the
areas of Financial Management and Strategic Planning. From November, 1987 to
November, 1988, Ms. Greenberg worked as a senior supervisor of Leventhal and
Horwath, a national accounting firm. From July, 1984 until August, 1987, Ms.
Greenberg worked as an assistant CFO for Selmer Sande, A.S., a billion dollar
international contracting company based in Oslo, Norway. Ms. Greenberg graduated
from the University of Denver with a degree in Business Administration in March,
1982. Ms. Greenberg obtained her Masters in Business Administration from the
University of Denver in March, 1983.
WILLIAM NANDOR, Director. Mr. Nandor was originally retained by the Company
in March, 1995, as a consultant to assist the Company with its search for new
retail locations and other issues surrounding the Company's strategic growth
plans. Mr. Nandor was also made a director of the Company at this time. Mr.
Nandor no longer performs consulting services for the Company; however, he
remains as a director. From 1987 through 1990, Mr. Nandor was employed with
Gymboree Corporation, first as Vice-President of Retailing and then as President
and C.E.O. While with Gymboree, Mr. Nandor spearheaded its growth from a
franchised play program for parents and kids into the retail specialty arena.
Under him, the retail stores grew from inception to over 40 stores. From 1990 to
1993 Mr. Nandor served as President and C.O.O. of Impostors Copy Jewelry, Inc.,
and during 1993 and 1994 he served as Executive Vice-President and C.O.O. of
S.S.R.S. Corporation, operator of Sesame Street Retail Stores. Under his
leadership, Impostors grew from 50 retail stores to over 100 locations, and
S.S.R.S. saw an increase in locations, comparable store sales and profits. In
addition to the Company, Mr. Nandor currently serves as a member of the Board of
Directors of Lisa's Tea Treasures, Inc., a San Jose, California wholesaler and
retailer of high quality tea and other related products.
JACK BRANDON, Director. Mr. Brandon has been a director of the Company since
October 1996 and a consultant to the Company, first informally since October,
1995 and formally since February, 1996. As a consultant, Mr. Brandon is actively
involved with the Company's expansion and remodeling program. He has worked as a
real estate, retail and construction consultant since 1995. From 1988 to 1995,
Mr. Brandon served as Vice-President of Studio Development for Expressly
Portraits, a large national portrait chain with locations in over 30 states.
From 1980 to 1988, he served as Vice-President of Operations for Prints Plus, a
mall-based national print and frame retailer with over 100 stores throughout the
United States.
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From 1975 to 1980, he was Senior Vice-President of Atherton Industries, which
operated over 200 retail clothing stores.
SIMONA KATZ YUFFA, Director. Ms. Yuffa has been a director since October,
1996. Since April, 1996, Ms. Yuffa has been the Chief Financial Officer,
Director and principal shareholder of Dazbog Coffee Company, a company which she
formed and organized specializing in custom roasting and distribution of coffee
equipment and accessories. Since 1990, she has also been a director and officer,
and since 1992, controller, of Shoe Biz, Ltd., a retail western boot chain,
where she is responsible for corporate operations and finance. From 1989 to
1992, Ms. Yuffa was controller of American Water Development, Inc., where she
was involved with corporate finance and fundraising. From 1981 to 1989, she
practiced as a Public Accountant, auditing publicly-held companies and
specializing in litigation consulting. Ms. Yuffa graduated with high distinction
from Colorado State University with a Bachelor of Science degree in Business
Administration and received her license as a Certified Public Accountant in the
State of Colorado in 1982 and practiced in that capacity until 1994.
TODD HUSS, Chief Financial Officer, Secretary, Treasurer. Mr. Huss has been
the Chief Financial Officer of the Company since January, 1996 and
Secretary/Treasurer since October, 1996. Prior to joining the Company, he served
as the Chief Financial Officer for Gardenswartz Sportz, Inc., a privately-held
corporation which owned and operated eight full service retail sporting goods
stores in New Mexico and Texas. Mr. Huss graduated from California State
University-Long Beach in 1984, with a Bachelor of Science degree in business
administration and professional accounting, and subsequently worked for KPMG
Peat Marwick in its Los Angeles, California, and Albuquerque, New Mexico offices
until 1991. He received his license as a certified public accountant from
California in 1987, and from New Mexico in 1990.
During the fiscal year ended January 28, 1996, three meetings of the Board
of Directors of the Company were held. Each meeting was attended by all members
of the Board of Directors.
During the fiscal year ended January 28, 1996, the Company did not have
standing Audit, Compensation or Nominating Committees of the Board of Directors.
However, during the first quarter of fiscal 1997, the Company formed Audit and
Compensation Committees of the Board of Directors. The members of the Audit
Committee will be Simona Katz Yuffa and William Nandor. No member of the Audit
Committee receives any additional compensation for his service as a member of
that Committee. The Audit Committee is responsible for providing assurance that
financial disclosures made by Management reasonably portray the Company's
financial condition, results of operations, plan and long-term commitments. To
accomplish this, the Audit Committee oversees the external audit coverage,
including the annual nomination of the independent public accountants, reviews
accounting policies and policy decisions, reviews the financial statements,
including interim financial statements and annual financial statements, together
with auditor's opinions, inquires about the existence and substance of any
significant accounting accruals, reserves or estimates made by Management,
reviews with Management the Management's Discussion and Analysis section of the
Annual Report, reviews the letter of Management Representations given to the
independent public accountants, meets privately with the independent public
accountants to discuss all pertinent matters, and reports regularly to the Board
of Directors regarding its activities.
The Compensation Committee will consist of William Nandor and Simona Katz
Yuffa. No member of the Compensation Committee receives any additional
compensation for his service as a member of that Committee. The Compensation
Committee is responsible for reviewing pertinent data and making recommendations
with respect to compensation standards for the executive officers, including the
President and Chief Executive Officer, establishing guidelines and making
recommendations for the implementation of Management incentive compensation
plans, reviewing the performance of the President and CEO, establishing
guidelines and standards for the grant of incentive stock options to key
employees under the Company's Incentive Stock Option Plan, and reporting
regularly to the Board of Directors with respect to its recommendations.
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There were no family relationships among Directors or persons nominated or
chosen by the Company to become a Director, nor any arrangements or
understandings between any Director and any other person pursuant to which any
Director was elected as such. The present term of office of each Director will
expire at the next annual meeting of shareholders.
The executive officers of the Company are elected annually at the first
meeting of the Company's Board of Directors held after each annual meeting of
Shareholders. Each executive officer will hold office until his successor is
duly elected and qualified, until his resignation or until he is be removed in
the manner provided by the Company's ByLaws.
DIRECTOR COMPENSATION
Directors who are also executive officers of the Company receive no
additional compensation for their services as Directors.
In March 1995, the Board of Directors adopted a Formula Plan for outside
Directors pursuant to which each outside Director is entitled to receive for
each year of service as a Director non-qualified stock options exercisable to
purchase 5,000 shares of Common Stock at an exercise price equal to 100% of the
fair market value of the Company's Common Stock on the date of grant. Effective
fiscal 1998, the options issuable to outside Directors under the Formula Plan
were increased to 10,000 for each Director. Pursuant to the Formula Plan, the
Company granted retroactively for the year ended December 31, 1994 to each of
its outside Directors 5,000 non-qualified stock options exercisable at $2.50 per
share. In fiscal 1996, the Company issued options for a total of 25,000 shares
to directors of the Company under the Formula Plan and options for 12,000 shares
to four of the Company's Directors (See "Certain Transactions") in return for
personally guaranteeing the Company's corporate office lease, which options are
exercisable at a price of $2.50 per share and expire in 2001.
Further, during fiscal 1997 the Company has issued under the Formula Plan
additional options to one outside director exercisable to purchase 5,000 shares
of Common Stock at an exercise price of $2.50 per share.
In addition, outside Directors are entitled to be reimbursed for their
expenses associated with attendance at meetings or otherwise incurred in
connection with the discharge of their duties as Directors of the Company.
EXECUTIVE COMPENSATION
The following tables and discussion set forth information with respect to
all plan and non-plan compensation awarded to, earned by or paid to the Chief
Executive Officer ("CEO"), and the Company's four most highly compensated
executive officers other than the CEO, for all services rendered in all
capacities to the Company and its subsidiaries for each of the Company's last
three completed fiscal years; provided, however, that no disclosure has been
made for any executive officer, other than the CEO, whose total annual salary
and bonus does not exceed $100,000.
42
<PAGE>
TABLE 1
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM COMPENSATION
---------------------------------------
ANNUAL COMPENSATION
----------------------------------- AWARDS
OTHER ------------------------
ANNUAL RESTRICTED PAYOUTS
COMPEN- STOCK -------------
SALARY SATION AWARD(S) OPTIONS/ LTIP PAYOUTS
NAME AND PRINCIPAL POSITION YEAR ($)(1) BONUS ($) ($)(2)(3) ($) SARS(4) ($)
- ------------------------------------ --------- --------- ----------- ----------- ----------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Sissel B. Greenberg, 1995 $ 76,750 -0- $ 6,312 $ 4,500 -0- -0-
President 1994 $ 32,953 -0- -0- $ 1,000 40,000 -0-
<CAPTION>
ALL OTHER
COMPEN- SATION
NAME AND PRINCIPAL POSITION ($)
- ------------------------------------ -------------
<S> <C>
Sissel B. Greenberg, -0-
President -0-
</TABLE>
- ------------------------------
(1) Effective June 20, 1994, the Company hired its new President, Sissel B.
Greenberg, at $6,000 per month, which sum was subsequently increased to a
base salary of $7,500 per month. Ms. Greenberg is also eligible to
participate in the Company's Incentive Stock Option Plan.
(2) All executive officers of the Company participate in the Company's group
health insurance plan. However, no executive officer received perquisites
and other personal benefits which, in the aggregate, exceeded the lesser of
either $50,000 or 10% of the total of annual salary and bonus paid during
the respective fiscal years.
(3) As of January 1, 1995, the Company assumed and agreed to pay a lease
covering an automobile acquired for the use of the Company's employees. The
total monthly lease payment is $480.
(4) The Company has granted to Ms. Greenberg incentive stock options exercisable
to purchase, in the aggregate 60,000 shares of the Company's Common Stock at
a weighted average exercise price of $2.08 per share under the Company's
Stock Incentive Plan, 50,000 of which are fully vested as of the date of
this Prospectus.
The Company currently has a two year written Employment Agreement with its
President, expiring June 20, 1999. The Company has no key man life insurance
covering any of its officers or employees.
EMPLOYEE STOCK PURCHASE PLAN
On June 12, 1995, the Company's shareholders ratified and approved a
qualified Employee Stock Purchase Plan ("ESPP") pursuant to Section 423 of the
Internal Revenue Code of 1986, as amended. Pursuant to the ESPP, the Company has
been authorized to offer up to 20,000 shares per year over a three-year term, or
a total of 60,000 shares, to the Company's employees. The ESPP includes certain
restrictions which preclude participation by part-time employees and employees
owning five percent (5%) or more of the Company's Common Stock. The purchase
price for the shares may not be less than eighty-five percent (85%) of the
market value of the stock on either the Enrollment Date or the Exercise Date as
those terms are defined in the ESPP. As of the date of this Prospectus, no
shares of common stock have been issued under the ESPP and there have been no
subscriptions of employees to participate in the plan.
STOCK INCENTIVE PLAN
On November 23, 1992, the Company's Shareholders adopted a Stock Incentive
Plan ("Plan") to commence in 1993. Pursuant to the Plan, stock options granted
to eligible participants may take the form of Incentive Stock Options ("ISO's")
under Section 422 of the Internal Revenue Code of 1986, as amended (the "Code")
or options which do not qualify as ISO's (Non-Qualified Stock Options or
"NQSO's"). An aggregate of 230,000 shares of common stock have been authorized
to be issued under the Plan. As required by Section 422 of the Code, the
aggregate fair market value of the Company's Common Stock with respect to its
ISO's granted to an employee exercisable for the first time in any calendar year
may not exceed $100,000. The foregoing limitation does not apply to NQSO's. The
exercise price of an ISO may not be less than 100% of the fair market value of
the shares of the Company's Common Stock on the date of grant. The exercise
price of an NQSO may be set by the administrator, but must not be less than fair
market value. An option is not transferable, except by will or the laws of
descent and distribution. If
43
<PAGE>
the employment of an optionee terminates for any reason (other than for cause,
or by reason of death, disability, or retirement), the optionee may exercise his
options within a ninety (90) day period following such termination to the extent
he was entitled to exercise such options at the date of termination. Either the
Board of Directors (provided that a majority of Directors are "disinterested")
can administer the Plan, or the Board of Directors may designate a committee
comprised of Directors meeting certain requirements to administer the Plan. The
Administrator will decide when and to whom to make grants, the number of shares
to be covered by the grants, the vesting schedule, the type of award and the
terms and provisions relating to the exercise of the awards. An aggregate of
196,000 shares of the Company's Common Stock are reserved for issuance upon the
exercise of options granted under the Plan.
As of January 28, 1996, incentive stock options to purchase 40,000 shares of
Common Stock were outstanding and unexercised, all of which were granted in 1994
to Sissel B. Greenberg, the Company's President, and were exercisable at a price
of $5.00 per share. During the fiscal year ended January 28, 1996, the exercise
price was reduced to $1.875 per share, the then current fair market value of the
Company's Common Stock and the term was extended to December 31, 1998. An
additional 13,000 incentive stock options were granted to other employees during
the year ended January 28, 1996, which options are also exercisable at $1.875
and expire on February 15, 2003. All of these options are currently vested.
In March, 1996, the Company granted incentive stock options exercisable to
purchase 80,000 shares to several employees at an exercise price of $2.50 per
share which expire in 2001. 30,000 of these incentive stock options have vested,
20,000 have been cancelled due to termination of an employee, and 15,000 vest on
each of the first and second anniversary dates.
In January, 1997, the Company granted to Ms. Greenberg incentive stock
options exercisable to purchase an additional 25,000 shares of Common Stock at
$2.50 per share. Of these options, 15,000 will vest on June 20, 1997 and 10,000
will vest on June 20, 1998.
No officer of the Company receives any additional compensation for his
services as a Director. The Company has no retirement, pension, profit sharing
or insurance or medical reimbursement plans covering its Directors.
44
<PAGE>
The following table sets forth certain information concerning the exercise
of incentive stock options during the last completed fiscal year by each of the
named executive officers and the fiscal year-end value of unexercised options on
an aggregated basis:
TABLE 2
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND OPTION/SAR VALUES
<TABLE>
<CAPTION>
VALUE OF
UNEXERCISED
NUMBER OF IN-THE-MONEY
UNEXERCISED OPTIONS/SARS AT
OPTIONS/SARS (#) FY-END($)(1)
------------------ -----------------
SHARES ACQUIRED ON VALUE REALIZED EXERCISABLE/ EXERCISABLE/
NAME EXERCISE(#) ($) UNEXERCISABLE UNEXERCISABLE
- --------------------------------------------- ------------------- ----------------- ------------------ -----------------
<S> <C> <C> <C> <C>
Sissel B. Greenberg.......................... -0- $ -0- 50,000/35,000(2) $ -0-
</TABLE>
- ------------------------
(1) The value of unexercised options is determined by calculating the difference
between the fair market value of the securities underlying the options at
fiscal year end and the exercise price of the options.
(2) Includes options exercisable to purchase 20,000 shares of Common Stock at a
price of $2.50 granted in March, 1996, of which 10,000 options are subject
to future vesting, and an additional 25,000 options granted in January,
1997, which are subject to future vesting.
INDEMNIFICATION AND LIMITATION ON LIABILITY OF DIRECTORS
The Company's Articles of Incorporation provide that the Company shall
indemnify, to the full extent permitted by Colorado law, any director, officer,
employee or agent of the corporation made or threatened to be made a party to a
proceeding, by reason of the former or present official of the person, against
judgments, penalties, fines, settlements and reasonable expenses incurred by the
person in connection with the proceeding if certain standards are met. At
present, there is no pending litigation or proceeding involving any director,
officer, employee or agent of the Company where indemnification will be required
or permitted. Insofar as indemnification for liabilities arising under the
Securities Act of 1933 (the "Act") may be permitted to directors, officers and
controlling persons of the Company pursuant to the foregoing provisions, or
otherwise, the Company has been advised that in the opinion of the Securities
and Exchange Commission such indemnification is against public policy as
expressed in the Act and is, therefore, unenforceable.
The Company's Articles of Incorporation limit the liability of its directors
to the fullest extent permitted by the Colorado Business Corporation Act.
Specifically, directors of the Company will not be personally liable for
monetary damages for breach of fiduciary duty as directors, except for (i) any
breach of the duty of loyalty to the Company or its shareholders, (ii) acts or
omissions not in good faith or that involved intentional misconduct or a knowing
violation of law, (iii) dividends or other distributions of corporate assets
that are in contravention of certain statutory or contractual restrictions, (iv)
violations of certain laws, or (v) any transaction from which the director
derives an improper personal benefit. Liability under federal securities law is
not limited by the Articles.
45
<PAGE>
CERTAIN TRANSACTIONS
TRANSACTION IN SECURITIES
In September 1993, the Company exchanged its interest in two gaming
properties to Global Casinos, Inc. for 2,500,000 shares of common stock of
Global Casinos. A $350,000 Promissory Note which had been held by an
unaffiliated third party was assigned to the Company in exchange for shares of
Common Stock of the Company in a private offering. The Company agreed to convert
the total outstanding balance of principal and all accrued and unpaid interest
on the Promissory Note into 200,000 shares of common stock of Global Casinos.
Those 200,000 shares were subsequently registered for sale under the Securities
Act by Global Casinos and have been used by the Company to collateralize a
venture capital loan with an affiliate of the Representative. At the time of the
agreement of the Company to convert the Promissory Note for 200,000 shares of
Global Casinos common stock, Mr. Stephen G. Calandrella served on the Board of
Directors of both the Company and Global Casinos. See Note 2 to Financial
Statements.
During 1994, the Company engaged in market transactions in the securities of
Global Casinos, Inc. and other corporations. These transactions resulted in
losses on marketable securities for the years ended December 31, 1994 and
January 28, 1996 of $146,963 and $182,643, respectively, principally due to
market declines in the value of Global Casinos, Inc. common stock. At the time
of these transactions, Mr. Gerald Jacobs, and to a limited extent, Mr.
Calandrella were members of the Board of Directors of Global Casinos and members
of the Board of Directors of the Company (Messrs. Calandrella and Jacobs
resigned as Directors of the Company in February 1995 and October 1996,
respectively), and Mr. Pete Bloomquist was Chief Financial Officer of Global
Casinos and a member of the Board of Directors of the Company, (Mr. Bloomquist
resigned as a Director in October 1996). See Note 1 to Financial Statements.
STOCK DISTRIBUTION
In March 1994, the Company undertook a stock distribution pursuant to which
it distributed to its common stockholders one share of common stock of Global
Casinos, Inc., a Utah corporation held by the Company as a portfolio security,
for each share of Company Common Stock beneficially owned on the record date of
the distribution. In connection with the stock dividend, the Company distributed
a total of 2,409,700 shares of Global Casinos, Inc. common stock to its
shareholders of record. The shares had been acquired by the Company in
connection with the exchange involving the Company's gaming property located in
Central City, Colorado. At the time of the stock distribution, Messrs. Jacobs
and Calandrella were members of the Board of Directors of both the Company and
Global Casinos, and Mr. Bloomquist was Chief Financial Officer of Global Casinos
and a member of the Company's Board of Directors. See Note 2 to Financial
Statements.
MIRAGE CONCEPTS, INC. ACQUISITION
In March, 1994, the Company acquired 100% of the outstanding common stock of
Mirage Concepts, Inc., an Arizona corporation ("Mirage"), which owned three
reproduction jewelry stores, operating under the tradenames "Mira Boutique" and
"Classic Copies." At the time of the transaction, the stockholders of Mirage
Concepts, Inc. were Raymond Stanz (50%), John C. Power (25%) and Mark R. Power
(25%). At the time, Mr. Stanz was serving as the Chief Operating Officer of the
Company, and John C. Power would have been deemed a principal shareholder of the
Company by virtue of the security ownership of Redwood Microcap Fund, Inc., of
which Mr. Power is a director and President.
The agreement for the acquisition of Mirage Concepts, Inc. initially
provided for the Company to issue to the shareholders of Mirage, PRO RATA,
27,000 units of the Company's securities, each unit consisting of one share of
Common Stock and one Common Stock Purchase Warrant exercisable through December
31, 1994 at an exercise price of $6.25 per share. However, following the closing
of the transaction, and prior to the issuance of any securities to the Mirage
shareholders, a dispute arose between Mr. Stanz, on
46
<PAGE>
the one hand, and the Company, on the other, concerning numerous matters,
including the financial condition of Mirage Concepts, Inc. at the time it was
acquired by the Company.
Following extensive negotiations, an agreement was entered into with Mr.
Stanz resolving the areas of disagreement pursuant to which (i) Mr. Stanz
resigned as an officer and director of Mirage as well as Chief Operating Officer
of the Company, (ii) Mr. Stanz transferred, sold and assigned to Rockies Fund,
Inc. 3,500 shares of the Company's Common Stock, 3,500 C Warrants, and all of
the Units which Stanz was to have received as a shareholder of Mirage Concepts,
Inc., in consideration for which Rockies Fund agreed to pay Stanz an aggregate
sum of $85,000, and (iii) the Company and Stanz exchanged mutual general
releases. Rockies Fund, Inc. was a principal shareholder of the Company whose
President and director was and is Stephen G. Calandrella, who at the time of the
Stanz agreement served as a director of the Company.
Following the resolution of the dispute with Stanz, the Company entered into
an agreement with Rockies Fund, Inc., Mr. Calandrella, Redwood Microcap Fund,
Inc., and John C. Power pursuant to which the Company issued an aggregate of
20,000 shares of Common Stock as full and final consideration for its
acquisition of Mirage Concepts, Inc. The warrants that were to have been
included in the units issuable in the Mirage transaction had already expired
unexercised and were therefore moot. See Note 2 to Financial Statements.
SHAREHOLDER GUARANTEES
In connection with the Company's acquisition of the Impostors retail jewelry
chain from bankruptcy proceedings, the Company agreed to assume and pay certain
post-petition liabilities of American Fashion Jewels, Inc. Included in those
post-petition liabilities were obligations to the law firm of Bronson & Bronson,
of San Francisco, California. This obligation is in the amount of $35,000, and
by agreement is being retired in monthly installments. By written agreement, the
Company's obligation to that law firm has been guaranteed by the Rockies Fund,
Inc., Redwood Microcap Fund, Inc., John C. Power, individually, and Stephen G.
Calandrella, individually. Under the terms of the written guarantees, in the
event any of the guarantors is required to cure the Company's default or
delinquency in any payment to that law firm, such payment can be applied, at the
option of the guarantor, to the purchase of Company Common Stock at a price per
share which is equal to the lesser of $5.00 per share or 50% of the closing bid
price of the Company's Common Stock on the date of such payment, but in no event
at a price per share less than $3.125. In addition, in the event a guarantor is
required to make any payment then Redwood would be entitled to designate one
person to serve as a member of the Company's Board of Directors for a minimum
term of one year. See Note 4 to Financial Statements.
PRIVATE OFFERING--INVESTOR GUARANTEES
On September 30, 1995, the Company entered into an Investment Term Sheet
("ITS") with Redwood Microcap Fund, Inc. ("Redwood"), a former principal
shareholder of the Company. Under the terms of the ITS, Redwood, and its
affiliates, agreed to purchase up to 240,000 shares of Common Stock at a price
of $1.25 per share, representing aggregate maximum proceeds to the Company of
$300,000 (the "Private Offering"). Further under the terms of the ITS, in
consideration of their investment of the Company's Common Stock at $1.25 per
share, investors in the Private Offering (the "Investors") severally agreed to
subscribe for and purchase all Shares of the Company's Common Stock offered in a
proposed rights offering which was never undertaken. See Note 6 to Financial
Statements.
In connection with the Private Offering, the Company sold an aggregate of
234,000 shares of Common Stock for aggregate net proceeds of $282,500. The
Company utilized the proceeds of the Private Offering to open two new stores and
to meet working capital requirements during the holiday season, the fourth
quarter of 1995.
47
<PAGE>
The Company is registering for resale the shares of Common Stock sold in the
Private Offering in a Registration Statement which the Company intends to file
in 30 days following the date of this Prospectus.
LEASE GUARANTEE
In April, 1996, the Company granted to four of its directors non-qualified
stock options exercisable to acquire 3,000 shares of the Company's common stock
each in exchange for each persons agreement to personally guarantee the
Company's office lease. The options are exercisable at a price of $2.50 per
share and expire in 2001. See "Securities Ownership of Management and Principal
Shareholders" and Notes 4 and 6 to Financial Statements.
All transactions between the Company and its officers, Directors, principal
shareholders, or other affiliates have been and will be on terms no less
favorable to the Company than could be obtained from unaffiliated third parties
on an arms-length basis and will be approved by a majority of the Company's
independent, disinterested Directors.
STOCK REDEMPTION
On December 27, 1996, the Company completed the Bridge Note Financing from
which it utilized $624,325 of net proceeds to redeem from certain former
securityholders an aggregate of 189,023 shares of Common Stock and 32,500 Class
C Warrants. The redemption consisted all of the equity securities of the Company
owned by these former securityholders, and was undertaken by the Company to
expedite this offering and the Company's application to have its securities
listed on NASDAQ. The price paid to these former securityholders in connection
with this redemption was $3.25 per share of Common Stock and an aggregate
redemption price of $10,000 for all 32,500 Class C Warrants.
48
<PAGE>
SECURITIES OWNERSHIP OF MANAGEMENT
AND PRINCIPAL SHAREHOLDERS
The following table sets forth, as of the date of this Prospectus, the stock
ownership of each person known by the Company to be the beneficial owner of five
(5%) percent or more of the Company's Common Stock, all directors individually
and all directors and officers of the Company as a group. Each person has sole
voting and investment power with respect to the shares shown, except as noted.
<TABLE>
<CAPTION>
SHARES BENEFICIALLY OWNED
---------------------------------------------------
PERCENT(1)
--------------------------------------
NAME & ADDRESS OF BENEFICIAL OWNER NUMBER BEFORE OFFERING AFTER OFFERING(2)
- ------------------------------------------------------------ ----------- ----------------- -------------------
<S> <C> <C> <C>
Sissel B. Greenberg(3)...................................... 55,600 9.1% 3.2%
3033 S. Parker Rd., #120
Aurora, CO 80014
William Nandor.............................................. 7,600 1.4% 0.5%
2698 Gapwall Court
Pleasanton, California 94566
Jack Brandon................................................ -0- -0- -0-
3033 S. Parker Rd., #120
Aurora, CO 80014
Simona Katz Yuffa........................................... -0- -0- -0-
3033 S. Parker Rd., #120
Aurora, CO 80014
Todd Huss(4)................................................ 15,000 2.6% 0.9%
3033 S. Parker Rd., #120
Aurora, Colorado 80014
Raymond D. Hand(5).......................................... 57,500 10.0% 3.4%
310 Radford Place
Knoxville, Tennessee 37927
Banca Adamas S.A............................................ 80,000 14.3% 4.8%
Via Nassa 42
6901 Lugano, Switzerland
AMC Consumer(6)............................................. 61,224 10.5% 3.6%
One Main Street, Suite 312
Eatontown, NJ 07724
Caribou Bridge Fund(7)...................................... 33,114 5.8% 2.0%
5350 S. Roslyn Street, #380
Englewood, CO 80111
Lee Schlessman(8)........................................... 35,714 6.0% -0-
1301 Pennsylvania St., #800
Denver, CO 80203
Gary C. Batz(8)............................................. 53,570 8.7% -0-
c/o Fike Corporation
704 S. 10th Street
Blue Springs, FL 64015
Directors and Officers as 78,200 12.3%
a Group (5persons)........................................ 4.5%
</TABLE>
- ------------------------
(1) Shares not outstanding but deemed beneficially owned by virtue of the
individual's right to acquire them as of the date of this Prospectus, or
within sixty (60) days of such date, are treated as outstanding when
determining the percent of the class owned by such individual and when
determining the percent owned by a group.
49
<PAGE>
(2) Assumes that the Over-Allotment Option is not exercised, none of the
Warrants sold in this offering have been exercised and none of the
Representative's Securities have been issued.
(3) Includes incentive stock options to purchase 50,000 shares of the Company's
Common Stock at a weighted average exercise price of $2.00 per share granted
under the Company's Stock Incentive Plan. Also includes non-qualified stock
options to purchase 3,000 shares of the Company's Common Stock at an
exercise price of $2.50 per share granted to Ms. Greenberg in return for her
agreement to personally guarantee the Company's corporate office lease. Does
not include incentive stock options to purchase 35,000 shares of the
Company's Common Stock at an exercise price of $2.50 per share which vest
through 1998.
(4) Consists of Incentive Stock Options exercisable to purchase 15,000 shares of
Common Stock at an exercise price of $2.50 per share. Does not include
additional Incentive Stock Options exercisable to purchase an additional
20,000 shares of Common Stock at an exercise price of $2.50 per share which
are not yet vested.
(5) Includes Class C Common Stock Purchase Warrants exercisable to acquire up to
12,500 additional shares of Common Stock at an exercise price of $10.00 per
share.
(6) Includes Class B Warrants exercisable to purchase 20,408 shares of Common
Stock at an exercise price of $5.00 per share. Each B Warrant will
automatically be exchanged for two Warrants upon the effective date of the
registration statement of which this Prospectus forms a part.
(7) Includes Class B Warrants exercisable to purchase 10,204 shares of Common
Stock at an exercise price of $5.00 per share. Each B Warrant will
automatically be exchanged for two Warrants upon the effective date of the
registration statement of which this Prospectus forms a part.
(8) Consists entirely of Class B Warrants purchased as part of the Bridge Note
Financing. Assumes all Warrants issued in exchange for the Class B Warrants
are sold in the Selling Shareholders' Offering.
50
<PAGE>
DESCRIPTION OF SECURITIES
The Company is authorized to issue up to 850,000,000 shares of $.002 par
value Common Stock and up to 20,000,000 shares of $.10 par value Preferred
Stock. As of the date of this Prospectus, 559,916 shares of Common Stock and
416,670 shares of Series A Convertible Preferred Stock were issued and
outstanding.
COMMON STOCK
Each holder of Common Stock of the Company is entitled to one vote for each
share held of record. There is no right to cumulative votes for the election of
directors. The shares of Common Stock are not entitled to pre-emptive rights and
are not subject to redemption or assessment. Each share of Common Stock is
entitled to share ratably in distributions to shareholders and to receive
ratably such dividends as may be declared by the Board of Directors out of funds
legally available therefor. Upon liquidation, dissolution or winding up of the
Company, the holders of Common Stock are entitled to receive, PRO RATA, the
assets of the Company which are legally available for distribution to
shareholders. The issued and outstanding shares of Common Stock are validly
issued, fully paid and non-assessable.
PREFERRED STOCK
The Company is authorized to issue up to 20,000,000 shares of $.10 par value
Preferred Stock. The preferred stock of the corporation can be issued in one or
more series as may be determined from time to time by the Board of Directors
without further stockholder approval. In establishing a series, the Board of
Directors shall give to it a distinctive designation so as to distinguish it
from the shares of all other series and classes, shall fix the number of shares
in such series, and the preferences, rights and restrictions thereof. All shares
of any one series shall be alike in every particular. All series shall be alike
except that there may be variation as to the following: (1) the rate of
distribution, (2) the price at and the terms and conditions on which shares
shall be redeemed, (3) the amount payable upon shares for distributions of any
kind, (4) sinking fund provisions for the redemption of shares, and (5) the
terms and conditions on which shares may be converted if the shares of any
series are issued with the privilege of conversion, and (6) voting rights except
as limited by law.
Although the Company currently does not have any plans to designate a series
of Preferred Stock, there can be no assurance that the Company will not do so in
the future. As a result, the Company could authorize the issuance of a series of
preferred stock which would grant to holders preferred rights to the assets of
the Company upon liquidation, the right to receive dividend coupons before
dividends would be declared to common stockholders, and the right to the
redemption of such shares, together with a premium, prior to the redemption of
Common Stock. Common stockholders have no redemption rights. In addition, the
Board could issue large blocks of voting stock to fend against unwanted tender
offers or hostile takeovers without further shareholder approval.
SERIES A CONVERTIBLE PREFERRED STOCK
The Company has issued and outstanding 416,670 shares of Series A
Convertible Preferred Stock (the "Convertible Preferred Stock") which were
issued to investors in the Bridge Offering which was completed on June 24, 1996.
Holders of shares of Convertible Preferred Stock are entitled to one vote for
each share on any matter to come before the shareholders of the Company and are
entitled to a liquidation preference of $.60 per share of Convertible Preferred
Stock in the event of a liquidation of the Company. Each outstanding share of
Convertible Preferred Stock is entitled to receive cumulative cash dividends at
the annual rate of $.051 per share, payable quarterly on the last day of
January, April July and October of each year. Each share of Convertible
Preferred Stock is convertible at the option of the holder into one share of
Common Stock (the "Conversion Shares") commencing June 24, 1997. However, each
share of Convertible Preferred Stock will convert automatically into shares of
Common Stock if the Conversion
51
<PAGE>
Shares are registered for sale under the Securities Act (the "Automatic
Conversion"). In the event of an Automatic Conversion, the conversion price
shall be equal to 70% of the offering price of the Common Stock to the public in
the public offering. The Registration Statement of which this Prospectus forms a
part includes the registration for sale by the Company of the Conversion Shares
issuable upon conversion of the Convertible Preferred Stock; and all information
with regard to the capital stock of the Company contained in this Prospectus
gives effect to that Automatic Conversion. Upon such Automatic Conversion,
holders of outstanding shares of Convertible Preferred Stock shall have no
further rights as preferred stockholders of the Company other than the right to
receive certificates evidencing the Conversion Shares issuable upon such
conversion.
12% CONVERTIBLE PROMISSORY NOTE
The Company has issued an aggregate of $1,120,000 in 12% Convertible
Promissory Notes. Each Convertible Promissory Note accrues interest at a rate of
12% per annum, payable quarterly. The total outstanding balance of principal and
any accrued and unpaid interest is due and payable December 26, 1999. Holders of
the Notes have the option to convert the outstanding principal balance of the
Notes into shares of the Company's Common Stock at any time commencing the
earlier of (i) December 27, 1997, or (ii) upon the effective date of the
Registration Statement registering for sale under the Securities Act the
Conversion Shares; provided, however, that in no event shall such conversion
option be exercisable prior to April 1, 1997. The conversion value at which the
principal amount of the Convertible Notes is convertible is initially $2.80 per
share of Common Stock, subject to adjustment under certain circumstances;
provided, however, that if either the Company fails to consummate a public
offering on or before June 30, 1997 or the Company fails to retire the Notes on
or before the Maturity Date, the conversion value shall be reduced to $1.00 per
share of Common Stock after either such event. The obligation of the Company to
repay the Convertible Notes is secured by a subordinated security interest
encumbering all of the Company's tangible and intangible assets. The Company has
agreed to retire the Convertible Notes out of the proceeds of this offering.
CLASS A WARRANT
The Board of Directors has authorized the issuance of up to 1,858,334
Warrants, including 1,100,000 Warrants offered hereby, 165,000 Warrants subject
to the Over-Allotment Option, 110,000 Warrants subject to the Representative's
Securities and 483,334 Warrants issuable to holders of outstanding Class B
Warrants. Two Warrants entitle the holder thereof to purchase one share of
Common Stock at a price of $ . The Warrant Exercise Price is subject to
adjustment upon certain events such as stock splits, stock dividends and similar
transactions. The Warrants are subject to redemption by the Company, as
described below. The exercise period for the Warrants expires at 5:00 p.m.,
Denver time on the date that is three years from the date of this Prospectus
(the "Warrant Term"), after which the Warrants will expire automatically. The
Company may at any time and from time to time extend the Warrant Term or reduce
the Warrant Exercise Price, provided written notice of such extension or
reduction is given to the registered holders of the Warrants prior to the
expiration date then in effect. The Company does not presently contemplate any
extension of the Warrant Term or reduction in the Warrant Exercise Price.
Subject to compliance with applicable securities laws, Warrants certificates
may be transferred or exchanged for new certificates of different denominations
at the offices of the Warrant Agent described below. The holders of Warrants, as
such, are not entitled to vote, to receive dividends or to exercise any of the
rights of shareholders for any purpose. The Warrants may be transferred
separately from the Common Stock with which they will be issued.
EXERCISE. The Warrants may be exercised during the Warrant Term only upon
surrender of the Warrant certificate at the offices of the Company with the form
of "Election to Purchase" on the reverse side of the Warrant certificate
completed and signed, accompanied by payment of the full Exercise Price for the
number of Warrants being exercised. Warrantholders will receive one share of
Common Stock for
52
<PAGE>
every two Warrants exercised, subject to any adjustment required by the Warrant
Agreement. For a holder to exercise Warrants, there must be a current
Registration Statement in effect with the Commission and various state
securities authorities registering the shares of Common Stock underlying the
Warrants or, in the sole determination of the Company and its counsel, there
must be a valid exemption therefrom. The Company has undertaken, and intends, to
maintain a current Registration Statement which will permit the exercise of the
Warrants during the Warrant Term. Maintaining a current effective Registration
Statement could result in substantial expense to the Company and there is no
assurance that the Company will be able to maintain a current Registration
Statement covering the shares issuable upon exercise of the Warrants. Holders of
Warrants will have the right to exercise the Warrants included therein for the
purchase of shares of Common Stock only if a Registration Statement is then in
effect and only if the shares are qualified for sale under securities laws of
the state in which the exercising warrantholder resides or if the Company, in
its and its counsel's sole discretion, is able to obtain valid exemptions from
the foregoing requirements. Although the Company believes that it will be able
to register or qualify the shares of Common Stock underlying the Warrants for
sales in those states where the Securities are offered, there can be no
guarantee that such registration or qualification, or an exemption therefrom,
can be accomplished without undue hardship or expense to the Company. The
Warrants may be deprived of any value if a Registration Statement covering the
shares issuable upon exercise thereof or an exemption therefrom cannot be filed
or obtained without undue expense or hardship or if such underlying shares are
not registered or exempted from such registration in the states in which the
holder of a Warrant resides. In the latter event, the only option available to a
holder of a Warrant may be to attempt to sell his or her Warrants into the
market, if a market then exists and only then in compliance with applicable
securities laws and restrictions on transfer.
REDEMPTION. The Company shall have the right, at its discretion, to call
all of the Warrants for redemption on 45 days' prior written notice at a
redemption price of $.05 per Warrant if: (i) the closing bid price of the
Company's Common Stock exceeds the Warrant Exercise Price by a least 50% during
a period of at least 20 of the 30 trading days immediately preceding the notice
of redemption; (ii) the Company has in effect a current Registration Statement
covering the Common Stock issuable upon exercise of the Warrants; and (iii) the
expiration of the 45 day notice period is within the Warrant Term. If the
Company elects to exercise its redemption right, holders of Warrants may either
exercise their Warrants, sell such Warrants in the market or tender their
Warrants to the Company for redemption. Within five business days after the end
of the 45 day period, the Company will mail a redemption check to each
registered holder of a Warrant who holds unexercised Warrants as of the end of
the 45 day period, whether or not such holder has surrendered the Warrant
certificates for redemption. The Warrants may not be exercised after the end of
such 45 day period.
CLASS B WARRANT
The Company has outstanding Class B Warrants exercisable to purchase, in the
aggregate, 241,667 shares of Common Stock at an exercise price of $5.00 per
share. The Class B Warrants were issued by the Company in the Bridge Offering
and the Bridge Note Financing. The Class B Warrants are exercisable at any time
commencing on the date of issuance and expiring on June 24, 1998. Upon
expiration, the Class B Warrant will terminate automatically, subject to certain
rights of the Company to extend the warrant term. The exercise price of each
Class B Warrant is subject to adjustment upon certain events such as stock
splits, stock dividends and similar transactions.
Each Class B Warrant will be automatically exchanged for two Class A
Warrants upon the Effective Date of the Registration Statement of which this
Prospectus forms a part. Upon such Effective Date, all outstanding Class B
Warrants shall be deemed surrendered for cancellation in exchange for the
issuance of twice the number of Class A Warrants; and holders of Class B
Warrants shall have the right only to receive two Class A Warrants for each
Class B Warrant beneficially owned on the Effective Date.
53
<PAGE>
Holders of outstanding Class B Warrants were granted certain registration
rights by the Company in connection with the Bridge Offering, which rights are
being exercised and fulfilled by the Registration Statement of which this
Prospectus forms a part.
CLASS C WARRANTS
The Company has outstanding Class C Warrants exercisable until December 31,
1997 to purchase 60,250 shares of Common Stock at a price of $10.00 per share.
TRANSFER AND WARRANT AGENT AND REGISTRAR
The transfer agent and registrar for the Common Stock and warrant agent for
the Warrants is Corporate Stock Transfer, Inc., Denver, Colorado.
REPORTS TO SHAREHOLDERS
The Company intends to furnish annual reports to shareholders which will
include certified financial statements reported on by its certified public
accountants. In addition, the Company may issue unaudited quarterly or other
interim reports to shareholders as it deems appropriate. The Company will comply
with the periodic reporting requirements imposed by the Securities Exchange Act
of 1934.
54
<PAGE>
UNDERWRITING
Subject to the terms and conditions of the Underwriting Agreement, a copy of
which has been filed as an exhibit to the Registration Statement of which this
Prospectus forms a part, the Underwriters named below (the "Underwriters") have
severally agreed, through Cohig & Associates, Inc. as the Representative of the
Underwriters, to purchase from the Company on a firm commitment basis, the
aggregate number of shares of Common Stock and Warrants set forth opposite their
names below:
<TABLE>
<CAPTION>
NUMBER OF
SHARES AND
UNDERWRITERS WARRANTS
- ------------------------------------------------------------------------------------------- ----------
<S> <C>
Cohig & Associates, Inc.................................................................... 1,100,000
----------
Total.................................................................................. 1,100,000
----------
----------
</TABLE>
The Common Stock and the Warrants are being offered by the several
Underwriters, subject to prior sale, when, as, and if delivered to and accepted
by the Underwriters and subject to their right to reject orders in whole or in
part and subject to approval of certain legal matters by counsel and to various
conditions. The nature of Underwriters' obligation is such that they must
purchase all of the Common Stock and Warrants offered hereby if any are
purchased.
The Company has granted the Underwriters options for 45 days from the date
of this Prospectus to purchase up to an additional 165,000 shares of Common
Stock and/or 165,000 Warrants at the assumed initial public offering prices less
the underwriting discounts of $.39 per share and $.01 per Warrant. The
Underwriters may exercise such options only for the purpose of covering any
over-allotments in the sale of the Common Stock and Warrants being offered.
The Underwriters have advised the Company that they propose to offer the
1,100,000 shares of Common Stock and 1,100,000 Warrants directly to the public
at the public offering price set forth on the cover page of this Prospectus and
to selected dealers at that price, less a concession of not more than $ per
share of Common Stock and $ per Warrant. After the offering, the Price to
the public and the concession may be changed by the Underwriters.
The Underwriters have advised the Company that they will not make sales of
the Common Stock or Warrants offered in this Prospectus to accounts over which
they exercise discretionary authority without specific authorization.
The Company will pay the Representative a non-accountable expense allowance
from offering proceeds, including proceeds from the over-allotment options to
the extent exercised. The Representative's expenses in excess of the
non-accountable expense allowance will be borne by the Representative. To
55
<PAGE>
the extent that the expenses of the Representative are less than the
non-accountable expense allowance, the excess shall be deemed to be compensation
to the Representative. On April 29, 1996, the Company and the Representative
entered into an agreement under which the Representative will act as the
Company's exclusive financial advisor until the agreement is terminated by
either party after September 30, 1996. The Company has paid $30,000 to the
Representative in consideration of the financial advisory services relating to
this offering. This amount will be deducted from the non-accountable expense
allowance due the Representative. Accordingly, the amount payable in respect of
the remaining non-accountable expense allowance would be 2.1% of the offering
proceeds if the over-allotment option were not exercised, or 2.3% of the
offering proceeds if the over-allotment were exercised.
The Company will bear all costs and expenses incident to the issuance,
offer, sale and delivery of the Common Stock and Warrants. The Underwriters have
agreed to pay all fees and expenses of any legal counsel whom it may employ to
represent it separately in connection with or on account of the proposed
offering by the Company, mailing, telephone, travel and clerical costs and all
other office costs incurred or to be incurred by the Underwriters or by their
representatives in connection with this offering.
The Company has granted the Representative a right of first refusal for a
period of three years after the date of this Prospectus to act as managing
underwriting for any public offering of the Company's securities.
The public offering price of the Common Stock and Warrants and the exercise
price of the Warrants were determined by negotiations between the Representative
and the Company. Among the factors considered in determining the public offering
price and the Warrant exercise price were the prospects for the Company, an
assessment of the industry in which the Company operates, the assessment of
management, the number of shares of Common Stock and Warrants offered, the price
that purchasers of such securities might be expected to pay given the nature of
the Company, and the general condition of the securities markets at the time of
the offering. Accordingly, the offering price set forth on the cover page of
this Prospectus should not be considered an indication of the actual value of
the Company or the Common Stock or Warrants.
The Company has obtained the agreement of its officers and certain other
shareholders not to sell, contract to sell or otherwise dispose of, directly or
indirectly, any shares of the Common Stock of the Company beneficially held by
them, other than Common Stock offered hereby, for a period of six months after
the date of this Prospectus, without the prior written consent of the
Representative.
The Company and the Underwriters have agreed to indemnify each other against
certain liabilities, including liabilities under the 1933 Act, and, if such
indemnifications are unavailable or insufficient, the Company and the
Underwriters have agreed to damage contribution agreements between them based
upon relative benefits received from this offering and relative fault resulting
in such damages. The Company also has agreed with the Underwriters that the
Company will file and cause to become effective a Registration Statement
pursuant to Section 12(g) of the Securities Exchange Act of 1934 no later than
the date of this Prospectus.
The Company has also agreed that, at the closing of this offering, it will
enter into a consulting agreement retaining the Representative as a financial
consultant to the Company for a fee of $2,500 per month for 12 months after the
closing of this offering. The entire $30,000 fee shall be payable to the
Representative at the closing.
The foregoing does not purport to be a complete statement of the terms and
conditions of the Underwriting Agreement, copies of which are on file at the
offices of the Representative, the Company and the Commission. See "Available
Information."
56
<PAGE>
REPRESENTATIVE'S SECURITIES
Upon completion of the offering, the Company will sell to the Representative
for $100 options to purchase 110,000 shares of Common Stock and 110,000 Warrants
(the "Representative's Securities"). The Representative's Securities will not be
exercisable for one year after the date of this Prospectus. Thereafter, for a
period of four years, the Representatives' Securities will be exercisable at
120% of the public offering price of the Common Stock and 120% of the public
offering price for the Warrants. The Warrants have the same exercise price as
the Warrants offered hereby. The exercise price for the Representative's
Securities is payable in cash or through the surrender of Common Stock or
Warrants having a value equal to the difference between the exercise price and
the average of the current market prices of the Common Stock for the 20
consecutive trading days commencing 21 trading days before the date the Common
Stock or Warrants are tendered for exchange.
The Representative's Securities will be non-transferable for one year after
the date of this Prospectus except between the Underwriters and by their
respective officers or partners. The Representative's Securities will also
contain anti-dilution provisions for stock splits, combinations and
reorganizations, piggyback registration rights, one demand registration right at
the expense of the Company, and one demand registration right paid for by the
holders of the Representative's Securities (all of which expire five years from
the date of the Prospectus) and will otherwise be in form and substance
satisfactory to the Representative. The Warrants included in the
Representative's Securities will be exercisable during the period provided in
the Warrants, commencing one year after the date of this Prospectus.
LEGAL MATTERS
The validity of the issuance of the Common Stock offered hereby will be
passed upon for the Company by Neuman & Cobb, Boulder, Colorado. Clifford L.
Neuman, a partner in the firm of Neuman & Cobb, is the beneficial owner of
24,300 shares of the Company's Common Stock, and Nathan L. Stone, an associate
with the firm, is the beneficial owner of 300 shares of the Company's Common
Stock. Certain legal matters will passed upon for the Representative by Jones &
Keller, P.C., Denver, Colorado.
EXPERTS
The financial statements of the Company as of January 28, 1996, for the
fiscal year ended January 28, 1996, the month ended January 29, 1995 and the
year ended December 31, 1994 are included herein in reliance on the reports of
Hein + Associates LLP, independent certified public accountants, and upon the
authority of that firm as experts in auditing and accounting. With respect to
the unaudited interim financial information for the nine months ended October
29, 1995 and October 27, 1996, the independent public accountants have not
audited or reviewed such financial statements and have not expressed an opinion
or other form of assurance with respect to such financial statements.
AVAILABLE INFORMATION
The Company is subject to the information requirements of the Securities
Exchange Act of 1934 (the "Exchange Act"), and in accordance with the Exchange
Act files periodic reports, proxy statements and other information with the
Securities and Exchange Commission (the "Commission"). Reports, proxy statements
and other information concerning the Company can be inspected and copied (at
prescribed rates) at the Commission's Public Reference Section, Room 1024, 450
Fifth Street, N.W., Judiciary Plaza, Washington, D.C. 20549, as well as at the
following Regional Offices: Northwestern Atrium Center, 500 West Madison Street,
Suite 1400, Chicago, Illinois 60661-2511; and Seven World Trade Center, 13th
Floor, New York, New York 10048. Copies of such material also may be obtained at
prescribed rates from the Public Reference Section of the Commission, 450 Fifth
Street, N.W., Judiciary Plaza, Washington, D.C. 20549.
57
<PAGE>
The Company has filed a Registration Statement on Form SB-2 with the
Commission in Washington, D.C., in accordance with the provisions of the
Securities Act. This Prospectus does not contain all of the information set
forth in the Registration Statement, certain portions of which have been omitted
as permitted by the rules and regulations of the Commission. For further
information pertaining to the shares of Common Stock and Warrants offered hereby
and the Company, reference is made to the Registration Statement, including the
exhibits and financial statement schedules filed as a part thereof. Statements
herein contained concerning the provisions of any document are not necessarily
complete and, in each instance, reference is made to the copy of such document
filed as an Exhibit to the Registration Statement. Each such statement is
qualified in its entirety by such reference. The Registration Statement may be
obtained from the Commission upon payment of the fees prescribed therefor and
may be examined at the principal office of the Commission in Washington, D.C.
58
<PAGE>
PREMIER CONCEPTS, INC.
FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 1994,
FOR THE ONE MONTH ENDED JANUARY 29, 1995,
FOR THE FISCAL YEAR ENDED JANUARY 28, 1996,
FOR THE NINE MONTHS ENDED OCTOBER 29, 1995 (UNAUDITED),
AND FOR THE NINE MONTHS ENDED OCTOBER 27, 1996 (UNAUDITED)
<PAGE>
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
INDEPENDENT AUDITOR'S REPORT............................................................................... F-2
BALANCE SHEETS--For the Year Ended January 28, 1996 and the Nine Months Ended October 27, 1996
(Unaudited)............................................................................................... F-3
STATEMENTS OF OPERATIONS--For the Year Ended December 31, 1994, for the One Month Ended January 29, 1995,
for the Fiscal Year Ended January 28, 1996, for the Nine Months Ended October 29, 1995 (Unaudited), and
for the Nine Months Ended October 27, 1996
(Unaudited)............................................................................................... F-4
STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY--For the Year Ended December 31, 1994, for the One Month
Ended January 29, 1995, for the Fiscal Year Ended January 28, 1996, and for the Nine Months Ended October
27, 1996 (Unaudited)...................................................................................... F-5
STATEMENTS OF CASH FLOWS--For the Year Ended December 31, 1994, for the One Month Ended January 29, 1995,
for the Fiscal Year Ended January 28, 1996, for the Nine Months Ended October 29, 1995 (Unaudited), and
for the Nine Months Ended October 27, 1996
(Unaudited)............................................................................................... F-6
NOTES TO FINANCIAL STATEMENTS.............................................................................. F-7
</TABLE>
F-1
<PAGE>
INDEPENDENT AUDITOR'S REPORT
Board of Directors and Stockholders
Premier Concepts, Inc.
Denver, Colorado
We have audited the accompanying balance sheet of Premier Concepts, Inc. as
of January 28, 1996, and the related statements of operations, changes in
stockholders' equity, and cash flows for the year ended December 31, 1994, for
the one month ended January 29, 1995, and for the fiscal year ended January 28,
1996. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Premier Concepts, Inc., as
of January 28, 1996, and the results of its operations and its cash flows for
the year ended December 31, 1994, for the month ended January 29, 1995, and for
the fiscal year ended January 28, 1996, in conformity with generally accepted
accounting principles.
HEIN + ASSOCIATES LLP
Denver, Colorado
April 5, 1996
F-2
<PAGE>
PREMIER CONCEPTS, INC.
BALANCE SHEETS
<TABLE>
<CAPTION>
JANUARY 28,
1996
------------ OCTOBER 27,
1996
------------
(UNAUDITED)
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents....................... $ 327,198 $ 47,619
Marketable securities........................... 45,113 7,006
Merchandise inventories......................... 1,393,925 1,588,254
Prepaid expenses and other current assets....... 95,503 164,969
------------ ------------
Total current assets.......................... 1,861,739 1,807,848
PROPERTY AND EQUIPMENT, net....................... 977,727 1,254,549
TRADEMARKS, net of accumulated amortization of
$39,100 and $53,067, respectively............... 104,900 90,933
DEFERRED OFFERING COSTS........................... -- 211,542
OTHER ASSETS...................................... 92,428 104,507
------------ ------------
TOTAL ASSETS...................................... $ 3,036,794 $ 3,469,379
------------ ------------
------------ ------------
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Notes payable and current portion of long-term
debt:
Related parties............................... $ 98,879 $ 74,420
Other......................................... 378,902 272,762
Account payable................................. 291,905 1,006,839
Other accrued liabilities....................... 408,881 174,024
------------ ------------
Total current liabilities................... 1,178,567 1,528,045
LONG-TERM DEBT, less current portion.............. 759,864 691,104
DEFERRED RENT..................................... 56,159 91,522
------------ ------------
Total liabilities........................... 1,994,590 2,310,671
------------ ------------
COMMITMENTS AND CONTINGENCIES (NOTE 5)
STOCKHOLDERS' EQUITY:
Preferred stock, $.10 par value, 20,000,000
shares authorized; 416,670 shares issued and
outstanding at October 27, 1996............... -- 41,667
Common stock, $.002 par value; 850,000,000
shares authorized; 748,939 shares issued and
outstanding................................... 1,498 1,498
Additional paid-in capital...................... 2,756,737 2,940,070
Accumulated deficit............................. (1,716,031) (1,824,527)
------------ ------------
Total stockholders' equity.................. 1,042,204 1,158,708
------------ ------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY........ $ 3,036,794 $ 3,469,379
------------ ------------
------------ ------------
</TABLE>
SEE ACCOMPANYING NOTES TO THESE FINANCIAL STATEMENTS.
F-3
<PAGE>
PREMIER CONCEPTS, INC.
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
FOR THE FOR THE NINE
FOR THE YEAR FOR THE ONE FISCAL YEAR MONTHS ENDED
ENDED MONTH ENDED ENDED --------------------------
DECEMBER 31, JANUARY 29, JANUARY 28, OCTOBER 29, OCTOBER 27,
1994 1995 1996 1995 1996
------------- ------------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
(UNAUDITED)
NET REVENUES:
Retail............................................. $ 7,641,427 $ 539,409 $ 8,958,807 $ 6,188,869 $ 6,263,960
Wholesale.......................................... 150,986 3,968 111,033 42,381 23,950
------------- ------------- ------------ ------------ ------------
Total revenues................................... 7,792,413 543,377 9,069,840 6,231,250 6,287,910
COST OF GOODS SOLD................................... 2,569,531 228,076 2,690,658 1,950,465 1,847,986
------------- ------------- ------------ ------------ ------------
Gross margin..................................... 5,222,882 315,301 6,379,182 4,280,785 4,439,924
OPERATING EXPENSES:
Selling, general and administrative................ 5,451,377 488,664 6,087,717 4,453,164 4,365,891
Provision for store closures....................... 143,000 -- (8,307) (8,107) --
Depreciation and amortization...................... 312,146 29,663 337,070 252,992 212,330
------------- ------------- ------------ ------------ ------------
Total operating expenses......................... 5,906,523 518,327 6,416,480 4,698,049 4,578,221
------------- ------------- ------------ ------------ ------------
OPERATING LOSS....................................... (683,641) (203,026) (37,298) (417,264) (138,297)
OTHER INCOME (EXPENSE):
Interest expense, net.............................. (145,577) (11,899) (108,180) (97,968) (79,350)
Gain (loss) on marketable securities, net.......... (146,963) -- (182,643) (150,471) 12,458
Other.............................................. (39,998) 141 10,899 28,755 70,516
------------- ------------- ------------ ------------ ------------
Other, net....................................... (332,538) (11,758) (279,924) (219,684) 3,624
------------- ------------- ------------ ------------ ------------
LOSS BEFORE INCOME TAX BENEFIT AND DISCONTINUED
OPERATIONS......................................... (1,016,179) (214,784) (317,222) (636,948) (134,673)
Income tax benefit................................. 51,000 -- 161,000 109,000 10,000
------------- ------------- ------------ ------------ ------------
INCOME (LOSS) BEFORE DISCONTINUED OPERATIONS......... (965,179) (214,784) (156,222) (527,948) (124,673)
DISCONTINUED OPERATIONS:
Income from discontinued operations, net of income
tax expense of $51,000 and $161,000 for the years
ended December 31, 1994 and January 28, 1996 and
$109,000 and $10,000 for the nine months ended
October 29, 1995 and October 27, 1996............ 141,237 -- 270,441 177,830 16,177
------------- ------------- ------------ ------------ ------------
NET INCOME (LOSS).................................... $ (823,942) $ (214,784) $ 114,219 $ (350,118) $ (108,496)
------------- ------------- ------------ ------------ ------------
------------- ------------- ------------ ------------ ------------
NET INCOME (LOSS) AVAILABLE TO COMMON SHAREHOLDERS... $ (823,942) $ (214,784) $ 114,219 $ (350,118) $ (116,496)
------------- ------------- ------------ ------------ ------------
------------- ------------- ------------ ------------ ------------
Net Income (Loss) Per Common Share:
Before discontinued operations..................... $ (2.77) $ (.49) $ (.31) $ (1.16) $ (.18)
Discontinued operations............................ .40 -- .54 .39 .02
Dividends applicable to preferred stock............ -- -- -- -- .01
------------- ------------- ------------ ------------ ------------
Net income (loss) per common share............... $ (2.37) $ (.49) $ .23 $ (.77) $ (.15)
------------- ------------- ------------ ------------ ------------
------------- ------------- ------------ ------------ ------------
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING........... 348,000 434,200 495,800 454,851 748,939
------------- ------------- ------------ ------------ ------------
------------- ------------- ------------ ------------ ------------
</TABLE>
SEE ACCOMPANYING NOTES TO THESE FINANCIAL STATEMENTS.
F-4
<PAGE>
PREMIER CONCEPTS, INC.
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE YEAR ENDED DECEMBER 31, 1994,
FOR THE ONE MONTH ENDED JANUARY 29, 1995,
FOR THE FISCAL YEAR ENDED JANUARY 28, 1996,
AND FOR THE NINE MONTHS ENDED OCTOBER 27, 1996 (UNAUDITED)
<TABLE>
<CAPTION>
PREFERRED STOCK COMMON STOCK ADDITIONAL
-------------------- ---------------------- PAID-IN ACCUMULATED
SHARES AMOUNT SHARES AMOUNT CAPITAL DEFICIT TOTAL
--------- --------- --------- ----------- ----------- ------------ -----------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCES, January 31, 1994............ -- $ -- 101,441 $ 203 $ 223,742 $ (791,524) $ (567,579)
Common stock issued for:
Rights offering................... -- -- 16,285 33 274,476 -- 274,509
Private placement................. -- -- 185,511 371 893,910 -- 894,281
Acquisition of Imposters and
Mirage.......................... -- -- 127,500 255 794,745 -- 795,000
Settlement of claims.............. -- -- 2,750 5 54,995 -- 55,000
Compensation to employees......... -- -- 660 1 3,299 -- 3,300
Net loss............................ -- -- -- -- -- (823,942) (823,942)
--------- --------- --------- ----------- ----------- ------------ -----------
BALANCES, December 31, 1994........... -- -- 434,147 868 2,245,167 (1,615,466) 630,569
Net loss............................ -- -- -- -- -- (214,784) (214,784)
--------- --------- --------- ----------- ----------- ------------ -----------
BALANCES, January 29, 1995............ -- -- 434,147 868 2,245,167 (1,830,250) 415,785
Common stock issued for:
Private placement................. -- -- 234,000 468 282,032 -- 282,500
Settlement of claims.............. -- -- 53,792 108 184,592 -- 184,700
Services.......................... -- -- 27,000 54 44,946 45,000
Net income.......................... -- -- -- -- -- 114,219 114,219
--------- --------- --------- ----------- ----------- ------------ -----------
BALANCES, January 28, 1996............ -- -- 748,939 1,498 2,756,737 (1,716,031) 1,042,204
Preferred stock issued for cash
(unaudited)....................... 416,670 41,667 -- -- 183,333 -- 225,000
Net loss (unaudited)................ -- -- -- -- -- (108,496) (108,496)
--------- --------- --------- ----------- ----------- ------------ -----------
BALANCES, October 27, 1996
(Unaudited).......................... 416,670 $ 41,667 748,939 $ 1,498 $ 2,940,070 $(1,824,527) $ 1,158,708
--------- --------- --------- ----------- ----------- ------------ -----------
--------- --------- --------- ----------- ----------- ------------ -----------
</TABLE>
SEE ACCOMPANYING NOTES TO THESE FINANCIAL STATEMENTS.
F-5
<PAGE>
PREMIER CONCEPTS, INC.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
FOR THE
FOR THE YEAR FOR THE ONE FOR THE NINE MONTHS ENDED
ENDED MONTH ENDED FISCAL YEAR ------------------------
DECEMBER 31, JANUARY 29, ENDED JANUARY OCTOBER 29, OCTOBER 27,
1994 1995 28, 1996 1995 1996
------------ ----------- ------------- ----------- -----------
<S> <C> <C> <C> <C> <C>
(UNAUDITED)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)................................ $ (823,942) $(214,784) $ 114,219 $(350,118) $(108,496)
Adjustments to reconcile net income (loss) to net
cash from operating activities:
Stock for services............................. -- -- 45,000 -- --
Gain on restructuring of debt.................. -- -- -- -- (14,250)
Reduction of accounts payable--discontinued
operations................................... (192,237) -- (431,441) (286,330) (26,177)
Provision for store closure.................... 143,000 -- 8,307 (8,107) --
Depreciation and amortization.................. 312,146 29,663 337,070 252,992 212,330
(Gain) loss on marketable securities........... 146,963 -- 182,643 150,471 (12,458)
Other, net..................................... 25,307 -- (13,201) 66,022 (12,079)
Changes in operating assets and liabilities:
(Increase) decrease in:
Merchandise inventories...................... (122,259) 201,735 (197,665) (330,066) (194,329)
Other assets................................. 382,853 6,356 (40,870) (34,003) (69,466)
Increase (decrease) in:
Accounts payable and accrued liabilities..... 39,716 (435,030) 99,834 515,607 506,254
Other liabilities............................ 29,509 2,030 24,620 (90,320) 35,363
------------ ----------- ------------- ----------- -----------
Net cash provided by (used in) operating
activities................................... (58,944) (410,030) 128,516 (113,852) 316,692
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures for property and
equipment...................................... (56,445) -- (165,137) (11,445) (475,185)
Cash balances of businesses acquired............. 367,313 -- -- -- --
Proceeds from sale of investments................ 155,283 -- 156,374 150,058 50,564
Purchase of investments.......................... (223,909) -- -- -- --
------------ ----------- ------------- ----------- -----------
Net cash (used in) provided by investing
activities................................... 242,242 -- (8,763) 138,613 (424,621)
CASH FLOWS FROM FINANCING ACTIVITIES:
Deferred offering costs.......................... -- -- -- -- (211,542)
Proceeds from the issuance of preferred stock.... -- -- -- -- 225,000
Proceeds from issuance of common stock........... 1,236,381 -- 282,500 156,625 --
Proceeds from issuance of notes payable.......... 446,453 -- 100,000 100,000 --
Payment on notes payable......................... (1,296,407) (18,008) (346,219) (313,791) (185,108)
------------ ----------- ------------- ----------- -----------
Net cash provided by (used in) financing
activities................................... 406,427 (18,008) 36,281 (57,166) (171,650)
------------ ----------- ------------- ----------- -----------
INCREASE (DECREASE) IN CASH........................ 589,725 (428,038) 156,034 (32,405) (279,579)
CASH AND CASH EQUIVALENTS, beginning of period..... 9,477 599,202 171,164 171,164 327,198
------------ ----------- ------------- ----------- -----------
CASH AND CASH EQUIVALENTS, end of period........... $ 599,202 $ 171,164 $ 327,198 $ 138,759 $ 47,619
------------ ----------- ------------- ----------- -----------
------------ ----------- ------------- ----------- -----------
SUPPLEMENTAL SCHEDULE OF CASH FLOW INFORMATION:
Cash paid for interest........................... $ 135,319 $ 11,899 $ 102,134 $ 98,807 $ 86,073
------------ ----------- ------------- ----------- -----------
------------ ----------- ------------- ----------- -----------
Purchase of Impostors and Mirage with common
stock.......................................... $ 650,000 $ -- $ -- $ -- $ --
------------ ----------- ------------- ----------- -----------
------------ ----------- ------------- ----------- -----------
Conversion of liabilities to equity securities... $ 149,000 $ -- $ 184,700 $ -- $ --
------------ ----------- ------------- ----------- -----------
------------ ----------- ------------- ----------- -----------
</TABLE>
SEE ACCOMPANYING NOTES TO THESE FINANCIAL STATEMENTS.
F-6
<PAGE>
PREMIER CONCEPTS, INC.
NOTES TO FINANCIAL STATEMENTS
(INFORMATION SUBSEQUENT TO JANUARY 28, 1996 IS UNAUDITED)
1. NATURE OF OPERATIONS AND SIGNIFICANT ACCOUNTING POLICIES:
NATURE OF OPERATIONS--Premier Concepts, Inc. (the Company) was incorporated
in the state of Colorado in 1988. During 1993, the Company acquired certain real
estate located in a limited stakes gaming city in Colorado, which were exchanged
during 1993 for common stock of Global Casinos, Inc. (Global), a company which
had two common directors. As further discussed in Note 2, during 1994, the
Company purchased out of bankruptcy certain assets and liabilities of American
Fashion Jewels, Inc. (Impostors) and, in a separate transaction, Mirage
Concepts, Inc. (Mirage), both of which are retail chains of reproduction jewelry
stores. As of October 27, 1996, the Company operated 27 retail stores with a
geographic concentration of stores in California, including one store in San
Francisco, California that accounted for 17% of total revenues during the fiscal
year ended January 28, 1996.
FISCAL YEAR--The Company was on a calendar year through December 31, 1994.
The Company changed its fiscal year to a 52/53-week period ending on the last
Sunday in January effective for periods ending after December 31, 1994. The
period ended January 29, 1995 had 29 days of activity. Fiscal year ended January
28, 1996 contained 364 days of activity.
INVENTORIES--Inventories consist primarily of merchandise which is held for
resale. Inventories are stated at the lower of cost or market, as calculated
using the average-cost method.
PROPERTY AND EQUIPMENT--Property and equipment is stated at cost.
Depreciation is computed over the estimated useful lives of the assets using the
straight-line method generally over a 5 to 10-year period. Leasehold
improvements are amortized on the straight-line method over the lesser of the
lease term of the useful life. Expenditures for ordinary maintenance and repairs
are charged to expense as incurred. Upon retirement or disposal of assets, the
cost of accumulated depreciation are eliminated from the account and any gain or
loss is reflected in the statement of operations.
TRADEMARKS--A portion of the Impostors purchase price was allocated to
trademarks (see Note 2). This cost is being amortized over 10 years. The Company
evaluates the recoverability of this intangible based on projected, undiscounted
future cash flows exclusive of interest. During the year ended January 28, 1996,
the Company determined that it was remote that a payable of $60,000 to a
consultant, that was capitalized as part of the trademark acquired from
Impostors, would ever be paid. Accordingly, trademarks were reduced to reflect
the reduction in the payable.
DEFERRED RENT--Many of the Company's store leases contain predetermined
fixed escalations of the minimum rentals during the initial term. For these
leases, the Company recognizes the related rental expense on a straight-line
basis and records the difference as deferred rent.
MARKETABLE SECURITIES--Trading securities, all of which are equity
investments, are carried at market value at the balance sheet date. All of the
marketable securities at January 28, 1996 are common stock of Global. Realized
gain (loss) on marketable securities is determined based on specific
identification of securities sold.
The change in the net unrealized holding loss for the year ended December
31, 1994, for the month ended January 29, 1995, and for the year ended January
28, 1996, was $53,164, $155, and $20,243, respectively.
FAIR VALUE OF FINANCIAL INSTRUMENTS--The estimated fair values for financial
instruments are determined at discrete points in time based on relevant market
information. These estimates involve uncertainties and cannot be determined with
precision. The carrying amounts of marketable securities, accounts
F-7
<PAGE>
PREMIER CONCEPTS, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION SUBSEQUENT TO JANUARY 28, 1996 IS UNAUDITED)
1. NATURE OF OPERATIONS AND SIGNIFICANT ACCOUNTING POLICIES: (CONTINUED)
payable, and accrued liabilities approximate fair value. The fair value of
certain notes payable is less than their carrying value as generally their
interest rates are lower than the Company's current effective annual borrowing
rate, however, the difference is not considered significant.
CASH EQUIVALENTS--For purposes of the statement of cash flows, the Company
considers all highly liquid debt instruments with original maturities of three
months or less to be cash equivalents.
NET INCOME (LOSS) PER COMMON SHARE--Net income (loss) per common share is
calculated based upon the weighted average number of common shares outstanding
during the periods presented. Dividends, including those accrued but not yet
paid on preferred stock is deducted to arrive at net income (loss) available to
the common shareholders. Convertible preferred stock, stock options, and
warrants have not been included in the calculation of net income (loss) per
share for the year ended December 31, 1994, for the one month ended January 29,
1995, and for the nine months ended October 29, 1995 and October 27, 1996, as
the results are antidilutive. Dilutive options have been included in the
calculation of net income per common share for the fiscal year ended January 28,
1996.
LICENSE AGREEMENTS--The Company grants license agreements to entities for
the use of the Impostor's name. License fees are recognized as income on a
straight-line basis over the term of the agreement.
INCOME TAXES--The Company accounts for income taxes under SFAS No. 109 which
requires recognition of deferred tax assets and liabilities for the expected
future tax consequences of events that have been included in the financial
statements or tax returns. Under this method, deferred tax assets and
liabilities are determined, based on the difference between the financial
statements and tax bases of asset and liabilities using enacted tax rates in
effect for the year in which the differences are expected to reverse.
USE OF ESTIMATES--The preparation of the Company's financial statements in
conformity with generally accepted accounting principles requires the Company's
management to make estimates and assumptions that affect the amounts reported in
these financial statements and accompanying notes. Actual results could differ
from those estimates.
IMPAIRMENT OF LONG-LIVED ASSETS--Effective January 29, 1996, the Company
adopted Financial Accounting Standards Board Statement 121 (FAS 121). In the
event that facts and circumstances indicate that the cost of assets or other
assets may be impaired, an evaluation of recoverability would be performed. If
an evaluation is required, the estimated future undiscounted cash flows
associated with the asset would be compared to the asset's carrying amount to
determined if a write-down to market value or discounted cash flow value is
required. Adoption of FAS 121 had no effect on the unaudited October 27, 1996
financial statements.
PROVISION FOR STORE CLOSURES AND WRITE-DOWN PRODUCTIVE ASSETS--The Company
accrues costs associated with store closures that are incremental to other costs
incurred prior to commitment date as a direct result of the exit plan. The
Company also accrues any amounts to be incurred under contractual obligations
that existed prior to the commitment date and will continue after the exit plan
is completed with no economic benefit. Prior to the adoption of FAS 121 on
January 29, 1996, the Company also wrote-down productive assets to their net
realizable value when it was determined the productive assets were permanently
impaired. During the year ended December 31, 1994, the Company accrued a
provision for store closures of $143,000 based upon the above described
accounting policies.
F-8
<PAGE>
PREMIER CONCEPTS, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION SUBSEQUENT TO JANUARY 28, 1996 IS UNAUDITED)
1. NATURE OF OPERATIONS AND SIGNIFICANT ACCOUNTING POLICIES: (CONTINUED)
STOCK BASED COMPENSATION--In October 1995, the Financial Accounting
Standards Board issued a new statement titled "Accounting for Stock-Based
Compensation" (FAS 123). The new statement is effective for fiscal years
beginning after December 15, 1995. FAS 123 encourages, but does not require,
companies to recognize compensation expense for grants of stock, stock options,
and other equity instruments to employees based on fair value. Companies that do
not adopt the fair value accounting rules must disclose the impact of adopting
the new method in the notes to the financial statements. Transactions in equity
instruments with non-employees for goods or services must be accounted for on
the fair value method. The Company has elected not to adopt the fair value
accounting prescribed by FAS 123 for employees, and will be subject only to the
disclosure requirements prescribed by FAS 123.
LIQUIDITY--At January 28, 1996, the Company had working capital of $683,172
and a stockholders' equity of $1,042,204. The Company incurred an operating loss
(before interest expense and other income) of $37,298 for the year ended January
28, 1996. For the nine months ended October 27, 1996, the Company incurred an
operating loss of $138,297 which is less than the comparable loss of $417,264
for the nine months ended October 29, 1995. The Company does experience seasonal
sales and the Company's net income for 1996 is substantially composed of income
from extinguishment and reversal of prior payables related to a predecessor
business (see Note 2). Imposters emerged from bankruptcy in February 1994, and
the Company has experienced liquidity difficulties in the past.
As shown in the Company's financial statements, the Company's sales have
increased during the fiscal year ended January 28, 1996, which has also resulted
in improved financial performance. As discussed further in Note 6, the Company
obtained additional capital through private placements of common stock during
fiscal 1996, and preferred stock and warrants in June 1996, and is undertaking a
proposed public offering of common stock and warrants.
UNAUDITED INFORMATION--The balance sheet as of October 27, 1996 and the
statements of operations for the nine-month periods ended October 29, 1995 and
October 27, 1996 were taken from the Company's books and records without audit.
However, in the opinion of management, such information includes all adjustments
(consisting only of normal accruals), which are necessary to properly reflect
the financial position of the Company as of October 27, 1996 and the results of
operations for the nine months ended October 29, 1995 and October 27, 1996.
2. ACQUISITIONS AND DISPOSITIONS:
In 1993, the Company exchanged its ownership in certain real estate and a
note receivable for 2,500,000 and 200,000 shares of common stock, respectively,
in Global, of which 2,409,700 shares of Global's common stock were distributed
to stockholders' of the Company during 1993. The remaining 290,300 shares were
held by the Company, which represents less than 5% of Global's outstanding
common stock. After distributing the Global common stock to the Company's
stockholders, there remained substantial liabilities to uncollateralized
creditors related to prior activities of the Company. As of January 28, 1996 and
October 27, 1996, the Company had accounts payable of $80,884 and $45,865,
respectively, that related to the prior activities of the Company. Certain of
these creditors have filed claims against the Company demanding payment. The
Company has negotiated settlements with certain creditors, which has resulted in
income before income tax expense, totaling approximately $192,000 and $209,000
during the years ended December 31, 1994 and January 28, 1996, respectively. The
Company also recorded approximately $222,000 of income during the year ended
January 28, 1996, as a result of the reduction in
F-9
<PAGE>
PREMIER CONCEPTS, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION SUBSEQUENT TO JANUARY 28, 1996 IS UNAUDITED)
2. ACQUISITIONS AND DISPOSITIONS: (CONTINUED)
recorded amounts of accounts payable based upon management's estimates of
amounts which may ultimately be paid, but the Company has not received formal
releases from payment from the creditors. Accordingly, these amounts were
recorded as income from discontinued operations, net of income tax expense.
RETAIL JEWELRY STORES--During 1994, the Company acquired substantially all
of the assets and liabilities of Impostors, a retail jewelry chain from a
corporation which had filed for protection under the United States Bankruptcy
Court. The retail jewelry chain was comprised of 27 retail jewelry stores,
operating under the trademark "Impostors." One store was closed in 1994 and five
stores were closed during the year ended January 28, 1996. In an affiliated
bankruptcy proceeding, the Company acquired certain additional commercial leases
utilized in connection with the operation of the retail business. In connection
with this transaction, the Company issued 137,500 shares of its common stock,
which was valued by the bankruptcy court at $695,000. The Company also assumed
liabilities of approximately $3,147,000, and acquired assets of approximately
$3,697,000, including trademarks and tradename valued at $204,000. For financial
statement purposes, this transaction has been treated as a purchase by the
Company of Impostors.
Also during 1994, the Company acquired Mirage, which, at the time of
acquisition, owned and operated three retail costume jewelry stores. The Company
and Mirage had a common officer and a common stockholder prior to the
acquisition date. The Company issued 20,000 shares of common stock valued at
$100,000 for the acquisition of Mirage. The Company also assumed liabilities of
approximately $76,000, and acquired assets of approximately $176,000. For
financial statement purposes, this transaction has been treated as a purchase by
the Company of Mirage.
The accompanying statement of operations includes Impostors and Mirage since
March 1, 1994, the date of acquisition.
3. PROPERTY AND EQUIPMENT:
At January 28, 1996, property and equipment consists of the following:
<TABLE>
<S> <C>
Furniture, fixtures and equipment............................... $ 717,869
Leasehold improvements.......................................... 845,015
---------
1,562,884
Less accumulated depreciation................................... 585,157
---------
$ 977,727
---------
---------
</TABLE>
The Company has incurred approximately $475,000 in capital expenditures
subsequent to January 28, 1996 consisting of expenditures on a new store and the
remodeling of several other stores and the corporate office.
Depreciation expense for the year ended December 31, 1994, one month ended
January 29, 1995, and for the year ended January 28, 1996 was $295,146, $27,963,
and $316,670, respectively.
F-10
<PAGE>
PREMIER CONCEPTS, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION SUBSEQUENT TO JANUARY 28, 1996 IS UNAUDITED)
4. NOTES PAYABLE AND LONG-TERM DEBT:
Notes payable and long-term debt consist of the following:
<TABLE>
<CAPTION>
JANUARY 28, OCTOBER 27,
1996 1996
------------ -----------
<S> <C> <C>
RELATED PARTIES
Note payable to a stockholder, payable in monthly installments of $5,000 plus accrued
interest at 18%, collateralized by marketable securities, paid during the nine months
ended October 27, 1996............................................................... $ 30,959 $ --
Note payable to a stockholder, at 12% principal and interest due December 31, 1996. The
Company has been in discussions with the noteholder to extend the maturity date of
the note............................................................................. 39,000 35,500
Notes and advances payable to stockholders of the Company, payable on demand,
non-interest bearing................................................................. 28,920 28,920
Other.................................................................................. -- 10,000
------------ -----------
Total related parties--all current................................................... $ 98,879 $ 74,420
------------ -----------
------------ -----------
OTHER
Note payable to a bank, interest payable monthly at 10%, principal payable in February
1998, collateralized by cash and inventory........................................... $ 635,000 $ 635,000
Note payable to a entity, interest payable monthly at 12%, principal payable in January
1996. Management has been in discussions with the noteholder to pay off the note with
part of the proceeds from a proposed public offering................................. 100,000 100,000
Payable to a vendor and creditor of Impostors from bankruptcy settlement (less
unamortized discount of $8,743 as of January 28, 1996), payable by adding 10% to the
cost of current purchases. Discounted at 7.7% assumed interest rate, collateralized
by receivables, inventory, property and equipment (see Note 5)....................... 87,591 48,956
Notes payable to creditors of Impostors from bankruptcy settlement, payable in monthly
installments plus accrued interest at 6% to 8%, over variable terms through December
1999. A note totaling $35,000 is guaranteed by former stockholders of the Company.... 197,724 119,910
Notes payable to an entity, payable in monthly installments of $10,000 plus accrued
interest at 12%. As of October 27, 1996, the Company is in arrears on $50,000 of
principal payments. The Company has been in discussions with the noteholder to pay
off the note with the proceeds of the offering....................................... 100,000 60,000
Other.................................................................................. 18,451 --
------------ -----------
1,138,766 963,866
Less current portion................................................................... (378,902) (272,762)
------------ -----------
$ 759,864 $ 691,104
------------ -----------
------------ -----------
</TABLE>
F-11
<PAGE>
PREMIER CONCEPTS, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION SUBSEQUENT TO JANUARY 28, 1996 IS UNAUDITED)
4. NOTES PAYABLE AND LONG-TERM DEBT: (CONTINUED)
Principal payments on the above obligations at January 28, 1996 are due as
follows:
<TABLE>
<CAPTION>
RELATED
PARTIES OTHER
--------- ------------
<S> <C> <C>
1997........................................................................... $ 98,878 $ 378,904
1998........................................................................... -- 725,326
1999........................................................................... -- 26,787
2000........................................................................... -- 7,749
--------- ------------
$ 98,878 $ 1,138,766
--------- ------------
--------- ------------
</TABLE>
On December 27, 1996, the Company completed the sale of $1,120,000 in
Convertible Notes and 200,000 Class B Warrants, realizing net proceeds of
$1,041,600. From the net proceeds, the Company utilized $624,325 to redeem an
aggregate of 189,023 shares of Common Stock and 32,500 Class C Warrants from
certain former securityholders. The Convertible Notes bear interest at the rate
of 12% per annum, payable quarterly and are convertible into shares of Common
Stock commencing April 1, 1997, at the option of the holder, at a conversion
value of $2.80 per share. However, if (i) the Company fails to complete a public
offering of its securities by June 30, 1997 or (ii) the principal balance of the
Convertible notes is not retired by the Company by their maturity date, the
conversion value is reduced to $1.00 per share. The Company has agreed to retire
the Convertible Notes from the proceeds of a proposed public offering. Unless
earlier converted or retired, the Convertible Notes mature and become due and
payable on December 26, 1999. The obligation of the Company to repay the
Convertible Notes is collateralized by a subordinated security agreement
covering all of the Company's tangible and intangible assets.
5. COMMITMENTS AND CONTINGENCIES:
LEASE COMMITMENTS--The Company leases its offices and retail facilities
under operating leases for terms expiring at various dates from 1996 to 2007.
Subsequent to January 28, 1996, the Company entered into twelve new retail
facility operating leases. The corporate office lease has been guaranteed by
certain directors of the Company. The aggregate minimum annual lease payments
under leases are as follows:
<TABLE>
<CAPTION>
NEW OPERATING
LEASES FROM
OPERATING JANUARY 29,
LEASES AS OF 1996
JANUARY 28, TO FEBRUARY 17,
1996 1997 TOTAL
------------ --------------- -------------
<S> <C> <C> <C>
1997..................................................... $ 1,487,312 $ 183,761 $ 1,671,073
1998..................................................... 1,385,860 579,942 1,965,802
1999..................................................... 1,190,250 595,620 1,785,870
2000..................................................... 1,056,871 619,702 1,676,573
Thereafter............................................... 1,767,854 4,115,247 5,883,101
------------ --------------- -------------
Total minimum lease payments............................. $ 6,888,147 $ 6,094,272 $ 12,982,419
------------ --------------- -------------
------------ --------------- -------------
</TABLE>
Most leases also provide for payment of operating expenses, real estate
taxes and in some cases for additional rent based on a percentage of sales.
Rental expense was $1,739,802, $174,592, and $1,977,718
F-12
<PAGE>
PREMIER CONCEPTS, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION SUBSEQUENT TO JANUARY 28, 1996 IS UNAUDITED)
5. COMMITMENTS AND CONTINGENCIES: (CONTINUED)
for the fiscal year ended December 31, 1994, for the one month ended January 29,
1995, and for the year ended January 28, 1996, respectively.
LITIGATION SETTLEMENT--The Company entered into a commitment to guarantee
the value of 55,000 shares of Global stock and 2,750 shares of the Company's
common stock related to a settlement with a former creditor. Under the terms of
the agreement, the Company agreed to buy back or guarantee that the total
"asking" price of the combined common shares would equal $200,000 at March 1,
1995. In fiscal 1996, the Company settled with the former creditor for the
issuance of an additional 46,792 shares of the Company's stock, valued at
$171,625.
PAYABLE TO VENDOR--The Company has agreed to purchase a minimum of $500,000
of merchandise annually from the vendor through 1997 or until Imposters'
liability to the vendor prior to Imposter's bankruptcy (totaling approximately
$49,000) has been paid in full. Payment for merchandise purchased will be paid
at 110% of the cost, with the additional 10% to be applied against the
outstanding balance of the vendor's claim until paid in full (see Note 4).
6. STOCKHOLDERS EQUITY:
STOCK REDEMPTION--During December 1996, the Company redeemed from certain
securityholders, 189,023 shares of its common stock and 32,500 of its Class C
warrants for $624,325.
PREFERRED STOCK--The Board of Directors has authority to divide the class of
the preferred stock into series and to fix and determine the relative rights and
preferences of the shares of any such series as permitted by the Company's
articles of incorporation at the time of designation.
During June 1996, the Company sold 208,355 units at $1.20 per unit in a
private offering. Each unit includes two shares of Series A Convertible
Preferred Stock and one warrant. Five warrants currently entitle the holder to
purchase one share of common stock at $5 per share and are exercisable through
June 1998. Each share of Series A Preferred Stock is entitled to $.051 per annum
cumulative dividends and is convertible commencing in June 1997 at a rate of
five shares of preferred stock for one share of common stock. If the Company
completes a public offering of common stock, the preferred shares will
automatically convert into 102,041 shares of common stock and five warrants will
automatically be exchanged for two warrants offered in the proposed public
offering.
COMMON SHARES--During 1994, the Company declared a 1 for 4 reverse stock
split and changed the par value from $.0001 to $.0004 per share. In December
1996, the Company's shareholders also approved a 1 for 5 reverse stock split and
a change in the par value from $.0004 to $.002 per share. Accordingly, all
common stock reflected in the accompanying financial statements and notes
reflect these reverse splits.
During 1994, the Company sold, in a private placement, 92,750 units for
$10.00 per unit. Each unit consisted of two shares of common stock and a warrant
for the purchase one share of common stock at a purchase price of $10.00 per
share, exercisable through December 31, 1995. Proceeds of $894,281 were net of
$33,219 expenses of the offering. The Company has extended the term of the
warrants to December 31, 1997. As discussed above, the Company redeemed warrants
for the purchase of 32,500 shares of common stock for $10,000.
During 1994, the Company completed a rights offering of 50,000 shares of the
Company's common stock at $18.00 per share and the right to a distribution of
1,000,000 shares of Global stock from the
F-13
<PAGE>
PREMIER CONCEPTS, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION SUBSEQUENT TO JANUARY 28, 1996 IS UNAUDITED)
6. STOCKHOLDERS EQUITY: (CONTINUED)
Company, which was part of a distribution of Global stock to all of the
Company's stockholders (see Note 2). During 1994, the 16,285 remaining shares
and 33,715 shares of this offering were sold. Proceeds of $881,378 were net of
$18,622 expenses of the offering.
During 1995, the Company sold in a private placement, 234,000 shares of
common stock at $1.25 per share. Also, during 1995, the Company issued 53,792
shares of common stock in settlement of liabilities and guarantees of
liabilities and 27,000 shares of common stock in payment for services, including
2,400 issued to an officer and director, and 2,600 issued to a director. The
Company has agreed to register 102,041 shares, under the Securities Act of 1933.
OPTIONS--The Company has an Incentive Stock Option Plan (Plan) which
provides for the grant of options to purchase up to 230,000 shares of the
Company's common stock to officers and employees of the Company. Options are
granted at a price equal to the market value at the date of grant. Options were
granted in 1994 to an officer/director on 40,000 shares at an exercise price of
$5; in fiscal 1996, the exercise price was reduced to $1.875 per share, and the
term was extended to December 31, 2001. An additional 13,000 incentive stock
options were granted to other employees in fiscal 1997 at $1.875 per share,
which expire in February 15, 2003. All of these options are currently vested.
In March 1996, the Company granted incentive stock options for 80,000 shares
to employees, at an exercise price of $2.50, which expire in 2001. Subsequent to
October 27, 1996, 20,000 of these options were canceled due to termination of an
employee. Of the remaining stock options for 60,000 shares of common stock,
30,000 of these incentive stock options have vested immediately and 15,000 vest
on each of the first and second anniversary dates.
Subsequent to October 27, 1996, the Company granted incentive stock options
for 25,000 shares of common stock to the Company's president, at an exercise
price of $2.50 and which expire in January 2002. Options for the purchase of (i)
15,000 shares of common stock vest in June 1997, (ii) 10,000 shares of common
stock vest in June 1998.
Subsequent to October 27, 1996, the Company granted incentive stock options
for 28,000 shares of common stock to employees at an exercise price of $2.50,
and which expire in January 2002. Options for the purchase of (i) 13,000 shares
of common stock vested immediately, (ii) 10,000 shares of common stock vest in
January 1998, and (iii) 5,000 shares of common stock vest in January 1999.
In April 1996, the Company adopted an non-qualified option plan (Director
Plan) for outside directors. Each outside director is to be granted stock
options for each full year of service for the purchase of 5,000 shares of common
stock at a price equal to 100% of the fair market value of the Company's common
stock at the date of grant. During 1995, the Company issued options on a total
of 25,000 shares to directors of the Company under the Director Plan and options
for 12,000 shares to directors in return for guaranteeing the Company's
corporate office lease, at an exercise price of $2.50 and which expire in 2001.
Subsequent to October 27, 1996, the Board of Directors approved an increase in
options from 5,000 to 10,000 that will be granted to outside directors for
fiscal 1998. Also, subsequent to October 27, 1996, the Company granted to a
director an option for the purchase of 5,000 shares at $2.50 per share, which
expires January 29, 2002.
EMPLOYEE STOCK PURCHASE PLAN--During June 12, 1995, the Company adopted a
qualified Employee Stock Purchase Plan (ESPP). The Company has been authorized
through the ESPP to offer up to
F-14
<PAGE>
PREMIER CONCEPTS, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION SUBSEQUENT TO JANUARY 28, 1996 IS UNAUDITED)
6. STOCKHOLDERS EQUITY: (CONTINUED)
20,000 shares per year over a three-year term, or a total of 60,000 shares, to
the Company's employees. The ESPP includes certain restrictions which preclude
participation by part-time employees and employees owning 5% or more of the
Company's common stock. The purchase price for the shares may not be less than
85% of the market value of the stock on either the enrollment date or the
exercise date as those terms are defined in the ESPP. No shares of common stock
have been issued under the ESPP and there have been no subscriptions of
employees to participate in the plan.
7. INCOME TAXES:
The Company's actual effective tax rate differs from U.S. Federal corporate
income tax rate of 34% as follows for the fiscal year ended January 28, 1996.
<TABLE>
<S> <C>
Statutory rate................................................... 34%
Effect of graduated rate......................................... (4.6)%
State income taxes, net of Federal income tax benefit............ 3.3%
Reduction in valuation allowance due to usage of net operating
loss carryforwards and change in temporary differences......... (32.7)%
-----------
$ -0-%
-----------
-----------
</TABLE>
The components of the net deferred tax asset recognized as of January 28,
1996 are as follows:
<TABLE>
<S> <C>
Current deferred tax assets (liabilities):
Unrealized loss on investments................................. $ 56,000
Accrued expenses not currently deductible for tax.............. 35,000
Other, net..................................................... (2,000)
Valuation allowance............................................ (89,000)
---------
Net current deferred tax asset............................... $ --
---------
---------
Long-term deferred tax assets (liabilities):
Net operating loss carryforwards............................... $ 231,000
Other, net..................................................... 5,000
Valuation allowance............................................ (236,000)
---------
Net long-term deferred tax asset............................. $ --
---------
---------
</TABLE>
The valuation allowance was $546,000 at December 31, 1994, increased by
$73,000 in the one month ended January 29, 1995, and decreased by $302,000 for
the year ended January 28, 1996.
At January 28, 1996, the Company had net operating loss carryforwards for
Federal tax purposes of approximately $680,000. The estimated NOL carryforward
has been reduced by approximately $400,000 as a result of changes in ownership
and a change in line of business which occurred in 1994 and prior years. The
loss carryforwards, unless utilized, will expire from 2009 through 2010.
F-15
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NO DEALER, SALESMAN OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS IN CONNECTION WITH THE OFFER MADE BY THIS PROSPECTUS AND IF, GIVEN OR
MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE COMPANY. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL
OR THE SOLICITATION OF ANY OFFER TO BUY ANY SECURITY OTHER THAN THE SHARES OF
COMMON STOCK AND WARRANTS OFFERED BY THIS PROSPECTUS, NOR DOES IT CONSTITUTE AN
OFFER TO SELL OR A SOLICITATION OF ANY OFFER TO BUY THE SHARES OF COMMON STOCK
OR WARRANTS BY ANYONE IN ANY JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION IS
NOT AUTHORIZED, OR IN WHICH THE PERSON MAKING SUCH OFFER OR SOLICITATION IS NOT
QUALIFIED TO DO SO, OR TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER
OR SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE
HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT
INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE
HEREOF.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
Prospectus Summary............................. 2
The Company.................................... 6
Risk Factors................................... 7
Use of Proceeds................................ 16
Dilution....................................... 18
Capitalization................................. 19
Dividends...................................... 20
Certain Market Information..................... 21
Selected Financial Data and Statistical Data... 22
Management's Discussion and Analysis of
Financial Condition and Results of
Operations................................... 24
Business....................................... 32
Management..................................... 39
Certain Transactions........................... 45
Securities Ownership of Management and
Principal Shareholders....................... 48
Description of Securities...................... 51
Underwriting................................... 55
Legal Matters.................................. 57
Experts........................................ 57
Available Information.......................... 57
Financial Statements........................... F-1
</TABLE>
1,100,000 SHARES OF COMMON STOCK
1,100,000 CLASS A COMMON STOCK
PURCHASE WARRANTS
PREMIER CONCEPTS, INC.
---------------------
PROSPECTUS
---------------------
COHIG & ASSOCIATES, INC.
, 1997
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
[Alternate Page for Selling Shareholders' Prospectus]
THE OFFERING
<TABLE>
<S> <C>
Securities offered by the Selling
Shareholders.................... 102,041 shares of Common Stock, $.002 par value and
483,334 Warrants. See "Description Of Securities."
Offering price.................... Prevailing market price
Common stock outstanding:......... 1,659,916 shares(1)(2)(3)
Proposed NASDAQ SmallCap symbols:
Common Stock.................... "FAUX"
Warrants........................ "FAUXW"
</TABLE>
RISK FACTORS
An investment in the Shares involves certain risks. Prospective investors
should carefully consider the factors set forth under "RISK FACTORS."
USE OF PROCEEDS
The Company will not receive any of the proceeds from the sale of shares
offered by Selling Shareholders.
- ------------------------
(1) Does not include (i) 230,000 shares of Common Stock reserved for issuance
upon exercise of options which may be granted under the Company's 1993 Stock
Incentive Plan, 196,000 of which are subject to outstanding and unexercised
options having a weighted average exercise price of $2.33 per share, and of
which 70,000 options are subject to future vesting, (ii) 60,250 shares of
Common Stock reserved for issuance upon exercise of outstanding Class C
Common Stock Purchase Warrants ("C Warrants") at a price of $10.00 per
share, (iii) 12,000 shares of Common Stock reserved for issuance pursuant to
the exercise of other outstanding options and warrants having a weighted
average exercise price of $2.50 per share, and (iv) 60,000 shares of Common
Stock reserved for issuance pursuant to the exercise of options which may be
granted under the Company's 1995 Employee Stock Purchase Plan ("1995 ESPP").
(2) On June 24, 1996, the Company completed the sale of 416,670 shares of Series
A Convertible Preferred Stock ("Convertible Preferred Stock") and 208,335
Class B Warrants (the "Bridge Offering"), realizing net proceeds of
$225,000. Does not include 102,041 shares of Common Stock reserved for
issuance on the date of this Prospectus pursuant to the automatic conversion
of the Convertible Preferred Stock, or 41,667 shares of Common Stock
reserved for issuance upon exercise of the outstanding Warrants. See
"Description of Securities--Series A Convertible Preferred Stock".
(3) Does not include shares reserved for issuance upon the conversion of the 12%
Convertible Promissory Notes (the "Convertible Notes"). On December 27,
1996, the Company completed a bridge financing (the "Bridge Note Financing")
consisting of $1,120,000 in Convertible Notes and 200,000 Class B Warrants,
realizing net proceeds of $1,041,600. The Company utilized $624,325 of these
proceeds to redeem from certain securityholders 189,023 of the Company's
Common Stock and 32,500 Class C Warrants. The principal balance of the
Convertible Notes is convertible after April 1, 1997, at the option of the
holder, into shares of the Company's Common Stock at a conversion value of
$2.80 per share, subject to adjustment under certain circumstances. Each
Class B Warrant entitles the holder to purchase one share of the Company's
Common Stock at an exercise price of $5.00 per share and will be
automatically exchanged for two Warrants upon the effective date of the
Registration Statement of
3
<PAGE>
[Alternate Page for Selling Shareholders' Prospectus]
which this Prospectus forms a part. See "Description of Securities--12%
Convertible Promissory Notes."
SUMMARY FINANCIAL DATA
Set forth below is selected summary financial data with respect to the
Company. Financial information for the period ended January 29, 1995, for the
year ended January 28, 1996, and as of and for the nine months ended October 29,
1995 and October 27, 1996, is derived from the financial statements included
elsewhere in this Prospectus and is qualified by reference to such financial
statements and the notes related thereto. In February 1995, the Company adopted
its new fiscal year to begin January 30, 1995 and end January 28, 1996; and
thereafter the fiscal year will end on the last Sunday of each January of each
successive year.
<TABLE>
<CAPTION>
NINE MONTHS ENDED
PERIOD ENDED YEAR ENDED --------------------------
JANUARY 29, JANUARY 28, OCTOBER 29, OCTOBER 27,
1995 (1) 1996 1995 1996
------------- ------------ ------------ ------------
<S> <C> <C> <C> <C>
STATEMENTS OF OPERATIONS DATA:
Total revenues........................................... $ 8,335,790 $ 9,069,840 $ 6,231,250 $ 6,287,910
Operating (loss)......................................... (886,667) (37,298) (417,264) (138,297)
Income from discontinued operations...................... 141,237 270,441 177,830 16,177
Net income (loss)........................................ (1,038,726) 114,219 (350,118) (108,496)
Net income (loss) available to common shareholders....... (1,038,726) 114,219 (350,118) (116,496)
Net income (loss) per common share....................... (2.93) .23 (.77) (.15)
Weighted average number of common shares outstanding
(2).................................................... 354,600 495,800 454,851 748,939
STATISTICAL DATA:
Store revenues........................................... $ 8,178,054 $ 8,957,344 $ 6,187,408 $ 6,263,579
Store gross margin....................................... 5,509,955 6,337,334 4,271,700 4,436,239
Store operating expenses................................. 4,850,747 4,906,077 3,597,412 3,567,700
Store operating profit................................... 659,237 1,431,257 674,288 868,538
Corporate overhead operating expenses.................... 1,430,884 1,518,416 1,069,974 971,923
Gross margin percentage.................................. 66.4% 70.3% 68.7% 70.6%
Comparable same store sales (2).......................... 7,448,884 8,186,449 5,605,465 5,794,447
Comparable same store sales growth (2)................... N/A 9.9% N/A 3.4%
Comparable same store sales per square foot (2).......... 520.68 572.24 391.83 405.04
</TABLE>
<TABLE>
<CAPTION>
AS OF OCTOBER 27, 1996
------------------------------------------
ACTUAL PROFORMA(3) AS ADJUSTED(4)
------------ ------------ --------------
<S> <C> <C> <C>
BALANCE SHEET DATA:
Total assets........................................................ $ 3,469,379 $ 3,965,054 $ 6,105,054
Total liabilities................................................... 2,310,671 3,430,671 2,060,671
Working capital..................................................... 279,803 697,078 2,837,078
Stockholders' equity................................................ 1,158,708 534,383 4,044,383
</TABLE>
- ------------------------
(1) Due to the Company's change in fiscal year, the Company's financial
statements are reported for the year ending December 31, 1994 ("Fiscal
1994"), a one month period ending January 29, 1995, and the year ending
January 28, 1996 ("Fiscal 1996"). The Impostors acquisition was completed on
February 24, 1994, and accordingly results of operations for the period
ended December 31, 1994 reflect only ten months of Impostors' operations.
Prior to the Impostors acquisition, which includes the period from January
1, 1994 through February 23, 1994 (approximately two months), the Company
4
<PAGE>
[Alternate Page for Selling Shareholders' Prospectus]
had no significant operating activity. Therefore, for purposes of
comparison, the one-month period from January 1, 1995 through January 29,
1995 has been combined with Fiscal 1994 and therefore represents thirteen
(13) months of combined operations but only eleven (11) months of operations
of Impostors. This combined period is referred to as "the period ended
January 29, 1995."
(2) Includes only the 24 stores open for the entire periods being compared. For
the purpose of comparable same store sales only, the period ended January
29, 1995 includes 12 months of sales. However, the financial statement data
for the same period includes only 11 months of Impostors operations, as the
retail chain was acquired in late February, 1994.
(3) Adjusted to give effect to (i) the sale by the Company of $1,120,000 in
Convertible Notes realizing net proceeds of $1,041,600, and (ii) the use of
$624,324 of those proceeds to redeem 189,023 shares of Common Stock and
32,500 Class C Warrants.
(4) Adjusted to reflect net proceeds from the sale by the Company in a
concurrent offering of 1,100,000 shares of Common Stock and 1,100,000
Warrants and the utilization of $1,370,000 of the net proceeds therefrom to
retire the Convertible Notes and other liabilities in the amount of
$250,000. See "Use of Proceeds." The "As Adjusted" information does not
include the exercise of the Warrants, the Underwriters' Over-Allotment
Options or the options to acquire the Representative's Securities. See "Use
Of Proceeds," "Capitalization" and "Underwriting."
5
<PAGE>
[Alternate Page for Selling Shareholders' Prospectus]
SELLING SHAREHOLDERS AND PLAN OF DISTRIBUTION
This Prospectus relates to the resale to the public of 102,041 shares of
Common Stock and 483,334 Warrants by the Selling Shareholders set forth below.
The following table sets forth certain information with respect to persons for
whom the Company is registering the Common Stock for resale to the public. The
Company will not receive any of the proceeds from the sale of the Common Stock
by the Selling Shareholders. Beneficial ownership of the Common Stock by such
Selling Shareholders after this offering will depend on the number of shares
sold by each Selling Shareholder. None of the Selling Shareholders have had any
material relationship within the past three years with the Company, or any of
its predecessors or affiliates, except as specifically noted.
<TABLE>
<CAPTION>
OFFERING SHARES
BENEFICIALLY OWNED CLASS A SHARES
AS OF OFFERING SHARES WARRANTS BENEFICIALLY OWNED
DATE OFFERED OFFERED AFTER OFFERING
NAME AND ADDRESS ------------------ ------- -------- -------------------
OF BENEFICIAL OWNER NUMBER PERCENT(1) NUMBER NUMBER NUMBER PERCENT(1)
- ----------------------------------------------------------------- ------ ---------- ------- -------- ------ ----------
<S> <C> <C> <C> <C> <C> <C>
Caribou Bridge Fund, L.L.C.(2) .................................. 28,742 5.1% 20,409 16,667 2,500 nil
5350 S. Roslyn Street, #380
Englewood, CO 80111
Corporate Communications(3) ..................................... 21,988 3.9% 15,613 12,751 -0- -0-
Network, Inc.
36 Tacoma Circle
Littleton, CO 80127
AMC Consumer(4) ................................................. 57,483 10.0% 40,816 33,334 -0- -0-
One Main Street, Suite 312
Eatontown, NJ 07724
Ralph H. Grills, Jr.(5) ......................................... 14,370 2.5% 10,204 8,333 -0- -0-
4155 East Jewell Ave., #1115
Denver, CO 80222
Rickey Chow(6) .................................................. 7,041 1.3% 5,000 4,083 -0- -0-
2135 E. California Street
San Marino, CA 91108
J.D. Bilberg Trust(6) ........................................... 7,041 1.3% 5,000 4,083 -0- -0-
Century City Trust Company, Ltd.
19800 MacArthur Blvd., #1450
Irvine, CA 92612
John Shaffer(6) ................................................. 7,041 1.3% 5,000 4,083 -0- -0-
7803 E. Lewis Street
Scottsdale, AZ 85257
Lee Schlessman(7) ............................................... 35,714 6.0% -0- 71,428 -0- -0-
1301 Pennsylvania St., #800
Denver, CO 80203
Estate of Fannabelle Z. Robineau, ............................... 17,856 3.1% -0- 35,712 -0- -0-
Acct. #30160855(7)
Larry C. Serr, Personal Rep.
12265 W. Bayaud Ave., #240
Lakewood, CO 80228
Estate of Fannabelle Z. Robineau, ............................... 8,929 1.6% -0- 17,858 -0- -0-
Acct. #30160860(7)
Larry C. Serr, Personal Rep.
12265 W. Bayaud Ave., #240
Lakewood, CO 80228
Cal Rickel & Amanda Mae Rickel, ................................. 8,929 1.6% -0- 17,858 -0- -0-
JTWROS(7)
P.O. Box 1076
Cortez, CO 81321
Gary Schlessman(7) .............................................. 8,929 1.6% -0- 17,858 -0- -0-
Lee Schlessman, POA
1301 Pennsylvania St., #800
Denver, CO 80203
</TABLE>
48
<PAGE>
[Alternate Page for Selling Shareholders' Prospectus]
<TABLE>
<CAPTION>
OFFERING SHARES
BENEFICIALLY OWNED CLASS A SHARES
AS OF OFFERING SHARES WARRANTS BENEFICIALLY OWNED
DATE OFFERED OFFERED AFTER OFFERING
NAME AND ADDRESS ------------------ ------- -------- -------------------
OF BENEFICIAL OWNER NUMBER PERCENT(1) NUMBER NUMBER NUMBER PERCENT(1)
- ----------------------------------------------------------------- ------ ---------- ------- -------- ------ ----------
<S> <C> <C> <C> <C> <C> <C>
Gary Schlessman Irrevocable Trust ............................... 8,929 1.6% -0- 17,858 -0- -0-
Dtd. 4/5/94(7)
Gerald D. Marrs, TTEE
1301 Pennsylvania St., #800
Denver, CO 80203
Susan Duncan(7) ................................................. 8,929 1.6% -0- 17,858 -0- -0-
2651 S. Wadsworth Circle
Lakewood, CO 80227
Susan M. Duncan, TTEE(7) ........................................ 8,929 1.6% -0- 17,858 -0- -0-
FBD Susan M. Duncan
Irrevocable Gift Trust Dtd. 12/28/73
2651 S. Wadsworth Circle
Lakewood, CO 80227
Sandra Garnett(7) ............................................... 8,929 1.6% -0- 17,858 -0- -0-
Les Schlessman, POA
1301 Pennsylvania St., #800
Denver, CO 80203
Cheryl Bennett(7) ............................................... 8,929 1.6% -0- 17,858 -0- -0-
Less Schlessman, POA
1301 Pennsylvania St., #800
Denver, CO 80203
Frederick A. Esgar & Jayne S. ................................... 5,000 0.9% -0- 10,000 -0- -0-
Esgar, JTWROS(7)
S. Jayne Esgar
P.O. Box 215
Wiley, CO 81092
Cord Investment Company(7) ...................................... 16,428 2.9% -0- 32,856 -0- -0-
Attn: Marvin Pepper
1660 S. Albion St., Suite 412
Denver, CO 80222
Gary C. Batz(7) ................................................. 53,570 8.7% -0- 107,140 -0- -0-
c/o Fike Corporation
704 S. 10th Street
Blue Springs, FL 64015
</TABLE>
- --------------------------
(1) Shares not outstanding but deemed beneficially owned by virtue of the
individual's right to acquire them as of the date of this Prospectus, or
within 60 days of such date, are treated as outstanding when determining the
percent of the class owned by such individual and when determining the
percent owned by the group.
(2) Includes Class B Warrants exercisable to purchase 8,333 shares of Common
Stock at an exercise price of $5.00 per share. Each B Warrant will
automatically be exchanged for two Warrants upon the effective date of the
registration statement of which this Prospectus forms a part.
(3) Includes Class B Warrants exercisable to purchase 6,375 shares of Common
Stock at an exercise price of $5.00 per share. Each B Warrant will
automatically be exchanged for two Warrants upon the effective date of the
registration statement of which this Prospectus forms a part.
(4) Includes Class B Warrants exercisable to purchase 16,667 shares of Common
Stock at an exercise price of $5.00 per share. Each B Warrant will
automatically be exchanged for two Warrants upon the effective date of the
registration statement of which this Prospectus forms a part.
(5) Includes Class B Warrants exercisable to purchase 4,166 shares of Common
Stock at an exercise price of $5.00 per share. Each B Warrant will
automatically be exchanged for two Warrants upon the effective date of the
Registration Statement of which this Prospectus forms a part.
(6) Includes Class B Warrants exercisable to purchase 2,041 shares of Common
Stock at an exercise price of $5.00 per share. Each B Warrant will
automatically be exchanged for two Warrants upon the effective date of the
Registration Statement of which this Prospectus forms a part.
49
<PAGE>
[Alternate Page for Selling Shareholders' Prospectus]
(7) Consists entirely of Class B Warrants purchased as part of the Bridge Note
Financing. Each Class B Warrant will automatically be exchanged for two
Warrants upon the effective date of the Registration Statement of which this
Prospectus forms a part.
The Selling Shareholders have agreed that they will not sell any of the
shares of Common Stock for a period of six months from the date of this
Prospectus without the consent of the Representative. Subject to this
restriction, the Selling Shareholders have advised the Company that sales of the
shares of Common Stock may be effected from time to time in transactions (which
may include block transactions) in the over-the-counter market, in negotiated
transactions, through the writing of options on the Common Stock or a
combination of such methods of sale, at fixed prices that may be changed, at
market prices prevailing at the time of sale, or at negotiated prices. The
Selling Shareholders may effect such transactions by selling the Common Stock
directly to purchasers or through broker-dealers that may act as agents or
principals. Such broker-dealers may receive compensation in the form of
discounts, concessions or commissions from the Selling Shareholders and/or the
purchasers of shares of Common Stock for whom such broker-dealers may act as
agents or to whom they sell as principals, or both (which compensation as to a
particular broker-dealer might be in excess of customary commissions).
The Selling Shareholders and any broker-dealers that act in connection with
the sale of the shares of Common Stock as principals may be deemed to be
"underwriters" within the meaning of Section 2(11) of the Securities Act and any
commissions received by them and any profit on the resale of the shares of
Common Stock as principals might be deemed to be underwriting discounts and
commissions under the Securities Act. The Selling Shareholders may agree to
indemnify any agent, dealer or broker-dealer that participates in transactions
involving sales of the shares of Common Stock against certain liabilities,
including liabilities arising under the Securities Act. The Company will not
receive any proceeds from the sales of shares of Common Stock by the Selling
Shareholders. Sales of the shares of Common Stock by the Selling Shareholders,
or even the potential of such sales, would likely have an adverse effect on the
market price of the Common Stock.
The shares of Common Stock are offered by the Selling Shareholders on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act. The
Company has agreed to pay all expenses incurred in connection with the
registration of the shares offered by the Selling Shareholders; provided,
however, that the Selling Shareholders shall be exclusively liable to pay any
and all commissions, discounts and other payments to broker-dealers incurred in
connection with their sale of the shares.
CONCURRENT OFFERING
The Registration Statement of which this Prospectus forms a part also covers
1,100,000 Shares of Common Stock and 1,100,000 Warrants being offered by the
Company through the Representative in the offering.
50
<PAGE>
[Alternate Page for Selling Shareholders' Prospectus]
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NO DEALER, SALESMAN OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS IN CONNECTION WITH THE OFFER MADE BY THIS PROSPECTUS AND IF, GIVEN OR
MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE COMPANY. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL
OR THE SOLICITATION OF ANY OFFER TO BUY ANY SECURITY OTHER THAN THE SHARES OF
COMMON STOCK AND WARRANTS OFFERED BY THIS PROSPECTUS, NOR DOES IT CONSTITUTE AN
OFFER TO SELL OR A SOLICITATION OF ANY OFFER TO BUY THE SHARES OF COMMON STOCK
OR WARRANTS BY ANYONE IN ANY JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION IS
NOT AUTHORIZED, OR IN WHICH THE PERSON MAKING SUCH OFFER OR SOLICITATION IS NOT
QUALIFIED TO DO SO, OR TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER
OR SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE
HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT
INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE
HEREOF.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
Prospectus Summary............................. 2
The Company.................................... 6
Risk Factors................................... 7
Use of Proceeds................................ 16
Dilution....................................... 18
Capitalization................................. 19
Dividends...................................... 20
Certain Market Information..................... 21
Selected Financial Data and Statistical Data... 22
Management's Discussion and Analysis of
Financial Condition and Results of
Operations................................... 24
Business....................................... 32
Management..................................... 39
Certain Transactions........................... 45
Selling Shareholders and Plan of
Distribution................................. 48
Concurrent Offering............................ 50
Description of Securities...................... 51
Underwriting................................... 55
Legal Matters.................................. 57
Experts........................................ 57
Available Information.......................... 57
Financial Statement............................ F-1
</TABLE>
102,041 SHARES OF COMMON STOCK
483,334 CLASS A COMMON STOCK
PURCHASE WARRANTS
PREMIER CONCEPTS, INC.
---------------------
PROSPECTUS
---------------------
, 1997
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 24. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The only statute, charter provision, bylaw, contract, or other arrangement
under which any controlling person, director or officers of the Registrant is
insured or indemnified in any manner against any liability which he may incur in
his capacity as such, is as follows:
Sections 7-109-101 through 7-109-110 of the Colorado Corporation Code
provide as follows:
7-109-101. DEFINITIONS. As used in this article:
(1) "Corporation" includes any domestic or foreign entity that is a
predecessor of a corporation by reason of a merger or other transaction in
which the predecessor's existence ceased upon consummation of the
transaction.
(2) "Director" means an individual who is or was a director of a corporation
or an individual who, while a director of a corporation, is or was serving at
the corporation's request as a director, officer, partner, trustee, employee,
fiduciary, or agent of another domestic or foreign corporation or other
person or of an employee benefit plan. A director is considered to be serving
an employee benefit plan at the corporation's request if his or her duties to
the corporation also impose duties on, or otherwise involve services by, the
director to the plan or to participants in or beneficiaries of the plan.
"Director" includes, unless the context requires otherwise, the estate or
personal representative of a director.
(3) "Expenses" includes counsel fees.
(4) "Liability" means the obligation incurred with respect to a proceeding
to pay a judgment, settlement, penalty, fine, including an excise tax
assessed with respect to an employee benefit plan, or reasonable expenses.
(5) "Official capacity" means, when used with respect to a director, the
office of director in a corporation and, when used with respect to a person
other than a director as contemplated in section 7-109-107, the office in a
corporation held by the officer or the employment, fiduciary, or agency
relationship undertaken by the employee, fiduciary, or agent on behalf of the
corporation. "Official capacity" does not include service for any other
domestic or foreign corporation or other person or employee benefit plan.
(6) "Party" includes a person who was, is, or is threatened to be made a
named defendant or respondent in a proceeding.
(7) "Proceeding" means any threatened, pending, or completed action, suit,
or proceeding, whether civil, criminal, administrative, or investigative and
whether formal or informal.
7-109-102. AUTHORITY TO INDEMNIFY DIRECTORS.
(1) Except as provided in subsection (4) of this section, a corporation may
indemnify a person made a party to a proceeding because the person is or was
a director against liability incurred in the proceeding if:
(a) The person conducted himself or herself in good faith; and
(b) The person reasonable believed:
(I) In the case of conduct in an official capacity with the
corporation, that his or her conduct was in the corporation's best interests;
and
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<PAGE>
(II) In all other cases, that his or her conduct was at least not
opposed to the corporation's best interests; and
(c) In the case of any criminal proceeding, the person had no reasonable
cause to believe his or her conduct was unlawful.
(2) A director's conduct with respect to an employee benefit plan for a
purpose the director reasonably believed to be in the interests of the
participants in or beneficiaries of the plan is conduct that satisfies the
requirement of subparagraph (II) of paragraph (b) of subsection (1) of this
section. A director's conduct with respect to an employee benefit plan for a
purpose that the director did not reasonably believe to be in the interests
of the participants in or beneficiaries of the plan shall be deemed not to
satisfy the requirements of paragraph (a) of subsection (1) of this section.
(3) The termination of a proceeding by judgment, order, settlement,
conviction, or upon a plea of nolo contendere or its equivalent is not, of
itself, determinative that the director did not meet the standard of conduct
described in this section.
(4) A corporation may not indemnify a director under this section:
(a) In connection with a proceeding by or in the right of the
corporation in which the director was adjudged liable to the corporation; or
(b) In connection with any other proceeding charging that the director
derived an improper personal benefit, whether or not involving action in an
official capacity, in which proceeding the director was adjudged liable on
the basis that he or she derived an improper personal benefit.
(5) Indemnification permitted under this section in connection with a
proceeding by or in the right of the corporation is limited to reasonable
expenses incurred in connection with the proceeding.
7-109-103. MANDATORY INDEMNIFICATION OF DIRECTORS. Unless limited by its
articles of incorporation, a corporation shall indemnify a person who was
wholly successful, on the merits or otherwise, in the defense of any
proceeding to which the person was a party because the person is or was a
director, against reasonable expenses incurred by him or her in connection
with the proceeding.
7-109-104. ADVANCE OF EXPENSES TO DIRECTORS.
(1) A corporation may pay for or reimburse the reasonable expenses incurred
by a director who is a party to a proceeding in advance of final disposition
of the proceeding if:
(a) The director furnishes to the corporation a written affirmation of
the director's good faith belief that he or she has met the standard of
conduct described in section 7-109-102;
(b) The director furnishes to the corporation a written undertaking,
executed personally or on the director's behalf, to repay the advance if it
is ultimately determined that he or she did not meet the standard of conduct;
and
(c) A determination is made that the facts then known to those making
the determination would not preclude indemnification under this article.
(2) The undertaking required by paragraph (b) of subsection (1) of this
section shall be an unlimited general obligation of the director but need not
be secured and may be accepted without reference to financial ability to make
repayment.
(3) Determinations and authorizations of payments under this section shall
be made in the manner specified in section 7-109-106.
7-109-105. COURT-ORDERED INDEMNIFICATION OF DIRECTORS.
(1) Unless otherwise provided in the articles of incorporation, a director
who is or was a party to a proceeding may apply for indemnification to the
court conducting the proceeding or to another court
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<PAGE>
of competent jurisdiction. On receipt of an application, the court, after
giving any notice the court considers necessary, may order indemnification in
the following manner:
(a) If it determines that the director is entitled to mandatory
indemnification under section 7-109-103, the court shall order
indemnification, in which case the court shall also order the corporation to
pay the director's reasonable expenses incurred to obtain court-ordered
indemnification.
(b) If it determines that the director is fairly and reasonable entitled
to indemnification in view of all the relevant circumstances, whether or not
the director met the standard of conduct set forth in section 7-109-102 (1)
or was adjudged liable in the circumstances described in section 7-109-102
(4), the court may order such indemnification as the court deems proper;
except that the indemnification with respect to any proceeding in which
liability shall have been adjudged in the circumstances described in section
7-109-102 (4) is limited to reasonable expenses incurred in connection with
the proceeding and reasonable expenses incurred to obtain court-ordered
indemnification.
7-109-106. DETERMINATION AND AUTHORIZATION OF INDEMNIFICATION OF DIRECTORS.
(1) A corporation may not indemnify a director under section 7-109-102
unless authorized in the specific case after a determination has been made
that indemnification of the director is permissible in the circumstances
because the director has met the standard of conduct set forth in section
7-109-102. A corporation shall not advance expenses to a director under
section 7-109-104 unless authorized in the specific case after the written
affirmation and undertaking required by section 7-109-104(1)(a) and (1)(b)
are received and the determination required by section 7-109-104(1)-C- has
been made.
(2) The determinations required by subsection (1) of this section shall be
made:
(a) By the board of directors by a majority vote of those present at a
meeting at which a quorum is present, and only those directors not parties to
the proceeding shall be counted in satisfying the quorum; or
(b) If a quorum cannot be obtained, by a majority vote of a committee of
the board of directors designated by the board of directors, which committee
shall consist of two or more directors not parties to the proceeding; except
that directors who are parties to the proceeding may participate in the
designation of directors for the committee.
(3) If a quorum cannot be obtained as contemplated in paragraph (a) of
subsection (2) of this section, and a committee cannot be established under
paragraph (b) of subsection (2) of this section, or, even if a quorum is
obtained or a committee is designated, if a majority of the directors
constituting such quorum or such committee so directs, the determination
required to be made by subsection (1) of this section shall be made:
(a) By independent legal counsel selected by a vote of the board of
directors or the committee in the manner specified in paragraph (a) or (b) of
subsection (2) of this section or, if a quorum of the full board cannot be
obtained and a committee cannot be established, by independent legal counsel
selected by a majority vote of the full board of directors; or
(b) By the shareholders.
(4) Authorization of indemnification and advance of expenses shall be made
in the same manner as the determination that indemnification or advance of
expenses is permissible; except that, if the determination that
indemnification or advance of expenses is permissible is made by independent
legal counsel, authorization of indemnification and advance of expenses shall
be made by the body that selected such counsel.
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<PAGE>
7-109-107. INDEMNIFICATION OF OFFICERS, EMPLOYEES, FIDUCIARIES, AND AGENTS.
(1) Unless otherwise provided in the articles of incorporation:
(a) An officer is entitled to mandatory indemnification under section
7-109-103, and is entitled to apply for court-ordered indemnification under
section 7-109-105, in each case to the same extent as a director;
(b) A corporation may indemnify and advance expenses to an officer,
employee, fiduciary, or agent of the corporation to the same extent as to a
director; and
(c) A corporation may also indemnify and advance expenses to an officer,
employee, fiduciary, or agent who is not a director to a greater extent, if
not inconsistent with public policy, and if provided for by its bylaws,
general or specific action of its board of directors or shareholders, or
contract.
7-109-108. INSURANCE. A corporation may purchase and maintain insurance on
behalf of a person who is or was a director, officer, employee, fiduciary, or
agent of the corporation, or who, while a director, officer, employee,
fiduciary, or agent of the corporation, is or was serving at the request of
the corporation as a director, officer, partner, trustee, employee,
fiduciary, or agent of another domestic or foreign corporation or other
person or of an employee benefit plan, against liability asserted against or
incurred by the person in that capacity or arising from his or her status as
a director, officer, employee, fiduciary, or agent, whether or not the
corporation would have power to indemnify the person against the same
liability under section 7-109-102, 7-109-103, or 7-109-107. Any such
insurance may be procured from any insurance company designated by the board
of directors, whether such insurance company is formed under the laws of this
state or any other jurisdiction of the United States or elsewhere, including
any insurance company in which the corporation has an equity or any other
interest through stock ownership or otherwise.
7-109-109. LIMITATION OF INDEMNIFICATION OF DIRECTORS.
(1) A provision treating a corporation's indemnification of, or advance of
expenses to, directors that is contained in its articles of incorporation or
bylaws, in a resolution of its shareholders or board of directors, or in a
contract, except an insurance policy, or otherwise, is valid only to the
extent the provision is not inconsistent with sections 7-109-101 to
7-109-108. If the article of incorporation limit indemnification or advance
of expenses, indemnification and advance of expenses are valid only to the
extent not inconsistent with the articles of incorporation.
(2) Sections 7-109-101 to 7-109-108 do not limit a corporation's power to
pay or reimburse expenses incurred by a director in connection with an
appearance as a witness in a proceeding at a time when he or she has not
been made a named defendant or respondent in the proceeding.
7-109-110. NOTICE TO SHAREHOLDER OF INDEMNIFICATION OF DIRECTOR. If a
corporation indemnifies or advances expenses to a director under this article
in connection with a proceeding by or in the right of the corporation, the
corporation shall give written notice of the indemnification or advance to
the shareholders with or before the notice of the next shareholders' meeting.
If the next shareholder action is taken without a meeting at the instigation
of the board of directors, such notice shall be given to the shareholders at
or before the time the first shareholder signs a writing consenting to such
action.
* * *
Article XIII of the Amended and Restated Articles of Incorporation of the
Company provides, in pertinent part:
Section 1. A director of this Corporation shall not be liable to the
Corporation or its stockholders for monetary damages for breach
of fiduciary duty as a director, except to the extent that
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<PAGE>
such exemption from liability or limitation thereof is not
permitted under the Colorado Corporation Code as the same exists
or may hereafter be amended.
Section 2. Any repeal or modification of the foregoing Section 1 by the
stockholders of the Corporation shall not adversely affect any
right or protection of a director of the Corporation existing at
the time of such repeal or modification.
Article XII of the Amended and Restated Articles of Incorporation of the
Company provides, in pertinent part:
Section 2. INDEMNIFICATION OF OFFICERS, DIRECTORS AND OTHERS.
(a) All officers and directors of the Corporation shall be
entitled to indemnification to the maximum extent permitted by
law or by public policy.
(b) Any mandate for indemnification, whether by statute or
order of Court, is to be expressly subject to the Corporation's
reasonable capability of paying.
-C- No person will be entitled to be reimbursed for expenses
incurred in connection with a Court proceeding to obtain Court
ordered indemnification unless such person first made reasonable
application to the Corporation and the Corporation either
unreasonably denied such application or through no fault of the
applicant was unable to consider such application within a
reasonable time.
(d) A director who is or was made a party to a proceeding
because he is or was an officer, employee, or agent of the
Corporation is entitled to the same rights as if he were or had
been made a party because he was a director.
(e) To the maximum extent permitted by law or by public policy,
directors of this Corporation are to have no personal liability
for monetary damages for breach of fiduciary duty as a director.
ITEM 25. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The estimated expenses of the offering are to be borne by the Company, are
as follows:
<TABLE>
<S> <C>
SEC Filing Fee.................................................... $ 4,298
NASD Fee.......................................................... 1,747
Printing Expenses................................................. 70,000
Accounting Fees and Expenses...................................... 48,000
Legal Fees and Expenses........................................... 130,000
Blue Sky Fees and Expenses........................................ 20,000
Registrar and Transfer Agent Fee.................................. 5,000
Underwriter's Non-Accountable Expense Allowance................... 132,000
Miscellaneous..................................................... 38,955
---------
Total*.......................................................... $ 450,000
---------
---------
</TABLE>
- ------------------------
* Of this amount, approximately $75,000 has been paid prior to the offering and
the balance is expected to be paid from the proceeds of the offering.
ITEM 26. RECENT SALES OF UNREGISTERED SECURITIES.
1. In January, 1994, the Company sold a total of 16,285 shares of Common
Stock to 45 accredited investors for an aggregate consideration of $274,509. The
shares were acquired for investment purposes
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<PAGE>
and were subject to appropriate transfer restrictions. These shares were not
registered under the Act in reliance upon Section 3(b) thereof and Regulation D,
Rule 506 thereunder.
2. In March, 1994, the Company issued 80,000 shares of Common Stock to
eight accredited investors in consideration of $145,000. These shares were
acquired for investment purposes and were subject to appropriate transfer
restrictions. These shares were not registered under the Act in reliance upon
Section 4(2) thereof.
3. In order to finance the acquisition of Impostors, the Company also
undertook a private placement of its securities in March 1994 consisting of
Units comprised of one (1) share of Common Stock and one (1) Class C Common
Stock Purchase Warrant. In connection with the private placement, the Company
sold an aggregate of 185,511 Units at a private offering price of $5.00 per Unit
for a total consideration of $894,281. These shares were acquired by 18
accredited investors for investment purposes and were subject to appropriate
transfer restrictions. These shares were not registered under the Act in
reliance upon Section 3(b) thereof and Regulation D, Rule 506 thereunder.
4. In March 1994, the Company issued 27,500 shares of Common Stock to the
unsecured creditors of American Fashion Jewels, Inc. pursuant to the confirmed
Plan of Reorganization in the bankruptcy proceedings. The shares were not
registered under the Act in reliance upon Section 1145 of the United States
Bankruptcy Code and Section 3(10) of the Act.
5. In March 1994, the Company issued 20,000 shares of Common Stock to two
accredited investors in exchange for 100% of the issued and outstanding shares
of Mirage Concepts, Inc., an Arizona corporation which owned three (3)
additional reproduction jewelry stores. The shares were acquired for investment
purposes and are subject to appropriate transfer restrictions. These shares were
not registered under the Act in reliance upon Section 4(2) thereof.
6. In 1994, the Company issued an aggregate of 2,750 shares of Common Stock
to 11 investors in settlement of a dispute involved in pending litigation. The
shares were acquired for investment purposes and were subject to appropriate
transfer restrictions. The shares were not registered under the Act in reliance
upon Section 4(2) thereof.
7. In December 1994, the Company issued to six employees as a bonus an
aggregate of 660 shares of Common Stock valued at $5.00 per share. The shares
were acquired for investment purposes and were subject to appropriate transfer
restrictions. The shares were not registered under the Act in reliance upon
Section 4(2) thereof.
8. In October 1995, the Company issued an additional 46,792 shares of
Common Stock to 11 investors in settlement of a dispute involved in pending
litigation. The shares were acquired for investment purposes and were subject to
appropriate transfer restrictions. The shares were not registered under the Act
in reliance upon Section 4(2) thereof.
9. In December 1995, the Company sold an aggregate of 234,000 shares of
Common Stock for gross proceeds of $292,500, or $1.25 per share. The shares were
acquired by eight accredited investors for investment purposes and were subject
to appropriate transfer restrictions. The shares were not registered under the
Act in reliance upon Section 3(b) thereof and Regulation D, Rule 506 thereunder.
10. In 1995, the Company issued 7,000 shares of Common Stock in settlement
of claims valued at $35,000. These shares were acquired by two accredited
investors for investment purposes and were subject to appropriate transfer
restrictions. The shares were not registered under the Act in reliance upon
Section 4(2) thereof.
11. In January 1996, the Company issued 22,000 shares of Common Stock in
consideration of services to the Company valued at $27,500. These shares were
acquired by one accredited investor for investment purposes and were subject to
appropriate transfer restrictions. The shares were not registered under the Act
in reliance upon Section 4(2) thereof.
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<PAGE>
12. In January 1996, the Company issued 5,000 shares of Common Stock in
consideration of services to the Company valued at $17,500. These shares were
acquired by two accredited investors for investment purposes and were subject to
appropriate transfer restrictions. The shares were not registered under the Act
in reliance upon Section 4(2) thereof.
13. In June 1996, the Company issued 416,670 shares of Convertible Preferred
Stock and 208,335 Class B Common Stock Warrants in consideration of $250,000.
These securities were acquired by three accredited investors for investment
purposes and were subject to appropriate transfer restrictions. The securities
were not registered under the Act in reliance upon Section 4(2) thereof.
14. In December, 1996, the Company sold and issued an aggregate of
$1,120,000 in 12% Convertible Promissory Notes and 200,000 Class B Warrants.
These securities were acquired by 13 accredited investors for investment
purposes and were subject to appropriate transfer restrictions. The securities
were not registered under the Act in reliance upon Section 4(2) thereof, and
Regulation D, Rule 506 thereunder.
ITEM 27. EXHIBITS.
a. The following Exhibits are filed as part of this Registration Statement
pursuant to Item 601 of Regulation S-B:
<TABLE>
<CAPTION>
EXHIBIT NO. TITLE
- ------------ -----------------------------------------------------------------------------------------------
<C> <S>
*****1.1 Underwriting Agreement
*****1.2 Agreement Among Underwriters
*****1.3 Master Selected Dealer Agreement
*****1.4 Financial Advisory Agreement
*****1.5 Form of Lock-up Agreement
1.6 Letter of Intent with Cohig & Associates, Inc.
**3.1 Articles of Incorporation
**3.2 Certificate and Articles of Amendment
**3.3 By-Laws
**4.1 Specimen Certificate of Common Stock
*4.2 Specimen Class A Warrant Certificate
*4.3 Designations of Series A Convertible Preferred Stock
*4.4 1992 Stock Incentive Plan
*4.5 1995 Employee Stock Purchase Plan
*****4.6 Representative's Share Option Agreement
*****4.7 Representative's Warrant Option Agreement
*4.8 Specimen Convertible Promissory Note
*4.9 Specimen Convertible Promissory Note and Warrant Purchase Agreement
5.0 Opinion of Neuman & Cobb
**10.1 Copy of signed Stock Transfer Agent Agreement
*10.2 Warrant Agreement
***10.3 Amendment No. 1 to Definitive Agreement and Plan of Reorganization, dated March 16, 1993
***10.4 Amended Plan of Reorganization dated January 24, 1994
***10.5 Order Confirming Amended Plan of Reorganization dated February 24, 1994
***10.6 Commitment Letter dated January 4, 1994
***10.7 Amendment to Commitment Letter dated January 21, 1994
</TABLE>
II-7
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT NO. TITLE
- ------------ -----------------------------------------------------------------------------------------------
<C> <S>
***10.8 Conveyance and Bill of Sale dated March 3, 1994
***10.9 Assumption Agreement dated March 3, 1994
*10.10 Employment Agreement with Sissel Greenberg
*10.11 Consulting Agreement with Cohig & Associates, Inc.
****16 Letter of Schumacher & Bruce, Inc. on change in certifying accountant
24.1 Consent of Neuman & Cobb
*****24.2 Consent of Hein + Associates, LLP
</TABLE>
- ------------------------
* Incorporated by reference from the Company's Registration Statement on
Form SB-2, SEC File No. 333-8741.
** Incorporated by reference from the Company's Registration Statement on
Form S-1; SEC File No. 33-42701.
*** Incorporated by reference from the Company's Current Report on Form 8-K
dated March 3, 1994
**** Incorporated by reference from the Company's Current Report on Form 8-K
dated February 16, 1995
***** Filed with this Amendment.
ITEM 28. UNDERTAKINGS.
The undersigned Registrant hereby undertakes:
1. To file, during any period in which offers or sales are being made, a
post-effective amendment to this Registration Statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after the
effective date of the Registration Statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set
forth in the Registration Statement;
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the Registration Statement
or any material change to such information in the Registration
Statement.
2. That, for the purpose of determining any liability under the Securities
Act of 1933, each such post-effective amendment shall be deemed to be a new
Registration Statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
3. To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the termination of the
offering.
4. To provide, upon effectiveness, certificates in such denominations and
registered in such names as are required to permit prompt delivery to each
purchaser.
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<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form SB-2 and has duly caused this
Registration Statement to be signed on its behalf by the undersigned thereunto
duly authorized, in the City of Aurora, State of Colorado on the 20th day of
February, 1997.
PREMIER CONCEPTS, INC.
By /s/ SISSEL GREENBERG
------------------------------------------
Sissel Greenberg,
PRESIDENT
Pursuant to the requirements of the Securities Act of 1933, as amended, this
Registration Statement has been signed by the following persons in the
capacities with Premier Concepts, Inc. and on the dates indicated.
SIGNATURE POSITION DATE
- ---------------------------- ------------------------------ -----------------
/s/ SISSEL GREENBERG
- ---------------------------- Chief Executive Officer February 20, 1997
Sissel Greenberg Director
/s/ WILLIAM NANDOR
- ---------------------------- Director February 20, 1997
William Nandor
/s/ JACK BRANDON
- ---------------------------- Director February 20, 1997
Jack Brandon
/s/ SIMONA KATZ YUFFA
- ---------------------------- Director February 20, 1997
Simona Katz Yuffa
/s/ TODD HUSS
- ---------------------------- Chief Financial Officer February 20, 1997
Todd Huss Principal Accounting Officer
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<PAGE>
UNDERWRITING AGREEMENT
_______________, 1997
Cohig & Associates, Inc.
As Representative of the Several
Underwriters Named in Schedule I Hereto
6300 South Syracuse Way, Suite 430
Englewood, Colorado 80111
Gentlemen:
Premier Concepts, Inc., a Colorado corporation (the "Company"), hereby
confirms its agreement with you (the "Representative") and with the other
Underwriters, including the Representative, named in Schedule I hereto
(hereinafter "the Underwriters") as follows:
SECTION 1
DESCRIPTION OF SECURITIES
The Company proposes to issue and sell to the Underwriters shares (the
"Shares") of Common Stock, $.002 par value per share, and Redeemable Common
Stock Purchase Warrants (the "Warrants") (the Shares and the Warrants shall
collectively be referred to as the "Securities"). The Underwriters propose
to purchase 1,100,000 Shares ("Firm Shares") and 1,100,000 Warrants ("Firm
Warrants") (collectively, the "Firm Securities") at a purchase price of
$_______ PER SHARE and $______ PER WARRANT. The Shares and the Warrants may
be purchased by the Underwriters only together on the basis of one Share and
one Warrant. The Underwriters shall also have options (the "Over-allotment
Options") to purchase up to an additional 165,000 Shares ("Over-allotment
Shares") and/or 165,000 Warrants ("Over-allotment Warrants") (collectively,
the "Over-allotment Securities"), as provided in Section 3.1 hereof.
Each Warrant shall entitle the holder to purchase one share of Common
Stock at $______ PER SHARE UNTIL __________ __, 2000. The Company may redeem
the Warrants on forty-five (45) days' written notice at a price of $.05 per
Warrant at such time as the market price of the Common Stock exceeds $
_______ PER SHARE for 20 of the 30 trading days ending within 30 days
preceding the date of the notice of redemption. To redeem the Warrants, the
Company must have in effect a current registration statement registering the
Common Stock issuable upon exercise of the Warrants. The shares of Common
Stock underlying the Warrants are referred to herein as the "Warrant Shares."
The Company proposes to issue and sell to the Representative and its
designees on the Closing Date (hereinafter defined) for an aggregate purchase
price of $100, options ("Share Options") to purchase 110,000 shares of Common
Stock and options ("Warrant Options") to purchase 110,000 Warrants. Each
Share Option shall be exercisable at $______ PER SHARE; and each Warrant
Option is exercisable at $______ PER WARRANT. The Share Options and the
Warrant Options are collectively referred to as the "Representative's
Options." The terms of the warrants receivable upon exercise of the Warrant
Options (the "Representative's Warrants"), including the exercise price,
shall be identical to the terms of the Warrants.
<PAGE>
SECTION 2
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
In order to induce the Underwriters to enter into this Agreement, the
Company hereby represents and warrants to and agrees with each Underwriter that:
2.1 REGISTRATION STATEMENT AND PROSPECTUS. A registration statement on
Form SB-2 (File No. 333-19901) has been prepared by the Company in conformity
with the requirements of the Securities Act of 1933, as amended (the "Securities
Act"), and the rules and regulations of the Securities and Exchange Commission
(the "Commission") thereunder, and said registration statement has been filed
with the Commission. Copies of such registration statement and any amendments,
and all forms of the related prospectuses contained therein, have been delivered
to the Representative. Such registration statement, including the prospectus,
Part II, and documents incorporated by reference therein and financial schedules
and exhibits thereto, as amended at the time when it shall become effective, is
herein referred to as the "Registration Statement," and the prospectus included
as part of the Registration Statement on file with the Commission when it shall
become effective or, if the procedure in Rule 430A of the Rules and Regulations
(as defined below) under the Securities Act is followed, the prospectus that
discloses all the information that was omitted from the prospectus on the
effective date pursuant to such Rule, and in either case, together with any
changes contained in any prospectus filed with the Commission by the Company
with your consent after the effective date of the Registration Statement, is
herein referred to as the "Final Prospectus." If the procedure in Rule 430A is
followed, the prospectus included as part of the Registration Statement on the
date when the Registration Statement became effective is referred to herein as
the "Effective Prospectus." Any prospectus included in the Registration
Statement and in any amendments thereto prior to the effective date of the
Registration Statement is referred to herein as a "Preliminary Prospectus." For
purposes of this Agreement, "Rules and Regulations" mean the rules and
regulations adopted by the Commission under the Securities Act.
Included in the Registration Statement are the Firm Securities and the
Over-allotment Securities; 632,500 shares of Common Stock reserved against
exercise of the Firm Warrants and the Over-allotment Warrants; 165,000 shares
of Common Stock and 110,000 Warrants reserved against exercise of the
Representative's Options; 102,041 shares of Common Stock to be issued upon
conversion of 416,670 shares of Series A Preferred Stock; and 483,334
Warrants reoffered by certain Selling Shareholders, including 241,667 shares
of Common Stock underlying such Warrants.
As used in this Agreement, the term "Effective Date" refers to the date
the Commission declares the Registration Statement effective pursuant to
Section 8 of the Securities Act.
2.2 ACCURACY OF REGISTRATION STATEMENT AND PROSPECTUS. The Commission
has not issued any order preventing or suspending the use of any Preliminary
Prospectus with respect to the Securities, and each Preliminary Prospectus
has conformed in all material respects with the requirements of the
Securities Act and the applicable Rules and Regulations and to the best of
the Company's knowledge has not included at the time of filing any untrue
statement of a material fact or omitted to state a material fact required to
be stated therein or necessary to make the statements therein not misleading;
except that the foregoing shall not apply to statements in or
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<PAGE>
omissions from any Preliminary Prospectus in reliance upon, and in conformity
with, written information furnished to the Company by the Representative, or
from any Underwriter through the Representative, specifically for use in the
preparation thereof.
When the Registration Statement becomes effective and on the Closing Date
(hereinafter defined), the Registration Statement, the Effective Prospectus
(and on the Closing Date, the Final Prospectus) will contain all statements
which are required to be stated therein in accordance with the Securities Act
and the Rules and Regulations. No such document will contain any untrue
statement of a material fact or omit to state any material fact required to
be stated therein or necessary to make the statements therein not misleading;
except that the foregoing does not apply to information contained in or
omitted from the Registration Statement or the Effective Prospectus or Final
Prospectus in reliance upon written information furnished by the
Representative, or by any Underwriter through the Representative,
specifically for use in the preparation thereof. The Company will not at any
time hereafter file any amendments to the Registration Statement or in
accordance with Rule 424(b) of the Rules and Regulations of which the
Representative shall not have been previously advised in advance of filing or
to which the Representative shall reasonably object in writing.
2.3 FINANCIAL STATEMENTS. Hein + Associates, LLP, whose reports appear
in the Effective Prospectus and the Final Prospectus, are, and during the
periods covered by their reports were, independent accountants as required by
the Securities Act and the applicable Rules and Regulations. The financial
statements and schedules (including the related notes) included in the
Registration Statement, any Preliminary Prospectus or the Effective
Prospectus or the Final Prospectus, present fairly the financial position,
the results of operations, and changes in financial position of the entities
purported to be shown thereby at the dates and for the periods indicated; and
such financial statements have been prepared in accordance with generally
accepted accounting principles consistently applied throughout the periods
indicated.
The financial information and related notes and schedules included in the
Registration Statement, any Preliminary Prospectus or the Final Prospectus
comply in all material respects with the requirements of the Securities Act
and the Rules and Regulations and present fairly the financial position of
the Company and its subsidiaries as of the dates indicated, and the results
of operation for the periods therein specified. Such financial information,
including the related notes and schedules, have been prepared on a basis
consistent with the historical financial statements included in the
Registration Statement, the Preliminary Prospectus and the Final Prospectus,
except for the adjustments specified herein, and give effect to assumptions
made on a reasonable basis to give effect to historical and proposed
transactions described in the Registration Statement, any Preliminary
Prospectus and the Final Prospectus. The financial information and
statistical data, and other data, set forth in the Final Prospectus under the
captions "Prospectus Summary--Financial and Operating Data," "Selected
Financial Data," "Dilution" and "Capitalization" are derived from and
prepared on a basis consistent with such financial information.
2.4 NO MATERIAL ADVERSE CHANGE. Except as may be reflected in or
contemplated by the Effective Prospectus or the Final Prospectus, subsequent
to the dates as of which information is given in the Effective Prospectus or
the Final Prospectus, and prior to the Closing Date, (a) there shall not have
been any material adverse change in the condition, financial or otherwise, of
the Company or in its business taken as a whole; (b) there shall not have
been any material transaction
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entered into by the Company other than transactions in the ordinary course of
business; (c) the Company shall not have incurred any material liabilities,
obligations or claims, contingent or otherwise, which are not disclosed in
the Effective Prospectus or the Final Prospectus; (d) except in the ordinary
course of business and with the consent of the Representative, there shall
not have been nor will there be any change in the capital stock or long-term
debt (except current payments) of the Company; and (e) the Company has not
and will not have paid or declared any dividends or other distributions on
its capital stock.
2.5 NO DEFAULTS. Other than as disclosed in the Effective Prospectus or
the Final Prospectus, the Company is not in any default (which has not been
waived) in the performance of any obligation, agreement or condition
contained in any debenture, note or other evidence of indebtedness or any
indenture or loan agreement. The execution and delivery of this Agreement
and the consummation of the transactions herein contemplated, and compliance
with the terms of this Agreement will not conflict with or result in a breach
of any of the terms, conditions or provisions of, or constitute a default
under, the articles of incorporation, as amended, or by-laws of the Company;
any note, indenture, mortgage, deed of trust, or other material agreement or
instrument to which the Company is a party or by which it or any of its
property is bound, other than for which the Company has received a consent or
waiver of such conduct, breach or default or except where such default would
not have a material adverse effect on the business of the Company; or any
existing law, order, rule, regulation, writ, injunction, or decree of any
government, governmental instrumentality, agency or body, arbitration
tribunal or court, domestic or foreign, having jurisdiction over the Company
or its property. The consent, approval, authorization, or order of any court
or governmental instrumentality, agency or body is not required for the
consummation of the transactions herein contemplated except such as may be
required under the Securities Act or under the securities laws of any state
or jurisdiction.
2.6 INCORPORATION AND STANDING. Each of the Company and its
Subsidiaries (as defined in Section 12.7 hereof) is, and at the Closing Date
(hereinafter defined) and the Over-allotment Closing Date (hereinafter
defined) will be, duly incorporated and validly existing in good standing as
a corporation under the laws of the jurisdiction of its organization, with
full power and authority (corporate and other) to own its property and
conduct its business, present and proposed, as described in the Effective
Prospectus and the Final Prospectus; the Company has full power and authority
to enter into this Agreement; is duly qualified and in good standing as a
foreign corporation in each jurisdiction in which the character or location
of its properties (owned or leased) or the nature of its business makes such
qualification necessary except where the failure to be so qualified would not
have a material adverse effect on the Company; and each of the Company and
its Subsidiaries holds all material licenses, certificates, and permits from
governmental authorities necessary for the conduct of its business as
described in the Effective Prospectus and Final Prospectus.
2.7 CAPITALIZATION. The Company's authorized and outstanding
capitalization on the Effective Date and on the Closing Date (hereinafter
defined), and on the Over-allotment Closing Date (hereinafter defined) are
and will be as set forth under the caption "Capitalization" in the Effective
Prospectus and the Final Prospectus. The Common Stock, the Warrants, and the
Representative's Options conform to the description thereof contained under
the captions "Description of Securities" and "Underwriting" in the Effective
Prospectus and the Final Prospectus.
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The outstanding shares of Common Stock have been, and the Securities, upon
issuance and delivery against payment therefor in the manner described
herein, will be, duly authorized and validly issued, fully paid and
nonassessable. No sales of securities have been made by the Company in
violation of the registration or anti-fraud provisions of the Securities Act
or in violation of any other federal law or laws of any state or jurisdiction.
2.8 LEGALITY OF SECURITIES. The Shares, the Warrants, the
Representative's Options, and the Common Stock and Representative's Warrants
issuable upon the exercise of the Representative's Options have been duly and
validly authorized and, when issued and delivered against payment therefor as
provided in this Agreement, will be validly issued, fully paid and
nonassessable. There are no preemptive rights or other rights to subscribe
for or to purchase, or any restriction upon the voting or transfer of, any
shares of Common Stock pursuant to the Company's articles of incorporation,
by-laws or other governing documents or any agreement or other instrument to
which the Company or any of its Subsidiaries is a party or by which any of
them may be bound. Neither the filing of the Registration Statement nor the
offering or sale of the Securities as contemplated by this Agreement gives
rise to any rights, other than those which have been waived or satisfied, for
or relating to the registration of any shares of Common Stock. All of the
outstanding shares of capital stock of each Subsidiary of the Company are
owned directly or indirectly by the Company, free and clear of any claim,
lien, encumbrance or security interest. The Warrants and the
Representative's Options, when sold and delivered, will constitute valid and
binding obligations of the Company enforceable in accordance with the terms
thereof. A sufficient number of shares of Common Stock of the Company has
been reserved for issuance upon exercise of the Warrants, the
Representative's Options and the Representative's Warrants.
2.9 PRIOR SALES. No unregistered securities of the Company, of an
affiliate or of a predecessor of the Company have been sold within three
years prior to the date hereof, except as disclosed in the Registration
Statement.
2.10 LITIGATION. Except as set forth in the Effective Prospectus and the
Final Prospectus, there is, and at the Closing Date there will be, no action,
suit or proceeding before any court, arbitration tribunal or governmental
agency pending, or to the knowledge of the Company, threatened, which might
result in judgments against the Company not adequately covered by insurance
or which collectively might result in any material adverse change in the
condition (financial or otherwise), the business or the prospects of the
Company, or which would materially affect the properties or assets of the
Company.
2.11 REPRESENTATIVE'S OPTIONS. Upon delivery of and payment for the
Representative's Options to be sold by the Company as set forth in Section
3.4 of this Agreement, the Representative and designees of the Representative
will receive good and marketable title thereto, free and clear of all liens,
encumbrances, charges and claims whatsoever; and the Company will have on the
Effective Date and at the time of delivery of such Representative's Options
the requisite power and authority to sell, transfer and deliver such
Representative's Options in the manner provided hereunder.
2.12 FINDER. The Company knows of no outstanding claims against it for
compensation for services in the nature of a finder's fee, origination fee or
financial consulting fee with respect to
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the offer and sale of the Securities hereunder except as previously disclosed
in writing to the Representative.
2.13 EXHIBITS; CONTRACTS; AGREEMENTS. There are no contracts or other
documents which are required to be filed as exhibits to the Registration
Statement by the Securities Act or by the Rules and Regulations which have
not been so filed and each contract to which the Company is a party and to
which reference is made in the Effective Prospectus and the Final Prospectus
has been duly and validly executed by the Company and, to the best of the
Company's knowledge, is in full force and effect in all material respects in
accordance with its terms, and none of such contracts have been assigned by
the Company; and the Company knows of no present situation or condition or
fact which would prevent compliance with the terms of such contracts, as
amended to date. Except for amendments or modifications of such contracts in
the ordinary course of business, the Company has no intention of exercising
any right which it may have to cancel any of its obligations under any of
such contracts, and has no knowledge that any other party to any of such
contracts has any intention not to render full performance under such
contracts. All material terms of each contract, agreement, plan, arrangement
or understanding to which the Company is a party, or to which it may
reasonably be expected to become a party, have been fully disclosed in the
Effective Prospectus and Final Prospectus.
2.14 TAX RETURNS. The Company has filed all federal and state tax
returns which are required to be filed by it and has paid all taxes shown on
such returns and on all assessments received by it to the extent such taxes
have become due. All taxes with respect to which the Company is obligated
have been paid or adequate accruals have been set up to cover any such unpaid
taxes.
2.15 PROPERTY. Except as otherwise set forth in or contemplated by the
Effective Prospectus and the Final Prospectus, the Company and its
Subsidiaries have good and marketable title in fee simple to all real
property and good and marketable title to all personal property owned by
them, in each case free and clear of all liens, encumbrances and defects,
except such as are described in the Effective Prospectus and the Final
Prospectus or such as do not materially effect the value of such property and
do not interfere with the use made or proposed to be made of such property by
the Company or such Subsidiaries; and any real property and buildings held
under lease by the Company and its Subsidiaries are held by them under valid,
existing, and enforceable leases with such exceptions as are not material and
do not interfere with the use made or proposed to be made of such property
and buildings by the Company and such Subsidiaries.
2.16 AUTHORITY. The execution and delivery by the Company of this
Agreement has been duly authorized by all necessary corporate action and this
Agreement is the valid, binding and legally enforceable obligation of the
Company, except as rights to indemnity hereunder may be limited by federal or
state securities laws or public policy and except as enforceability may be
limited by bankruptcy, insolvency, or similar laws affecting creditors rights
generally and by general equitable principles.
2.17 LOCK-UP. The Company has obtained from each of its officers, his or
her written agreement that for a period of one year from the Effective Date
he/she will not, without the prior
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written consent of the Representative, sell or otherwise dispose of any
shares of Common Stock of the Company owned directly or indirectly or
beneficially by him/her.
2.18 USE OF FORM SB-2. The Company is eligible to use Form SB-2 for the
offer and sale of the Securities.
2.19 GOVERNMENTAL COMPLIANCE. Neither the Company nor any Subsidiary is
in violation of any law, ordinance, governmental rule or regulation or court
decree to which it may be subject which violation might reasonably be
expected to have a material adverse effect on the condition (financial or
other), properties, prospective results of operations or net worth of the
Company and its Subsidiaries.
2.20 STABILIZATION. The Company has not taken and may not take, directly
or indirectly, any action designed to cause or result in, or which has
constituted or which might reasonably be expected to constitute, the
stabilization or manipulation of the price of the shares of Common Stock to
facilitate the sale or resale of the Shares or the Warrants.
2.21 CUSIP NUMBER. The Company has obtained CUSIP numbers for the Common
Stock and the Warrants.
2.22 SUBSIDIARIES. The Company has no Subsidiaries and it has no present
intention of acquiring or forming any subsidiaries, except as disclosed in
the Effective Prospectus or the Final Prospectus.
2.23 BOOKS AND ACCOUNTS. The books, records and accounts of the Company
and each of its subsidiaries accurately and fairly reflect, in reasonable
detail, the transactions in and dispositions of the assets of the Company and
each of its subsidiaries. The systems of internal accounting controls
maintained by the Company and each of its subsidiaries are sufficient to
provide reasonable assurances that (w) transactions are executed in
accordance with management's general or specific authorization; (x)
transactions are recorded as necessary (A) to permit preparation of financial
statements in conformity with generally accepted accounting principles and
(B) to maintain accountability for assets; and (z) the recorded
accountability for assets is compared with the existing assets at reasonable
intervals and appropriate action is taken with respect to any differences.
2.24 EMPLOYEES. No labor disturbance by the employees of the Company or
any of its subsidiaries exists or is imminent; and the Company is not aware
of any existing or imminent labor disturbance by the employees of any
principal suppliers, contract manufacturing organizations, manufacturers,
authorized dealers or distributors that might be expected to result in any
material adverse change in the condition (financial or otherwise), earnings,
operations, business or prospects of the Company and its subsidiaries,
considered as a whole. No collective-bargaining agreement exists with any of
the Company's or any of the Company's subsidiaries' employees and, to the
best knowledge of the Company, no such agreement is imminent.
2.25 POLITICAL CONTRIBUTIONS. Neither the Company nor any of its
subsidiaries has, directly or indirectly, at any time (x) made any
contributions to any candidate for political office, or
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failed to disclose fully any such contribution, in violation of law; (y) made
any payment to any state, federal or foreign governmental officer or
official, or other person charged with similar public or quasi-public duties,
other than payments required or allowed by all applicable laws; or (z)
violated nor is it in violation of any provision of the Foreign Corrupt
Practices Act of 1977, as amended.
2.26 ENVIRONMENTAL LIABILITIES. Neither the Company nor any of its
subsidiaries has any liability, known or unknown, matured or not matured,
absolute or contingent, assessed or unassessed, imposed or based upon any
provision of, or has received notice of any potential liability under, any
foreign, federal, state or local law, rule or regulation or the common law,
or any tort, nuisance or absolute liability theory, or under any code, order,
decree, judgment or injunction applicable to the Company or any of its
subsidiaries relating to public health or safety, worker health or safety or
pollution, damage to or protection of the environment, including, without
limitation, laws relating to damage to natural resources, emissions,
discharges, releases or threatened releases of hazardous materials into the
environment (including, without limitation, ambient air, surface water,
ground water, land surface or subsurface strata), or otherwise relating to
the manufacture, processing, use treatment, storage, generation, disposal,
transport or handling of hazardous materials. As used herein, "hazardous
material" includes chemical substances, wastes, pollutants, contaminants,
hazardous or toxic substances, constituents, materials or wastes, whether
solid, gaseous or liquid in nature.
2.27 INVESTMENT COMPANY ACT. The Company is familiar with the Investment
Company Act of 1940, as amended (the "1940 Act"), and the rules and
regulations thereunder, and has in the past conducted, and intends in the
future to conduct, its affairs in such a manner as to ensure that it will not
become an "investment company" within the meaning of the 1940 Act and such
rules and regulations.
2.28 PROPRIETARY RIGHTS. Each of the Company and each of its
Subsidiaries owns or possesses adequate rights to use all material trade
secrets, know-how, trademarks, service marks, trade names and copyrights
described or referred to in the Final Prospectus as owned by or used by any
of them, or which are necessary for the conduct of their business as
described in the Final Prospectus; and neither the Company nor any of its
Subsidiaries has received any notice of infringement of or conflict with
asserted rights of others with respect to any patents, patent rights,
inventions, trade secrets, know-how, trademarks, service marks, tradenames or
copyrights which, singly or in the aggregate, if the subject of an
unfavorable decision, ruling or finding, might have a material adverse effect
on the business, properties, condition (financial or otherwise), prospects or
results of operations of the Company and its Subsidiaries, taken as a whole.
SECTION 3
PURCHASE AND SALE OF THE SECURITIES
3.1 PURCHASE OF SECURITIES AND OVER-ALLOTMENT OPTION. Subject to the
terms and conditions and upon the basis of the representations and warranties
herein set forth, the Company agrees to issue and sell to the Underwriters,
and each of the Underwriters agrees to purchase from the Company at a price
of $_____ PER SHARE AND $______ PER WARRANT, severally and not jointly, the
number of Shares and Warrants set forth opposite their respective names in
Schedule I hereto. The Underwriters agree to offer the Shares and Warrants
to the public as set forth in the Final Prospectus.
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The Company hereby grants to the Underwriters an option to purchase from
the Company, solely for the purpose of covering over-allotments in the sale
of Firm Securities, all or any portion of the Over-allotment Shares and/or
the Over-allotment Warrants for a period of forty-five (45) days after the
Effective Date at the purchase price set forth above. The Representative
shall notify the Company of its intention to exercise the Over-allotment
Option at least three (3) days prior to such exercise or exercises.
3.2 SUBSTITUTION OF UNDERWRITERS. If any Underwriter defaults in its
obligation to purchase the number of Securities which it has agreed to
purchase under this Agreement, the non-defaulting Underwriters shall be
obligated to purchase (pro rata in proportion to the number of Securities set
forth opposite the name of each non-defaulting Underwriter in Schedule I
hereto) the total number of Securities which the defaulting Underwriter
agreed but failed to purchase; except that the non-defaulting Underwriters
shall not be obligated to purchase any of the Securities if the total number
of Securities which the defaulting Underwriter or Underwriters agreed but
failed to purchase exceeds 9.09% of the total number of Securities, and any
non-defaulting Underwriter shall not be obligated to purchase more than 110%
of the number of Securities set forth opposite its name in Schedule I hereto
purchasable by it pursuant to the terms of Section 3.1; and provided further
that the non-defaulting Underwriters shall not be obligated to purchase any
Securities which the defaulting Underwriter or Underwriters agreed to
purchase if such additional purchase would cause the Underwriter to be in
violation of the net capital rule of the Commission or other applicable law.
If the foregoing maximums are exceeded, the non-defaulting Underwriters, and
any other underwriters satisfactory to the Representative who so agree, shall
have the right, but will not be obligated, to purchase (in such proportions
as may be agreed upon among them) all the Securities. In any such case, the
Representative shall have the right to postpone the Closing determined as
provided in Section 3.3.2 hereof for not more than seven Business Days after
the date originally fixed as the Closing pursuant to said Section 3.3.2 in
order that any necessary changes in the Registration Statement, the
Prospectus or any other documents or arrangements may be made. If the
non-defaulting Underwriters or the other underwriters satisfactory to the
Representative do not elect to purchase the Securities which the defaulting
Underwriter or Underwriters agreed but failed to purchase, this Agreement
shall terminate without liability on the part of any non-defaulting
Underwriter or the Company except for the payment of expenses to be borne by
the Company and the Underwriters as provided in Section 3.5 and the indemnity
and contribution agreements of the Company and the Underwriters contained in
Section 6 hereof.
Nothing contained herein shall relieve a defaulting Underwriter of any
liability it may have to the Company or to the non-defaulting Underwriters
for damages caused by its default hereunder.
3.3 PUBLIC OFFERING PRICE. After the Commission notifies the Company
that the Registration Statement has become effective, the Underwriters
propose to offer the Firm Securities to the public at an initial public
offering price of $_______ PER SHARE AND $______ PER WARRANT as set forth in
the Final Prospectus. The Underwriters may allow such discounts and
concessions upon sales to selected dealers as may be determined from time to
time by the Representative.
3.3.1 PAYMENT FOR SECURITIES. Payment for the Securities
(including any Securities included in the Over-allotment Option which the
Underwriters agree to purchase) shall be made to the Company or its order
by certified or official bank check or checks, in the amount of the
purchase price by or on behalf of the Underwriters at the offices of the
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Representative in Englewood, Colorado, upon delivery to the Representative
or its designee of certificates for the Shares and Warrants in definitive
form in such numbers and registered in such names as the Representative
requests in writing at least three full business days prior to such
delivery. At the request of the Representative, the Company shall deliver
the Securities to the Underwriters through the facilities of The Depository
Trust Company or as otherwise directed.
3.3.2 CLOSING. The time and date of delivery and payment
hereunder is herein called the "Closing Date" and shall take place at the
office of the Representative in Englewood, Colorado, or at such other
location as may be specified by the Representative, on the fourth Business
Day (as hereinafter defined) following the Effective Date; provided,
however, that such date may be extended for not more than an additional
seven business days by the Representative. Should the Underwriters elect
to exercise any part of the Over-allotment Option pursuant to Section 3.1
above, the time and date of delivery and payment for such Over-allotment
Shares and/or Over-allotment Warrants shall be the third Business Day
following such exercise of the Over-allotment Option, or each earlier date
as may be agreed upon by the Representative and the Company. Said date is
referred to as the "Over-allotment Closing Date."
3.3.3 INSPECTION OF CERTIFICATES. For the purpose of expediting
the checking and packaging of the certificates for the Securities, if
requested by the Representative, the Company agrees to make the
certificates available for inspection by the Representative at the main
office of the Representative in Englewood, Colorado, at least two full
business days prior to the proposed delivery date.
3.4 SALE OF REPRESENTATIVE'S OPTIONS. On the Closing Date the Company
will sell and deliver to the Representative and its designees, for a purchase
price of $100, Share Options and Warrant Options dated as of the date of the
Prospectus substantially in the form filed as an Exhibit to the Registration
Statement with such changes therein, if any, as may be agreed upon by the
Company and the Representative, to purchase 110,000 SHARES AT $______ PER
SHARE AND 110,000 Underwriters' WARRANTS AT $______ PER WARRANT. The Company
shall not be obligated to sell and deliver the Representative's Options, and
the Representative will not be obligated to purchase and pay for the
Representative's Options, except upon payment for the Securities pursuant to
Subsection 3.3.1 hereof.
The Representative's Options shall be non-transferable for a period of
one (1) year following the Effective Date except to the Underwriters and
their respective officers or partners. The Representative's Options shall
also contain anti-dilution provisions for stock splits, recombinations and
reorganizations, a one-time demand registration provision, customary
piggyback registration rights, a right to convert the options to shares in a
"cashless exercise," and shall otherwise be in form and substance
satisfactory to the Representative. The Representative's Options will be
exercisable during the four year period commencing one (1) year after the
Effective Date.
3.5 REPRESENTATIVE'S EXPENSE ALLOWANCE. It is understood that the
Company shall reimburse the Representative, for itself alone and not on
behalf of the other Underwriters, for its expenses on a nonaccountable basis
in the amount of 3% ($__________) of the gross proceeds from the sale of the
Shares and the Warrants ($_____ PER SHARE AND $______ PER WARRANT)
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including proceeds from the sale of the Over-allotment Shares and/or the
Over-allotment Warrants (hereinafter the "Expense Allowance"). The
Representative acknowledges receipt of $30,000 paid pursuant to a corporate
consulting agreement, which will be deducted from the Expense Allowance. On
the Closing Date and, if applicable, on the Over-allotment Closing Date, the
Representative shall be entitled to withhold the unpaid balance of such
Expense Allowance. The Representative shall be solely responsible for all
expenses incurred by it in connection with the offering including, but not
limited to, the expenses of its own counsel except as set forth in Section
5.7 hereof. Notwithstanding the foregoing, if the Registration Statement
does not become effective, or the offering is never commenced after it
becomes effective, or if this Agreement is terminated as provided herein, the
Representative will retain so much of the Expense Allowance which has been or
should have been received by the Representative from the Company as is equal
to its actual accountable out-of-pocket expenses and reimburse the remainder,
if any, to the Company, provided that the amount to be reimbursed will not
exceed $30,000. The Representative's expenses shall include, but are not to
be limited to, a fee to compensate the Representative for the services and
time of Representative's counsel (internal and external), plus any additional
expenses and fees, including but not limited to, travel expenses, postage
expenses, duplication expenses, confirmation and other record preparation
expenses, long-distance telephone expenses, consultant and investigator
expenses and other expenses incurred by the Representative in connection with
the proposed offering.
3.6 REPRESENTATIONS OF THE PARTIES. The parties hereto respectively
represent that as of the Closing Date the representations herein contained
and the statements contained in all the certificates theretofore or
simultaneously delivered by any party to another, pursuant to this Agreement,
shall in all material respects be true and correct.
3.7 POST-CLOSING INFORMATION. The Representative covenants that
reasonably promptly after the Closing Date, it will supply the Company with
all information required from the Representative which must be supplied to
the Commission, if any, and such additional information as the Company may
reasonably request to be supplied to the securities authorities for such
states in which the Securities have been qualified for sale.
3.8 RE-OFFERS BY SELECTED DEALERS. On each sale by the Underwriters of
any of the Securities to selected dealers, the Representative shall require
the selected dealer purchasing any such Securities to agree to re-offer the
same on the terms and conditions of the offering set forth in the Final
Prospectus.
3.9 RIGHT OF FIRST REFUSAL. If the Offering is consummated and subject
to the conditions set forth below, the Company will grant to the
Representative the right to act as managing underwriter for any public
offering of its securities contemplated by the Company or any of its
Subsidiaries during the three (3) year period commencing on the Effective
Date. The right shall continue in effect during the entire 3-year period or
until the Representative declines to accept the right of first refusal for a
transaction that is ultimately completed on the general terms presented to
the Representative despite the exercise of the right or the refusal to
exercise the right during the period. The Representative shall have 30 days
within which to determine whether to exercise the right.
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In addition, if the Representative determines not to exercise the right
provided in the preceding paragraph, upon the request of the Representative
the Company agrees that it will use its best efforts to have the
Representative designated as a co-manager of the public offering of its
securities and to receive at least 20% of the management fee for acting in
such capacity. If the Representative determines not to co-manage the
proposed transaction or if the Company is unable or unwilling to cause the
Representative to be designated a co-manager, then the Company agrees to pay
the Representative an amount equivalent to the greater of 1% of the gross
proceeds from the sales of the Shares in this Offering; or 5% of the
underwriting discount or commission paid in connection with such future
financing (including any overallotment option that may be exercised).
The rights granted to the Representative hereby are subject to the
following conditions: (a) that the terms of any such underwriting are
competitive with those otherwise available to the Company; (b) that the
Representative shall have presented evidence reasonably satisfactory to the
Company's board of directors of its ability, alone or with a co-manager that
has agreed to participate in that capacity, to consummate the offering; and
(c) that the Representative shall agree to any reasonable request by the
Company to include one co-manager in the Offering.
3.10 FINANCIAL CONSULTING AGREEMENT. Upon the closing of the proposed
offering, the Company shall enter into a Financial Consulting Agreement with
the Representative pursuant to which the Representative shall receive a
consulting fee of $2,500 per month, payable in advance at the time of
closing, for twelve (12) months from the Closing Date, for services which
shall include, but are not limited to, advising the Company in connection
with financial planning, corporate organization and structure, financial
matters in connection with the operation of the business of the Company,
private and public equity and debt refinancing, the Company's relations with
its securities holders, and the preparation and distribution of periodic
reports; and the Representative shall periodically provide to the Company an
analysis of the Company's financial statements.
SECTION 4
REGISTRATION STATEMENT AND PROSPECTUS
4.1 DELIVERY OF REGISTRATION STATEMENTS. The Company shall deliver to
the Representative without charge two (2) manually signed copies of the
Registration Statement, including all financial statements and exhibits filed
therewith and any amendments or supplements thereto, and shall deliver
without charge to the Representative ten (10) conformed copies of the
Registration Statement and any amendment or supplement thereto, including
such financial statements and exhibits. The signed copies of the
Registration Statement so furnished to the Representative will include
manually signed copies of any and all consents and certificates of the
independent public accountant certifying to the financial statements included
in the Registration Statement and signed copies of any and all opinions,
consents and certificates of any other persons whose profession gives
authority to statements made by them and who are named in the Registration
Statement as having prepared, certified, or reviewed any part thereof.
4.2 DELIVERY OF PRE-EFFECTIVE PROSPECTUS. The Company will cause to be
delivered to the Underwriters and to other broker-dealers, without charge,
prior to the Effective Date, as many copies of each Preliminary Prospectus
filed with the Commission bearing in red ink the statement required by Item
501(c)(8) of Regulation S-K (Reg. 229.501(c)(8)) as may be required
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by the Representative. The Company consents to the use of such documents by
the Underwriters and by selected dealers prior to the Effective Date of the
Registration Statement.
4.3 DELIVERY OF PROSPECTUS. The Company will deliver, without charge,
copies of the Effective Prospectus and the Final Prospectus at such addresses
and in such quantities as may be required by the Underwriters for the
purposes contemplated by this Agreement and shall deliver said printed copies
of the Effective Prospectus and the Final Prospectus to the Underwriters and
to selected dealers within one business day after the Effective Date.
4.4 FURTHER AMENDMENTS AND SUPPLEMENTS. If during such period of time
as in the opinion of the Representative or its counsel the Final Prospectus
is required to be delivered under the Securities Act, any event occurs or any
event known to the Company relating to or affecting the Company shall occur
as a result of which the Final Prospectus as then amended or supplemented
would include an untrue statement of a material fact, or omit to state any
material fact necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading, or if it is
necessary at any time after the Effective Date to amend or supplement the
Final Prospectus to comply with the Securities Act, the Company will
forthwith notify the Representative thereof and prepare and file with the
Commission such further amendment to the Registration Statement or supplement
the Final Prospectus (at the expense of the Company) so as to correct such
statement or omission or effect such compliance. The Company shall furnish
and deliver to the Representative and to others whose names and addresses are
designated by the Representative, all at the cost of the Company, a
reasonable number of copies of the amended or supplemented Prospectus which
as so amended or supplemented will not contain any untrue statement of a
material fact or omit to state any material fact necessary in order to make
the Prospectus not misleading in the light of the circumstances as of the
date of such Prospectus, amendment, or supplement, and which will comply in
all respects with the Securities Act. In the event the Underwriters are
required to deliver a Prospectus beyond completion of their participation in
the public offering, upon request the Company will prepare promptly such
Prospectus or Prospectuses as may be necessary to permit continued compliance
with the requirements of Section 10 of the Securities Act.
4.5 USE OF PROSPECTUS. The Company authorizes the Underwriters and all
selected dealers to whom any of the Securities may be sold to use the
Effective Prospectus and the Final Prospectus, as from time to time amended
or supplemented, in connection with the offer and sale of the Securities and
in accordance with the applicable provisions of the Securities Act, the Rules
and Regulations and state Blue Sky or securities laws.
SECTION 5
COVENANTS OF THE COMPANY
The Company covenants and agrees with the Underwriters that:
5.1 OBJECTION OF REPRESENTATIVE TO AMENDMENTS OR SUPPLEMENTS. The
Company will not at any time, whether before or after the Effective Date,
file any amendment or supplement to the Registration Statement or Prospectus,
unless and until a copy of such amendment or supplement has been furnished
to the Representative a reasonable period of time prior to the proposed
filing thereof; or to which the Representative or counsel for the
Representative have
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reasonably objected, in writing, on the ground that such amendment or
supplement is not in compliance with the Securities Act or the Rules and
Regulations.
5.2 COMPANY'S BEST-EFFORTS TO CAUSE REGISTRATION STATEMENT TO BECOME
EFFECTIVE. The Company will use its best efforts to cause the Registration
Statement to become effective or, if the procedure in Rule 430A of the Rules
and Regulations is followed, comply with the provisions of and make all
requisite filings with the Commission pursuant to such Rule and to notify the
Representative promptly (in writing, if requested) of all such filings. The
Company shall promptly advise the Representative, and will confirm such
advice in writing (a) when the Registration Statement shall become effective
and when any amendment thereto shall have become effective and when any
amendment of or supplement to the Effective Prospectus or the Final
Prospectus shall be filed with the Commission; (b) when the Commission makes
a request or suggestion for any amendment to the Registration Statement or
the Effective Prospectus or the Final Prospectus or for additional
information and the nature and substance thereof; and (c) of the happening of
any event which in the judgment of the Company makes any material statement
in the Registration Statement or Effective Prospectus or the Final Prospectus
untrue or which requires the making of any changes in the Registration
Statement or the Effective Prospectus or Final Prospectus in order to make
the statements therein not misleading. The Company shall also promptly
notify the Representative, and confirm such notice in writing, when the
Company has knowledge of the issuance by the Commission of an order
suspending the effectiveness of the Registration Statement pursuant to
Section 8 of the Securities Act, suspending or preventing the use of any
Preliminary Prospectus or the Effective Prospectus or Final Prospectus or
suspending the qualification of the Securities for offering or sale in any
jurisdiction, or of the institution of any proceedings for any such purpose.
The Company will use every reasonable effort to prevent the issuance of any
order suspending the effectiveness of the Registration Statement or refusing
or suspending the qualification of the Securities, and to obtain as soon as
possible a lifting of any such suspension order, the reversal of any such
refusal to qualify, and the termination of any such suspension.
5.3 PREPARATION AND FILING OF AMENDMENTS AND SUPPLEMENTS. The Company
agrees to prepare and file promptly with the Commission, upon request of the
Representative, such amendments or supplements to the Registration Statement
or Final Prospectus, in form satisfactory to counsel to the Company, as may
be necessary, in the opinion of counsel to the Representative and of counsel
to the Company; and it shall use its best efforts to cause the same to become
effective as promptly as possible.
5.4 BLUE SKY QUALIFICATION. The Company has used and will use its best
efforts to qualify (blue-sky) the sale of the Securities in those states as
may be agreed upon by the Company and the Representative. Copies of all
applications for the registration of securities and related documents (except
for the Registration Statement and Preliminary or Final Prospectus) filed by
the Representative's counsel with the various states have been supplied to
the Company's counsel, concurrently with their transmission to the various
states, and copies of all comments and orders received from the various
states have been and shall be immediately supplied to the Company's counsel.
Immediately prior to the Effective Date, counsel for the Representative shall
advise the Representative in writing of all states wherein the offering is
exempt or has been registered for sale, canceled, withdrawn or denied, the
date of such event(s) and the number of Securities
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registered for sale in each such state. After settlement and closing, the
Representative shall notify its counsel of the number of Securities sold in
each such jurisdiction.
5.5 FINANCIAL STATEMENTS. The Company at its own expense will prepare
and give such financial statements and other information to the Commission,
or the proper public bodies of the states in which the Securities may be
registered or qualified, as may be required by them.
5.6 REPORTS AND FINANCIAL STATEMENTS TO THE REPRESENTATIVE. During the
period ending three years from the Closing Date, the Company will deliver to
the Representative copies of each annual report of the Company, and will
deliver to the Representative, within 90 days after the close of each fiscal
year of the Company, a financial report of the Company and its Subsidiaries,
if any, on a consolidated basis, and a similar financial report of all
unconsolidated Subsidiaries, if any. All such reports will include a balance
sheet as of the end of the preceding fiscal year, a statement of operations,
a statement of cash flows and an analysis of shareholders' equity covering
such fiscal year, and all will be in reasonable detail and certified by
independent public accountants for the Company. These requirements will be
satisfied if the Company provides to the Representative copies of its Forms
10-K, Forms 10-Q and Forms 8-K (or other appropriate forms) when they are
filed with the Commission.
If the Company shall fail to furnish the Representative with financial
statements as herein provided, within the times specified herein, the
Representative, after giving reasonable notice of not less than 30 days (and
if the financial statements are not provided within such 30 day period),
shall have the right to have such financial statements prepared by
independent public accountants of its own choosing and the Company agrees to
furnish such independent public accountants such data and assistance and
access to such records as they may reasonably require to enable them to
prepare such statements and to pay their reasonable fees and expenses in
preparing the same.
During the period ending three years from the Closing Date the Company
shall also provide to the Representative copies of all other statements,
documents, or other information which the Company shall mail or otherwise
make available to any class of its security holders, or which it shall file
with the Commission; and, upon request in writing from the Representative,
the Company shall furnish to the Representative such other information as may
reasonably be requested and which may be properly disclosed to the
Representative with reference to the property, business and affairs of the
Company and its Subsidiaries, if any; provided such written request includes
an agreement to keep confidential any information which should not be
disclosed to the public.
5.7 EXPENSES PAID BY THE COMPANY. The Company will pay or cause to be
paid, whether or not the transactions contemplated hereunder are consummated
or the Registration Statement is prevented from becoming effective or this
Agreement is terminated, (a) all expenses (including stock transfer taxes)
incurred in connection with the delivery to the several Underwriters of the
Securities; (b) all fees and expenses (including, without limitation, fees
and expenses of the Company's accountants and counsel, but excluding fees and
expenses of counsel for the Underwriters other than those described in (9)
below) in connection with the preparation, printing, filing, delivery and
shipping of
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the Registration Statement (including financial statements therein and all
amendments and exhibits thereto), each Preliminary Prospectus, the Effective
Prospectus and the Final Prospectus as amended or supplemented, and the
printing, delivery and shipping of this Agreement and other underwriting
documents, including Underwriter's Questionnaires, Underwriters' Powers of
Attorney, Blue Sky Memoranda, Agreements Among Underwriters, and Selected
Dealer Agreements; (c) the filing fee of the National Association of
Securities Dealers, Inc.; (d) any applicable listing fees; (e) the cost of
printing certificates representing the Shares and Warrants; (f) the cost and
charges of any transfer agent or registrar, and the Warrant agent; (g) the
fees and expenses of the Representative's counsel for qualifying the
Securities under the blue sky laws of various jurisdictions; and (h) all
other costs and expenses incident to the performance of its obligations
hereunder which are not otherwise provided for in this Section. It is
understood, however, that, except as provided in this Section, the
Underwriters shall pay all of their own costs and expenses, including the
fees of their counsel, stock transfer taxes on resale of any of the
Securities by them, and any advertising expenses connected with any offers
they may make.
5.8 REPORTS TO SHAREHOLDERS. During the period ending five years from
the Closing Date the Company will, as promptly as possible, but not later
than 180 days after the end of its annual fiscal year, render and distribute
reports to its shareholders which will include audited statements of its
operations and cash flows during such period and its balance sheet as of the
end of such period, as to which statements the Company's independent
certified public accountants shall have rendered an opinion.
5.9 SECTION 11(a) FINANCIALS. The Company will make generally available
to its security holders and will deliver to the Representative, as soon as
practicable, an earnings statement (as to which no opinion need be rendered
but which will satisfy the provisions of Section 11(a) of the Securities Act)
covering a period of at least 12 months beginning after the Effective Date.
Compliance by the Company with Rule 158 promulgated under the Securities Act
shall satisfy the requirements of this Section 5.9.
5.10 POST-EFFECTIVE AVAILABILITY OF PROSPECTUS. The Company will comply,
at its own expense, with all requirements imposed upon it by the Securities
Act, as now or hereafter amended, by the Rules and Regulations, as from time
to time may be in force, and by any order of the Commission, so far as
necessary to permit the continuance of sales or dealings in the Shares and
the Warrants and the exercise of the Warrants.
5.11 APPLICATION OF PROCEEDS. The Company will apply the net proceeds
from the sale of the Securities substantially in the manner specifically set
forth in the Final Prospectus. Any deviation from such application must be in
accordance with the Final Prospectus and may occur only after approval by the
board of directors of the Company and then only after the board of directors
has obtained the written opinion as to the propriety of any such deviation
provided by recognized legal counsel well versed in the federal and state
securities laws .
5.12 AGREEMENTS OF CERTAIN SHAREHOLDERS. The Company has delivered to
the Representative, prior to the execution of this Agreement, the agreement
of each officer, that for a period of one year from the Effective Date such
persons shall not sell, contract to sell, pledge, hypothecate, grant any
option to purchase or otherwise dispose of any portion of the shares of
Common Stock owned directly, indirectly or beneficially by such person prior
to the Effective Date, without the Representative's prior written consent.
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5.13 DELIVERY OF DOCUMENTS. At the Closing, the Company has delivered to
the Representative true and correct copies of the articles of incorporation
of the Company and all amendments thereto; true and correct copies of the
by-laws of the Company and of the minutes of all meetings of the directors
and shareholders of the Company held prior to the Closing Date which in any
way relate to the subject matter of this Agreement. All such copies shall be
certified by the Secretary of the Company.
5.14 COOPERATION WITH REPRESENTATIVE'S DUE DILIGENCE. At all times prior
to the Closing Date, the Company will cooperate with the Representative in
such investigation as the Representative may make or cause to be made of all
the properties, management, business and operations of the Company, and the
Company will make available to the Representative in connection therewith
such information in its possession as the Representative may reasonably
request.
5.15 APPOINTMENT OF TRANSFER AGENT AND WARRANT AGENT. The Company has
appointed Corporate Stock Transfer, Inc., as Transfer Agent for the Common
Stock and Warrant Agent for the Warrants, subject to the closing of the
offering. The Company will not change or terminate such appointment for a
period of three years from the Effective Date without first obtaining the
written consent of the Representative, which consent shall not be
unreasonably withheld.
5.16 COMPLIANCE WITH CONDITIONS PRECEDENT. The Company will use all
reasonable efforts to comply or cause to be complied with the conditions
precedent to the several obligations of the Underwriters in Section 8 hereof.
5.17 FILING OF FORM SR. If required under the Securities Act, the
Company agrees to file with the Commission all required reports on Form SR in
accordance with the provisions of Rule 463 promulgated under the Securities
Act and to provide a copy of such reports to the Representative and its
counsel.
5.18 BOUND VOLUME. The Company shall supply to the Representative and
the Representative's counsel, at the Company's cost, three bound volumes each
of all of the public offering materials within a reasonable time after the
closing, not to exceed three months.
5.19 LISTING IN MOODY'S AND STANDARD & POOR'S. The Company is listed in
Moody's Over-The-Counter Manual or Standard & Poor's Standard Corporation
Records, and it agrees to maintain such listings.
5.20 NASDAQ. The Company has applied to have the Common Stock and
Warrants quoted on NASDAQ on the Effective Date and it shall continue such
listing on NASDAQ or on a national securities exchange during the entire
period each such security is outstanding; provided that the Company is in
compliance with NASDAQ maintenance requirements. The NASDAQ symbols shall be
mutually agreeable to the Company and the Representative.
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5.21 SECONDARY TRADING QUALIFICATION. The Company agrees to use its best
efforts to qualify the Common Stock and Warrants for secondary trading as
soon as legally possible in such states as are requested by the
Representative from time to time, including, without limitation, California
and Texas.
5.22 RIGHT OF INSPECTION. For a period of three years after the
Effective Date, the Representative, at the Representative's expense, will
have the right to have a person or persons selected by the Representative
review the books and records of the Company upon seven days' written notice
and at reasonable times. Such person or persons will be required to execute a
confidentiality agreement which will, in part, prohibit disclosure of
information to any party except the Representative, which information shall
be held in confidence unless otherwise specifically agreed to by the Company
in writing.
5.23 OUTSIDE DIRECTORS, COMMITTEES, EXECUTIVE COMPENSATION. The Company
shall use its best efforts to have at least two members elected to its board
of directors who are not officers or employees of the Company ("outside
directors") on the Effective Date of the Registration Statement, and to cause
two such outside directors to be nominated as directors for two additional
one-year terms. The Company will form independent audit and compensation
committees which shall be comprised of at least three of the Company's
directors, at least a majority of whom shall be outside directors.
5.24 REGISTRATION UNDER THE EXCHANGE ACT. The Common Stock is registered
under Section 12(g) of the Exchange Act. The Company has filed a
Registration Statement under Section 12(g) of the Exchange Act with respect
to the Warrants. The Company has delivered a copy of such filing to the
Representative and to legal counsel for the Representative. The Company
shall use its best efforts to cause the registration statement under the
Exchange Act to become effective not later than the Effective Date, or as
soon thereafter as possible.
SECTION 6
INDEMNIFICATION AND CONTRIBUTION
6.1 INDEMNIFICATION BY COMPANY. The Company shall indemnify and hold
harmless each Underwriter against any and all loss, claim, damage or liability,
joint or several, to which such Underwriter may become subject, under the
Securities Act or otherwise, insofar as such loss, claim, damage, or liability
(or action with respect thereto) arises out of or is based upon (a) any
violation of any registration requirements; (b) any improper use of sales
literature by the Company; (c) any untrue statement or alleged untrue statement
made by the Company in Section 2 hereof; (d) any untrue statement or alleged
untrue statement of a material fact contained (i) in the Registration Statement,
any Preliminary Prospectus, the Effective Prospectus, or the Final Prospectus or
any amendment or supplement thereto, or (ii) in any application or other
document, executed by the Company specifically for such application or based
upon written information furnished by the Company, filed in order to qualify the
Securities under the securities laws of the states where filings were made (any
such application, document, or information being hereinafter called "Blue Sky
Application"); or (e) the omission or alleged omission to state in the
Registration Statement, any Preliminary Prospectus, the Effective Prospectus, or
the Final Prospectus or any amendment or supplement thereto or in any Blue Sky
Application a material fact required to be
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stated therein or necessary to make the statements therein not misleading;
and shall reimburse each Underwriter for any legal or other reasonable
expenses incurred by such Underwriter in connection with investigating or
defending against or appearing as a third-party witness in connection with
any such loss, claim, damage, liability or action, notwithstanding the
possibility that payments for such expenses might later be held to be
improper, in which case the person receiving them shall promptly refund them;
except that the Company shall not be liable in any such case to the extent,
but only to the extent, that any such loss, claim, damage, or liability
arises out of or is based upon an untrue statement or alleged untrue
statement or omission or alleged omission made in reliance upon and in
conformity with written information furnished to the Company through the
Representative by or on behalf of any Underwriter specifically for use in the
preparation of the Registration Statement, any Preliminary Prospectus, the
Effective Prospectus and the Final Prospectus or any amendment or supplement
thereto, or any Blue Sky Application.
6.2 INDEMNIFICATION BY UNDERWRITERS. Each Underwriter severally, but
not jointly, shall indemnify and hold harmless the Company against any and
all loss, claim, damage or liability, joint or several, to which the Company
may become subject under the Securities Act or otherwise, insofar as such
loss, claim, damage, liability (or action in respect thereto) arises out of
or are based upon (a) any untrue statement or alleged untrue statement of a
material fact contained (i) in the Registration Statement, any Preliminary
Prospectus, the Effective Prospectus or the Final Prospectus or any amendment
or supplement thereto or (ii) in any Blue Sky Application; or (b) the
omission or alleged omission to state in the Registration Statement, any
Preliminary Prospectus, the Effective Prospectus or the Final Prospectus or
any amendment or supplement thereto or in any Blue Sky Application a material
fact required to be stated therein or necessary to make the statements
therein not misleading; except that such indemnification shall be available
in each such case to the extent, but only to the extent, that such untrue
statement or alleged untrue statement or omission or alleged omission was
made in reliance upon information and in conformity with written information
furnished to the Company through the Representative or on behalf of such
Underwriter specifically for use in the preparation thereof; and shall
reimburse any legal or other expenses reasonably incurred by the Company in
connection with the investigation or defending against any such loss, claim,
damage, liability, or action.
6.3 RIGHT TO PROVIDE DEFENSE. Promptly after receipt by an indemnified
party under Section 6.1 or 6.2 above of written notice of the commencement of
any action, the indemnified party shall, if a claim in respect thereof is to
be made against the indemnifying party under such section, notify the
indemnifying party in writing of the claim or the commencement of that
action; the failure to notify the indemnifying party shall not relieve it of
any liability which it may have to an indemnified party, except to the extent
that the indemnifying party did not otherwise have knowledge of the
commencement of the action and the indemnifying party's ability to defend
against the action was prejudiced by such failure. Such failure shall not
relieve the indemnifying party from any other liability which it may have to
the indemnified party or any person identified in Section 6.4 below. If any
such claim or action shall be brought against an indemnified party, and it
shall notify the indemnifying party thereof, the indemnifying party shall be
entitled to participate therein and, to the extent that it wishes, jointly
with any other similarly notified indemnifying party, to assume the defense
thereof with counsel reasonably satisfactory to the indemnified party. After
notice from the indemnifying party to the indemnified party of its election
to assume the defense of such claim or action, the indemnifying party shall
not be liable to the indemnified party under
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such section for any legal or other expenses subsequently incurred by the
indemnified party in connection with the defense thereof other than
reasonable costs of investigation; except that the Representative shall have
the right to employ counsel to represent the Representative and those other
Underwriters who may be subject to liability arising out of any claim in
respect of which indemnity may be sought by the Underwriters against the
Company under such section if, in the Representative's reasonable judgment,
it is advisable for the Representative and those Underwriters to be
represented by separate counsel, and in that event the fees and expenses of
such separate counsel shall be paid by the Company.
6.4 CONTRIBUTION. If the indemnification provided for in Sections 6.1
and 6.2 of this Agreement is unavailable or insufficient to hold harmless an
indemnified party, then each indemnifying party shall contribute to the
amount paid or payable by such indemnified party as a result of the losses,
claims, damages, or liabilities referred to in Sections 6.1 or 6.2 above (a)
in such proportion as is appropriate to reflect the relative benefits
received by the Company on the one hand and the Underwriters on the other
from the offering of the Securities; or (b) if the allocation provided by
clause (a) above is not permitted by applicable law, in such proportion as is
appropriate to reflect the relative benefits referred to in clause (a) above
but also the relative fault of the Company on the one hand and the
Underwriters on the other in connection with the statements or omissions
which resulted in such losses, claims, damages, or liabilities, as well as
any other relevant equitable considerations. The relative benefits received
by the Company and the Underwriters shall be deemed to be in the same
proportion as the total net proceeds from the offering (before deducting
expenses) received by the Company bear to the total underwriting discounts
and un-itemized expenses received by the Underwriters, in each case as set
forth in the table on the cover page of the Final Prospectus. Relative fault
shall be determined by reference to, among other things, whether the untrue
statement of a material fact or the omission to state a material fact relates
to information supplied by the Company or the Underwriter and the parties'
relative intent, knowledge, access to information, and opportunity to correct
or prevent such untrue statement or omission. For purposes of this Section
6.4, the term "damages" shall include any counsel fees or other expenses
reasonably incurred by the Company or the Underwriters in connection with
investigating or defending any action or claim which is the subject of the
contribution provisions of this Section 6.4. Notwithstanding the provisions
of this Section 6.4, no Underwriter shall be required to contribute any
amount in excess of the amount by which the total price at which the
Securities underwritten by it and distributed to the public were offered to
the public exceeds the amount of any damages which such Underwriter has
otherwise been required to pay by reason of any such untrue statements or
omissions. No person adjudged guilty of fraudulent misrepresentation (within
the meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation. Under this Section 6.4, each Underwriter's obligations to
contribute are several in proportion to their respective underwriting
obligations and not joint.
Each party entitled to contribution agrees that upon the service of a
summons or other initial legal process upon it in any action instituted
against it in respect of which contribution may be sought, it shall promptly
give written notice of such service to the party or parties from whom
contribution may be sought, but the omission so to notify such party or
parties of any such service shall not relieve the party from whom
contribution may be sought from any obligation it may have hereunder or
otherwise (except as specifically provided in Section 6.4 hereof).
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6.5 EXTENSION OF OBLIGATIONS. The obligations of the Company under this
Section 6 shall be in addition to any other liability which the Company may
otherwise have, and shall extend, upon the same terms and conditions, to each
person, if any, who controls any Underwriter within the meaning of the
Securities Act; and the obligations of the Underwriters under this Section
shall be in addition to any liability that the respective Underwriters may
otherwise have, and shall extend, upon the same terms and conditions, to each
director of the Company (including any person who, with his consent, is named
in the Registration Statement as about to become a director of the Company),
to each officer of the Company who has signed the Registration Statement, and
to each person, if any, who controls the Company within the meaning of the
Securities Act.
6.6 REIMBURSEMENT OF UNDERWRITERS. In addition to its obligations under
Section 6.1 of this Agreement, the Company agrees that, as an interim measure
during the pendency of any claim, action, investigation, inquiry or other
proceeding arising out of or based upon any loss, claim, damage, or liability
described in Section 6.1 of this Agreement, it will reimburse the
Underwriters, and each of them, on a monthly basis (or more often, if
requested) for all reasonable legal or other expenses incurred in connection
with investigating or defending any such claim, action, investigation,
inquiry or other proceeding, notwithstanding the absence of a judicial
determination as to the propriety and enforceability of the Company's
obligation to reimburse the Underwriters for such expenses and the
possibility that such payments might later be held to have been improper by a
court of competent jurisdiction. To the extent that any portion, or all, of
any such interim reimbursement payments are so held to have been improper,
the Underwriters receiving the same shall promptly return such amounts to the
Company together with interest, compounded daily, determined on the basis of
the prime rate (or other commercial lending rate for borrowers of the highest
credit rating) announced from time to time by Norwest Bank of Denver, Denver,
Colorado (the "Prime Rate"). Any such interim reimbursement payments that
are not made to the Underwriters within 30 days of a request for
reimbursement shall bear interest at the Prime Rate from the date of such
request until the date paid.
6.7 REIMBURSEMENT OF THE COMPANY. In addition to their obligations
under Section 6.2 of this Agreement, the Underwriters agree that, as an
interim measure during the pendency of any claim, action, investigation,
inquiry or other proceeding arising out of or based upon any loss, claim,
damage or liability described in Section 6.2 of this Agreement, they will
reimburse the Company on a monthly basis (or more often, if requested) for
all reasonable legal or other expenses incurred by the Company in connection
with investigating or defending any such claim, action, investigation,
inquiry or other proceeding, notwithstanding the absence of a judicial
determination as to the propriety and enforceability of the Underwriters'
obligation to reimburse the Company for such expenses and the possibility
that such payments might later be held to have been improper by a court of
competent jurisdiction. To the extent that any portion, or all, of any such
interim reimbursement payments are so held to have been improper, the Company
shall promptly return such amounts to the Underwriters together with
interest, compounded daily, determined on the basis of the Prime Rate. Any
such interim reimbursement payments that are not made to the Company within
30 days of a request for reimbursement shall bear interest at the Prime Rate
from the date of such request until the date paid.
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SECTION 7
EFFECTIVENESS OF AGREEMENT
This Agreement shall become effective (a) at 10:00 a.m., Colorado time,
on the first full business day after the Effective Date, or (b) upon release
by the Representative of the Securities for sale after the Effective Date,
whichever shall first occur. The Representative shall notify the Company
immediately after the Representative shall have taken any action, by release
or otherwise, whereby this Agreement shall have become effective. For
purposes of this Agreement, the release of the initial public offering of the
Firm Securities for sale to the public shall be deemed to have been made when
the Representative releases, by telegram or otherwise, firm offers of the
Firm Securities to securities dealers or release for publication of a
newspaper advertisement relating to the Firm Securities, whichever occurs
first. This Agreement shall, nevertheless, become effective at such time
earlier than the time specified above, after the Effective Date, as the
Representative may determine by notice to the Company.
SECTION 8
CONDITIONS OF THE UNDERWRITERS' OBLIGATIONS
The obligations of the several Underwriters hereunder to purchase the
Securities and to make payment to the Company hereunder on the Closing Date
and on the Over-allotment Closing Date, if any, shall be subject to the
accuracy, as of the Closing Date and the Over-allotment Closing Date, of each
of the representations and warranties on the part of the Company herein
contained, to the performance by the Company of all its agreements herein
contained, to the fulfillment of or compliance by the Company with all
covenants and conditions hereof, and to the following additional conditions:
8.1 EFFECTIVENESS OF REGISTRATION STATEMENT. The Registration Statement
and all post-effective amendments thereto filed with the Commission prior to
the Closing Date or the Over-allotment Closing Date shall have become
effective and any and all filings required by Rule 424 and Rule 430A of the
Rules and Regulations shall have been made; no stop order suspending the
effectiveness of the Registration Statement or any amendment or supplement
thereto shall have been issued; no proceeding for that purpose shall have
been initiated or threatened by the Commission or be pending; any request for
additional information on the part of the Commission (to be included in the
Registration Statement or Final Prospectus or otherwise) shall have been
complied with to the satisfaction of the Commission; and neither the
Registration Statement, the Effective Prospectus or Final Prospectus, nor any
amendment thereto shall have been filed to which counsel to the
Representative shall have reasonably objected in writing or have not given
their consent.
8.2 ACCURACY OF REGISTRATION STATEMENT. The Representative shall not
have advised the Company that the Registration Statement or the Effective
Prospectus or Final Prospectus or any amendment thereof or supplement thereto
contains an untrue statement of a fact which, in the opinion of counsel to
the Representative, is material, or omits to state a fact which, in the
opinion of such counsel, is material and is required to be stated therein, or
is necessary to make the statements therein not misleading.
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8.3 CASUALTY AND OTHER CALAMITY. Since the Effective Date the Company
shall not have sustained any loss on account of fire, explosion, flood,
accident, calamity or any other cause, of such character as materially
adversely affects its business or property considered as an entire entity,
whether or not such loss is covered by insurance, and no officer or director
of the Company shall have suffered any injury, sickness or disability of a
nature which would materially adversely affect his or her ability to properly
function as an officer or director of the Company.
8.4 LITIGATION AND OTHER PROCEEDINGS. Other than as disclosed in the
Registration Statement or Prospectus, there shall be no litigation instituted
or threatened against the Company and there shall be no proceeding instituted
or threatened against the Company before or by any federal or state
commission, regulatory body or administrative agency or other governmental
body, domestic or foreign, wherein an unfavorable ruling, decision or finding
would materially adversely affect the business, management, licenses,
operations or financial condition or income of the Company considered as an
entity.
8.5 LACK OF MATERIAL CHANGE. Except as contemplated herein or as set
forth in the Registration Statement and Final Prospectus, during the period
subsequent to the date of the last audited balance sheet included in the
Registration Statement, the Company (a) shall have conducted its business in
the usual and ordinary manner as the same was being conducted on the date of
the last audited balance sheet included in the Registration Statement, and
(b) except in the ordinary course of its business, the Company shall not have
incurred any liabilities, claims or obligations (direct or contingent) or
disposed of any of its assets, or entered into any material transaction or
suffered or experienced any substantially adverse change in its condition,
financial or otherwise. The capital stock and surplus accounts of the
Company shall be substantially the same as at the date of the last audited
balance sheet included in the Registration Statement, without considering the
proceeds from the sale of the Securities, other than as may be set forth in
the Final Prospectus, and except as the surplus reflects the result of
continued profits or losses from operations consistent with prior periods.
8.6 REVIEW BY REPRESENTATIVE'S COUNSEL. The authorization of the
Shares, the Warrants, the Warrant Shares, the Representative's Options and
the Common Stock and Warrants issuable upon the exercise of the
Representative's Options, the Registration Statement, the Effective
Prospectus and the Final Prospectus and all corporate proceedings and other
legal matters incident thereto and to this Agreement shall be reasonably
satisfactory in all respects to counsel to the Representative.
8.7 OPINION OF COUNSEL. The Company shall have furnished to the
Representative the opinion, dated the Closing Date and, if applicable, the
Over-allotment Closing Date, addressed to the Representative, from Neuman &
Cobb, counsel to the Company, to the effect that based upon a review by them
of the Registration Statement, Effective Prospectus and the Final Prospectus,
the Company's articles of incorporation, by-laws, and relevant corporate
proceedings and contracts, and examination of such statutes they deem
necessary and such other investigation by such counsel as they deem necessary
to express such opinion:
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(a) The Company has been duly incorporated and is validly existing as
a corporation in good standing under the laws of the State of Colorado, and
has the corporate power and authority to own its properties and to carry on
its business as described in the Registration Statement and Effective
Prospectus and the Final Prospectus.
(b) The Company is duly qualified and in good standing as a foreign
corporation authorized to do business in all jurisdictions in which the
character of the properties owned or held under lease or the nature of the
business conducted requires such qualification except where the failure to
qualify would not have a material adverse effect on the business of the
Company.
(c) The authorized and outstanding capital stock of the Company is as
set forth in the Effective Prospectus and Final Prospectus; the Common
Stock of the Company, the Warrants, and the Representative's Options
conform in all material respects to the statements concerning them in the
Effective Prospectus and Final Prospectus; the outstanding Common Stock of
the Company contains no preemptive rights; the Shares, the Warrants, and
the Representative's Options have been, and the Common Stock issuable upon
exercise of the Share Options and the Representative's Options, will be,
duly and validly authorized and, upon issuance thereof and payment therefor
in accordance with this Agreement, validly issued, fully paid and
nonassessable, and will not be subject to the preemptive rights of any
shareholder of the Company.
(d) A sufficient number of shares of Common Stock have been duly
reserved for issuance upon the exercise of the Warrants, the
Representative's Options and the Warrants issuable upon exercise of the
Representative's Options.
(e) To such counsel's knowledge, no consents, approvals,
authorizations or orders of agencies, officers or other regulatory
authorities are required for the valid authorization, issuance or sale of
the Common Stock, the Warrants and the Representative's Options
contemplated by this Agreement, except for those consents, approvals,
authorizations, and orders which the Company has obtained and which are in
full force and effect under the Securities Act, the Exchange Act, and under
applicable state securities laws in connection with the purchase and
distribution of such securities by the Underwriters, and the clearance of
the underwriting compensation by the NASD.
(f) The issuance and sale of the Securities and the Representative's
Options, the consummation of the transactions herein contemplated, and the
compliance with the terms of this Agreement will not conflict with or
result in a breach of any of the terms, conditions, or provisions of or
constitute a default under the articles of incorporation or by-laws of the
Company; nor, to such counsel's knowledge, will they conflict with or
result in a breach of any of the terms, conditions, or provisions of any
note, indenture, mortgage, deed of trust, or other agreement or instrument
to which the Company is a party or by which the Company or any of its
property is bound, other than for which the Company has received a consent
or waiver of such conflict, breach or default, or where such conflict or
breach would not have a material adverse effect on the business of the
Company; or any existing law (provided this paragraph shall not relate to
federal or state securities laws), order, rule, regulation, writ,
injunction, or decree known to such counsel of any government,
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governmental instrumentality, agency, body, arbitration tribunal, or
court, domestic or foreign, having jurisdiction over the Company or
its property.
(g) On the basis of a reasonable inquiry by such counsel, including
participation in conferences with representatives of the Company and its
accountants at which the contents of the Registration Statement and the
Effective Prospectus and the Final Prospectus and related matters were
discussed, and without expressing any opinion as to the financial
statements or other financial data contained therein: (i) nothing has come
to such counsel's attention which leads them to believe that the
Registration Statement and the Final Prospectus, as amended or supplemented
by any amendments or supplements thereto made by the Company prior to the
Closing Date, do not comply as to form in all material respects with the
requirements of the Securities Act; (ii) nothing has come to their
attention which leads them to believe that the Registration Statement or
the Final Prospectus, as amended or supplemented by any such amendments or
supplements thereto, contains any untrue statement of a material fact or
omits to state any material fact required to be stated therein or necessary
to make the statements therein, in light of the circumstances under which
they were made, not misleading; (iii) they do not know of any contract or
other document required to be described in or filed as an exhibit to the
Registration Statement which is not so described or filed; and (iv) the
Registration Statement has become effective under the Securities Act, and,
to the best of their knowledge, no stop order suspending the effectiveness
of the Registration Statement has been issued and no proceedings for that
purpose have been instituted or are pending or contemplated by the
Commission.
(h) This Agreement has been duly authorized and executed by the
Company and is a valid and binding agreement of the Company, except as
rights to indemnity hereunder may be limited by federal or state securities
laws or public policy and except as enforceability may be limited by
bankruptcy, insolvency, or similar laws affecting creditors rights
generally and by general equitable principles.
(i) Except as disclosed in the Registration Statement, the Effective
Prospectus, and the Final Prospectus, the Company is not in default of any
of the material contracts, licenses, leases or agreements to which it is a
party, and the offering of the Shares, the Warrants and the
Representative's Options will not cause the Company to become in default of
any of its material contracts, licenses, leases or agreements.
(j) To such counsel's knowledge the Company is not currently offering
any securities for sale except as described in the Registration Statement.
(k) Counsel has no knowledge of any promoter, affiliate, parent or
subsidiaries of the Company except as are described in the Registration
Statement and Final Prospectus.
(l) To the knowledge of counsel, and without making any statement as
to title, except as described in the Registration Statement, the Company
owns all properties described in the Registration Statement as being owned
by it; the properties are free and clear of all liens, charges,
encumbrances or restrictions; all of the leases, subleases and other
agreements under which the Company holds its properties are in full force
and effect;
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the Company is not in default under any of the material terms or
provisions of any of the leases, subleases or other agreements; and
there are no claims against the Company concerning its rights under
the leases, subleases and other agreements and concerning its right
to continued possession of its properties.
(m) To the knowledge of counsel, the Company has been issued by the
appropriate federal, state and local regulatory authorities the required
licenses, certificates, authorizations or permits necessary to conduct its
business as described in the Registration Statement and to retain
possession of its properties. Counsel is unaware of any notice of any
proceeding relating to the revocation or modification of any of these
certificates or permits.
(n) To the knowledge of counsel, the Company has paid all taxes which
are shown as due and owing on the financial statements included in the
Registration Statement and Final Prospectus.
As to all factual matters, including without limitation the issuance of
stock certificates and receipt of payment therefor, the states in which the
Company transacts business, and the adoption of resolutions reflected by the
Company's minute book, such counsel may rely on the certificate of an
appropriate officer of the Company. Counsel's opinion as to the validity and
enforceability of any and all contracts and agreements referenced herein may
exclude any opinion as to the validity or enforceability of any
indemnification or contribution provisions thereof, or as the validity or
enforceability of any such contract or agreement may be limited by bankruptcy
or other laws relating to or affecting creditors' rights generally and by
equitable principles.
8.8 ACCOUNTANT'S LETTER. The Representative shall have received letters
addressed to it dated the Effective Date, the Closing Date and, if
applicable, the Over-allotment Closing Date, respectively, and a draft of
such letter at least five days prior to the Effective Date, the Closing Date
and, if applicable, the Over-allotment Closing Date, from Hein + Associates,
L.L.C., confirming that they are independent public accountants with respect
to the Company within the meaning of the Act and the published Rules and
Regulations. In the letter dated the date of this Agreement, they shall state
their conclusions and findings with respect to such financial, accounting,
and statistical information and other matters contained in the Registration
Statement as have been approved by the Representative prior to the execution
of this Agreement. In the letter dated the Closing Date (and if applicable,
the Over-allotment Closing Date), they shall state as of such date (or, with
respect to matters involving changes or developments since the respective
dates as of which specified financial information is given in the Final
Prospectus, as of a date not more than five days prior to the date of such
letter) their conclusions and findings with respect to the financial
information and other matters covered by their letter dated the date of this
Agreement, the purpose of the letter to be delivered on the Closing Date
(and, if applicable, the Over-allotment Closing Date) being to update in all
respects the conclusions and findings set forth in the prior letter or
letters. The Representative shall be furnished without charge, in addition to
the original signed copies, such number of signed or photostatic or conformed
copies of such letters as the Representative shall reasonably request.
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8.9 OFFICER'S CERTIFICATE. The Company shall furnish to the
Representative certificates, each signed by the President and Chief Financial
Officer of the Company, one dated as of the Effective Date, one dated as of
the Closing Date, and, if applicable, one dated as of the Over-allotment
Closing Date, to the effect that:
(a) The representations and warranties of the Company in this
Agreement are true and correct at and as of the date of the certificate, and
the Company has complied with all the agreements and has satisfied all the
conditions on its part to be performed or satisfied at or prior to the date
of the certificate.
(b) The Registration Statement has become effective and to the best
of the knowledge of the respective signers no order suspending the
effectiveness of the Registration Statement has been issued and no proceeding
for that purpose has been initiated or is threatened by the Commission.
(c) The respective signers have each examined the Registration
Statement and the Final Prospectus and any amendments and supplements
thereto, and to the best of their knowledge the Registration Statement and
the Final Prospectus and any amendments and supplements thereto contain all
statements required to be stated therein, do not include any untrue statement
of a material fact or omit to state any material fact required to be stated
therein or necessary to make the statements therein not misleading and, since
the Effective Date, there has occurred no event required to be set forth in
an amended or a supplemented Prospectus which has not been so set forth.
8.10 TENDER OF DELIVERY OF SECURITIES. All of the Securities being
offered by the Company and being purchased from the Company by the
Underwriters, and the Representative's Options being purchased from the
Company by the Representative, shall be tendered for delivery in accordance
with the terms and provisions of this Agreement.
8.11 BLUE-SKY REGISTRATION OR QUALIFICATION. The Shares and the Warrants
shall be registered or qualified in such states as the Representative and the
Company may agree pursuant to Section 5.4, and each such registration or
qualification shall be in effect and not subject to any stop order or other
proceeding on the Closing Date or the Over-allotment Closing Date. On the
Effective Date, on the Closing Date and, if applicable, the Over-allotment
Closing Date, the Representative shall receive from counsel for the
Representative, written information which contains the following:
(a) the names of the states in which applications to register or
qualify the Shares, the Warrants and the Warrant Shares have been filed;
(b) the status of such registrations or qualifications in such
states as of the date of such letter;
(c) a list containing the name of each such state in which the
Shares, the Warrants and the Warrant Shares may be legally offered and sold
by a dealer licensed in such state and the number of each which may be
legally offered and sold in the offering in each such state as of the date of
such letter;
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(d) with respect to the written information provided on the Effective
Date, a representation that such counsel will promptly update such written
information if counsel receives actual notice of any material changes in the
information provided therein between the Effective Date and the Closing Date
and, if applicable, Over-allotment Closing Date;
(e) the names of the states in which the offer and sale of the Shares
and Warrants in the offering is exempt from registration or qualification; and
(f) a statement that the Underwriters and selected dealers in the
offering may rely upon the information contained therein.
8.12 APPROVAL OF REPRESENTATIVE'S COUNSEL. All opinions, letters,
certificates and evidence mentioned above or elsewhere in this Agreement shall
be deemed to be in compliance with the provisions hereof only if they are in
form and substance satisfactory to counsel to the Representative, whose approval
shall not be unreasonably withheld. The suggested form of such documents shall
be provided to the counsel for the Representative at least three business days
before the dates they are to be provided, that is, the Effective Date, the
Closing Date, and the Over-allotment Closing Date, if applicable.
8.13 OFFICERS' CERTIFICATE AS A COMPANY REPRESENTATION. Any certificate
signed by an officer of the Company and delivered to the Representative or
counsel for the Representative shall be deemed a representation and warranty by
the Company to the Underwriters as to the statements made therein.
8.14 OPINION OF REPRESENTATIVE'S COUNSEL. The Representative shall have
received from Jones & Keller, P.C., counsel for the Representative, an opinion
dated the Closing Date, with respect to the issuance and sale of the Securities,
and such other related matters as the Representative may reasonably require, and
the Company shall have furnished such counsel with all documents which they may
request for the purpose of enabling them to pass upon such matter.
SECTION 9
TERMINATION
9.1 TERMINATION BECAUSE OF NONCOMPLIANCE. This Agreement may be
terminated in its entirety by the Representative by notice to the Company
prior to its effectiveness in the event that the Company shall have failed or
been unable to comply with any of the terms, conditions or provisions of this
Agreement which the Company is required by this Agreement to be performed,
complied with or fulfilled (including but not limited to those specified in
Sections 2, 3, 4, 5, and 8 hereof) within the respective times herein
provided for, unless compliance therewith or performance or satisfaction
thereof shall have been expressly waived by the Representative in writing.
9.2 MARKET OUT TERMINATION. This Agreement may be terminated by the
Representative by notice to the Company at any time if, in the sole judgment
of the Representative, payment for and delivery of the Securities is rendered
impracticable or inadvisable because of:
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(a) Material adverse changes in the Company's business, business
prospects, management, earnings, properties or conditions, financial or
otherwise, which are outside the ordinary course of business;
(b) Any action, suit, or proceedings, at law or in equity, hereafter
threatened or filed against the Company by any person or entity, or by any
federal, state or other commission, board or agency wherein any unfavorable
result or decision could materially adversely affect the business, business
prospects, properties, financial condition or income or earnings of the Company;
(c) Additional material governmental restrictions not in force and
effect on the date hereof shall have been imposed upon the trading in securities
generally, or new offering or trading restrictions shall have been generally
established by a registered securities exchange, the Commission, NASD or other
applicable regulatory authority, or trading in securities generally on any such
exchange, NASDAQ or otherwise, shall have been suspended, or a general
moratorium shall have been established by federal or state authorities;
(d) Substantial and material changes in the condition of the market
beyond normal fluctuations such that it would be undesirable, impracticable or
inadvisable in the judgment of the Representative to proceed with this Agreement
or with the public offering of the Securities;
(e) Any outbreak or escalation of major hostilities in which the
United States is involved, any declaration of war by Congress or any other
substantial national or international calamity or emergency if, in the judgment
of the Representative, the effect of any such outbreak, escalation, declaration,
calamity or emergency makes it impractical or inadvisable to proceed with
completion of the sale of and payment for the Securities; or
(f) Any suspension of trading in the securities of the Company in the
over-the-counter market or the interruption or termination of quotations of any
security of the Company on the NASDAQ System.
9.3 EFFECT OF TERMINATION HEREUNDER. Any termination of this Agreement
pursuant to this Section 9 shall be without liability of any character
(including, but not limited to, loss of anticipated profits or consequential
damages) on the part of any party hereto, except that the Company shall remain
obligated to pay the costs and expenses provided to be paid by it specified in
Sections 3.5 and 5.7; and the Company and the Underwriters shall be obligated to
pay, respectively, all losses, claims, damages or liabilities, joint or several,
under Sections 6.1 or 6.4 in the case of the Company and Sections 6.2 or 6.4 in
the case of the Underwriters .
SECTION 10
REPRESENTATIVE'S REPRESENTATIONS AND WARRANTIES
The Representative represents and warrants to and agrees with the Company
that:
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10.1 REGISTRATION AS BROKER-DEALER AND MEMBER OF NASD. The
Representative is registered as a broker-dealer with the Commission and is
registered as a securities broker-dealer in all states in which it will sell
Securities and is a member in good standing of the National Association of
Securities Dealers, Inc.
10.2 NO PENDING PROCEEDINGS. There is not now pending or threatened
against the Representative any action or proceeding of which it has been
advised, either in any court of competent jurisdiction, before the Commission
or any state securities regulatory authority concerning activities as a
broker or dealer which are foreseen as affecting the Representative's
capacity to complete the terms of this Agreement.
10.3 COMPANY'S RIGHT TO TERMINATE. In the event any action or proceeding
of the type referred to in Section 10.2 above shall be instituted or
threatened against the Representative at any time prior to the Effective Date
hereunder, or in the event there shall be filed by or against the
Representative in any court pursuant to any federal, state, local or
municipal statute, a petition in bankruptcy or insolvency or for
reorganization or for the appointment of a receiver or trustee of its assets
or if it makes an assignment for the benefit of creditors, the Company shall
have the right on three days' written notice to the Representative to
terminate this Agreement without any liability to the Representative or the
Company of any kind except for the payment of all expenses as provided herein.
10.4 REPRESENTATIVE'S COVENANTS. The Representative covenants and agrees
with the Company that (a) it will not offer or sell the Securities in any
state or other jurisdiction where it has not been advised in writing by legal
counsel for the Company that the Securities are qualified for the offer and
sale therein or exempt from such requirements; (b) it will not make any
representation to any person in connection with the offer and sale of the
Securities covered hereby except as set forth in the Registration Statement
or as authorized in writing by the Company and the Representative; (c) it
will comply in good faith with all laws, rules and regulations applicable to
the distribution of the securities, including the Conduct Rules of the NASD;
and (d) the Representative has the authority to execute this Agreement on
behalf of all of the Underwriters.
SECTION 11
NOTICE
Except as otherwise expressly provided in this Agreement:
11.1 NOTICE TO THE COMPANY. Whenever notice is required by the
provisions of this Underwriting Agreement to be given to the Company,
such notice shall be in writing addressed to the Company as follows:
Premier Concepts, Inc.
3033 South Parker Road, Suite 120
Denver, Colorado 80014
Attn: Sissel B. Greenberg, President
with a copy to:
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Clifford L. Neuman, Esq.
Nathan L. Stone, Esq.
Neuman & Cobb
1507 Pine Street
Boulder, Colorado 80302
11.2 NOTICE TO THE REPRESENTATIVE. Whenever notice is required by the
provisions of this Agreement to be given to the Representative, such notice
shall be given in writing addressed to the Representative as follows:
Cohig & Associates, Inc.
6300 South Syracuse Way, Suite 430
Englewood, Colorado 80111
Attn: David H. Drennen, Executive Vice President
with a copy to:
Samuel E. Wing, Esq.
Jones & Keller, P.C.
1625 Broadway, Suite 1600
Denver, Colorado 80202
11.3 EFFECTIVE DATE OF NOTICES. Such notices shall be effective on the
date of delivery set forth on the receipt if the notice is sent by registered or
certified mail or any expedited delivery, or, if sent regular mail, three days
from the day of mailing.
SECTION 12
MISCELLANEOUS
12.1 BENEFIT. This Agreement is made solely for the benefit of the
Representative, other Underwriters , the Company, their respective officers,
directors and controlling persons referred to in Section 15 of the Securities
Act and such other persons as are identified in this Agreement, and their
respective successors and assigns, and no other person shall acquire or have
any right under or by virtue of this Agreement. The term "successor" or the
term "successors and assigns" as used in this Agreement shall not include any
purchasers, as such, of any of the Securities.
12.2 SURVIVAL. The respective indemnities, agreements, representations,
warranties, and covenants of the Company or its officers and the Representative
or the Underwriters as set forth in or made pursuant to this Agreement and the
indemnity and contribution agreements contained in Section 6 hereof of the
Company and the Underwriters (as defined in Section 6) shall survive and remain
in full force and effect, regardless of (a) any investigation made by or on
behalf of the Company or the Underwriters or any such officer or director
thereof or any controlling person of the Company or of the Underwriters, (b)
delivery of or payment for the Securities, and (c) the Closing Date and, if
applicable, the Over-allotment Closing Date, and any successor of the Company or
the Underwriters or any controlling person, officer or director thereof, as the
case may be, shall be entitled to the benefits hereof.
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12.3 GOVERNING LAW. The validity, interpretation and construction of this
Agreement and of each part hereof will be governed by the laws of the State of
Colorado.
12.4 ENTIRE AGREEMENT. This Agreement contains the entire agreement and
understanding between the parties hereto, and supersedes all agreements and
understandings including, but not limited to, the Letter of Intent dated April
29, 1996.
12.5 REPRESENTATIVE'S INFORMATION. The statements with respect to the
public offering of the Securities on the inside and outside of both the front
and back cover pages of the Prospectus and under the caption "Underwriting" in
the Final Prospectus constitute the written information furnished by or on
behalf of the Representative referred to in Section 2.2 hereof, in Section 6.1
hereof and Section 6.2 hereof.
12.6 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original and all of which
together will constitute one and the same instrument.
12.7 DEFINITION OF "BUSINESS DAY" AND "SUBSIDIARY". For purposes of this
Agreement, (a) "Business Day" means any day on which the New York Stock
Exchange, Inc. is open for trading and (b) "Subsidiary" has the meaning set
forth in Rule 405 of the Rules and Regulations.
Please confirm that the foregoing correctly sets forth the Agreement
between you and the Company.
Very truly yours,
ATTEST:
PREMIER CONCEPTS, INC.
By By
--------------------------- -----------------------------
Secretary Sissel B. Greenberg, President
WE HEREBY CONFIRM AS OF THE DATE HEREOF THAT THE ABOVE SETS FORTH THE
AGREEMENT BETWEEN THE COMPANY AND US.
COHIG & ASSOCIATES, INC.
(for itself and as Representative of
the several Underwriters named in
Schedule I hereto)
By
---------------------------------
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PREMIER CONCEPTS, INC.
(A Colorado Corporation)
SCHEDULE I
This Schedule sets forth the name of each Underwriter referred to in the
Underwriting Agreement and the number of Shares and Warrants to be purchased
by each Underwriter.
Number
Name of Shares and Warrants
---- ----------------------
Cohig & Associates, Inc.
Total
----------
1,100,000
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UNDERWRITERS' QUESTIONNAIRE
Each Underwriter should deliver four (4) executed Questionnaires to Cohig &
Associates, Inc., 6300 South Syracuse Way, Suite 430, Englewood, Colorado
80111, Attention: Syndicate Department.
PREMIER CONCEPTS, INC.
1,100,000 Shares
1,100,000 Warrants
Cohig & Associates, Inc.
6300 South Syracuse Way, Suite 430
Englewood, Colorado 80111
Dear Sirs and Madames:
In connection with the proposed public offering by Premier Concepts, Inc.
(the "Company") of 1,100,000 Shares of $.002 par value common stock, ("Common
Stock") and 1,100,000 common stock purchase warrants ("Warrant") (hereinafter
referred to as the "Securities"), and for use in the Registration Statement on
Form SB-2 (or other appropriate form) and related Prospectus which the Company
has filed or will file covering the Securities, the undersigned, as one of the
prospective Underwriters, furnishes the following information:
Our name, exactly as it should appear in the Underwriting Agreement and the
Prospectus, and our address (including punctuation, abbreviations and zip code)
are as follows:
-------------------------------------------------------
-------------------------------------------------------
-------------------------------------------------------
(Check one): We are a corporation ( ) partnership ( )
sole proprietorship ( ).
(Check one): We are ( ) are not ( ) registered as a broker or dealer under
the Securities Exchange Act of 1934.
Except as indicated below:
other than in our capacity as an Underwriter neither we nor any of
our directors, officers or partners has a "material" relationship (as
the term "material" is defined in the Rules and Regulations ("Rules and
Regulations") promulgated under the Securities Act of 1933, as amended
("1933 Act")), with the Company;
neither we nor any of our directors, officers or partners is now or was at
any time during the past three years an "associate" (as "associate"
is defined in the Rules and Regulations) of the Company, or of any
person who, to our knowledge or as set forth in the Registration
Statement, now owns, or owned as of the latest practicable date for
such purpose set forth in the Registration Statement, of record or
beneficially, more than 5% of the outstanding Common Stock or other
securities of the Company;
<PAGE>
neither we nor any of our directors, officers or partners now owns or owned
in the aggregate as of the latest practicable date for such purpose
set forth in the Registration Statement either of record or
beneficially, more than 5% of the outstanding Common Stock or other
securities of the Company;
we have no knowledge that more than 5% of any of the outstanding
Common Stock or other securities of the Company is held or is to be
held subject to any voting trust or other similar arrangement;
(a) neither we nor any of our directors, officers or partners is an
"affiliate" (as "affiliate" is defined in the Rules and Regulations and
in Schedule E of the By-Laws of the National Association of Securities
Dealers, Inc. ("NASD")) of the Company;
other than as may be stated in the proposed Agreement Among Underwriters,
Underwriting Agreement, Selected Dealer Agreement or in the
Prospectus, we do not know of any discounts or commissions to
be allowed or paid to underwriters or dealers or arrangements
therefor (including all cash, securities, contracts or other
consideration to be received by any underwriter or dealer in
connection with the sale of the Securities) or of any arrangement
designed to limit or restrict the sale (or other disposition) of, or
to stabilize the market for the Securities, Common Stock or Warrants
or to withhold commissions or otherwise to hold each underwriter or
dealer responsible for the distribution of his participation;
we are familiar with applicable Securities Act Releases, including
Nos. 3844, 5009 and 5101, issued by the Securities and
Exchange Commission and we have not disseminated any written
information outside of our organization relating to the Company or
its securities other than in accordance with such releases;
neither we nor any of our directors, officers, partners or
persons associated with us (as defined in the By-Laws of the NASD),
nor, to our knowledge any "related person" (defined by the NASD
to include our counsel, financial consultants and advisors,
finders, members of the selling or distribution groups and any
other persons associated with or related to any of the foregoing
persons) or any other broker-dealer (1) within the last 18 months
has purchased in private transactions, or intends before, at
or within six months after the commencement of the public
offering to purchase in private transactions, any outstanding
Common Stock or other securities of the Company, or (2) within
the last 12 months had any dealings with the Company or any
controlling shareholder thereof (other than relating to the proposed
Underwriting Agreement, Agreement Among Underwriters and
selling arrangements) as to which documents or information are
required to be filed with the NASD pursuant to its Interpretation
With Respect to Review of Corporate Financing; and
we have not within the past 12 months prepared or had prepared
for us any engineering, management or similar report or memorandum
relating to the broad aspects of the business, operations or products
of the Company, nor has any report or memorandum been prepared for
external use by us in connection with the proposed offering.
-2-
<PAGE>
(Mark "No Exceptions" below or mark "Exception(s)", if any, and
give details. If an exception is to be made with respect to material
of the type referred to in paragraph 3 (i) above, attach four copies
of any such document for transmittal to counsel together with a
statement as to the actual or proposed use and distribution of each
such document, including the date of distribution and identifying
each class of persons who has received or will receive the report or
memorandum and stating the number of copies distributed to each such
class. The undersigned understands that such material and statement
may be required to be submitted to the Securities and Exchange
Commission and authorizes such submissions.)
( ) No Exceptions
( ) Exception(s)
The answers to the foregoing questions are correctly stated, to the best of
our knowledge, information, and belief. We will notify you immediately of any
developments which may occur prior to or after the effective date of the
Registration Statement covering the Securities which makes untrue or incomplete
any of the above statements as of such effective date.
We will keep an accurate record of the names and addresses of all persons
to whom we furnish copies of the Registration Statement, the Preliminary
Prospectus (in each case as defined in the proposed Underwriting Agreement) or
of any summary prospectus or copies of any amendments to any of them, and when
we are furnished with copies of any subsequent amendment to the Registration
Statement, any subsequent Preliminary Prospectus or the Final Prospectus, or of
any memorandum outlining changes in the Registration Statement or in any
Preliminary or Final Prospectus we will promptly forward copies of the
Preliminary or Final Prospectus or copies of any amendments to any of such
persons in the quantities previously given.
The undersigned agrees not to distribute any written information outside of
its organization relating to the Company or its securities except in accordance
with applicable law, including Securities Act Releases Nos. 3844, 5009 and 5101,
and further agrees to comply with the prospectus delivery requirements of Rule
15c2-8 under the Securities Exchange Act of 1934.
In the event our name is included in any advertising of the Securities, it
should appear in the form set forth in paragraph 1 hereof.
Very truly yours,
For Partnership Signature:
----------------------------------------
(Partnership Name)
For Corporation Signature: By:
-----------------------------------
(Partner)
-----------------------------------
(Name of Corporation)
-3-
<PAGE>
By:
-----------------------------------
(Signature and Title
of Authorized Officer)
For Sole Proprietorship Signature:
-----------------------------------
(Name under which the Business of
the Sole Proprietorship is Conducted)
By:
-----------------------------------
(Individual Signature of
the Sole Proprietor)
-4-
<PAGE>
PREMIER CONCEPTS, INC.
AGREEMENT AMONG UNDERWRITERS
__________________, 1997
Cohig & Associates, Inc.
As Representative of the Several Underwriters
Cohig & Associates, Inc.
6300 South Syracuse Way, Suite 430
Englewood, Colorado 80111
Dear Sirs:
We wish to confirm the agreement among you, Cohig & Associates, Inc., as
Representative of the several Underwriters (the "Representative"), and each of
the other Underwriters named in Schedule I to the Underwriting Agreement which
is attached hereto as EXHIBIT A and by reference incorporated herein
("Underwriting Agreement") (all such parties being herein called the
"Underwriters"), with respect to the purchase by the Underwriters severally, and
not jointly, from Premier Concepts, Inc. (the "Company") of the respective
number of Securities (the "Securities") set forth in the Underwriting
Agreement. The Securities consist of one share (a "Share") of Common Stock and
one Common Stock Purchase Warrant (a "Warrant").
We understand that changes may be made in those who are to be Underwriters
and in the respective numbers of Securities to be purchased by them, but that
the number of Securities to be purchased by us as set forth in the Underwriting
Agreement will not be changed without our consent except as provided herein or
in the Underwriting Agreement. The aggregate number of the Securities which any
Underwriter will be obligated to purchase from the Company pursuant to the terms
of the Underwriting Agreement or as subject to adjustment pursuant to the terms
of the Underwriting Agreement is herein called the "Underwriting Obligation" of
that Underwriter. Unless otherwise indicated, the definition of terms used
herein shall have the same meaning as in the Underwriting Agreement.
THE UNDERWRITERS SHALL ONLY OFFER AND SELL THE SECURITIES TO CUSTOMERS
TOGETHER ON THE BASIS OF ONE SHARE AND ONE WARRANT.
1. AUTHORITY AND GENERAL POSITION OF THE REPRESENTATIVE. We hereby
authorize you, as our Representative and on our behalf, (a) to enter into the
Underwriting Agreement with the Company, substantially in the form attached
hereto as Exhibit A, but with such changes therein as in your judgment will not
be materially adverse to the Underwriters, providing for the purchase by us,
severally and not jointly, from the Company, at a price per Share and at a price
per Warrant equal to the public offering price (the "Offering Price") less the
Underwriting Discount as set forth in the Registration Statement (equal to ten
percent (10%) of the Initial Offering Price of the Shares and Warrants), of the
number of the Securities set forth opposite our name in Schedule I of the
Underwriting Agreement, (b) to exercise all the authority and discretion vested
in the Underwriters
<PAGE>
and in you by the provisions of the Underwriting Agreement, and (c) to take
all such action as you in your discretion may deem necessary and advisable in
order to carry out the provisions of the Underwriting Agreement and of this
Agreement and in furtherance of the sale and distribution of the Securities.
We authorize you to file with any governmental agency or authority any report
which in your judgment is necessary or desirable in connection with the
offering of the Securities, and we agree to furnish you any information
needed for each such report.
Without limiting the foregoing, you are authorized, with respect to the
Underwriting Agreement and this Agreement, in your sole discretion, to (i)
postpone the Closing Date or any other time or date specified therein, (ii)
exercise any right of cancellation or termination, (iii) arrange for the
purchase by other persons (including yourselves or any other Underwriter) of any
Securities not taken up by any defaulting Underwriter or by the other
Underwriters, (iv) consent to such changes in the Underwriting Agreement as you
deem advisable in your sole discretion, and (v) enter into agreements on behalf
of the Underwriters in furtherance of any of any other conferred authority.
Your authority as Representative of the several Underwriters shall include
the taking of such action as you may deem advisable in respect of all matters
pertaining to any and all offers and sales of the Securities, including the
right to make any modifications which you consider necessary or desirable in the
arrangements with Selected Dealers or others. You shall be under no liability,
for or in respect of, (i) the value, validity or form of the Securities and
underlying securities, (ii) the form, accuracy or legal sufficiency of the
Registration Statement, the Prospectus, agreements or other instruments executed
by the Company or others, (iii) the delivery of the Securities, or (iv) the
performance by the Company or by others of any agreement on its or their part.
Nor shall you as such Representative or otherwise be liable under any of the
provisions hereof or for any matters connected herewith, except for liabilities
arising from actions not taken in good faith and no obligation not expressly
assumed by you as such Representative herein shall be implied from this
Agreement.
In representing the Underwriters hereunder, you shall act as the
Representative of each of them, respectively. Nothing herein contained shall
constitute the several Underwriters partners with you or with each other, or
render any Underwriter liable for the commitments of any other Underwriter,
except as otherwise provided herein or in the Underwriting Agreement. The
commitments and liabilities of each of the Underwriters are several in
accordance with their respective Underwriting Obligation and are not joint.
2. PUBLIC OFFERING. We authorize you to manage the offering of the
Securities and to take such action as you deem advisable with respect thereto.
The public offering of the Securities is to be made as soon after the
Registration Statement becomes effective as in your judgment is advisable, and
the public offering of the Securities is to be made at the public offering price
specified in the Final Prospectus, subject to other terms and conditions as you
determine in accordance with the Underwriting Agreement. We authorize you as
our Representative to make any changes in the public offering price and other
terms of the Offering as you deem advisable, in your sole discretion, by reason
of changes in general market conditions or otherwise. We understand that you
will advise us when the Securities are released for public offering, when the
-2-
<PAGE>
Registration Statement relating to such offering becomes effective and the price
at which the Securities are to be offered.
3. ACCOUNTING FOR SALES OF SECURITIES. The Underwriting Discount, as set
forth in the Registration Statement, shall consist of a Management Fee, an
Underwriting Fee, and a Selling Concession. On or before the Effective Date of
the Registration Statement you shall inform us, by facsimile, telephone or
similar communication, of what portion of the Underwriting Discount is allocated
to the Management Fee, Underwriting Fee and Selling Concession.
The Securities constituting our Underwriting Obligation may be delivered to
us for resale by us or may be sold by you for our account as provided in Section
5 hereof. With respect to Securities delivered to us, you shall be entitled to
the Management Fee and we shall be entitled to the Selling Concession and the
Underwriting Fee. With respect to Securities retained by you and sold for our
account, you shall be entitled to the Management Fee and the Selling Concession
and we shall be entitled to the Underwriting Fee.
You shall maintain a separate account with respect to our participation in
this Offering. With respect to Securities to be delivered to us for resale by
us, such account shall be debited in the amount we have agreed to pay the
Company for the Securities plus the amount of the Management Fee with respect to
such Securities. With respect to Securities sold by you for our account and for
which payment in full has been received by you, the account shall be credited
with the amount of the Underwriting Fee with respect to such Securities. With
respect to Securities reserved for sale by you for our account and that have not
been sold or for which payment in full has not been received by you, our account
shall be debited by the amount that we have agreed to pay to the Company for
such Securities; provided, however, that we may request delivery to us of any
such Securities remaining unsold or unpaid for on the Closing Date, in which
event such Securities shall be accounted for as provided above for Securities
delivered to us for resale by us. Our account shall be credited in the amount
of funds delivered or credited to you as provided in Section 4 hereof.
If we agree at any time to purchase Securities in addition to those
constituting our Underwriting Obligation, our account shall be adjusted with
respect to such Securities in the same manner as if those Securities had been a
part of our Underwriting Obligation.
4. SETTLEMENT OF ACCOUNT. At or before the close of business, Denver,
Colorado time, on the last business day prior to the Closing Date, we shall
deliver to you, by wire or by certified or official bank check in United States
funds payable to your order, the full aggregate public offering price of the
Securities delivered to us for resale by us. After the Closing Date, we agree
to promptly remit to you any debit balance in our account and you agree to remit
to us any credit balance in our account after such adjustments as are provided
for herein and in the Underwriting Agreement. You shall not be accountable for
any interest on any credit balance in our account. The determination by you of
the amounts to be paid to or by us shall be final and conclusive.
If we fail (whether or not such failure shall constitute a default
hereunder) to deliver to you, or you fail to receive, our delivery of funds for
the Securities which we have agreed to purchase, at the time and in the manner
provided in this Section 4, you, individually and not as Representative
-3-
<PAGE>
of the Underwriters, are authorized (but shall not be obligated) to make
payment to the Company for such Securities for our account, but any such
payment by you shall not relieve us of any of our obligations hereunder or
under the Underwriting Agreement, and we agree to repay you on demand the
amount, together with associated costs, so advanced for our account.
On the Closing Date of the offering, you are authorized to accept delivery
of the certificates representing the securities underlying the Securities
purchased for our account and to give a receipt therefor.
We authorize you to deliver our Securities, and any other securities of the
Company purchased by you for our account pursuant to the provisions of Section 7
hereof, against sales of the Company's securities made by you for our account
pursuant to any provisions of this Agreement. You agree to cause to be
delivered to us, as soon as practicable after the Closing Date referred to in
the Underwriting Agreement or earlier in your discretion, the Securities
representing such part of our Underwriting Obligation as shall not have been
sold or reserved for sale by you for our account. In any case, if any of the
Securities reserved for sale in Retail Sales or to Selected Dealers and foreign
dealers shall not be purchased and paid for in due course as contemplated
hereby, we agree (i) to accept delivery when tendered by you of any of the
Securities so reserved for our account and not so purchased and paid for, and
(ii) in case we shall have received payment from you in respect of any such
Securities, to reimburse you on demand for the full amount which you shall have
paid us in respect of such Securities.
Notwithstanding anything above to the contrary, you may in your discretion
deliver to us through the facilities of The Depository Trust Company ("DTC") the
certificates representing the securities comprising the Securities purchased by
us that are not sold or reserved for sale by you and cause DTC to debit us and
to credit you an amount representing the full aggregate public offering price of
such Securities and you, in turn, shall credit our account by such amount in
accordance with Section 3 hereof.
5. RESERVATION OF SECURITIES. We authorize you, with respect to our
Underwriting Obligation, to reserve for sale and sell and deliver for our
account any or all of such Securities in amounts determined in your discretion
(a) to institutional and other retail purchasers selected by you, (b) to dealers
(including any Underwriters) selected by you who are members of the National
Association of Securities Dealers, Inc. (the "NASD"), and (c) to foreign dealers
(including any Underwriters) who are not eligible for membership in the NASD who
agree to make no sales in the United States, its territories, or its possessions
or to persons who are citizens thereof or residents therein and to comply with
the Interpretation of the NASD with respect to Free-Riding and Withholding. You
will advise us (i) of the number of Securities purchased by us that we will
retain for sale for our account; (ii) if applicable, the number of Securities
not purchased by us that you have allocated to us for resale and for which our
account shall be debited as provided in Section 3 hereof; and (iii) the amount
the Underwriters have agreed to pay the Company for the Securities plus the
Management Fee and Underwriting Fee with respect to such Securities. With your
consent, any Securities reserved by you for sale for our account but not sold
and paid for, may be released to us for direct sale, in which event the number
of Securities reserved shall be correspondingly reduced. We authorize you to
fix the concession to dealers and the reallowance
-4-
<PAGE>
to dealers and, after initial public offering of the Securities, to make
changes therein you deem advisable.
When requested by you from time to time, we will advise you of the number
of Securities retained by, released, or allocated to us for resale that remain
unsold. You may at any time prior to the Closing Date (a) reserve such unsold
Securities for sale by you for our account or (b) purchase any such unsold
Securities that, in your opinion, are needed to enable you to make deliveries on
your behalf or for the accounts of the several Underwriters pursuant to this
Agreement. Such purchases, if made, will be accounted for as Securities
retained by you to be sold for our account.
6. CREDIT ARRANGEMENTS. We authorize you, in carrying out the provisions
of this Agreement, to advance your own funds (charging then current interest
rates) or to arrange loans for our account, and in connection therewith to
execute and deliver any notes or other instruments and to hold or pledge as
security therefor any Securities or other securities of the Company purchased
pursuant to this Agreement for our account that you may be holding for our
account. Any third party lender is hereby authorized to accept your
instructions with respect to all matters relating to such loans. You shall
promptly remit to us on credit to our account the proceeds of any loan made on
our behalf. Nothing contained in the foregoing, however, shall be construed as
requiring you to advance funds or negotiate for loans with third parties for the
purpose of meeting any of our obligations under this Agreement or the
Underwriting Agreement.
7. STABILIZATION; TRADING. We authorize you, at any time during the
term of this Agreement or for such longer period necessary to cover any short
position or to liquidate any long position incurred under the provisions of this
Agreement, (a) to make purchases and sales of Securities in the open market or
otherwise, in addition to purchases and sales made under the authority of
Section 5 hereof, either for long or short account, on terms and at prices as
you determine and (b) in arranging for sales of Securities pursuant to Section 5
hereof to over-allot and to make purchases for the purpose of covering any
over-allotments made. Any such purchases, sales, and over-allotments may, but
are not required to, be made, at your sole discretion, for the accounts of the
several Underwriters and if so made shall be as nearly as is practicable in
proportion to their respective Underwriting Obligation; provided, however, that
at no time shall our net commitment under this Section 7 for long and short
account exceed 15 percent of our Underwriting Obligation. Any securities that
have been purchased by you for stabilizing purposes before the execution of this
Agreement may at your option be treated as having been purchased for the
accounts of the several Underwriters pursuant to the foregoing authorization.
We agree to take up at cost on demand any securities so purchased for our
account and deliver on demand any securities sold or over-allotted for our
account. We will advise you from time to time, at your request, of the amount
of securities remaining unsold that were delivered to us pursuant to this
Section 7.
You will notify us promptly if you engage in any transaction hereunder that
in your judgment may be deemed a "stabilizing transaction" within the meaning of
the applicable rules of the Securities and Exchange Commission (the
"Commission"). We will not effect any stabilizing purchases without your prior
written consent.
-5-
<PAGE>
If, pursuant to the provisions of the first paragraph of this Section 7 and
prior to the termination of this Agreement (or prior to an earlier date
determined by you), you purchase or contract to purchase for the accounts of the
several Underwriters in the open market or otherwise any Securities that were
retained by or released to us for direct sale, or any Securities that may have
been issued in exchange for such Securities, we authorize you either to charge
our account with an amount equal to the Selling Concession with respect thereto,
which amount shall be credited against the cost of such Securities, or to
require us to repurchase such Securities, and to debit our account for such
purchase, at a price equal to the total cost of such purchase, including
commissions, if any, and transfer taxes on the redelivery.
8. OPEN MARKET TRANSACTIONS. We agree that, except with your consent and
except as herein provided upon advice from you, we will not make purchases or
sales on the open market or otherwise or attempt to induce others to make
purchases or sales, either before or after the purchase of the Securities, of
any securities of the Company, and prior to the completion of our participation
in the distribution of the Securities (as defined in Regulation M promulgated by
the Commission under the Securities Exchange Act of 1934 (the"Exchange Act").
We will otherwise comply with all applicable laws and requirements, including
Regulation M. Nothing contained in this Section 8 shall prohibit us from acting
as broker or agent in the execution of unsolicited orders of customers for the
purchase or sale of any securities of the Company.
9. BLUE SKY. Prior to the commencement of the Offering by the
Underwriters, you will inform us as to the states under the respective
securities or blue sky laws of which it is believed that the Securities have
been qualified or are exempt for sale, but you do not assume any responsibility
or obligation as to the accuracy of such information or as to the right of any
Underwriter or dealer to sell the Securities in any jurisdiction.
In arranging sales of the Securities for our account hereunder, you are
authorized to sell our Securities to any particular Selected Dealer or other
buyer or to one or more other Underwriters at the Offering Price less such
amount, not in excess of the Selling Concession, as you may determine, if you
deem it advisable because of the securities or blue sky laws of any
jurisdiction, The transfer tax on any such sales among Underwriters shall be
treated as an expense and charged to the respective accounts of the several
Underwriters in proportion to their respective Underwriting Obligation.
10. TERMINATION AND SETTLEMENT. Unless sooner terminated by you, this
Agreement shall terminate 45 full calendar days from the Effective Date or the
date of the Final Prospectus, whichever is later, but may be extended by you for
a period of time not exceeding an additional 30 calendar days by notice to us to
such effect. You may in your discretion on notice to us, prior to the
termination of this Agreement, terminate or suspend any of the terms or
conditions of the Offering.
Upon termination of this Agreement, all authorizations, rights, and
obligations hereunder will cease, except (a) the mutual obligations to settle
accounts hereunder, (b) our obligations to pay any amounts referred to in the
last paragraph of this Section 10, and (c) the indemnity and other agreements
set forth in Section 11 hereof, all of which shall continue until fully
discharged. No such termination shall affect any obligations of any defaulting
Underwriter.
-6-
<PAGE>
If any Underwriter defaults in its obligations to pay amounts due from the
Underwriter pursuant to the Underwriting Agreement and this Agreement, we will
assume our proportionate share (determined on the basis of the respective
Underwriting Obligations of the nondefaulting Underwriters) of its obligation to
the extent required by the Underwriting Agreement, but this assumption shall not
affect any obligations of any defaulting Underwriter. Such obligation shall be
eliminated to the extent that such obligation would cause the Underwriter to be
in violation of any financial responsibility rule of the Securities and Exchange
Commission.
We authorize you to charge our account with any transfer taxes on sales or
other transfers made for our account.
Notwithstanding any settlement on the termination of this Agreement, we
agree to pay our proportionate share (based on our Underwriting Obligation) of
(a) all expenses incurred by you in investigating or defending against any
claim, proceeding, or inquiry that is asserted, instituted, or initiated by any
person (including any governmental or regulatory body), other than an
Underwriter, in connection with the Registration Statement or Final Prospectus
or any amendment or supplement thereto, or any Preliminary Prospectus relating
to the offering, or any claim of invalidity of the Underwriting Agreement; and
(b) any liability, including counsel fees and expenses, incurred by you in
respect of any such claim, proceeding, or inquiry, whether such liability is the
result of a judgment or the result of any settlement agreed to by you, other
than any liability, fee, or expense as to which you receive indemnity pursuant
to Section 11 hereof or pursuant to the Underwriting Agreement. We also agree
to pay any transfer taxes that may be assessed and paid after settlement on
account of any sales or transfer hereunder for our account.
11. INDEMNITY. Each Underwriter, including the Representative, agrees to
indemnify and hold harmless each other Underwriter, any person who controls any
other Underwriter within the meaning of either Section 15 of the Securities Act
of 1933 (the "Securities Act") or Section 20 of the Exchange Act, and any
successor of any other Underwriter or of any such controlling person, all to the
extent that each Underwriter will be obligated in the Underwriting Agreement to
indemnify and hold harmless the Company and its respective directors, officers
and controlling persons, and regardless of any investigation made by or on
behalf of any Underwriter or any person controlling an Underwriter.
12. MISCELLANEOUS. We hereby confirm that we have examined the
Registration Statement relating to the Securities, including the related
Prospectus and the amendment(s) thereto filed with the Commission in respect of
the Securities, that we are willing to accept the responsibilities of an
Underwriter thereunder and that we are willing to proceed as contemplated
therein. We are familiar with the terms of the offering that are to be set
forth in the proposed amendment to the Registration Statement. In addition, we
confirm that the information relating to us that has been furnished to the
Company for use therein is correct. You are authorized to approve on our behalf
such proposed amendment and any further amendments or supplements to the
Registration Statement or the Prospectus.
-7-
<PAGE>
WE CONFIRM THAT WE ARE EITHER (a) A MEMBER OF THE NASD AND THAT OUR
OBLIGATION TO PURCHASE SECURITIES PURSUANT TO THE UNDERWRITING AGREEMENT WILL
NOT RESULT IN A VIOLATION OF THE FINANCIAL RESPONSIBILITY REQUIREMENTS OF RULE
15c3-1 OF THE COMMISSION UNDER THE EXCHANGE ACT OR OF ANY SIMILAR PROVISIONS OF
ANY APPLICABLE RULES OF ANY SECURITIES EXCHANGE OR ASSOCIATION TO WHICH WE ARE
SUBJECT OR OF ANY RESTRICTION IMPOSED UPON US BY ANY SUCH EXCHANGE OR ANY
GOVERNMENTAL AUTHORITY; OR (b) A FOREIGN DEALER WHO IS NOT ELIGIBLE FOR
MEMBERSHIP IN THE NASD WHO HEREBY AGREES TO MAKE NO SALES WITHIN THE UNITED
STATES, ITS TERRITORIES, OR ITS POSSESSIONS (EXCEPT THAT WE MAY PARTICIPATE IN
GROUP SALES) OR TO PERSONS WHO ARE CITIZENS THEREOF OR RESIDENT THEREIN, AND IN
MAKING OTHER SALES TO COMPLY WITH THE NASD INTERPRETATION ON FREE-RIDING AND
WITHHOLDING.
WE AGREE THAT WE WILL NOT SELL ANY OF THE SECURITIES TO BE DELIVERED TO US
TO ACCOUNTS AS TO WHICH WE HAVE DISCRETIONARY AUTHORITY WITHOUT THE PRIOR
SPECIFIC WRITTEN APPROVAL OF THE CUSTOMER. WE REPRESENT TO YOU THAT ANY SUCH
SALES WILL BE MADE IN CONFORMITY WITH ALL APPLICABLE RULES CONCERNING
SUITABILITY, DISCLOSURE, AND THE LIKE.
We represent that we will comply with the provisions of Rules 2470, 2730,
2740, and 2750 of the NASD Rules of Conduct with respect to our participation in
this Offering. If a foreign dealer, we will comply with such sections as if we
were a member of the NASD.
We will not advertise with respect to the offering or sale of the
Securities until after the first public advertisement made by you on behalf of
the Underwriters and then only with your consent and at our own expense.
We agree that with respect to any matters connected with this Agreement or
action taken by you pursuant to it, you shall act only as agent of the
Underwriters and shall be under no liability to us in any such respect or in
respect of the form of, or the statements contained in, or the validity of, any
Preliminary Prospectus, the Registration Statement, the Final Prospectus, or any
amendment or supplement to any of them; for any report or other filing made by
you for us or on our behalf under this Agreement; for or in respect of the
validity or value of or title to any Securities; the performance by the Company
or others of any agreement on its or their part; or the qualification of the
sale of Securities under the laws of any jurisdiction; except for lack of good
faith, for obligations expressly assumed by you in this Agreement (and no
obligations on your part will be implied or inferred from confirmation or
acceptance of this Agreement), and for any liability imposed by the Securities
Act.
Any notice from you to us shall be deemed to have been duly given if sent
or transmitted by mail, facsimile, or similar means to us at our address as set
forth in the current CCH NASD Manual or at such other address of which we shall
have advised you in writing.
This Agreement shall be governed by and construed in accordance with the
laws of the State of Colorado.
-8-
<PAGE>
The section headings in this Agreement have been inserted as a matter of
convenience of reference and are not part of this Agreement.
This Agreement is being executed by us and delivered to you in duplicate.
Please indicate your receipt of identical agreements for each of the other
Underwriters by confirming this Agreement, whereupon it shall constitute a
binding contract between us.
Very truly yours,
By:
--------------------------------------------
Attorney-in-fact for each of the several
Underwriters named in Schedule I to the
Underwriting Agreement
Confirmed as of the date first mentioned above:
COHIG & ASSOCIATES, INC.
By:
----------------------------------
Title:
----------------------------------
-9-
<PAGE>
MASTER SELECTED DEALER AGREEMENT
Dear Sirs and Madames:
In connection with public offerings of securities after the date hereof
for which we are acting as manager of an underwriting syndicate or are
otherwise responsible for the distribution of securities to the public by
means of an offering of securities for sale to selected dealers, you may be
offered the right as such a dealer to purchase as principal a portion of such
securities. This will confirm our mutual agreement as to the general terms
and conditions applicable to our participation in any such selected dealer
group organized by us as follows:
1. APPLICABILITY OF AGREEMENT. The terms and conditions of this
Agreement shall be applicable to any public offering of securities
("Securities") pursuant to a registration statement filed under the
Securities Act of 1933 (the "Securities Act"), or exempt from registration
thereunder (other than a public offering of Securities effected wholly
outside the United State of America), wherein Cohig & Associates, Inc.
(acting for is own account or for the account of any underwriting or similar
group or syndicate) is responsible for managing or otherwise implementing the
sale of Securities to selected dealers ("Selected Dealers") and has expressly
informed you that such terms and conditions shall be applicable. Any such
offering of Securities to you as a Selected Dealer is hereinafter called an
"Offering." In the case of any Offering where we are acting for the account
of any underwriting or similar group or syndicate ("Underwriters"), the terms
and conditions of this Agreement shall be for the benefit of, and binding
upon, such Underwriters, including, in the case of any Offering where we are
acting with others as representatives of Underwriters, such other
representatives.
2. CONDITIONS OF OFFERING; ACCEPTANCE AND PURCHASE. Any Offering will
be subject to delivery of the Securities and their acceptance by us and any
other Underwriters, may be subject to the approval of all legal matters by
counsel and the satisfaction of other conditions, and may be made on the
basis of reservation of Securities or an allotment against subscription. We
will advise you by telegram, telex or other form of written communication
("Written Communication," which term, in the case of any Offering described
in Section 3(a) or 3(b) hereof, may include a prospectus or offering
circular) of the particular method and supplementary terms and conditions
(including without limitation, the information as to prices and offering date
referred to in Section 3(c) hereof) any Offering in which you are invited to
participate. To the extent such supplementary terms and conditions are
inconsistent with any provision herein, such terms and conditions shall
supersede any such provision. Unless otherwise indicated in any such Written
Communication, acceptances and other communications by you with respect to an
Offering should be sent to Cohig & Associates, Inc., 6300 S. Syracuse Way,
Suite 430, Englewood, Colorado, 80111. An acceptance by you may be in the
form of an "all sold" wire. We reserve the right to reject any acceptance in
whole or in part. The offering price, selling concession and reallowance (if
any) to dealers at any time in effect with respect to an Offering are
hereinafter referred to, respectively, as the "Public Offering Price," the
"Concession," and the "Reallowance." With our consent, you may allow a
discount, not in excess of the Reallowance fixed by us, in selling such
Securities to other dealers, provided that in doing so you comply with the
Rules of Fair Practice of the National Association of Securities Dealers,
Inc. (the "NASD"). Upon our request you will advise us of the identity of
any dealer to whom you allow such a discount and any underwriters or dealers
from whom you receive such a discount. Unless notified otherwise by us,
Securities purchased by you shall be paid for on such date as we shall
determine, on one day's prior notice to you, by certified or official bank
check
<PAGE>
or wire, in an amount equal to the Public Offering Price or, if we shall so
advise you, at such Public Offering Price less the Concession, payable in
Federal or Clearing House funds to the order of Cohig & Associates, Inc.,
6300 S. Syracuse Way, Suite 430, Englewood, Colorado, 80111. Delivery of the
Securities will made as soon as possible after receipt of payment therefor.
We shall have authority to make appropriate arrangements for payment for
and/or delivery through the facility of the Depository Trust Company or any
such depository or other facility for the Securities. If Securities are
purchased and paid for at such Public Offering Price, such Concession will be
paid after the termination of the provisions of Section 3(c) hereof with
respect to such Securities.
3. REPRESENTATIONS, WARRANTIES AND AGREEMENTS.
(a) REGISTERED OFFERINGS. In the case of any Offering of Securities
which are registered under the Securities Act ("Registered Offering"),
we shall provide you with such number of copies of each Preliminary
Prospectus and of the Final Prospectus (as defined in the Underwriting
Agreement) relating thereto as you may reasonably request for the
purposes contemplated by the Securities Act and the Securities
Exchange Act of 1934 (the "Exchange Act") and the applicable rules and
regulations of the Securities and Exchange Commission (the "SEC")
thereunder. You represent and warrant that you are familiar with Rule
15c2-8 under the Exchange Act relating to the distribution of each
Preliminary and Final Prospectus and agree that you will comply
therewith. You agree to make a record of your distribution of each
Preliminary Prospectus and, when furnished with copies of any revised
Preliminary Prospectus, you will, upon our request, promptly forward
copies thereof to each person to whom you have theretofore distributed
a Preliminary Prospectus. You agree that in purchasing Securities in
a Registered Offering you will rely upon no statements whatsoever,
written or oral, other than the statements in the Final Prospectus
delivered to you by us. You will not be authorized by the issuer or
other seller of Securities offered pursuant to a Prospectus or by any
Underwriter to give any information or to make any representation not
contained in the Prospectus in connection with the sale of such
securities.
(b) OFFERINGS PURSUANT TO OFFERING CIRCULAR. In the case of any
Offering of Securities, other than a Registered Offering, which is
made pursuant to an offering circular or other document comparable to
a prospectus in a Registered Offering (an "Offering Circular"), we
shall provide you with such number of copies of each preliminary
Offering Circular and of the final Offering Circular relating thereto
as you may reasonably request. You agree that you will comply with
the applicable Federal and State laws, and the applicable rules and
regulations of any regulatory body promulgated thereunder, governing
the use and distribution of offering circulars by brokers or dealers.
You agree that in purchasing Securities pursuant to an Offering
Circular you will rely upon no statements whatsoever, written or oral,
other than the statements in the final Offering Circular delivered to
you by us. You will not be authorized by the issuer or other seller
of Securities offered pursuant to an Offering Circular or by any
Underwriter to give any information or to make any representation not
contained in the Offering Circular in connection with the sale of such
Securities.
-2-
<PAGE>
(c) OFFER AND SALE TO THE PUBLIC. With respect to any Offering of
Securities, we will inform you by a Written Communication of the
Public Offering Price, the Selling Concession, the Reallowance (if
any) to dealers and the time when you may commence selling Securities
to the public. After such public offering has commenced, we may
change the Public Offering Price, the Selling Concession and
Reallowance to dealers. With respect to each Offering of Securities,
until the provisions of this Section 3(c) shall be terminated pursuant
to Section 4 hereof, you agree to offer Securities to the public only
at the Public Offering Price, except that if a Reallowance is in
effect, a reallowance from the Public Offering Price not in excess of
such Reallowance may be allowed as consideration for services rendered
in distribution to dealers who are actually engaged in the investment
banking or securities business, who execute the written agreement
prescribed by Section 24(c) of Article III of the Rules of Fair
Practice of the National Association of Securities Dealers, Inc (the
"NASD") and who are either members in good standing of the NASD or
foreign banks, dealers or institutions not eligible for membership in
the NASD who represent to you that they will promptly reoffer such
Securities at the Public Offering Price and will abide by the
conditions with respect to foreign banks, dealers and institutions set
forth in Section 3(e) hereof.
(d) OVER-ALLOTMENT; STABILIZATION; UNSOLD ALLOTMENTS. We may, with
respect to any Offering, be authorized to over-allot in arranging
sales to Selected Dealers, to purchase and sell Securities for long or
short account, and to stabilize or maintain the market price of the
Securities. You agree that upon our request at any time and from time
to time prior to the termination of the provisions of Section 3(c)
hereof with respect to any Offering, you will report to us the amount
of Securities purchased by you pursuant to such offering which then
remain unsold by you and will, upon our request at any such time, sell
to us for our account or the account of one or more Underwriters such
amount of such unsold Securities as we may designate, at the Public
Offering Price less an amount to be determined by us not in excess of
the Concession. If, prior to the later of (a) the termination of the
provisions of Section 3(c) hereof with respect to any Offering, or (b)
the covering by us of any short position created by us in connection
with Section 3(c) hereof with respect to any Offering in which we
purchase or contract to purchase for our account or the account of one
or more Underwriters in the open market or otherwise any Securities
purchased by you under this Agreement as part of such Offering, you
agree to pay us on demand an amount equal to the Concession with
respect to such Securities (unless you shall have purchased such
Securities pursuant to Section 2 hereof at the Public Offering Price,
in which case we shall not be obligated to pay such Concession to you
pursuant to Section 2) plus transfer taxes and broker's commissions or
dealer's mark-up, if any, paid in connection with such purchase or
contract to purchase.
(e) NASD. You represent that you are a dealer actually engaged in
the investment banking or securities business and that you are either
(i) a member in good standing of the NASD or (ii) a dealer with its
principal place of business located outside the United States, its
territories or possessions and not registered under the Exchange Act
((a "non-member foreign dealer"). If you are a non-
-3-
<PAGE>
member foreign dealer, you agree to make no sales of securities
within the United States, its territories or its possessions or to
persons who are nationals thereof or residents therein. Non-member
foreign dealers agree, in making any sales, to comply with the
NASD's interpretation with respect to free-riding and withholding.
In accepting a selling concession where we are acting as such
Representative, and in allowing a discount to any other person,
you agree to comply with the provisions of Rule 2740 of the NASD
Conduct Rules, and, in addition, if you are a non-member foreign
dealer or bank, you agree to comply, as though you were a member
of the NASD, with the provisions of Rules 2730 and 2750 of such
Conduct Rules and to comply with Rule 2420 thereof as that Rule
applies to a non-member foreign dealer or bank. You represent
that you are fully familiar with the above provisions of the
Rules of Fair Practice of the NASD.
You agree further that in connection with any purchase of securities from
us that is not otherwise covered by the terms of this Agreement (whether
we are acting as manager, as a member of an underwriting syndicate or a
selling group or otherwise), if a selling concession, discount or other
allowance is granted to you, clauses (i) and (ii) of the preceding
paragraph will be applicable.
(f) RELATIONSHIP AMONG UNDERWRITERS AND SELECTED DEALERS. We may buy
Securities from or sell Securities to any Underwriter or Selected
Dealer and with our consent, the Underwriters (if any) and the
Selected Dealers may purchase Securities from and sell Securities to
each other at the Public Offering Price less all or any part of the
Concession. You are not authorized to act as agent for us or any
Underwriter of the issuer or other seller of any Securities in
offering Securities to the public or otherwise. Nothing contained
herein or in any Written Communication from us shall constitute the
Selected Dealers partners with us or any Underwriter or with one
another. Neither we nor any Underwriter shall be under any obligation
to you except for obligations assumed hereby or in any Written
Communication from us in connection with any Offering. In connection
with any Offering you shall be liable for your proportionate amount of
any claim, demand or liability which may be asserted against you alone
or against one or more Selected Dealers participating in such
Offering, or against us or the Underwriters, if any, based upon the
claim that the Selected Dealers, or any of them, constitute an
association, an unincorporated business or other entity.
(g) BLUE SKY LAWS. Upon application to us, we shall inform you as to
any advice we have received from counsel concerning the jurisdictions
in which Securities have been qualified for sale or are exempt under
the securities or blue sky laws of such jurisdiction, but we do not
assume any obligation or responsibility as to your right to sell
securities in any such jurisdiction.
(h) COMPLIANCE WITH LAW. You agree that in connection with any
offering of securities covered by this Agreement you will comply with
the applicable provisions of the Securities Act and the Exchange Act
and the applicable rules and regulations of the SEC thereunder, the
applicable rules and regulations of the NASD, and the applicable rules
of any securities exchange having jurisdiction over the offering.
-4-
<PAGE>
In addition, you will not, until advised by us in writing or by wire of
completion of the offering (as defined in Rule 10b-6 of the SEC under the
Exchange Act), bid for or purchase the securities in the open market or
otherwise make a market in the securities or otherwise attempt to induce
others to purchase the securities in the open market, in violation of Rule
10b-6.
4. AUTHORITY. We shall have full authority to take such action as we
may deem advisable in respect of all matters pertaining to any Offering
covered by this Agreement. We shall be under no liability to you except for
our lack of good faith and for obligations assumed by us in this Agreement,
except that you do not waive any rights that you may have under the
Securities Act or the rules and regulations thereunder.
5. NOTICE. Any notice from us shall be deemed to have been duly given
if mailed or transmitted by any standard form of written telecommunications
to you at the above address or at such other address as you shall specify to
us in writing.
6. TERMINATION; SUPPLEMENTS AND AMENDMENTS. This Agreement shall
continue in full force and effect until terminated by a written instrument
executed by each of the parties hereto. This Agreement may be supplemented
or amended by us by written notice thereof to you, and any such supplement or
amendment to this Agreement shall be effective with respect to any Offering
to which this Agreement applies after the date of such supplement or
amendment. Each reference to "this Agreement" herein shall, as appropriate,
be to this Agreement as so amended and supplemented. The terms and
conditions set forth in Section 3(c) hereof with regard to any Offering will
terminate at the close of business on the 30th day after (a) in the case of a
Registered Offering, the effective date of the Registration Statement
pursuant to which such Offering is made, and (b) in the case of any other
Offering, the commencement of the public offering of the Securities to which
such Offering relates, but in our discretion may in either case be extended
by us for a further period not exceeding 30 days and in our discretion,
whether or not extended, may be terminated at any earlier time.
7. SUCCESSORS AND ASSIGNS. This Agreement shall be binding on, and
inure to the benefit of, the parties hereto and other persons specified in
Section 1 hereof, and the respective successors and assigns of each of them.
8. GOVERNING LAW. This Agreement and the terms and conditions set
forth herein with respect to any Offering together with such supplementary
terms and conditions with respect to such Offering as may be contained in any
Written Communication from us to you in connection therewith shall be
governed by, and construed in accordance with the laws of the State whose law
governs the terms and provisions of the Underwriting Agreement executed in
connection with the Offering.
Please confirm by signing and returning to us the enclosed copy of this
Agreement that your subscription to, or your acceptance of any reservation of
any Securities pursuant to an Offering shall constitute (i) acceptance of and
agreement to the terms and conditions of this Agreement (as supplemented and
amended pursuant to Section 4 hereof) together with and subject to any
supplementary terms and conditions contained in any Written Communication
from us in connection with such Offering, all of which shall constitute a
binding agreement between you and us, individually or as representative of
any Underwriters, (ii) confirmation that your representations and warranties
set forth in Section 3 hereof are true and correct at that time, (iii)
confirmation that your agreements set forth in Section 2 and 3 hereof have
been and will be fully performed by you
-5-
<PAGE>
to the extent and at the times required thereby and (iv) in the case of any
offering described in Section 3(a) or 3(b) hereof, acknowledgment that you
have requested and received from us sufficient copies of the Final Prospectus
or final Offering Circular, as the case may be with respect to such Offering
in order to comply with your undertakings in Section 3(a) or 3(b) hereof.
Very truly yours,
COHIG & ASSOCIATES, INC.
By:
--------------------------------
Confirmed , 19
-------------- ----
- --------------------------------
By:
-----------------------------
(sign name and print title)
-6-
<PAGE>
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that the undersigned hereby
constitutes and appoints Harold M. Golz, Steven R. Hinkle, and Edward C.
Larkin, of Cohig & Associates, Inc., 6300 South Syracuse Way, Suite 430,
Englewood, Colorado 80111, and each of them, the true and lawful agents and
attorneys-in-fact of the undersigned, with full power to appoint a substitute
or substitutes to act hereunder, with respect to all matters arising in
connection with the undersigned's acting as one of the Underwriters of the
proposed offering of the following securities:
PREMIER CONCEPTS, INC.
1,100,000 Shares of Common Stock*
1,100,000 Common Stock Purchase Warrants*
with full power and authority to execute and deliver for and on behalf of the
undersigned all such agreements, contracts, consents and documents in
connection herewith as said agents and attorneys-in-fact, or any of them, may
deem advisable. The undersigned hereby gives to said agents and
attorneys-in-fact, and to each of them, full power and authority to act in
the premises, including, without limiting the generality of the foregoing,
the power and authority to execute, by manual or facsimile signature, and
deliver an Agreement Among Underwriters relating to such offering and to
appoint a substitute or substitutes to act hereunder with the same power and
authority as said agents and attorneys-in-fact, or any of them, would have if
personally acting. The undersigned hereby ratifies and confirms all that
said agents and attorneys-in-fact, or any of them, or any substitute or
substitutes, may do by virtue hereof.
This appointment shall remain in full force and effect until revoked by
the undersigned in writing.
Duly executed at this day of , 1997.
----------------------- ----- --------------
----------------------------------------
By:
-------------------------------------
Title:
----------------------------------
* Plus options to acquire an additional 165,000 Shares and 165,000 Warrants
pursuant to an Over-allotment Option.
<PAGE>
(CORPORATE ACKNOWLEDGMENT)
STATE OF
------------------------------)
) ss.
COUNTY OF )
-----------------------------
On this _______ day of __________________, 19____, before me, a
notary public duly commissioned and sworn, personally appeared
________________________________, to me known and known to me to be the
identical person whose name is affixed to the above Power of Attorney,
who, being by me duly sworn, did depose and say that he resides at
_______________________________________________________________________,
that he is __________________________ of ________________________________,
the corporation described in and which executed the foregoing Power of
Attorney, that he has signed the above Power of Attorney by authority of the
Board of Directors of said corporation as the free and voluntary act and deed
of said corporation for the uses and purposes therein set forth, and that he,
being informed of the contents of said Power of Attorney, acknowledges that
the statements contained therein are true and that he signed his name thereto
by like authority.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my official
seal the day in this acknowledgment first above written.
My commission expires:
------------------------
[SEAL]
--------------------------------------
Notary Public
(PARTNERSHIP ACKNOWLEDGMENT)
STATE OF
------------------------------)
) ss.
COUNTY OF )
-----------------------------
On this _______ day of __________________, 19____, before me, a
notary public duly commissioned and sworn, personally appeared
_________________________________, one of the members of the firm
__________________________________________________, to me known and known
to me to be the individual described in and who executed the foregoing Power
of Attorney who, being by me duly sworn, did depose and say that he executed,
and was duly authorized to execute, the same as the free and voluntary act
and deed of said firm for the uses and purposes therein set forth, and that
he, being informed of the contents of said Power of Attorney, acknowledges
that he signed his name thereto.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my official
seal the day in this acknowledgment first above written.
My commission expires:
------------------------
[SEAL]
--------------------------------------
Notary Public
-2-
<PAGE>
Contemporaneously with the proposed offering, Cohig & Associates, Inc. will
transmit to the Syndicate Department of the signer of the foregoing power of
attorney, via telegram, facsimile or equivalent form of communication, a
statement of the anticipated terms of the offering as follows:
Principal amount to be underwritten;
(a) Proposed public offering date;
(b) Proposed closing date;
(c) Public offering price;
Underwriting Discount and the portion thereof representing the management
fee, underwriting fee and selling concession;
Dealer's concession and reallowance, if any.
Unless the Syndicate Department of Cohig & Associates, Inc. receives a
communication via telegram, facsimile or equivalent form of communication
(whether or not the statement of anticipated terms was received) revoking
such power of attorney (i) not later than 7:00 a.m. Denver time on the
proposed public offering date, if the statement of anticipated terms has been
transmitted prior thereto, or (ii) within two hours following the
transmission of the statement of the anticipated terms, if such statement is
sent on the proposed public offering date, the power and authority granted by
such power of attorney may be exercised in accordance with the terms thereof.
(No statement of anticipated terms will be sent after 4:00 p.m. Denver time
on any day.)
A copy of the Agreement Among Underwriters as executed (with facsimile
signatures) will be sent to the Syndicate Department of the signer of the
foregoing power of attorney promptly after execution.
-3-
<PAGE>
February ___, 1997
Ms. Sissel B. Greenberg, President
Premier Concepts, Inc.
3033 South Parker Road
Suite 120
Denver, Colorado 80014
Dear Ms. Greenberg:
The purpose of this letter is to confirm the engagement of Cohig &
Associates, Inc. ("Cohig") by Premier Concepts, Inc. (the "Company") on an
exclusive basis to render financial advisory and investment banking services to
the Company.
1. ENGAGEMENT OF CONSULTANT. The Company hereby engages Consultant and
Consultant hereby agrees to render services to the Company as a corporate
finance consultant.
2. SERVICES. During the term of this Agreement, Consultant shall
provide advice to, and consult with, the Company concerning business and
financial planning, corporate organization and structure, financial matters
in connection with the operation of the business of the Company, private and
public equity and debt financing, acquisitions, mergers and other similar
business combinations, the Company's relations with its securities holders,
and the preparation and distribution of periodic reports; and it shall
periodically provide to the Company analysis of the Company's financial
statements. Such advice and consultation are hereinafter referred to as
"Financial Services." The Financial Services shall be provided to the
Company in such form, manner and place as the Company reasonably requests.
In connection therewith, a representative of Consultant shall attend
directors' meetings and participate in executive management discussions upon
request of the Company's management. Consultant shall not by this agreement
be prevented or barred from rendering services of the same or similar nature,
as herein described, or services of any nature whatsoever for, or on behalf
of, persons, firms, or corporations other than the Company. Similarly, the
Company shall not be prevented or barred from seeking or requiring services
of a same or similar nature from persons other than Consultant.
3. EXTENT OF CONSULTING SERVICES PROVIDED. Consultant shall be
available to provide Financial Services for not more than ten (10) hours per
month during the term of this Agreement ("Minimum Financial Services"). In
addition, Consultant shall be available, during the term of this Agreement,
for an additional one person/day per month at the request of the Company for
the purpose of providing additional Financial Services ("Additional Financial
Services"). Consultant may, but shall not be required to, devote such
additional time to the Company as may be requested by the Company. For
purposes of this Agreement, a person/day shall be a total of eight (8) hours
of work by Consultant.
<PAGE>
Premier Concepts, Inc.
Financial Consulting Agreement
Page 2
4. TERM. The term of this Agreement shall be a period commencing on the
date of this Agreement and continuing through [twelve months from date].
5. COMPENSATION. As compensation for the Minimum Financial Services, the
Company shall pay to Consultant a fee of $2,500 per month for twelve months,
all of which is payable on the date hereof.
6. ACCUMULATION OF MINIMUM FINANCIAL SERVICES. During the term of this
Agreement, any person/days of Minimum Financial Services not requested in the
month in which the Company is entitled thereto may be requested at any time
during the immediately following month's period. If not requested during
such following period, the Company waives receipt of such Financial Services.
7. DISCLAIMER OF RESPONSIBILITY FOR ACTS OF THE COMPANY. The
obligations of the Consultant described in this Agreement consist solely of
Financial Services to the Company. In no event shall Consultant be required
by this Agreement to act as the agent of the Company or otherwise to
represent or make decisions for Company. All final decisions with respect to
acts of Company or its affiliates, whether or not made pursuant to or in
reliance on information or advice furnished by Consultant hereunder, shall be
those of Company or such affiliates and Consultant shall under no
circumstances be liable for any expense incurred or loss suffered by Company
as a consequence of such decisions.
8. INDEMNITY. The Company agrees to indemnify and hold Consultant, its
affiliates, control persons, officers, employees, agents and sureties
harmless from and against all losses, claims, damages, liabilities, costs or
expenses (including reasonable attorneys' and accountants' fees and the cost
of any of Consultant's personnel involved in any such matter) arising out of
Consultant's entering into or performing under this Agreement, including
costs arising out of any dispute whether or not Consultant is a party to such
dispute.
9. CONTRIBUTION. If for any reason the foregoing indemnification is
unavailable to Consultant, or insufficient to hold it harmless, then the
Company shall contribute to the amount paid or payable by Consultant as a
result of such loss, claim, damage, or liability in such proportion as is
appropriate to reflect not only the relative benefits received by the Company
and its stockholders on the one hand and Consultant on the other hand, but
also the relative fault of the Company and Consultant, as well as any
relevant equitable considerations. The reimbursement, indemnity, and
contribution obligations of the Company under this paragraph 8 shall be in
addition to any liability which the Company may otherwise have and shall be
binding upon and inure to the benefit of any successor, assigns, heirs, and
personal representatives of the Company, Consultant and any such person.
Consultant agrees to indemnify and hold the Company, its affiliates, control
persons, officers, employees, and agents harmless to the same extent and
subject to the same contribution obligations and same limitations as the
Company has agreed to indemnify Consultant as set forth above. The
provisions of this paragraph 9 shall survive the termination and expiration
of this Agreement.
<PAGE>
Premier Concepts, Inc.
Financial Consulting Agreement
Page 3
10. AMENDMENT. No amendment to this Agreement shall be valid unless such
amendment is in writing and is signed by authorized representatives of all the
parties to this Agreement.
11. WAIVER. Any of the terms and conditions of this Agreement may be
waived at any time and from time to time in writing by the party entitled to
the benefit thereof, but a waiver in one instance shall not be deemed to
constitute a waiver in any other instance. A failure to enforce any
provision of this Agreement shall not operate as a waiver of this provision
or of any other provision hereof.
12. SEVERABILITY. In the event that any provision of this Agreement
shall be held to be invalid, illegal, or unenforceable in any circumstances, the
remaining provisions shall nevertheless remain in full force and effect and
shall be construed as if the unenforceable portion or portions were deleted.
13. ASSIGNMENT. This Agreement shall be binding upon and inure to the
benefit of the parties and their respective successors and permitted assigns.
Any attempt by either party to assign any rights, duties, or obligations which
may arise under this Agreement without the prior written consent of the other
party shall be void.
14. GOVERNING LAW. The validity, interpretation and construction of this
Agreement and each part thereof will be governed by the laws of the State of
Colorado.
15. COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which may be deemed an original and all of which together
will constitute one and the same instrument.
16. ARBITRATION. The parties agree that all controversies which may
arise between them concerning any transaction, the construction, performance
or breach of this or any other agreement between them, whether entered into
prior, on, or subsequent to the date hereof, or any other matter, including
but not limited to, securities activity, investment advice or in any way
related thereto, shall be determined by arbitration in accordance with the
rules of the NASD. This shall inure to the benefit of and be binding on the
Company, its officers, directors, registered representatives, agents,
independent contractors, employees, sureties, and any person acting on its
behalf in relation to acting subject to this Agreement. Any award rendered
in arbitration may be enforced in any court of competent jurisdiction.
PREMIER CONCEPTS, INC.
"The Company"
By:
----------------------------------
Sissel B. Greenberg, President
<PAGE>
Premier Concepts, Inc.
Financial Consulting Agreement
Page 4
COHIG & ASSOCIATES, INC.
"Consultant"
By:
----------------------------------
<PAGE>
________________, 1997
Cohig & Associates, Inc.
6300 South Syracuse Way, Suite 430
Englewood, Colorado 80111
RE: PREMIER CONCEPTS, INC.--AGREEMENT NOT TO SELL
Ladies and Gentlemen:
Reference is made to a proposed public offering of 1,100,000 Shares and
1,100,000 Warrants (together, the "Securities") of Premier Concepts, Inc.
(the "Company") pursuant to a Registration Statement and prospectus included
therein (the "Registration Statement" and the "Prospectus") filed with the
Securities and Exchange Commission and to be underwritten by Cohig &
Associates, Inc. as representative of the several underwriters to be named in
an underwriting agreement (the "Representative").
In consideration of the offer and sale of such Securities by the Company
and the underwriters and of other valuable consideration, the receipt of
which is hereby acknowledged, the undersigned agrees not to offer, sell
(including engaging in a short sale), contract to sell, pledge, hypothecate,
grant any option to purchase or otherwise dispose of (the "Resale
Restrictions") any shares of common stock of the Company or any securities
convertible into or exchangeable for common stock of the Company beneficially
owned or otherwise held by the undersigned as of the date of this letter or
acquired on or prior to the date of effectiveness of the Registration
Statement or issuable upon exercise of options or warrants held by the
undersigned on such dates (collectively, the "Shares") for the period
specified hereafter without the prior written consent of the Representative.
Such restrictions shall apply to the total number of Shares for a period of
one year after the date of the Final Prospectus (the "Restriction Period").
As a reasonable means of ensuring compliance with the terms of this
Agreement, the undersigned further agrees that the Company may instruct the
transfer agent for the Shares to place a transfer restriction on such
transfer agent's records.
Notwithstanding the foregoing, if the undersigned is an individual, he or
she may transfer any or all of the Shares either during his or her lifetime
or on death by will or intestacy to his or her immediate family or to a
trust, the beneficiaries of which are exclusively the undersigned and/or a
member or members of his or her immediate family; provided, however, that in
any such case it shall be a condition to the transfer that the transferee
execute an agreement stating that the transferee is receiving and holding the
Shares subject to the provisions of this Agreement, and there shall be no
further transfer of such Shares except in accordance with this Agreement.
For purposes of this paragraph, "immediate family" shall mean spouse, lineal
descendant, father, mother, brother or sister of the transferor.
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Premier Concepts, Inc.
Lock-Up Agreement
Page 2
In addition, notwithstanding the foregoing, if the undersigned is a
partnership, the partnership may transfer any Shares to a partner of such
partnership or a retired partner of such partnership who retires after the
date hereof, or to the estate of any such partner or retired partner, and any
partner who is an individual may transfer Shares by gift, will or intestate
succession to his or her immediate family (as defined above) or ancestors;
and if the undersigned is a corporation, the corporation may transfer Shares
to any shareholder of such corporation and any shareholder who is an
individual may transfer Shares by gift, will or intestate succession to his
or her immediate family (as defined above) or ancestors; provided, however,
that in any such case, it shall be a condition to the transfer that the
transferee execute an agreement stating that the transferee is receiving and
holding the Shares subject to the provisions of this Agreement, and there
shall be no further transfer of such Shares except in accordance with this
Agreement.
This agreement shall be enforceable by the Company and the
Representative, or either of them, and shall bind and inure to the benefit of
their respective successors, personal representatives, heirs, and assigns.
Very truly yours,
By:
- ---------------------------------- -----------------------------------
Shares of common stock subject Signature
to this Agreement after closing
of public offering
--------------------------------------
- ---------------------------------- Printed name of person or entity
Warrants subject to this Agreement
after closing of public offering
--------------------------------------
Title if signing for an entity
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PREMIER CONCEPTS, INC.
COHIG & ASSOCIATES, INC.
REPRESENTATIVE'S SHARE OPTION AGREEMENT
Dated as of ________
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REPRESENTATIVE'S SHARE OPTION AGREEMENT
THIS REPRESENTATIVE'S SHARE OPTION AGREEMENT (the "Agreement"), dated as
of ____, is made and entered into by and between PREMIER CONCEPTS, INC., a
Colorado corporation (the "Company"), and COHIG & ASSOCIATES, INC. ("Cohig").
The Company agrees to issue and sell, and Cohig agrees to purchase, for the
price of $100, Options to purchase up to an aggregate of 110,000 Shares of the
Company's Common Stock, subject to the terms and conditions set forth below.
In consideration of the foregoing and for the purpose of defining the terms
and provisions of the Options and the respective rights and obligations
thereunder, the Company and Cohig, for value received, hereby agree as follows:
SECTION 1. DEFINITIONS
The following terms used in this agreement shall have the following
meanings (unless otherwise expressly provided herein):
1.1. THE "ACT." The Securities Act of 1933, as amended.
1.2. THE "COMMISSION." The Securities and Exchange Commission.
1.3. THE "COMPANY." Premier Concepts, Inc., a Colorado corporation.
1.4. "COMMON STOCK." The Company's $.002 par value Common Stock.
1.5. "CURRENT MARKET PRICE." The Current Market Price shall be determined
as follows:
(a) if the security at issue is listed on a national securities
exchange or admitted to unlisted trading privileges on such an exchange or
quoted on NASDAQ, the Current Market Price shall be the last reported sale
price of that security on such exchange or system on the day immediately
before the event; or, if no such sale is made on such day, the average of the
highest closing bid and lowest asked price for such day on such exchange or
system; or
(b) if the security at issue is not so listed or quoted or admitted
to unlisted trading privileges, the Current Market Price shall be the average
of the last reported highest bid and lowest asked prices quoted by the
National Quotation Bureau, Inc. on the last business day prior to the day of
the event; or
(c) if the security at issue is not so listed or quoted or admitted
to unlisted trading privileges and bid and asked prices are not reported, the
Current Market Price shall be determined in such reasonable manner as may be
prescribed from time to time by the Board of Directors of the Company.
1.6. "EFFECTIVE DATE." ___________________.
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1.7. "EXERCISE DATE." [one year from Effective Date].
1.8. "EXERCISE PRICE" $__________ per Share, as modified in accordance
with Section 4, below.
1.9. "EXPIRATION DATE." [five years from Effective Date].
1.10. "HOLDER." Cohig & Associates, Inc., and any valid transferee
thereof pursuant to Section 3.1. below.
1.11. "MAJORITY HOLDER." Any Holder, any holder of Option Securities,
or any combination of Holders and such holders of Option Securities; and any
Holder of Warrant Options, any holder of Warrant Option Securities, or any
combination of such Holders and such holders of Warrant Option Securities, if
they hold, in the aggregate, unexercised Options plus issued and outstanding
Option Securities equal to more than 50% of the total of (i) all Option
Securities issued and outstanding as a result of the exercise of the Option, and
(ii) all Option Securities that may at that time be purchased by exercising the
unexercised portion of the Option. For purposes hereof, a Holder of an Option
which entitles the Holder to purchase more than one share or Warrant shall be
deemed to hold Options equal to the number of shares or Warrants which may be
acquired pursuant to any such Option.
1.12. "NASD." The National Association of Securities Dealers, Inc.
1.13. "NASDAQ." The electronic inter-dealer quotation system operated
by the Nasdaq Stock Market, Inc.
1.14. "OPTION." An Option issued in accordance with the terms of this
Agreement and any Option issued in substitution for or replacement of such
Option, or any Option into which such Option may be divided or exchanged.
1.15. "OPTION CERTIFICATE." A certificate substantially in the form of
Exhibit A to this Agreement, issued to a Holder to evidence the Options held by
such Holder.
1.16. "OPTION SECURITIES." The Common Stock purchasable upon exercise
of an Option.
1.17. "PUBLIC OFFERING." The public offering by the Company of
1,100,000 shares of Common Stock and 1,100,000 warrants pursuant to an
underwriting agreement dated as of ______, between the Company and Cohig as
Representative of the several Underwriters named in the underwriting
agreement.
1.18. "TERMINATION OF BUSINESS." Any sale, lease or exchange of all,
or substantially all, of the Company's assets or business or any dissolution,
liquidation or winding up of the Company.
1.19. "UNDERWRITER." A broker-dealer identified as an Underwriter in
the Final Prospectus for the Public Offering.
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1.20. "WARRANT OPTIONS." Those options to purchase Warrants issued to
the Holder concurrently with the issuance of the Share Options under this
Agreement, pursuant to a Representative's Warrant Option Agreement dated the
date of this Agreement.
SECTION 2. TERM OF OPTIONS; EXERCISE OF OPTION
2.1 EXERCISE OF OPTION. Subject to the terms of this Agreement, the
Holder shall have the right, at any time during the four-year period commencing
at 9:00 a.m., Colorado time, on the Exercise Date and ending at 5:00 p.m.,
Colorado time, on the Expiration Date to purchase from the Company up to the
number of fully paid and nonassessable Shares to which the Holder may at the
time be entitled to purchase pursuant to this Agreement, upon surrender to the
Company, at its principal office, of the certificate evidencing the Options to
be exercised, together with the purchase form on the reverse thereof, or the
Cashless Exercise Form in the case of a cashless exercise pursuant to Section
2.2 herein, duly filled in and signed, and upon payment to the Company of the
Exercise Price for the number of Shares in respect of which such Options are
then exercised, but in no event for less than 100 Shares (unless fewer than an
aggregate of 100 shares are then purchasable under all outstanding Options held
by a Holder).
2.2 PAYMENT OF EXERCISE PRICE. Payment of the aggregate Exercise Price
shall be made in cash or by check, or any combination thereof.
2.3. DELIVERY OF OPTION CERTIFICATE. Subject to Section 11, upon receipt
of an Option Certificate with the Notice of Exercise thereon duly executed,
together with payment in full of the Exercise Price for the Shares being
purchased by such exercise, the Company shall requisition from any transfer
agent for the Shares, and upon receipt shall make delivery of certificates
evidencing the total number of whole Shares for which Options are then being
exercised, together with cash as provided in Section 12 hereof in respect of any
fractional Share otherwise issuable upon such surrender. The certificates shall
be in such names and denominations as are required for delivery to, or in
accordance with the instructions of the Holder; provided that if fewer than all
Shares issuable on exercise of an Option Certificate are purchased, the Company
(if so requested) shall issue such balance Option Certificate for the balance of
the Shares. Such certificates for the Shares shall be deemed to be issued, and
the person to whom such Shares are issued of record shall be deemed to have
become a holder of record of such Shares, as of the date of the surrender of
such Option Certificate and payment of the Exercise Price, whichever shall last
occur; provided further that if the books of the Company with respect to the
Shares shall be closed as of such date, the certificates for such Shares shall
be deemed to have been issued, and the person to whom such Shares are issued of
record shall be deemed to have become a record holder of such Shares, as of the
date on which such books shall next be open (whether before, on or after the
applicable Expiration Date) but at the Exercise Price and upon the other
conditions in effect upon the date of surrender of the Option Certificate and
payment of the Exercise Price, whichever shall have last occurred, to the
Company.
2.4 CONVERSION OF OPTION. Subject to the terms of this Agreement, the
Optionholder shall have the right, at any time during the four-year period
commencing at 9:00 a.m., Denver Time, on the Exercise Date and ending at 5:00
p.m., Denver Time, on the Expiration Date to purchase from the Company up to the
number of fully paid and nonassessable Shares to which the
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Optionholder may at the time be entitled to purchase pursuant to this
Agreement, upon surrender to the Company, at its principal office, of the
certificate evidencing the Options to be exercised, together with the
purchase form on the reverse thereof; or to convert the Options into Option
Securities pursuant to Section 4.5 herein, duly filled in and signed, and
upon payment to the Company of the Exercise Price for the number of Shares in
respect of which such Options are then exercised, but in no event for less
than 100 Shares (unless fewer than an aggregate of 100 shares are then
purchasable under all outstanding Options held by a Optionholder).
SECTION 3. TRANSFERABILITY AND FORM OF OPTION
3.1. LIMITATION ON TRANSFER. The Options may not be sold, transferred,
assigned, pledged or hypothecated until the Exercise Date, except for (a) the
sale, transfer, or assignment, in whole or in part, to or among the officers of
Cohig and other Underwriters, if such underwriters are corporations, or the
partners of such Underwriters if they are partnerships, and (b) the transfer by
operation of law as a result of the death of any transferee to whom all or a
portion of the Options may be transferred. After the Exercise Date, the Options
are nontransferable other than by will or pursuant to the laws of descent and
distribution, except to a partner of Cohig and/or the Underwriters when the
underwriter is a partnership, or to a stockholder, officer or director of the
underwriter or beneficiary of a trust which is a stockholder of such underwriter
when the underwriter is a corporation. However, after the Exercise Date such a
transfer may occur providing the Option is exercised immediately upon transfer;
if it is not exercised immediately, the Option shall lapse. All sales,
transfers, assignments or hypothecations of the Options after the Exercise Date
must be in compliance with Section 11 hereof. Any assignment or transfer of an
Option shall be made by the presentation and surrender of this Option to the
Company at its principal office or the office of its transfer agent, if any,
accompanied by a duly executed Assignment Form, in the form attached to and by
this reference incorporated in this Option as Exhibit B. Upon the presentation
and surrender of these items to the Company, the Company, at its sole expense,
shall execute and deliver to the new Holder or Holders a new Option or Options,
subject to the terms and conditions of this Option Agreement, in the name of the
new Holder or Holders as named in the Assignment Form, and the Option shall at
that time be canceled.
3.2. EXCHANGE OF CERTIFICATE. Any Option Certificate may be exchanged for
another certificate or certificates entitling the Holder to purchase a like
aggregate number of Shares as the certificate or certificates surrendered then
entitled such Holder to purchase. Any Holder desiring to exchange an Option
Certificate shall make such request in writing delivered to the Company, and
shall surrender, properly endorsed, with signatures guaranteed, the certificate
evidencing the Option to be so exchanged. Thereupon, the Company shall execute
and deliver to the person entitled thereto a new Option Certificate as so
requested.
3.3. MUTILATED, LOST, STOLEN, OR DESTROYED CERTIFICATE. In case the
certificate or certificates evidencing the Options shall be mutilated, lost,
stolen or destroyed, the Company shall, at the request of the Holder, issue and
deliver in exchange and substitution for and upon cancellation of the mutilated
certificate or certificates, or in lieu of and substitution for the certificate
or certificates lost, stolen or destroyed, a new Option Certificate or
certificates of like tenor and representing an equivalent right or interest, but
only upon receipt of evidence satisfactory to the Company of such loss, theft or
destruction of such Option and a bond of indemnity, if requested,
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also satisfactory in form and amount, at the applicant's cost. Applicants
for such substitute Option Certificate shall also comply with such other
reasonable regulations and pay such other reasonable charges as the Company
may prescribe.
3.4. FORM OF CERTIFICATE. The text of the Option Certificate and of the
form of election to purchase Shares shall be substantially as set forth in
Exhibit A attached hereto. The number of Shares issuable upon exercise of the
Options is subject to adjustment upon the occurrence of certain events, all as
hereinafter provided. The Option Certificates shall be executed on behalf of
the Company by its President or by a Vice President and attested to by its
Secretary or an Assistant Secretary. An Option Certificate bearing the
signature of an individual who was at any time the proper officer of the Company
shall bind the Company, notwithstanding that such individual shall have ceased
to hold such officer prior to the delivery of such Option Certificate or did not
hold such office on the date of this Agreement.
3.5. DATE OF CERTIFICATE. The Option Certificates shall be dated as of the
date of signature thereof by the Company either upon initial issuance or upon
division, exchange, substitution or transfer.
SECTION 4. ADJUSTMENT OF NUMBER OF SHARES
The number and kind of securities purchasable upon the exercise of the
Options and the Option Price shall be subject to adjustment from time to time
upon the happening of certain events, as follows:
4.1. ADJUSTMENTS. The number of Shares purchasable upon the exercise of
the Options shall be subject to adjustments as follows:
In case the Company shall (i) pay a dividend in Common Stock or make a
distribution to its shareholders in Common Stock, (ii) subdivide its outstanding
Common Stock, (iii) combine its outstanding Common Stock into a smaller number
of shares of Common Stock, or (iv) issue by classification of its Common Stock
other securities of the Company, the number of Shares purchasable upon exercise
of the Options immediately prior thereto shall be adjusted so that the Holder
shall be entitled to receive the kind and number of Shares or other securities
of the Company which it would have owned or would have been entitled to receive
immediately after the happening of any of the events described above, had the
Options been exercised immediately prior to the happening of such event or any
record date with respect thereto. Any adjustment made pursuant to this
subsection 4.1(a) shall become effective immediately after the effective date of
such event retroactive to the record date, if any, for such event.
If, prior to the expiration of the Options by exercise, by their terms, or
by redemption, the Company shall be recapitalized by reclassifying its
outstanding shares of Common Stock into shares with a different par value, or by
changing its outstanding shares of Common Stock into shares without par value or
in the event of any other material change of the capital structure of the
Company or of any successor corporation by reason of any reclassification,
recapitalization or conveyance, prompt, proportionate, equitable, lawful and
adequate provision shall be made whereby any Option Holder shall thereafter have
the right to purchase, on the basis and the terms
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and conditions specified in this Agreement, in lieu of the Option Shares
theretofore purchasable on the exercise of any Option, such securities or
assets as may be issued or payable with respect to or in exchange for the
number of Option Shares theretofore purchasable on exercise of the Options
had such reclassification, recapitalization or conveyance not taken place;
and in any such event, the rights of any Option Holder to any adjustment in
the number of Option Shares purchasable on exercise of such Option, as set
forth above, shall continue to be preserved in respect of any stock,
securities or assets which the Option Holder becomes entitled to purchase.
(a) In case the Company shall issue rights, options, warrants, or
convertible securities to all or substantially all holders of its Common Stock,
without any charge to such holders, entitling them to subscribe for or purchase
Common Stock at a price per share which is lower at the record date mentioned
below than the then Current Market Price, the number of Shares thereafter
purchasable upon the exercise of each Option shall be determined by multiplying
the number of Shares theretofore purchasable upon exercise of the Options by a
fraction, of which the numerator shall be the number of shares of Common Stock
outstanding immediately prior to the issuance of such rights, options, warrants
or convertible securities plus the number of additional shares of Common Stock
offered for subscription or purchase, and of which the denominator shall be the
number of shares of Common Stock outstanding immediately prior to the issuance
of such rights, options, warrants, or convertible securities plus the number of
shares which the aggregate offering price of the total number of shares offered
would purchase at such Current Market Price. Such adjustment shall be made
whenever such rights, options, warrants, or convertible securities are issued,
and shall become effective immediately and retroactively to the record date for
the determination of shareholders entitled to receive such rights, options,
warrants, or convertible securities.
(b) In case the Company shall distribute to all or substantially all
holders of its Common Stock evidences of its indebtedness or assets (excluding
cash dividends or distributions out of earnings) or rights, options, warrants,
or convertible securities containing the right to subscribe for or purchase
Common Stock (excluding those referred to in subsection 4.1(b) above), then in
each case the number of Shares thereafter purchasable upon the exercise of the
Options shall be determined by multiplying the number of Shares theretofor
purchasable upon exercise of the Options by a fraction, of which the numerator
shall be the then Current Market Price on the date of such distribution, and of
which the denominator shall be such Current Market Price on such date minus the
then fair value (determined as provided in subsection 4.1(f)(y) below) of the
portion of the assets or evidences of indebtedness so distributed or of such
subscription rights, options, warrants, or convertible securities applicable to
one share. Such adjustment shall be made whenever any such distribution is made
and shall become effective on the date of distribution retroactive to the record
date for the determination of shareholders entitled to receive such
distribution.
(c) No adjustment in the number of Shares purchasable pursuant to the
Options shall be required unless such adjustment would require an increase or
decrease of at least one percent in the number of Shares then purchasable upon
the exercise of the Options or, if the Options are not then exercisable, the
number of Shares purchasable upon the exercise of the Options on the first date
thereafter that the Options become exercisable; provided, however, that any
adjustments which by reason of this subsection 4.1(d) are not required to be
made immediately shall be carried forward and taken into account in any
subsequent adjustment.
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(d) Whenever the number of Shares purchasable upon the exercise of
the Option is adjusted, as herein provided, the Exercise Price payable upon
exercise of the Option shall be adjusted by multiplying such Exercise Price
immediately prior to such adjustment by a fraction, of which the numerator
shall be the number of Option Shares purchasable upon the exercise of the
Option immediately prior to such adjustment, and of which the denominator
shall be the number of Option Shares so purchasable immediately thereafter.
(e) Whenever the number of Shares purchasable upon exercise of the
Options is adjusted as herein provided, the Company shall cause to be
promptly mailed to the Holder by first class mail, postage prepaid, notice of
such adjustment and a certificate of the chief financial officer of the
Company setting forth the number of Shares purchasable upon the exercise of
the Options after such adjustment, a brief statement of the facts requiring
such adjustment and the computation by which such adjustment was made.
(f) For the purpose of this subsection 4.1, the term "Common Stock"
shall mean (i) the class of stock designated as the Common Stock of the
Company at the date of this Agreement, or (ii) any other class of stock
resulting from successive changes or reclassifications of such Common Stock
consisting solely of changes in par value, or from par value to no par value,
or from no par value to par value. In the event that at any time, as a
result of an adjustment made pursuant to this Section 4, the Holder shall
become entitled to purchase any securities of the Company other than Common
Stock, (y) if the Holder's right to purchase is on any other basis than that
available to all holders of the Company's Common Stock, the Company shall
obtain an opinion of an independent investment banking firm valuing such
other securities; and (z) thereafter the number of such other securities so
purchasable upon exercise of the Options shall be subject to adjustment from
time to time in a manner and on terms as nearly equivalent as practicable to
the provisions with respect to the Shares contained in this Section 4.
(g) Upon the expiration of any rights, options, warrants, or
conversion privileges, if such shall have not been exercised, the number of
Shares purchasable upon exercise of the Options, to the extent the Options
have not then been exercised, shall, upon such expiration, be readjusted and
shall thereafter be such as they would have been had they been originally
adjusted (or had the original adjustment not been required, as the case may
be) on the basis of (i) the fact that the only shares of Common Stock so
issued were the shares of Common Stock, if any, actually issued or sold upon
the exercise of such rights, options, warrants, or conversion privileges, and
(ii) the fact that such shares of Common Stock, if any, were issued or sold
for the consideration actually received by the Company upon such exercise
plus the consideration, if any, actually received by the Company for the
issuance, sale or grant of all such rights, options, warrants, or conversion
privileges whether or not exercised; provided, however, that no such
readjustment shall have the effect of decreasing the number of Shares
purchasable upon exercise of the Options by an amount in excess of the amount
of the adjustment initially made in respect of the issuance, sale, or grant
of such rights, options, warrants, or conversion rights.
4.2. NO ADJUSTMENT FOR DIVIDENDS. Except as provided in subsection 4.1,
no adjustment in respect of any dividends or distributions out of earnings
shall be made during the term of the Options or upon the exercise of the
Options.
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4.3. NO ADJUSTMENT IN CERTAIN CASES. No adjustments shall be made
pursuant to Section 4 hereof in connection with the issuance of the Common
Stock sold as part of the public sale pursuant to the Underwriting Agreement
or the issuance of Shares upon exercise of the Options. No adjustments shall
be made pursuant to Section 4 hereof in connection with the grant or exercise
of presently authorized or outstanding options to purchase, or the issuance
of shares, under the Company's director or employee benefit plans disclosed
in the Registration Statement relating to the Public Offering.
4.4. PRESERVATION OF PURCHASE RIGHTS UPON RECLASSIFICATION,
CONSOLIDATION, ETC. In case of any consolidation of the Company with or
merger of the Company into another corporation, or in case of any sale or
conveyance to another corporation of the property, assets, or business of the
Company as an entirety or substantially as an entirety, the Company or such
successor or purchasing corporation, as the case may be, shall execute with
the Holder an agreement that the Holder shall have the right thereafter upon
payment of the Exercise Price in effect immediately prior to such action to
purchase, upon exercise of the Options, the kind and amount of shares and
other securities and property which it would have owned or have been entitled
to receive after the happening of such consolidation, merger, sale, or
conveyance had the Options been exercised immediately prior to such action.
In the event of a merger described in Section 368(a)(2)(E) of the Internal
Revenue Code of 1986, in which the Company is the surviving corporation, the
right to purchase Shares under the Options shall terminate on the date of
such merger and thereupon the Options shall become null and void, but only if
the controlling corporation shall agree to substitute for the Options, its
Options which entitle the holder thereof to purchase upon their exercise the
kind and amount of shares and other securities and property which it would
have owned or been entitled to receive had the Options been exercised
immediately prior to such merger. Any such agreements referred to in this
subsection 4.4 shall provide for adjustments, which shall be as nearly
equivalent as may be practicable to the adjustments provided for in Section 4
hereof. The provisions of this subsection 4.4 shall similarly apply to
successive consolidations, mergers, sales, or conveyances.
4.5. PAR VALUE OF SHARES OF COMMON STOCK. Before taking any action which
would cause an adjustment effectively reducing the portion of the Exercise
Price allocable to each Share below the par value per share of the Common
Stock issuable upon exercise of the Options, the Company will take any
corporate action which may, in the opinion of its counsel, be necessary in
order that the Company may validly and legally issue fully paid and
nonassessable Common Stock upon exercise of the Options.
4.6. INDEPENDENT PUBLIC ACCOUNTANTS. The Company may retain a firm of
independent public accountants of recognized national standing (which may be
any such firm regularly employed by the Company) to make any computation
required under this Section 4, and a certificate signed by such firm shall be
conclusive evidence of the correctness of any computation made under this
Section 4.
4.7. STATEMENT ON OPTION CERTIFICATES. Irrespective of any adjustments
in the number of securities issuable upon exercise of the Options, Option
Certificates theretofore or thereafter issued may continue to express the
same number of securities as are stated in the similar Option Certificates
initially issuable pursuant to this Agreement. However, the Company may, at
any time
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in its sole discretion (which shall be conclusive), make any change in the
form of Option Certificate that it may deem appropriate and that does not
affect the substance thereof; and any Option Certificate thereafter issued,
whether upon registration of transfer of, or in exchange or substitution for,
an outstanding Option Certificate, may be in the form so changed.
4.8. TREASURY STOCK. For purposes of this Section 4, shares of Common
Stock owned or held at any relevant time by, or for the account of, the
Company, in its treasury or otherwise, shall not be deemed to be outstanding
for purposes of the calculations and adjustments described.
SECTION 5. NOTICE TO HOLDERS
5.1. ADJUSTMENTS. Whenever the number of Shares purchasable upon
exercise of the Options is adjusted as herein provided, the Company shall
cause to be promptly mailed to the Holder by first class mail, postage
prepaid, notice of such adjustment and a certificate of the chief financial
officer of the Company setting forth the number of Shares purchasable upon
the exercise of the Options after such adjustment, a brief statement of the
facts requiring such adjustment and the computation by which such adjustment
was made.
5.2. DECLARATION OF DIVIDEND; REORGANIZATION; DISSOLUTION; ETC. If,
prior to the expiration of the Options either by their terms or by their
exercise in full, any of the following shall occur:
(a) the Company shall declare a dividend or authorize any other
distribution on its Common Stock; or
(b) the Company shall authorize the granting to the shareholders of
its Common Stock of rights to subscribe for or purchase any securities or any
other similar rights; or
(c) any reclassification, reorganization or similar change of the
Common Stock, or any consolidation or merger to which the Company is a party,
or the sale, lease, or exchange of any significant portion of the assets of
the Company; or
(d) the voluntary or involuntary dissolution, liquidation or
winding up of the Company; or
(e) any purchase, retirement or redemption by the Company of its
Common Stock;
then, and in any such case, the Company shall deliver to the Holder or
Holders written notice thereof at least 30 days prior to the earliest
applicable date specified below with respect to which notice is to be given,
which notice shall state the following:
(a) the date on which a record is to be taken for the purpose of
such dividend, distribution or rights, or, if a record is not to be taken,
the date as of which the shareholders of Common Stock of record to be
entitled to such dividend, distribution or rights are to be determined;
(b) the date on which such reclassification, reorganization,
consolidation, merger, sale, transfer, dissolution, liquidation, winding up
or purchase, retirement or redemption
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is expected to become effective, and the date, if any, as of which the
Company's shareholders of Common Stock of record shall be entitled to
exchange their Common Stock for securities or other property deliverable upon
such reclassification, reorganization, consolidation, merger, sale, transfer,
dissolution, liquidation, winding up, purchase, retirement or redemption; and
(c) if any matters referred to in the foregoing clauses (x) and (y)
are to be voted upon by shareholders of Common Stock, the date as of which
those shareholders to be entitled to vote are to be determined.
5.3. FAILURE TO GIVE NOTICE. Without limiting the obligation of the
Company hereunder to provide notice to each Warrant Holder, it is agreed that
failure of the Company to give notice shall not invalidate corporate action
taken by the Company.
SECTION 6. OFFICERS' CERTIFICATE
Whenever the Exercise Price or the aggregate number of Option Securities
purchasable pursuant to the Options shall be adjusted as required by the
provisions of Section 4 above, the Company shall promptly file with its
Secretary or an Assistant Secretary at its principal office, and with its
transfer agent, if any, an officers' certificate executed by the Company's
President and Secretary or Assistant Secretary, describing the adjustment and
setting forth, in reasonable detail, the facts requiring such adjustment and
the basis for and calculation of such adjustment in accordance with the
provisions of this Option Agreement. Each such officers' certificate shall
be made available to the Holder or Holders of the Options for inspection at
all reasonable times, and the Company, after each such adjustment, shall
promptly deliver a copy of the officers' certificate relating to that
adjustment to the Holder or Holders of the Options. The officers'
certificate described in this Section 6 shall be deemed to be conclusive as
to the correctness of the adjustment reflected therein if, and only if, no
Holder of an Option delivers written notice to the Company of an objection to
the adjustment within 30 days after the officers' certificate is delivered to
the Holder or Holders of the Options. The Company will make its books and
records available for inspection and copying during normal business hours by
the Holder so as to permit a determination as to the correctness of the
adjustment. If written notice of an objection is delivered by a Holder to
the Company and the parties cannot reconcile the dispute, the Holder and the
Company shall submit the dispute to arbitration pursuant to the provisions of
Section 19 below. Failure to prepare or provide the officers' certificate
shall not modify the parties' rights hereunder.
SECTION 7. RESERVATION OF OPTION SECURITIES
There has been reserved, and the Company shall at all times keep reserved
so long as the Options remain outstanding, out of its authorized and unissued
Common Stock, such number of shares of Common Stock as shall be subject to
purchase under the Options. Every transfer agent for the Common Stock and
other securities of the Company issuable upon the exercise of the Options
will be irrevocably authorized and directed at all times to reserve such
number of authorized shares and other securities as shall be requisite for
such purpose. The Company will keep a copy of this Agreement on file with
every transfer agent for the Common Stock and other securities of the Company
issuable upon the exercise of the Options. The Company will supply
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<PAGE>
every such transfer agent with duly executed stock and other certificates, as
appropriate, for such purpose.
SECTION 8. REGISTRATION RIGHTS
8.1. DEMAND REGISTRATION RIGHT. Upon the written request of a Majority
Holder, made at any time after the Exercise Date, but before the Expiration
Date, the Company shall file within 90 days of such written request a
registration statement or Regulation A offering statement pursuant to the
Act, and all necessary amendments thereto, to register or qualify the Option
Securities and the Option Securities underlying the unexercised portion of
the Options. No additional securities shall be included in such registration
statement or offering statement without the written consent of the Majority
Holder. The Company may use the Regulation A exemption if available, but the
Company must file a registration statement if the securities that are to be
covered cannot be sold pursuant to Regulation A because of the limitations
applicable to the use of the Regulation A exemption. The Company agrees to
use its best efforts to cause this registration or qualification to become
effective as promptly as practicable and to keep such registration effective
for a period of the lesser of 180 days or the date of completion of the
distribution described in the Registration Statement; and its officers,
directors, consultants, auditors and counsel shall cooperate in all matters
necessary or advisable to pursue this objective. All of the expenses of this
registration or qualification shall be borne by the Company, including, but
not limited to, legal, accounting, consulting, printing, filing and NASD
fees, out-of-pocket expenses incurred by counsel, accountants, and
consultants retained by the Company and miscellaneous expenses directly
related to the registration statement or offering statement and the offering,
and the underwriter's accountable and nonaccountable expense allowances and
fees; but the Company shall not pay any brokerage fees, commissions or
underwriting discounts except to the extent they are attributable to other
securities that the Company has been permitted to register or qualify or to
offer in conjunction with the registration and qualification of the Option,
Option Securities or the Option Securities underlying the unexercised portion
of the Options. Notwithstanding the foregoing, if, as a qualification of any
offering in any state or jurisdiction in which the Company (by vote of its
Board of Directors) or any underwriter determines in good faith that it
wishes to offer securities registered in the offering, it is required that
offering expenses be allocated in a manner different from that provided
above, then the offering expenses shall be allocated in whatever manner is
most nearly in compliance with the provisions set out above. The Majority
Holder shall be entitled to exercise the rights described in this subsection
8.1 one time only.
Within 10 days after the delivery by the Majority Holder to the Company
of the notice described above, the Company shall deliver written notice to
all other Holders of the Options and holders of the Option Securities, if
any, advising them that the Company is proceeding with a registration
statement or offering statement and offering them the right to include the
Option and Option Securities of those Holders or holders therein. If any
Holder of a Option and Option Securities delivers written acceptance of that
offer to the Company within 30 days after the delivery of the Company's
notice, the Company shall be obligated to include that holder's Option and
that holder's Option Securities in the contemplated registration statement or
offering statement.
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<PAGE>
8.2. PIGGY-BACK REGISTRATION RIGHT. If at any time prior to the
Expiration Date the Company files a registration statement with the
Commission pursuant to the Act, or pursuant to any other act passed after the
date of this Agreement, which filing provides for the sale of securities by
the Company to the public, or files a Regulation A offering statement under
the Act, the Company shall offer to the Holder or Holders of the Options and
the holders of any Option Securities the opportunity to register or qualify
the Option Securities and any Option Securities underlying the unexercised
portion of the Options, if any, at the Company's sole expense, regardless of
whether the Holder or Holders of the Options or the holders of Option
Securities or both may have previously availed themselves of any of the
registration rights described in this Section 8; provided, however, that in
the case of a Regulation A offering, the opportunity to qualify shall be
limited to the amount of the available exemption after taking into account
the securities that the Company wishes to qualify. Notwithstanding anything
to the contrary, this subsection 8.2 shall not be applicable to a
registration statement registering securities issued or issuable pursuant to
an employee benefit plan or as to a transaction subject to Rule 145
promulgated under the Act or which a form S-4 registration statement could be
used.
The Company shall deliver written notice to the Holder or Holders of the
Options and to any holders of the Option Securities of its intention to file a
registration statement or Regulation A offering statement under the Act at least
60 days prior to the filing of such registration statement or offering
statement, and the Holder or Holders and holders of Option Securities shall have
30 days thereafter to request in writing that the Company register or qualify
the Option Securities or the Option Securities underlying the unexercised
portion of the Options in accordance with this subsection 8.2. Upon the
delivery of such a written request within the specified time, the Company shall
be obligated to include in its contemplated registration statement or offering
statement all information necessary or advisable to register or qualify the
Option Securities or Option Securities underlying the unexercised portion of the
Options for a public offering, if the Company does file the contemplated
registration statement or offering statement; provided, however, that neither
the delivery of the notice by the Company nor the delivery of a request by a
Holder or by a holder of Option Securities shall in any way obligate the Company
to file a registration statement or offering statement. Furthermore,
notwithstanding the filing of a registration statement or offering statement,
the Company may, at any time prior to the effective date thereof, determine not
to offer the securities to which the registration statement or offering
statement relates, other than the Option, Option Securities and Option
Securities underlying the unexercised portion of the Options. Notwithstanding
the foregoing, if, as a qualification of any offering in any state or
jurisdiction in which the Company (by vote of its Board of Directors) or any
underwriter determines in good faith that it wishes to offer securities
registered in the offering, it is required that offering expenses be allocated
in a manner different from that provided above, then the offering expenses shall
be allocated in whatever manner is most nearly in compliance with the provisions
set out above.
The Company shall comply with the requirements of this subsection 8.2 and
the related requirements of subsection 8.7 at its own expense. That expense
shall include, but not be limited to, legal, accounting, consulting, printing,
federal and state filing fees, NASD fees, out-of-pocket expenses incurred by
counsel, accountants and consultants retained by the Company, and miscellaneous
expenses directly related to the registration statement or offering statement
and the offering. However, this expense shall not include the portion of any
underwriting commissions, transfer taxes and the underwriter's accountable and
nonaccountable expense allowances
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<PAGE>
attributable to the offer and sale of the Option, Option Securities and the
Option Securities underlying the unexercised portion of the Options, all of
which expenses shall be borne by the Holder or Holders of the Options and the
holders of the Option Securities registered or qualified.
8.3. INCLUSION OF INFORMATION. In the event that the Company registers
or qualifies the Option, Option Securities or the Option Securities
underlying the unexercised portion of the Options pursuant to subsections 8.1
or 8.2 above, the Company shall include in the registration statement or
qualification, and the prospectus included therein, all information and
materials necessary or advisable to comply with the applicable statutes and
regulations so as to permit the public sale of the Option Securities or the
Option Securities underlying the unexercised portion of the Options. As used
in subsections 8.1 and 8.2, reference to the Company's securities shall
include, but not be limited to, any class or type of the Company's securities
or the securities of any of the Company's subsidiaries or affiliates.
8.4. REGISTRATION STATEMENT FILED BY HOLDER. In addition to the
registration rights described in subsections 8.1 and 8.2 above, upon the
written request of any Majority Holder, the Company, as promptly as possible
after delivery of such request, shall cooperate with the requesting Majority
Holder or holder in preparing and signing any registration statement or
offering statement that the Holder or holder may desire to file in order to
sell or transfer the Option and Option Securities. Within 10 days after the
delivery of the written request described above, the Company shall deliver
written notice to all other Holders of the Options and holders of Option
Securities, if any, advising them that the Company is proceeding with a
registration statement or offering statement and that their Option and Option
Securities will be included therein if they so desire and agree to pay their
pro rata share of the cost of registration or qualification and provided that
the Holder or holder delivers written notice to the Company of their desire
to be included and their agreement to pay their pro rata share of the cost
within 30 days after the delivery of the Company's notice to them. The
Company will supply all information necessary or advisable for any such
registration statements or offering statements; provided, however, that all
the costs and expenses of such registration statements or offering statements
shall be borne, in a manner proportionate to the number of securities for
which they indicate a desire to register, by the Holders of the Options and
the holders of Option Securities who seek the registration or qualification
of their Option, Option Securities or Option Securities underlying the
unexercised portion of their Option. In determining the amount of costs and
expenses to be borne by those Holders or holders, the only costs and expenses
of the Company to be included are the additional costs and expenses that
would not have otherwise been incurred by the Company if those Holders or
holders had not desired to file a registration statement or offering
statement. As an example, and without limitation, audit fees would not be
charged to those Holders or holders if or to the extent that the Company
would have incurred the same audit fees for its year-end or other use in the
absence of the registration statement or offering statement. The Holders or
holders responsible for the costs and expenses shall reimburse the Company
for those reimbursable costs and expenses reasonably incurred by the Company
within 30 days after the initial effective date of the registration statement
or qualification at issue.
8.5. PAYMENT OF EXERCISE PRICE FROM PROCEEDS. In the event that any such
Registration Statement is utilized for a public offering of any of the Shares to
be received upon exercise of the Options pursuant to this Section 8, the Holder
may elect to pay the exercise price of the Options
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<PAGE>
to the Company out of the proceeds of the sale of the Shares pursuant to the
Registration Statement concurrently with the closing of such sale of the
Shares; provided that if such sale is not closed within 90 days of the
effective date of such Registration Statement, then the Holder shall be
obligated to pay the exercise price of the Options to the Company on such
90th day.
8.6. CONDITION OF COMPANY'S OBLIGATIONS. As to each registration
statement or offering statement, the Company's obligations contained in this
Section 8 shall be conditioned upon a timely receipt by the Company in
writing of the following:
(a) Information as to the terms of the contemplated public offering
furnished by and on behalf of each Holder or holder intending to make a
public distribution of the Option Securities or Option Securities underlying
the unexercised portion of the Option; and
(b) Such other information as the Company may reasonably require
from such Holders or holders, or any underwriter for any of them, for
inclusion in the registration statement or offering statement.
8.7. ADDITIONAL REQUIREMENTS. In each instance in which the Company
shall take any action to register or qualify the Option Securities or the
Option Securities underlying the unexercised portion of the Options, if any,
pursuant to this Section 8, the Company shall do the following:
(a) supply to Cohig, as the representative of the Holders of the
Option and the holders of Option Securities whose Option Securities are being
registered or qualified, two (2) manually signed copies of each registration
statement or offering statement, and all amendments thereto, and a reasonable
number of copies of the preliminary, final or other prospectus or offering
circular, all prepared in conformity with the requirements of the Act and the
rules and regulations promulgated thereunder, and such other documents as
Cohig shall reasonably request;
(b) cooperate with respect to (i) all necessary or advisable
actions relating to the preparation and the filing of any registration
statements or offering statements, and all amendments thereto, arising from
the provisions of this Section 8, (ii) all reasonable efforts to establish an
exemption from the provisions of the Act or any other federal or state
securities statutes, (iii) all necessary or advisable actions to register or
qualify the public offering at issue pursuant to federal securities statutes
and the state "blue sky" securities statutes of each jurisdiction that the
Holders of the Option or holders of Option Securities shall reasonably
request, and (iv) all other necessary or advisable actions to enable the
Holders of the Option Securities to complete the contemplated disposition of
their securities in each reasonably requested jurisdiction; and
(c) keep all registration statements or offering statements to
which this Section 8 applies, and all amendments thereto, effective under the
Act for a period of at least 180 days after their initial effective date and
cooperate with respect to all necessary or advisable actions to permit the
completion of the public sale or other disposition of the securities subject
to a registration statement or offering statement.
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8.8. RECIPROCAL INDEMNIFICATION. In each instance in which pursuant to
this Section 8 the Company shall take any action to register or qualify the
Securities or the Option Securities underlying the unexercised portion of the
Options, prior to the effective date of any registration statement or offering
statement, the Company and each Holder or holder of Options or Option Securities
being registered or qualified shall enter into reciprocal indemnification and
contribution agreements, in the form customarily used by reputable investment
bankers with respect to public offerings of securities, containing substantially
the same terms as described in Section 10.
8.9. COHIG AS REPRESENTATIVE. For purposes of subsection 8.6 (a) above, by
the receipt of an Option or any Option Securities, all Holders and all holders
of Option Securities acknowledge and agree that Cohig is and shall be their
representative.
8.10. SURVIVAL. The Company's obligations described in this Section 8
shall continue in full force and effect regardless of the exercise, surrender,
cancellation or expiration of the Options, unless the Options expire
unexercised.
SECTION 9. PAYMENT OF TAXES
The Company will pay all documentary stamp taxes, if any, attributable to
the initial issuance of the Options or the securities comprising the Shares;
provided, however, the Company shall not be required to pay any tax which may be
payable in respect of any transfer of the Options or the securities comprising
the Shares.
SECTION 10. RESTRICTIONS ON TRANSFER
10.1. RESTRICTIONS ON TRANSFER. The Options, the Option Securities,
and all other securities issued or issuable upon exercise of the Options, may
not be offered, sold or transferred, in whole or in part, except in compliance
with the Act, and except in compliance with all applicable state securities
laws. The Holder agrees that prior to making any disposition of the Options,
other than to persons or entities identified in Section 3.1, the Holder shall
give written notice to the Company describing briefly the manner in which any
such proposed disposition is to be made; and no such disposition shall be made
if the Company has notified the Holder that in the opinion of counsel reasonably
satisfactory to the Holder a registration statement or other notification or
post-effective amendment thereto (hereinafter collectively a "Registration
Statement") under the Act is required with respect to such disposition and no
such Registration Statement has been filed by the Company with, and declared
effective, if necessary, by, the Commission.
10.2. RESTRICTIVE LEGEND. The Company may cause substantially the
following legends, or their equivalents, to be set forth on each certificate
representing the Options, the Option Securities, or any other security issued or
issuable upon exercise of the Options, not theretofore distributed to the public
or sold to underwriters, as defined by the Act, for distribution to the public
pursuant to Section 8 above:
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(a) "THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933 OR ANY STATE SECURITIES LAWS AND
MAY NOT BE SOLD, EXCHANGED, HYPOTHECATED OR TRANSFERRED IN ANY MANNER EXCEPT
IN COMPLIANCE WITH THE AGREEMENT PURSUANT TO WHICH THEY WERE ISSUED."
(b) Any legend required by applicable state securities laws.
Any certificate issued at any time in exchange or substitution for any
certificate bearing such legends (except a new certificate issued upon
completion of a public distribution pursuant to a registration statement
under the Securities Act of 1933, as amended (the "Act"), or the securities
represented thereby) shall also bear the above legends unless, in the opinion
of the Company's counsel, the securities represented thereby need no longer
be subject to such restrictions.
SECTION 11. FRACTIONAL SHARES
No fractional shares or scrip representing fractional shares shall be
issued upon the exercise of all or any part of an Option. With respect to
any fraction of a share of any security called for upon any exercise of an
Option, the Company shall pay to the Holder an amount in money equal to that
fraction multiplied by the Current Market Price of that share.
SECTION 12. NO RIGHTS AS SHAREHOLDER; NOTICES TO HOLDER
Nothing contained in this Agreement or in the Options shall be construed
as conferring upon the Holder or its transferees any rights as a shareholder
of the Company, including the right to vote, receive dividends, consent or
receive notices as a shareholder in respect to any meeting of shareholders
for the election of directors of the Company or any other matter. The
Company covenants, however, that for so long as an Option is unexercised, it
will furnish any Holder of the Options with copies of all reports and
communications furnished to the shareholders of the Company. In addition, if
at any time prior to the expiration of the Options and prior to their
exercise, any one or more of the following events shall occur:
(a) any action which would require an adjustment pursuant to
Section 4.1 or 4.4; or
(b) a dissolution, liquidation, or winding up of the Company (other
than in connection with a consolidation, merger, or sale of its property,
assets, and business as an entirety or substantially as an entirety) shall be
proposed:
then the Company shall give notice in writing of such event to the
Holder, as provided in Section 15 hereof, at least 20 days prior to the date
fixed as a record date or the date of closing the transfer books for the
determination of the shareholders entitled to any relevant dividend,
distribution, subscription rights or other rights or for the determination of
shareholders entitled to vote on such proposed dissolution, liquidation, or
winding up. Such notice shall specify such record date or the date of
closing the transfer books, as the case may be. Failure to mail or receive
notice or any defect therein shall not affect the validity of any action
taken with respect thereto.
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SECTION 13. CHARGES DUE UPON EXERCISE
The Company shall pay any and all issue or transfer taxes, including, but
not limited to, all federal or state taxes, that may be payable with respect
to the transfer of an Option or the issue or delivery of Option Securities
upon the exercise of an Option.
SECTION 14. OPTION SECURITIES TO BE FULLY PAID
The Company covenants that all Option Securities that may be issued and
delivered to a Holder of this Option upon the exercise of this Option and
payment of the Exercise Price will be, upon such delivery, validly and duly
issued, fully paid and nonassessable.
SECTION 15. NOTICES
Any notice pursuant to this Agreement by the Company or by an Holder or a
holder of Shares shall be in writing and shall be deemed to have been duly
given if delivered or mailed by certified mail, return receipt requested:
(a) If to a Holder or a holder of Shares, addressed to Cohig &
Associates, Inc., 6300 South Syracuse Way, Suite 430, Englewood, Colorado
80111, Attention: Corporate Finance Department; or
(b) If to the Company addressed to it at 3033 South Parker Road,
Suite 120, Denver, Colorado 80014, Attention: Sissel B. Greenberg, President.
Each party may from time to time change the address to which notices to
it are to be delivered or mailed hereunder by notice in accordance herewith
to the other party.
SECTION 16. MERGER OR CONSOLIDATION OF THE COMPANY
The Company will not merge or consolidate with or into any other
corporation or sell all or substantially all of its property to another
corporation, unless the provisions of Section 4.4 are complied with.
SECTION 17. APPLICABLE LAW
The Options and this Option Agreement shall be governed by and construed
in accordance with the laws of the State of Colorado, and courts located in
Colorado shall have exclusive jurisdiction over all disputes arising
hereunder.
SECTION 18. ARBITRATION
The Company and the Holder, and by receipt of an Option or any Option
Securities, all subsequent Holders or holders of Option Securities, agree to
submit all controversies, claims, disputes and matters of difference with
respect to the Options and this Option Agreement, including, without limitation,
the application of this Section 18 to arbitration in Denver, Colorado,
17
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according to the rules and practices of the American Arbitration Association
from time to time in force; provided, however, that if such rules and
practices conflict with the applicable procedures of Colorado courts of
general jurisdiction or any other provisions of Colorado law then in force,
those Colorado rules and provisions shall govern. This agreement to
arbitrate shall be specifically enforceable. Arbitration may proceed in the
absence of any party if notice of the proceeding has been given to that
party. The parties agree to abide by all awards rendered in any such
proceeding. These awards shall be final and binding on all parties to the
extent and in the manner provided by the rules of civil procedure enacted in
Colorado. All awards may be filed, as a basis of judgment and of the
issuance of execution for its collection, with the clerk of one or more
courts, state or federal, having jurisdiction over either the party against
whom that award is rendered or its property. No party shall be considered in
default hereunder during the pendency of arbitration proceedings relating to
that default.
SECTION 19. MISCELLANEOUS PROVISIONS
(a) Subject to the terms and conditions contained herein, this
Option Agreement shall be binding on the Company and its successors and shall
inure to the benefit of the original Holder, its successors and assigns and
all holders of Option Securities and the exercise of this Option Agreement in
full shall not terminate the provisions of this Option Agreement as it
relates to holders of Option Securities.
(b) If the Company fails to perform any of its obligations
hereunder, it shall be liable to the Holder for all damages, costs and
expenses resulting from the failure, including, but not limited to, all
reasonable attorney's fees and disbursements.
(c) This Option Agreement cannot be changed or terminated or any
performance or condition waived in whole or in part except by an agreement in
writing signed by the party against whom enforcement of the change,
termination or waiver is sought; provided, however, that any provisions
hereof may be amended, waived, discharged or terminated upon the written
consent of the Company and Cohig.
(d) If any provision of this Option Agreement shall be held to be
invalid, illegal or unenforceable, such provision shall be severed, enforced
to the extent possible, or modified in such a way as to make it enforceable,
and the invalidity, illegality or unenforceability shall not affect the
remainder of this Option Agreement.
(e) The Company and the Holders agree to execute such further
agreements, conveyances, certificates and other documents as may be
reasonably requested to effectuate the intent and provisions of this Option
Agreement.
(f) Paragraph headings used in this Option Agreement are for
convenience only and shall not be taken or construed to define or limit any
of the terms or provisions of this Option Agreement. Unless otherwise
provided, or unless the context shall otherwise require, the use of the
singular shall include the plural and the use of any gender shall include all
genders.
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IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed, all as of the day and year first above written.
PREMIER CONCEPTS, INC.
By:
-----------------------------------
Sissel B. Greenberg, President
COHIG & ASSOCIATES, INC.
By:
-----------------------------------
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EXHIBIT A
THE SECURITIES REPRESENTED BY THIS CERTIFICATE MAY NOT BE SOLD, EXCHANGED,
HYPOTHECATED OR TRANSFERRED IN ANY MANNER EXCEPT IN COMPLIANCE WITH THE
AGREEMENT PURSUANT TO WHICH THEY WERE ISSUED.
Option Certificate No. __________
REPRESENTATIVE'S OPTIONS TO PURCHASE __________
SHARES OF COMMON STOCK
PREMIER CONCEPTS, INC.
INCORPORATED UNDER THE LAWS
OF THE STATE OF COLORADO
This certifies that, for value received, ________________, the registered
holder hereof or assigns (the "Holder"), is entitled to purchase from Premier
Concepts, Inc. (the "Company"), at any time during the period commencing at
9:00 a.m., Colorado time, on ___________________ and ending at 5:00 p.m.,
Colorado time, on __________ at the purchase price per Share of
_______________ (the "Exercise Price"), the number of shares of Common Stock
of the Company set forth above (the "Shares"). The number of shares of
Common Stock of the Company purchasable upon exercise of the Options
evidenced hereby shall be subject to adjustment from time to time as set
forth in the Representative's Option Agreement.
The Options evidenced hereby may be exercised in whole or in part by
presentation of this Option Certificate with the Purchase Form attached
hereto duly executed (with a signature guarantee as provided thereon) and
simultaneous payment of the Exercise Price at the principal office of the
Company. Payment of such price shall be made at the option of the Holder in
cash or by check or by Cashless Exercise subject to the provisions of Section
2 of the Representative's Option Agreement (as that term is defined herein).
The Options evidenced hereby represent the right to purchase an aggregate
of up to 110,000 Shares and are issued under and in accordance with a
Representative's Share Option Agreement, dated as of ____________, between
the Company and Cohig & Associates, Inc. and are subject to the terms and
provisions contained in the Representative's Option Agreement, to all of
which the Holder by acceptance hereof consents.
Upon any partial exercise of the Options evidenced hereby, there shall be
signed and issued to the Holder a new Option Certificate in respect of the
Shares as to which the Options evidenced hereby shall not have been
exercised. These Options may be exchanged at the office of the Company by
surrender of this Option Certificate properly endorsed for one or more new
Options of the same aggregate number of Shares as here evidenced by the
Option or Options exchanged. No fractional shares of Common Stock will be
issued upon the exercise of rights to purchase hereunder, but the Company
shall pay the cash value of any fraction upon the exercise of one or more
Options. These Options are transferable at the office of the Company in the
manner and subject to the limitations set forth in the Representative's
Option Agreement.
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This Option Certificate does not entitle any Holder to any of the rights
of a shareholder of the Company.
PREMIER CONCEPTS, INC.
By:
----------------------------------
Sissel B. Greenberg, President
Dated:
[Seal]
Attest:
- -------------------------------
Secretary
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NOTICE OF EXERCISE
(To be executed by a Holder desiring to exercise the right to purchase
Shares pursuant to a Option.)
The undersigned Holder of a Option hereby
(a) irrevocably elects to exercise the Option to the extent of
purchasing _______________ Shares;
(b) makes payment in full of the aggregate Exercise Price for those
Shares in the amount of $_________________ by the delivery of certified
funds or a bank cashier's check in the amount of $_________________; or
pursuant to Section 2 of the Representative's Option Agreement ("Cashless
Exercise");
(c) requests that certificates evidencing the securities underlying
such Shares be issued in the name of the undersigned, or, if the name and
address of some other person is specified below, in the name of such other
person:
------------------------------------------------------
------------------------------------------------------
------------------------------------------------------
(Name and address of person OTHER than the
undersigned in whose name Shares are to be registered)
(d) requests, if the number of Shares purchased are not all the
Shares purchasable pursuant to the unexercised portion of the Option, that
a new Option of like tenor for the remaining Shares purchasable pursuant to
the Option be issued and delivered to the undersigned at the address stated
below.
Dated:
----------------------- ---------------------------------------------
Signature
(This signature must conform in all respects
to the name of the Holder as specified on the
face of the Option.)
- ----------------------------- ---------------------------------------------
Social Security Number Printed Name
or Employer ID Number
Address:
---------------------------------------------
---------------------------------------------
3
<PAGE>
ASSIGNMENT FORM
FOR VALUE RECEIVED, the undersigned, _____________________________, hereby
sells, assigns and transfers unto:
Name:
-------------------------------------------------
(Please type or print in block letters)
Address:
-------------------------------------------------
-------------------------------------------------
the right to purchase _________________ Shares of Premier Concepts, Inc. (the
"Company") pursuant to the terms and conditions of the Option held by the
undersigned. The undersigned hereby authorizes and directs the Company (i)
to issue and deliver to the above-named assignee at the above address a new
Option pursuant to which the rights to purchase being assigned may be
exercised, and (ii) if there are rights to purchase Shares remaining pursuant
to the undersigned's Option after the assignment contemplated herein, to
issue and deliver to the undersigned at the address stated below a new Option
evidencing the right to purchase the number of Shares remaining after
issuance and delivery of the Option to the above-named assignee. Except for
the number of Shares purchasable, the new Options to be issued and delivered
by the Company are to contain the same terms and conditions as the
undersigned's Option. To complete the assignment contemplated by this
Assignment Form, the undersigned hereby irrevocably constitutes and appoints
____________________________________ as the undersigned's attorney-in-fact to
transfer the Options and the rights thereunder on the books of the Company
with full power of substitution for these purposes.
Dated:
----------------------- ---------------------------------------------
Signature
(This signature must conform in all respects
to the name of the Holder as specified on the
face of the Option.)
- ----------------------------- ---------------------------------------------
Printed Name
Address:
---------------------------------------------
4
<PAGE>
WARRANT CONVERSION EXERCISE FORM
TO: Premier Concepts, Inc.
3033 South Parker Road, Suite 120
Denver, Colorado 80014
Pursuant to Section 2.4 of the Warrant Agreement, the Holder hereby
irrevocably elects to convert Warrants with respect to Shares of the Company
into __________________ Shares of the Company. A conversion calculation is
attached hereto as Exhibit B-1.
The undersigned requests that certificates for such Shares be issued as
follows:
Name:
-----------------------------------------------------------------
Address:
--------------------------------------------------------------
Deliver to:
-----------------------------------------------------------
and that a new Warrant Certificate for the balance remaining of the Warrants,
if any, subject to the Warrant be registered in the name of, and delivered
to, the undersigned at the address stated above.
Signature: Dated:
----------------------------- ---------------------
5
<PAGE>
Exhibit B-1
CALCULATION OF WARRANT CONVERSION
Converted Securities = Net Value
---------
FMV
FMV = $
---------------------
Net Value = Aggregate FMV - Aggregate Exercise
Price
= $ -
--------------------- ---------------
= $
---------------------
Converted Shares =
---------------------
Fractional Converted Shares = (1)
---------------------
(1) Premier Concepts, Inc. to pay for fractional Shares in cash
@ $_______________ per Share.
6
<PAGE>
PREMIER CONCEPTS, INC.
COHIG & ASSOCIATES, INC.
REPRESENTATIVE'S WARRANT OPTION AGREEMENT
Dated as of ________
<PAGE>
REPRESENTATIVE'S WARRANT OPTION AGREEMENT
THIS REPRESENTATIVE'S WARRANT OPTION AGREEMENT (the "Agreement"), dated as
of ____, is made and entered into by and between PREMIER CONCEPTS, INC., a
Colorado corporation (the "Company"), and COHIG & ASSOCIATES, INC. ("Cohig").
The Company agrees to issue and sell, and Cohig agrees to purchase, for the
price of $100, options ("Options") to purchase up to an aggregate of 110,000
warrants, subject to the terms and conditions set forth below.
In consideration of the foregoing and for the purpose of defining the terms
and provisions of the Options and the respective rights and obligations
thereunder, the Company and Cohig, for value received, hereby agree as follows:
SECTION 1. DEFINITIONS
The following terms used in this agreement shall have the following
meanings (unless otherwise expressly provided herein):
1.1. THE "ACT." The Securities Act of 1933, as amended.
1.2. THE "COMMISSION." The Securities and Exchange Commission.
1.3. THE "COMPANY." Premier Concepts, Inc., a Colorado corporation.
1.4. "COMMON STOCK." The Company's $.002 par value Common Stock.
1.5. "EFFECTIVE DATE." __________________________________.
1.6. "EXERCISE DATE." [one year from Effective Date].
1.7. "EXERCISE PRICE." $__________ per Warrant, as modified in accordance
with Section 4, below.
1.8. "EXPIRATION DATE." [five years from Effective Date].
1.9. "MAJORITY HOLDER." Any Holder, any holder of Option Securities, or
any combination of Holders and such holders of Option Securities; and any Holder
of Share Options, any holder of Share Option Securities, or any combination of
such Holders and such holders of Share Option Securities, if they hold, in the
aggregate, unexercised Options plus issued and outstanding Option Securities
equal to more than 50% of the total of (i) all Option Securities issued and
outstanding as a result of the exercise of the Option, and (ii) all Option
Securities that may at that time be purchased by exercising the unexercised
portion of the Option. For purposes hereof, a Holder of an Option which
entitles the Holder to purchase more than one share or Warrant shall be deemed
<PAGE>
to hold Options equal to the number of shares or Warrants which may be acquired
pursuant to any such Option.
1.10. "NASD." The National Association of Securities Dealers, Inc.
1.11. "OPTION." An option issued in accordance with the terms of this
Agreement and any option issued in substitution for or replacement of such
option, or any option into which the Option may be divided or exchanged.
1.12. "OPTION CERTIFICATE." A certificate substantially in the form
set forth as Exhibit A to this agreement, issued to an Optionholder to evidence
the Options held by such Optionholder.
1.13. "HOLDER." Cohig & Associates, Inc., and any valid transferee
thereof pursuant to Section 3.1. below.
1.14. "OPTION SECURITIES." The Warrants issued or issuable upon
exercise of an Option; and the Common Stock issued or issuable upon exercise of
such Warrants.
1.15. "PUBLIC OFFERING." The public offering by the Company of
1,100,000 shares of Common Stock and 1,100,000 Warrants pursuant to an
underwriting agreement dated as of ______, between the Company and Cohig as
Representative of several Underwriters named in the underwriting agreement.
1.16. "SHARE OPTIONS." Those options to purchase Warrants issued to
the Holder concurrently with the issuance of the Share Options under this
Agreement, pursuant to a Representative's Warrant Option Agreement dated the
date of this Agreement.
1.17. "UNDERWRITER." A broker-dealer identified as an Underwriter in
the Final Prospectus for the Public Offering.
1.18. "WARRANTS." The Warrants issued to the public pursuant to the
Registration Statement.
SECTION 2. TERM OF OPTIONS; EXERCISE OF OPTION
2.1. EXERCISE OF OPTION. Subject to the terms of this Agreement, the
Optionholder shall have the right, at any time during the four-year period
commencing at 9:00 a.m., Denver Time, on the Exercise Date and ending at 5:00
p.m., Denver Time, on the Expiration Date to purchase from the Company up to the
number of fully paid and nonassessable Warrants to which the Optionholder may at
the time be entitled to purchase pursuant to this Agreement, upon surrender to
the Company, at its principal office, of the certificate evidencing the Options
to be exercised, together with the purchase form on the reverse thereof, duly
filled in and signed, and upon payment to the Company of the Exercise Price for
the number of Warrants in respect of which such Options are then exercised. In
no event will such exercise be for less than 100 Warrants unless fewer than an
aggregate of 100 Warrants are then purchasable under all outstanding Options
held by an Optionholder. If the Warrants are called for redemption, or would
for any other reason terminate
2
<PAGE>
before the Exercise Date, the Holder may exercise all or any portion of this
Option in order to exercise the Warrants in accordance with the terms of this
Section; but notwithstanding any such early exercise, the Option Securities
received by the Holder may not be sold, transferred, assigned, pledged, or
hypothecated until the Exercise Date.
2.2. PAYMENT OF EXERCISE PRICE. Payment of the aggregate Exercise Price
shall be made in cash or by check, or any combination thereof.
2.3. DELIVERY OF WARRANT CERTIFICATE. Subject to the provisions of Section
11, upon receipt of an Option Certificate with the Notice of Exercise thereon
duly executed, together with payment in full of the Exercise Price for the
Warrants being purchased by such exercise, the Company shall requisition from
any transfer agent for the Warrants, and upon receipt shall make delivery of
certificates evidencing the total number of Warrants for which Options are then
being exercised. The certificates shall be in such names and denominations as
are required for delivery to, or in accordance with the instructions of the
Holder; provided that if fewer than all Warrants issuable on exercise of an
Option Certificate are purchased, the Company (if so requested) shall issue such
balance Option Certificate for the balance of the Warrants. Such certificates
for the Warrants shall be deemed to be issued, and the person to whom such
Warrants are issued of record shall be deemed to have become a holder of record
of such Warrants, as of the date of the surrender of such Option Certificate and
payment of the Exercise Price, whichever shall last occur; provided further that
if the books of the Company with respect to the Warrants shall be closed as of
such date, the certificates for such Warrants shall be deemed to have been
issued, and the person to whom such Warrants are issued of record shall be
deemed to have become a record holder of such Warrants, as of the date on which
such books shall next be open (whether before, on or after the applicable
Expiration Date) but at the Exercise Price and upon the other conditions in
effect upon the date of surrender of the Option Certificate and payment of the
Exercise Price, whichever shall have last occurred, to the Company.
SECTION 3. TRANSFERABILITY AND FORM OF OPTION
3.1. LIMITATION ON TRANSFER. The Options may not be sold, transferred,
assigned, pledged or hypothecated until the Exercise Date, except for (a) the
sale, transfer, or assignment, in whole or in part, to or among the officers of
Cohig and other Underwriters, if such underwriters are corporations, or the
partners of such Underwriters if they are partnerships, (b) the transfer by
operation of law as a result of the death of any transferee to whom all or a
portion of the Options may be transferred, and (c) the transfer to any successor
to the business of an Underwriter. After the Exercise Date, the Options are
nontransferable other than by will or pursuant to the laws of descent and
distribution, except to a partner of Cohig and/or the Underwriters when the
underwriter is a partnership, or to a stockholder, officer or director of the
underwriter or beneficiary of a trust which is a stockholder of such underwriter
when the underwriter is a corporation. However, after the Exercise Date such a
transfer may occur providing the Option is exercised immediately upon transfer;
if it is not exercised immediately, the Option shall lapse. All sales,
transfers, assignments or hypothecations of the Options after the Exercise Date
must be in compliance with Section 11 hereof. Any assignment or transfer of an
Option shall be made by the presentation and surrender of the Option to the
Company at its principal office or the office of its transfer agent, if any,
accompanied by a duly executed Assignment Form, in the form attached to and by
this reference
3
<PAGE>
incorporated in this Option Agreement as Exhibit B. Upon the presentation
and surrender of these items to the Company, the Company, at its sole
expense, shall execute and deliver to the new Holder or Holders a new Option
or Options, subject to the terms and conditions of this Option Agreement, in
the name of the new Holder or Holders as named in the Assignment Form, and
the Option shall at that time be canceled.
3.2. EXCHANGE OF CERTIFICATE. Any Option Certificate may be exchanged for
another certificate or certificates entitling the Optionholder to purchase a
like aggregate number of Shares as the certificate or certificates surrendered
then entitled such Optionholder to purchase. Any Optionholder desiring to
exchange an Option Certificate shall make such request in writing delivered to
the Company, and shall surrender, properly endorsed, the certificate evidencing
the Option to be so exchanged. Thereupon, the Company shall execute and deliver
to the person entitled thereto a new Option Certificate as so requested.
3.3. MUTILATED, LOST, STOLEN, OR DESTROYED CERTIFICATE. In case the
certificate or certificates evidencing the Options shall be mutilated, lost,
stolen or destroyed, the Company shall, at the request of the Optionholder,
issue and deliver in exchange and substitution for and upon cancellation of
the mutilated certificate or certificates, or in lieu of and substitution for
the certificate or certificates lost, stolen or destroyed, a new Option
Certificate or certificates of like tenor and representing an equivalent
right or interest, but only upon receipt of evidence satisfactory to the
Company of such loss, theft or destruction of such Option and a bond of
indemnity, if requested, also satisfactory in form and amount, at the
applicant's cost. Applicants for such substitute Option Certificate shall
also comply with such other reasonable regulations and pay such other
reasonable charges as the Company may prescribe.
3.4. FORM OF CERTIFICATE. The text of the Option and of the form of
election to purchase Warrants shall be substantially as set forth in Exhibit A
attached hereto. The number of Warrants issuable upon exercise of the Options
is subject to adjustment upon the occurrence of certain events, all as
hereinafter provided. The Option Certificates shall be executed on behalf of
the Company by its President or by a Vice President and attested to by its
Secretary or an Assistant Secretary. An Option bearing the signature of an
individual who was at any time the proper officer of the Company shall bind the
Company, notwithstanding that such individual shall have ceased to hold such
officer prior to the delivery of such Option Certificate or did not hold such
office on the date of this Agreement.
3.5. DATE OF CERTIFICATE. The Option Certificates shall be dated as of the
date of signature thereof by the Company either upon initial issuance or upon
division, exchange, substitution or transfer.
SECTION 4. ADJUSTMENT OF NUMBER OF SHARES
4.1. ADJUSTMENTS. The adjustments to the number of Shares purchasable upon
the exercise of the Warrants underlying the Options and the adjustments to the
exercise price of such Warrants shall be made to the Option Securities,
notwithstanding that such Options shall not have been exercised at the time of
the event which causes such adjustment.
4.2. NOTICE OF ADJUSTMENT. Whenever the number of Shares purchasable upon
exercise of the Options is adjusted as herein provided, the Company shall cause
to be promptly mailed to
4
<PAGE>
the Optionholder by first class mail, postage prepaid, notice of such
adjustment and a certificate of the chief financial officer of the Company
setting forth the number of Warrants purchasable upon the exercise of the
Options after such adjustment, a brief statement of the facts requiring such
adjustment and the computation by which such adjustment was made.
4.3. PRESERVATION OF PURCHASE RIGHTS UPON RECLASSIFICATION, CONSOLIDATION,
ETC. In case of any consolidation of the Company with or merger of the Company
into another corporation, or in case of any sale or conveyance to another
corporation of the property, assets, or business of the Company as an entirety
or substantially as an entirety, the Company or such successor or purchasing
corporation, as the case may be, shall execute with the Optionholder an
agreement that the Optionholder shall have the right thereafter upon payment of
the Exercise Price in effect immediately prior to such action to purchase, upon
exercise of the Options, the kind and amount of shares and other securities and
property which it would have owned or have been entitled to receive after the
happening of such consolidation, merger, sale, or conveyance had the Options
been exercised immediately prior to such action. In the event of a merger
described in Section 368(a)(2)(E) of the Internal Revenue Code of 1986, in which
the Company is the surviving corporation, the right to purchase Warrants under
the Options shall terminate on the date of such merger and thereupon the Options
shall become null and void, but only if the controlling corporation shall agree
to substitute for the Options, its Options which entitle the holder thereof to
purchase upon their exercise the kind and amount of Warrants and other
securities and property which it would have owned or been entitled to receive
had the Options been exercised immediately prior to such merger. Any such
agreements referred to in this subsection 4.3 shall provide for adjustments,
which shall be as nearly equivalent as may be practicable to the adjustments
provided for in Section 4 hereof. The provisions of this subsection 4.3 shall
similarly apply to successive consolidations, mergers, sales, or conveyances.
4.4. INDEPENDENT PUBLIC ACCOUNTANTS. The Company may retain a firm of
independent public accountants of recognized national standing (which may be any
such firm regularly employed by the Company) to make any computation required
under this Section 4, and a certificate signed by such firm shall be conclusive
evidence of the correctness of any computation made under this Section 4.
SECTION 5. NOTICE TO HOLDERS
If, prior to the expiration of the Options either by its terms or by its
exercise in full, any of the following shall occur:
(i) the Company shall declare a dividend or authorize any other
distribution on its Common Stock; or
(ii) the Company shall authorize the granting to the shareholders of
its Common Stock of rights to subscribe for or purchase any securities or any
other similar rights; or
(iii) any reclassification, reorganization or similar change of
the Common Stock, or any consolidation or merger to which the Company is a
party, or the sale, lease, or exchange of any significant portion of the assets
of the Company; or
5
<PAGE>
(iv) the voluntary or involuntary dissolution, liquidation or winding
up of the Company; or
(v) any purchase, retirement or redemption by the Company of its
Common Stock;
then, and in any such case, the Company shall deliver to the Holder or
Holders written notice thereof at least 30 days prior to the earliest applicable
date specified below with respect to which notice is to be given, which notice
shall state the following:
the date on which a record is to be taken for the purpose of such dividend,
distribution or rights, or, if a record is not to be taken, the date as of which
the shareholders of Common Stock of record to be entitled to such dividend,
distribution or rights are to be determined;
the date on which such reclassification, reorganization, consolidation,
merger, sale, transfer, dissolution, liquidation, winding up or purchase,
retirement or redemption is expected to become effective, and the date, if any,
as of which the Company's shareholders of Common Stock of record shall be
entitled to exchange their Common Stock for securities or other property
deliverable upon such reclassification, reorganization, consolidation, merger,
sale, transfer, dissolution, liquidation, winding up, purchase, retirement or
redemption; and
if any matters referred to in the foregoing clauses (x) and (y) are to be
voted upon by shareholders of Common Stock, the date as of which those
shareholders to be entitled to vote are to be determined.
SECTION 6. OFFICERS' CERTIFICATE
Whenever the Exercise Price or the aggregate number of Option Securities
purchasable pursuant to this Option Agreement shall be adjusted as required by
the provisions of Section 4 above, the Company shall promptly file with its
Secretary or an Assistant Secretary at its principal office, and with its
transfer agent, if any, an officers' certificate executed by the Company's
President and Secretary or Assistant Secretary, describing the adjustment and
setting forth, in reasonable detail, the facts requiring such adjustment and the
basis for and calculation of such adjustment in accordance with the provisions
of this Option Agreement. Each such officers' certificate shall be made
available to the Holder or Holders of the Options for inspection at all
reasonable times, and the Company, after each such adjustment, shall promptly
deliver a copy of the officers' certificate relating to that adjustment to the
Holder or Holders of the Options. The officers' certificate described in this
Section 6 shall be deemed to be conclusive as to the correctness of the
adjustment reflected therein if, and only if, no Holder of an Option delivers
written notice to the Company of an objection to the adjustment within 30 days
after the officers' certificate is delivered to the Holder or Holders of the
Options. The Company will make its books and records available for inspection
and copying during normal business hours by the Holder so as to permit a
determination as to the correctness of the adjustment. If written notice of an
objection is delivered by a Holder to the Company and the parties cannot
reconcile the dispute, the Holder and the Company shall submit the dispute to
arbitration pursuant to the provisions of Section 19 below. Failure to prepare
or provide the officers' certificate shall not modify the parties' rights
hereunder.
6
<PAGE>
SECTION 7. RESERVATION OF OPTION SECURITIES
There has been reserved, and the Company shall at all times keep reserved
so long as the Options remain outstanding, out of its authorized and unissued
Common Stock, such number of shares of Common Stock as shall be subject to
purchase under the Options. Every transfer agent for the Common Stock and other
securities of the Company issuable upon the exercise of the Options will be
irrevocably authorized and directed at all times to reserve such number of
authorized shares and other securities as shall be requisite for such purpose.
The Company will keep a copy of this Agreement on file with every transfer agent
for the Common Stock and other securities of the Company issuable upon the
exercise of the Options. The Company will supply every such transfer agent with
duly executed stock and other certificates, as appropriate, for such purpose.
SECTION 8. REGISTRATION RIGHTS
8.1. DEMAND REGISTRATION RIGHTS. Upon the written request of a Majority
Holder, made at any time after the Exercise Date, but before the Expiration
Date, the Company shall file within 90 days of such written request a
registration statement or Regulation A offering statement pursuant to the Act,
and all necessary amendments thereto, to register or qualify the Option
Securities (including both the Warrants issued or issuable upon exercise of the
Options and the shares issued or issuable upon exercise of such Warrants). No
additional securities shall be included in such registration statement or
offering statement without the written consent of the Majority Holder. The
Company may use the Regulation A exemption if available, but the Company must
file a registration statement if the securities that are to be covered cannot be
sold pursuant to Regulation A because of the limitations applicable to the use
of the Regulation A exemption. The Company agrees to use its best efforts to
cause this registration or qualification to become effective as promptly as
practicable and to keep such registration effective for a period of the lesser
of 180 days or the date of completion of the distribution described in the
Registration Statement; and its officers, directors, consultants, auditors and
counsel shall cooperate in all matters necessary or advisable to pursue this
objective. All of the expenses of this registration or qualification shall be
borne by the Company, including, but not limited to, legal, accounting,
consulting, printing, filing and NASD fees, out-of-pocket expenses incurred by
counsel, accountants, and consultants retained by the Company and miscellaneous
expenses directly related to the registration statement or offering statement
and the offering, and the underwriter's accountable and nonaccountable expense
allowances and fees; but the Company shall not pay any brokerage fees,
commissions or underwriting discounts except to the extent they are attributable
to other securities that the Company has been permitted to register or qualify
or to offer in conjunction with the registration and qualification of the Option
Securities. Notwithstanding the foregoing, if, as a qualification of any
offering in any state or jurisdiction in which the Company (by vote of its Board
of Directors) or any underwriter determines in good faith that it wishes to
offer securities registered in the offering, it is required that offering
expenses be allocated in a manner different from that provided above, then the
offering expenses shall be allocated in whatever manner is most nearly in
compliance with the provisions set out above. The Majority Holder shall be
entitled to exercise the rights described in this subsection 8(b) one time only.
Within 10 days after the delivery by the Majority Holder to the Company of
the notice described above, the Company shall deliver written notice to all
other Holders of the Options and holders of the Option Securities, if any,
advising them that the Company is proceeding with a
7
<PAGE>
registration statement or offering statement and offering them the right to
include the Option Securities of those Holders or holders therein. If any
Holder of an Option and/or Option Securities delivers written acceptance of
that offer to the Company within 30 days after the delivery of the Company's
notice, the Company shall be obligated to include that holder's Option
Securities in the contemplated registration statement or offering statement.
8.2. "PIGGY-BACK" REGISTRATION RIGHTS. If at any time prior to the
Expiration Date the Company files a registration statement with the Commission
pursuant to the Act, or pursuant to any other act passed after the date of this
Agreement, which filing provides for the sale of securities by the Company to
the public, or files a Regulation A offering statement under the Act, the
Company shall offer to the Holder or Holders of the Options and the holders of
any Option Securities the opportunity to register or qualify the Option
Securities, at the Company's sole expense, regardless of whether the Holder or
Holders of the Options or the holders of Option Securities or both may have
previously availed themselves of any of the registration rights described in
this Section 8; provided, however, that in the case of a Regulation A offering,
the opportunity to qualify shall be limited to the amount of the available
exemption after taking into account the securities that the Company wishes to
qualify. Notwithstanding anything to the contrary, this subsection 8(c) shall
not be applicable to a registration statement registering securities issued
pursuant to an employee benefit plan or as to a transaction subject to Rule 145
promulgated under the Act or which a Form S-4 registration statement could be
used.
The Company shall deliver written notice to the Holder or Holders of the
Options and to any holders of Option Securities of its intention to file a
registration statement or Regulation A offering statement under the Act at least
60 days prior to the filing of such registration statement or offering
statement, and the Holder or Holders and holders of Option Securities shall have
30 days thereafter to request in writing that the Company register or qualify
the Option Securities in accordance with this subsection 8.2. Upon the delivery
of such a written request within the specified time, the Company shall be
obligated to include in its contemplated registration statement or offering
statement all information necessary or advisable to register or qualify the
Option Securities, if the Company does file the contemplated registration
statement or offering statement; provided, however, that neither the delivery of
the notice by the Company nor the delivery of a request by a Holder or by a
holder of Option Securities shall in any way obligate the Company to file a
registration statement or offering statement. Furthermore, notwithstanding the
filing of a registration statement or offering statement, the Company may, at
any time prior to the effective date thereof, determine not to offer the
securities to which the registration statement or offering statement relates,
other than the Option Securities. Notwithstanding the foregoing, if, as a
qualification of any offering in any state or jurisdiction in which the Company
(by vote of its Board of Directors) or any underwriter determines in good faith
that it wishes to offer securities registered in the offering, it is required
that offering expenses be allocated in a manner different from that provided
above, then the offering expenses shall be allocated in whatever manner is most
nearly in compliance with the provisions set out above.
The Company shall comply with the requirements of this subsection (8.2.) at
its own expense. That expense shall include, but not be limited to, legal,
accounting, consulting, printing, federal and state filing fees, NASD fees,
out-of-pocket expenses incurred by counsel, accountants and consultants retained
by the Company, and miscellaneous expenses directly related to the registration
statement or offering statement and the offering. However, this expense shall
not include the portion of any underwriting commissions, transfer taxes and the
underwriter's
8
<PAGE>
accountable and nonaccountable expense allowances attributable to the offer
and sale of the Option Securities, all of which expenses shall be borne by
the Holder or Holders of the Options and the holders of the Option Securities
registered or qualified.
8.3. INCLUSION OF INFORMATION. In the event that the Company registers or
qualifies the Option Securities pursuant to subsections 8.1 or 8.2 above, the
Company shall include in the registration statement or qualification, and the
prospectus included therein, all information and materials necessary or
advisable to comply with the applicable statutes and regulations so as to permit
the public sale of the Option Securities. As used in subsections 8.1 and 8.2,
reference to the Company's securities shall include, but not be limited to, any
class or type of the Company's securities or the securities of any of the
Company's subsidiaries or affiliates.
8.4. REGISTRATION STATEMENT FILED BY HOLDER. In addition to the
registration rights described in subsections 8.1 and 8.2 above, upon the written
request of any Majority Holder, the Company, as promptly as possible after
delivery of such request, shall cooperate with the requesting Holder or holder
in preparing and signing any registration statement or offering statement that
the Holder or holder may desire to file in order to sell or transfer the Option
Securities. Within 10 days after the delivery of the written request described
above, the Company shall deliver written notice to all other Holders of the
Options and holders of Option Securities, if any, advising them that the Company
is proceeding with a registration statement or offering statement and that their
Option Securities will be included therein if they so desire and agree to pay
their pro rata share of the cost of registration or qualification and provided
that the Holder or holder delivers written notice to the Company of their desire
to be included and their agreement to pay their pro rata share of the cost
within 30 days after the delivery of the Company's notice to them. The Company
will supply all information necessary or advisable for any such registration
statements or offering statements; provided, however, that all the costs and
expenses of such registration statements or offering statements shall be borne,
in a manner proportionate to the number of securities for which they indicate a
desire to register, by the Holders of the Options and the holders of Option
Securities who seek the registration or qualification of their Option
Securities. In determining the amount of costs and expenses to be borne by
those Holders or holders, the only costs and expenses of the Company to be
included are the additional costs and expenses that would not have otherwise
been incurred by the Company if those Holders or holders had not desired to file
a registration statement or offering statement. As an example, and without
limitation, audit fees would not be charged to those Holders or holders if or to
the extent that the Company would have incurred the same audit fees for its
year-end or other use in the absence of the registration statement or offering
statement. The Holders or holders responsible for the costs and expenses shall
reimburse the Company for those reimbursable costs and expenses reasonably
incurred by the Company within 30 days after the initial effective date of the
registration statement or qualification at issue.
8.5. PAYMENT OF EXERCISE PRICE FROM PROCEEDS. In the event that any
registration statement is utilized for a public offering of any of the Option
Securities to be received upon exercise of the Options pursuant to this Section
8, the Optionholder may elect to pay the Exercise Price of the Options to the
Company out of the proceeds of the sale of the Option Securities pursuant to the
registration statement concurrently with the closing of such sale of the Option
Securities; provided that if such sale is not closed within 90 days of the
effective date of such registration statement, then the Optionholder shall be
obligated to pay the Exercise Price of the Options and/or the Warrants to the
Company on such 90th day.
9
<PAGE>
8.6. CONDITION OF COMPANY'S OBLIGATIONS. As to each registration statement
or offering statement, the Company's obligations contained in this Section 8
shall be conditioned upon a timely receipt by the Company in writing of the
following:
(a) Information as to the terms of the contemplated public offering
furnished by and on behalf of each Holder or holder intending to make a public
distribution of the Option Securities; and
(b) Such other information as the Company may reasonably require from
such Holders or holders, or any underwriter for any of them, for inclusion in
the registration statement or offering statement.
8.7. ADDITIONAL REQUIREMENTS. In each instance in which the Company shall
take any action to register or qualify the Option Securities, if any, pursuant
to this Section 8, the Company shall do the following:
(a) supply to Cohig, as the representative of the Holders of the
Option and the holders of Option Securities whose Option Securities are being
registered or qualified, two (2) manually signed copies of each registration
statement or offering statement, and all amendments thereto, and a reasonable
number of copies of the preliminary, final or other prospectus or offering
circular, all prepared in conformity with the requirements of the Act and the
rules and regulations promulgated thereunder, and such other documents as Cohig
shall reasonably request;
(b) cooperate with respect to (i) all necessary or advisable actions
relating to the preparation and the filing of any registration statements or
offering statements, and all amendments thereto, arising from the provisions of
this Section 8, (ii) all reasonable efforts to establish an exemption from the
provisions of the Act or any other federal or state securities statutes, (iii)
all necessary or advisable actions to register or qualify the public offering at
issue pursuant to federal securities statutes and the state "blue sky"
securities statutes of each jurisdiction that the Holders of the Option or
holders of Option Securities shall reasonably request, and (iv) all other
necessary or advisable actions to enable the Holders of the Option Securities to
complete the contemplated disposition of their securities in each reasonably
requested jurisdiction; and
(c) keep all registration statements or offering statements to which
this Section 8 applies, and all amendments thereto, effective under the Act for
a period of at least 180 days after their initial effective date and cooperate
with respect to all necessary or advisable actions to permit the completion of
the public sale or other disposition of the securities subject to a registration
statement or offering statement.
8.9. INDEMNIFICATION AGREEMENTS. In each instance in which pursuant to
this Section 8 the Company shall take any action to register or qualify the
Option Securities, prior to the effective date of any registration statement or
offering statement, the Company and each Holder or holder of Options or Option
Securities being registered or qualified shall enter into reciprocal
indemnification agreements, in the form customarily used by reputable investment
bankers with respect to public offerings of securities, containing substantially
the same terms as described in Section 10. These indemnification agreements
also shall contain an agreement by the Holder or holder at issue to indemnify
and hold harmless the Company, its officers and directors from and against any
and all losses, claims, damages and liabilities, including, but not limited to,
all expenses
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reasonably incurred in investigating, preparing, defending or settling any
claim, directly resulting from any untrue statements of material facts, or
omissions to state a material fact necessary to make a statement not
misleading, contained in a registration statement or offering statement to
which this Section 8 applies, if, and only if, the untrue statement or
omission directly resulted from information provided in writing to the
Company by the indemnifying Holder or shareholder expressly for use in the
registration statement or offering statement at issue.
8.10. COHIG AS REPRESENTATIVE. For purposes of subsection 8.7(i)
above, by the receipt of an Option or any Option Securities, all Holders and all
holders of Option Securities acknowledge and agree that Cohig is and shall be
their representative.
8.11. SURVIVAL. The Company's obligations described in this Section 8
shall continue in full force and effect regardless of the exercise, surrender,
cancellation or expiration of the Options, unless the Options (or the Warrants
underlying the Options) expire unexercised.
SECTION 9. PAYMENT OF TAXES
The Company will pay all documentary stamp taxes, if any, attributable to
the initial issuance of the Options or the securities comprising the Option
Securities; provided, however, the Company shall not be required to pay any tax
which may be payable in respect of any transfer of the Options or the Option
Securities.
SECTION 10. RESTRICTIONS ON TRANSFER
10.1. RESTRICTIONS ON TRANSFER. The Options, the Option Securities,
and all other securities issued or issuable upon exercise of the Options, may
not be offered, sold or transferred, in whole or in part, except in compliance
with the Act, and except in compliance with all applicable state securities
laws. The Optionholder agrees that prior to making any disposition of the
Options, other than to persons or entities identified in Section 3.1, the
Optionholder shall give written notice to the Company describing briefly the
manner in which any such proposed disposition is to be made; and no such
disposition shall be made if the Company has notified the Optionholder that in
the opinion of counsel reasonably satisfactory to the Optionholder a
registration statement or other notification or post-effective amendment thereto
(hereinafter collectively a "Registration Statement") under the Act is required
with respect to such disposition and no such Registration Statement has been
filed by the Company with, and declared effective, if necessary, by, the
Commission.
10.2. RESTRICTIVE LEGEND. The Company may cause substantially the
following legends, or their equivalents, to be set forth on each certificate
representing the Options, the Option Securities, or any other security issued or
issuable upon exercise of the Options or the Option Securities, not theretofore
distributed to the public or sold to underwriters, as defined by the Act, for
distribution to the public pursuant to Section 8 above:
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"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933 OR ANY STATE SECURITIES
LAWS AND MAY NOT BE SOLD, EXCHANGED, HYPOTHECATED OR TRANSFERRED IN
ANY MANNER EXCEPT IN COMPLIANCE WITH THE AGREEMENT PURSUANT TO WHICH
THEY WERE ISSUED."
Any legend required by applicable state securities laws.
Any certificate issued at any time in exchange or substitution for any
certificate bearing such legends (except a new certificate issued upon
completion of a public distribution pursuant to a registration statement under
the Securities Act of 1933, as amended (the "Act"), or the securities
represented thereby) shall also bear the above legends unless, in the opinion of
the Company's counsel, the securities represented thereby need no longer be
subject to such restrictions.
SECTION 11. FRACTIONAL SHARES
No fractional Warrant shall be issued upon the exercise of all or any part
of an Option. In any case in which other than a full number of Warrants would
be issuable hereunder, the number of Warrants issuable shall be rounded up to
the next whole number.
SECTION 12. NO RIGHTS AS SHAREHOLDER; NOTICES TO OPTIONHOLDER
Nothing contained in this Agreement or in the Options shall be construed as
conferring upon the Optionholder or its transferees any rights as a shareholder
of the Company, including the right to vote, receive dividends, consent or
receive notices as a shareholder in respect to any meeting of shareholders for
the election of directors of the Company or any other matter. The Company
covenants, however, that for so long as an Option is unexercised, it will
furnish any Holder of an Option with copies of all reports and communications
furnished to the shareholders of the Company. In addition, if at any time prior
to the expiration of the Options and prior to their exercise, any one or more of
the following events shall occur:
(i) any action which would require an adjustment pursuant to Section
4.1 or 4.4; or
(ii) a dissolution, liquidation, or winding up of the Company (other
than in connection with a consolidation, merger, or sale of its property,
assets, and business as an entirety or substantially as an entirety) shall be
proposed:
then the Company shall give notice in writing of such event to the Optionholder,
as provided in Section 15 hereof, at least 20 days prior to the date fixed as a
record date or the date of closing the transfer books for the determination of
the shareholders entitled to any relevant dividend, distribution, subscription
rights or other rights or for the determination of shareholders entitled to vote
on such proposed dissolution, liquidation, or winding up. Such notice shall
specify such record date or the date of closing the transfer books, as the case
may be. Failure to mail or receive notice or any defect therein shall not
affect the validity of any action taken with respect thereto.
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SECTION 13. CHARGES DUE UPON EXERCISE
The Company shall pay any and all issue or transfer taxes, including, but
not limited to, all federal or state taxes, that may be payable with respect to
the transfer of the Options or the issue or delivery of Option Securities upon
the exercise of an Option.
SECTION 14. OPTION SECURITIES TO BE FULLY PAID
The Company covenants that all Option Securities that may be issued and
delivered to a Holder of an Option upon the exercise of an Option and payment
of the Exercise Price will be, upon such delivery, validly and duly issued,
fully paid and nonassessable.
SECTION 15. NOTICES
Any notice pursuant to this Agreement by the Company or by an
Optionholder or a holder of Option Securities shall be in writing and shall
be deemed to have been duly given if delivered or mailed by certified mail,
return receipt requested:
If to an Optionholder or a holder of Option Securities, addressed to
Cohig & Associates, Inc., 6300 South Syracuse Way, Suite 430, Englewood,
Colorado 80111, Attention: Corporate Finance Department; or
If to the Company, addressed to it at 3033 South Parker Road, Suite 120,
Denver, Colorado 80014, Attention: Sissel B. Greenberg, President.
Each party may from time to time change the address to which notices to it are
to be delivered or mailed hereunder by notice in accordance herewith to the
other party.
SECTION 16. MERGER OR CONSOLIDATION OF THE COMPANY
The Company will not merge or consolidate with or into any other
corporation or sell all or substantially all of its property to another
corporation, unless the provisions of Section 4.4 are complied with.
SECTION 17. APPLICABLE LAW
The Options and this Option Agreement shall be governed by and construed in
accordance with the laws of the State of Colorado, and courts located in
Colorado shall have exclusive jurisdiction over all disputes arising hereunder.
SECTION 18. ARBITRATION
The Company and the Holder, and all subsequent Holders or holders of Option
Securities, agree to submit all controversies, claims, disputes and matters of
difference with respect to the Options and this Option Agreement, including,
without limitation, the application of this Section 18 to arbitration in Denver,
Colorado, according to the rules and practices of the American Arbitration
Association from time to time in force; provided, however, that if such rules
and practices conflict with the applicable procedures of Colorado courts of
general jurisdiction or any other provisions of Colorado law then in force,
those Colorado rules and provisions shall govern. This agreement to
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arbitrate shall be specifically enforceable. Arbitration may proceed in the
absence of any party if notice of the proceeding has been given to that
party. The parties agree to abide by all awards rendered in any such
proceeding. These awards shall be final and binding on all parties to the
extent and in the manner provided by the rules of civil procedure enacted in
Colorado. All awards may be filed, as a basis of judgment and of the
issuance of execution for its collection, with the clerk of one or more
courts, state or federal, having jurisdiction over either the party against
whom that award is rendered or its property. No party shall be considered in
default hereunder during the pendency of arbitration proceedings relating to
that default.
SECTION 19. MISCELLANEOUS PROVISIONS
(a) Subject to the terms and conditions contained herein, this Option
Agreement shall be binding on the Company and its successors and shall inure to
the benefit of the original Holder, its successors and assigns and all holders
of Option Securities and the exercise of the Options in full shall not terminate
the provisions of this Option Agreement as it relates to holders of Option
Securities.
(b) If the Company fails to perform any of its obligations
hereunder, it shall be liable to the Holder for all damages, costs and
expenses resulting from the failure, including, but not limited to, all
reasonable attorney's fees and disbursements.
(c) This Option Agreement cannot be changed or terminated or any
performance or condition waived in whole or in part except by an agreement in
writing signed by the party against whom enforcement of the change,
termination or waiver is sought; provided, however, that any provisions
hereof may be amended, waived, discharged or terminated upon the written
consent of the Company and Cohig.
(d) If any provision of this Option Agreement shall be held to be
invalid, illegal or unenforceable, such provision shall be severed, enforced
to the extent possible, or modified in such a way as to make it enforceable,
and the invalidity, illegality or unenforceability shall not affect the
remainder of this Option Agreement.
(e) The Company and the Holders agree to execute such further
agreements, conveyances, certificates and other documents as may be
reasonably to effectuate the intent and provisions of this Option Agreement.
(f) Paragraph headings used in this Option Agreement are for
convenience only and shall not be taken or construed to define or limit any
of the terms or provisions of this Option Agreement. Unless otherwise
provided, or unless the context shall otherwise require, the use of the
singular shall include the plural and the use of any gender shall include all
genders.
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed, all as of the day and year first above written.
PREMIER CONCEPTS, INC.
By:
----------------------------------
Sissel B. Greenberg, President
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COHIG & ASSOCIATES, INC.
By:
------------------------------------
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EXHIBIT A
THE SECURITIES REPRESENTED BY THIS CERTIFICATE MAY NOT BE SOLD, EXCHANGED,
HYPOTHECATED OR TRANSFERRED IN ANY MANNER EXCEPT IN COMPLIANCE WITH THE
AGREEMENT PURSUANT TO WHICH THEY WERE ISSUED.
Option Certificate No. RWO-
REPRESENTATIVE'S OPTIONS TO PURCHASE __________ WARRANTS
PREMIER CONCEPTS, INC.
INCORPORATED UNDER THE LAWS
OF THE STATE OF COLORADO
This certifies that, for value received, _______________, the registered
holder hereof or assigns (the "Optionholder"), is entitled to purchase from
Premier Concepts, Inc. (the "Company"), at any time during the period commencing
at 9:00 a.m., Colorado time, on _______________ and ending at 5:00 p.m. Colorado
time on ___________ at the purchase price of $__________ per Warrant (the
"Exercise Price"), the number of Warrants of the Company set forth above (the
"Warrants"). The number of Warrants purchasable upon exercise of the Options
evidenced hereby shall be subject to adjustment from time to time as set forth
in the Representative's Option Agreement.
The Options evidenced hereby may be exercised in whole or in part by
presentation of this Option Certificate with the Notice of Exercise attached
hereto duly executed (with a signature guarantee as provided thereon) and
simultaneous payment of the Exercise Price at the principal office of the
Company. Payment of such price shall be made at the option of the Optionholder
in cash or by check.
The Options evidenced hereby represent the right to purchase an aggregate
of up to 110,000 Warrants and are issued under and in accordance with a
Representative's Warrant Option Agreement, dated as of ________________, between
the Company and Cohig & Associates, Inc. and are subject to the terms and
provisions contained in the Representative's Warrant Option Agreement, to all of
which the Optionholder by acceptance hereof consents.
Upon any partial exercise of the Options evidenced hereby, there shall be
signed and issued to the Optionholder a new Option Certificate in respect of
the Warrants as to which the Options evidenced hereby shall not have been
exercised. These Options may be exchanged at the office of the Company by
surrender of this Option Certificate properly endorsed for one or more new
Options of the same aggregate number of Warrants as here evidenced by the
Option or Options exchanged. No fractional Warrants will be issued upon the
exercise of rights to purchase hereunder, but the Company shall issue an
additional Warrant in lieu of a fractional Warrant if the fractional Warrant
otherwise issuable would be equivalent to one-half a Warrant or more. These
Options are transferable at the office of the Company in the manner and
subject to the limitations set forth in the Representative's Warrant Option
Agreement.
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This Option Certificate does not entitle any Optionholder to any of the
rights of a shareholder of the Company.
PREMIER CONCEPTS, INC.
Dated: By:
---------------------- ------------------------------------
Sissel B. Greenberg, President
[Seal]
Attest:
- ----------------------------
Secretary
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NOTICE OF EXERCISE
(To be executed by a Holder desiring to exercise the right to purchase Warrants
pursuant to an Option.)
The undersigned Holder of a Option hereby
(a) irrevocably elects to exercise the Option to the extent of purchasing
_______________ Warrants;
(b) makes payment in full of the aggregate Exercise Price for those
Warrants in the amount of $_________________ by the delivery of certified funds
or a bank cashier's check in the amount of $_________________;
(c) requests that certificates evidencing the Warrants be issued in the
name of the undersigned, or, if the name and address of some other person is
specified below, in the name of such other person:
_______________________________________________________________________________
(Name and address of person other than the undersigned in whose name Warrants
are to be registered)
(d) requests, if the number of Warrants purchased are not all the
Warrants purchasable pursuant to the unexercised portion of the Option, that a
new Option of like tenor for the remaining Warrants purchasable pursuant to the
Option be issued and delivered to the undersigned at the address stated below.
Dated:
--------------------- ---------------------------------------------
Signature: (This signature must conform in all respects
to the name of the Holder as specified on the
face of the Option.)
- ----------------------------- ------------------------------------------
Social Security Number Printed Name:
or Employer ID Number
Address: ------------------------------------------
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ASSIGNMENT FORM
FOR VALUE RECEIVED, the undersigned, __________________________________, hereby
sells, assigns and transfers unto:
Name:
----------------------------------------------------
(Please type or print in block letters)
Address:
----------------------------------------------------
----------------------------------------------------
the right to purchase _________________ Warrants of Premier Concepts, Inc. (the
"Company") pursuant to the terms and conditions of the Option held by the
undersigned. The undersigned hereby authorizes and directs the Company (i) to
issue and deliver to the above-named assignee at the above address a new Option
pursuant to which the rights to purchase being assigned may be exercised, and
(ii) if there are rights to purchase Warrants remaining pursuant to the
undersigned's Option after the assignment contemplated herein, to issue and
deliver to the undersigned at the address stated below a new Option evidencing
the right to purchase the number of Warrants remaining after issuance and
delivery of the Option to the above-named assignee. Except for the number of
Warrants purchasable, the new Options to be issued and delivered by the Company
are to contain the same terms and conditions as the undersigned's Option. To
complete the assignment contemplated by this Assignment Form, the undersigned
hereby irrevocably constitutes and appoints _________________________________
as the undersigned's attorney-in-fact to transfer the Options and the rights
thereunder on the books of the Company with full power of substitution for these
purposes.
----------------------------------------------
Signature (This signature must conform in all
respects to the name of the Holder as specified on
the face of the Option.)
Printed Name:
----------------------------------------------
Address:
----------------------------------------------
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INDEPENDENT AUDITOR'S CONSENT
We consent to the use in the Pre-Effective Amendment No. 1 to Registration
Statement on Form SB-2 and related Prospectus of Premier Concepts, Inc. of our
report dated April 5, 1996, accompanying the financial statements of Premier
Concepts, Inc. contained in such Registration Statement, and to the use of our
name and the statements with respects to us, as appearing under the heading
"Experts" in the Prospectus.
HEIN + ASSOCIATES LLP
Denver, Colorado
February 17, 1997
