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PREMIER CONCEPTS, INC.
3033 South Parker Road, Suite 120
Aurora, Colorado 80014
PROXY STATEMENT
FOR
SPECIAL MEETING OF SHAREHOLDERS
We are furnishing this Proxy Statement to you, as a shareholder of
Premier Concepts, Inc. (the "Company") in connection with our solicitation
of proxies to be used at the Company's Special Meeting of Shareholders (the
"Meeting"). The Meeting will be held on May , 1999, at the time, place
and for the purposes set forth in the accompanying Notice of Special
Meeting of Shareholders, and at any adjournment thereof. When you properly
execute and return the accompanying proxy, the shares of common stock it
represents will be voted at the Meeting and, where you specify a choice on
the proxy, will be voted in accordance with your specifications. If you do
not specify a choice on the proxy, the shares it represents will be voted
FOR the ratification and approval of that certain Second Stock Purchase
Agreement dated as of March 11, 1999 ("Stock Purchase Agreement" or the
"Agreement") between the Company, on the one hand, and Infusion Capital
Partners, LLC ("Infusion"), on the other, or, should the Second Stock
Purchase Agreement not be ratified and approved by the Company's
Shareholders at the Meeting, FOR the ratification and approval of the
issuance to Equisition Capital LLC of a warrant exercisable to purchase
70,400 shares of the Company's Common Stock as more fully described
hereinbelow, and according to the judgment of the persons named in the
enclosed proxies as to any other action which may properly come before the
Meeting or any adjournment thereof.
YOU MAY REVOKE YOUR PROXY AND RECLAIM YOUR RIGHT TO VOTE AT ANY TIME
BEFORE YOUR PROXY IS VOTED BY MAILING OR DELIVERING A WRITTEN NOTICE OF
REVOCATION TO THE SECRETARY. WE WILL ALSO CONSIDER YOUR PROXY TO HAVE BEEN
REVOKED IF WE RECEIVE A PROPERLY SIGNED PROXY THAT IS DATED AFTER AN
EARLIER PROXY. YOUR PROXY MAY ALSO BE REVOKED BY REQUEST, IN PERSON, AT
THE MEETING. IF YOU DO NOT REVOKE YOUR PROXY, THE SHARES REPRESENTED BY
IT WILL BE VOTED IN ACCORDANCE WITH THE INSTRUCTIONS ON THE PROXY FORM.
We are mailing this Statement on or about April , 1999, to our
Shareholders eligible to vote at the Meeting. Concurrently with the
mailing of this Statement, we are furnishing a copy of the Agreement.
We are bearing all costs of soliciting proxies, and expressly reserve
the right to solicit proxies otherwise than by mail. We may follow the
solicitation of proxies by mail with telephone, telegraph or other personal
solicitations of certain Shareholders and brokers which may be conducted by
one or more of our Directors or by certain of our officers or employees.
We may request banks and brokers or other similar agents or fiduciaries for
the voting instructions of beneficial owners and reimburse the expenses
incurred by such agents or fiduciaries in obtaining such instructions. As
of the date of this mailing, however, we have not made any contracts or
arrangements for such solicitations, hence we cannot identify any parties
or estimate the cost of such solicitation.
Only Shareholders of record as of the close of business on April ,
1999 (the "Record Date") will be entitled to vote at the Meeting.
Representation of a majority of our shares of common stock outstanding on
such date, either in person or by proxy, constitutes a quorum for the
Meeting. When a quorum is present, the vote by the holders of a majority
of the shares represented at the Meeting shall decide the proposals to be
voted upon at the Meeting. As of the Record Date, we had outstanding
2,128,255 shares of common stock, $.002 par value ("Common Stock"), with
each share being entitled to one vote.
1. SECURITY OWNERSHIP OF MANAGEMENT AND PRINCIPAL STOCKHOLDERS.
This table sets forth, as of the date of this Proxy Statement, and as
adjusted for the sale of Option Stock, the stock ownership of each person
we know to be the beneficial owner of five (5%) percent or more of our
common stock, of all our directors individually and of all our directors
and officers as a group. Each person listed below has sole voting and
investment power with respect to the shares shown, except as noted.
Name & Address Shares Beneficially Owned
of Beneficial Owner -------------------------
- -------------------- Number Percent
------ -------
Sissel B. Greenberg(2) 160,000 7.1%
3033 S. Parker Rd., #120
Aurora, CO 80014
William Nandor(3) 18,000 0.8%
2698 Gapwall Court
Pleasanton, California 94566
Simona Katz Yuffa(4) 15,000 0.7%
3033 S. Parker Rd., #120
Aurora, CO 80014
John M. Gerber, Esq.(5) -0- 0.%
1601 Market Street, Suite 2450
Philadelphia, PA 19103
Todd Huss(6) 84,000 3.8%
3033 S. Parker Rd., #120
Aurora, CO 80014
Kevin O'Brien(7) 20,000 0.9%
3033 S. Parker Rd., #120
Aurora, CO 80014
Equisition Capital, LLC(8) 353,230 16.6%
1601 Market Street, Suite 2450
Philadelphia, PA 19103
Birgit LaFace 108,000 5.1%
1168 Olympic View Lane
Avacortas, WA 98221
Directors and Officers as 288,600 12.1%
a Group (6 persons)
- ------------------------------------
(1) Shares not outstanding but deemed beneficially owned by virtue of
the individual's right to acquire them as of the date of this Proxy
Statement, 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.
(2) Includes incentive stock options to purchase 50,000 shares of the
Common Stock at an exercise price of $.6875 per share, 40,000 shares
of the Common Stock at an exercise price of $1.875 per share, 20,000
shares of the Company's common stock at an exercise price of $2.50
per share and 25,000 shares of the Common Stock at an exercise price
of $3.25 per share, all of which were granted under the Company's
Stock Incentive Plan. Also includes non-qualified stock options to
purchase 3,000 shares of the 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 exercisable to purchase up to
100,000 shares of common stock at a price equal to the market price
of the Common Stock on the date of grant, subject to future grant
and vesting.
(3) Includes non-qualified stock options exercisable to purchase 5,000
shares of Common Stock at an exercise price of $3.25 per share and
non-qualified stock options exercisable to purchase 10,000 shares of
Common Stock at an exercise price of $3.50 per share.
(4) Includes non-qualified stock options exercisable to purchase 5,000
shares of Common stock at an exercise price of $3.25 per share and
non-qualified stock options exercisable to purchase 10,000 shares of
Common Stock at an exercise price of $3.50 per share.
(5) Does not include non-qualified stock options exercisable to purchase
10,000 shares of the Common Stock at an exercise price of $1.00 per
share which are subject to future vesting.
(6) Includes incentive stock options exercisable to purchase 25,000
shares of the Common Stock at an exercise price of $.6875, 20,000
shares of Common Stock at an exercise price of $2.50 per share,
incentive stock options exercisable to purchase 5,000 shares of
Common Stock at an exercise price of $3.25 per share, and incentive
stock options exercisable to purchase an additional 20,000 shares of
Common Stock at an exercise price of $3.50. Does not include
additional Incentive Stock Options exercisable to purchase an
additional 5,000 shares of Common Stock at an exercise price of
$3.50 per share which are not yet vested. Does not include
additional incentive stock options exercisable to purchase up to
50,000 shares of Common Stock at an exercise price equal to the
market value of the Company's Common Stock on the date of grant,
which additional incentive stock options are subject to future grant
and vesting.
(7) As part of his employment agreement as Chief Operating Officer of
the Company, Mr. O'Brien was granted incentive stock options
exercisable to purchase 20,000 shares of Common Stock at an exercise
price of $.6875. Does not reflect additional incentive stock
options exercisable to purchase up to 40,000 shares of Common Stock
at exercise prices equal to the fair market value of the Company's
Common Stock on the date of grant which may be granted to Mr.
O'Brien on the first and second anniversaries of his employment,
subject to his continued employment on those dates.
(8) Equisition Capital, LLC is a Delaware limited liability company
whose managers are David M. M. Taffet, Todd M. Spehler and Therese
Zangara. Voting and investment power with respect to the securities
beneficially owned by Equisition Capital, LLC is exercised by its
managers. Mr. Taffet is the indirect controlling voting equity
member of Equisition Capital, LLC. Mr. Taffet, Mr. Spehler and Ms.
Zangara disclaim beneficial ownership of shares owned by Equisition
Capital, LLC for purposes of Section 16 under the Exchange Act.
Also does not give effect to the issuance of additional securities
in the event the Second Stock Purchase Agreement is ratified and
consummated.
Certain Relationships and Related Transactions
Stock Redemption
On December 27, 1996, we 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. We used $624,325
of the net proceeds to redeem from certain former securityholders an
aggregate of 189,180 shares of Common Stock and 32,500 Class C Warrants.
The redemption consisted of all the equity securities of the Company owned
by these former securityholders. We undertook this redemption in order to
facilitate a secondary public offering of our securities which we
successfully completed on April 25, 1997. The redemption was also
undertaken to expedite our application to have our 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.
All transactions between the Company and our 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
our independent, disinterested Directors.
Infusion Capital Agreements
Effective February 26, 1999, the Company entered into an Agreement
Regarding Basic Terms with Infusion Capital Partners, LLC ("Infusion") (the
"Basic Agreement"). Under the terms of the Basic Agreement, effective
March 11, 1999, the Company entered into a Management Services Agreement
with Infusion and a First Stock Purchase Agreement with Equisition Capital,
LLC ("Equisition"). Mr. David M. M. Taffet would be deemed a controlling
person of both Infusion and Equisition.
Under the terms of the Management Services Agreement, Infusion will
provide certain financial advisory services for the Company for an initial
term of one year. In consideration of those services, Infusion received an
initial payment of $10,000, will receive additional monthly payments of
$5,000 payable over the next three months and an additional $25,000 payable
upon consummation of a Second Stock Purchase Agreement described below,
until a total of $50,000 has been paid. In addition, concurrently with the
consummation of the Second Stock Purchase Agreement, Infusion will receive
a warrant exercisable for three years to purchase 50,000 shares of the
Company's Common Stock at an exercise price of $.625 per share.
Under the terms of the First Stock Purchase Agreement, Equisition
purchased an aggregate of 353,230 shares of the Company's Common Stock at a
price of $.625 per share. In addition, Equisition exercised its right to
designate one person to serve as a member of the Company's Board of
Directors by designating John M. Gerber, who became elected to serve as an
outside director of the Company effective March 12, 1999. Mr. Gerber is a
licensed attorney practicing in Philadelphia, Pennsylvania who serves as
corporate counsel to Infusion and Equisition.
The Basic Agreement also provides for the execution and delivery of a
Second Stock Purchase Agreement more fully described below, subject to the
approval of the Company's shareholders which is being sought by the
solicitation of proxies pursuant to this Proxy Statement.
Compliance with Section 16(a) of the Exchange Act
Section 16(a) of the Securities Exchange Act of 1934 (the "Exchange Act")
requires any person who owns more than ten percent of any class of any
equity security which is registered pursuant to Section 12 of the Exchange
Act, or who is a director or an officer of the issuer of such security, to
file reports of ownership and changes in ownership with the Securities and
Exchange Commission (the "SEC"). Directors, officers, and greater than
ten-percent shareholders are also required by SEC regulation to furnish the
issuer of such securities with copies of all Section 16(a) reports filed.
Because we do not have a class of equity securities which is registered
pursuant to Section 12 of the Exchange Act, no persons are required to file
reports of ownership and changes in ownership with the SEC, or to provide
us with copies of such reports.
2. SECOND STOCK PURCHASE AGREEMENT AND RELATED TRANSACTIONS.
The following discussion is qualified in its entirety by its reference to
the more detailed information appearing elsewhere herein, including the
Second Stock Purchase Agreement and Agreement Regarding Basic Terms, which
have been attached to this Proxy Statement as Appendices A and B and which
are incorporated herein by this reference. Shareholders should examine
carefully this Statement and the Appendices in their entirety.
Background of the Transaction
Throughout fiscal 1999, the Company engaged in active discussions with
several parties in an effort to obtain additional working capital to enable
the Company to (i) expand its e-commerce marketing activity (ii) reduce
debt and (iii) provide additional general working capital. Following
extensive negotiations, the Company has entered into certain agreements
described below with Infusion Capital Partners, LLC ("Infusion") and
certain affiliated entities (hereafter collectively referred to as the
"Infusion Agreements").
Agreement Regarding Basic Terms
The Company has entered into the Basic Agreement with Infusion which
serves as an omnibus agreement for the various transactions covered by the
Infusion Agreements, all of which are either with Infusion or affiliates of
Infusion. The Basic Agreement provides for the execution of the following
further agreements:
1. Management Services Agreement with Infusion
2. First Stock Purchase Agreement with Equisition Capital, LLC
3. E-Commerce Services Agreement with MeridianTelesis, LLC
4. Second Stock Purchase Agreement with Infusion
Effective March 11, 1999, the Company executed and delivered in a
concurrent closing the Management Services Agreement, the First Stock
Purchase Agreement and deferred execution of the E-Commerce Services
Agreement which are summarized below.
Management Services Agreement
Under the Management Services Agreement, the Company engaged the services
of Infusion to provide financial advisory and other related services for an
initial term of one year. Under the agreement, the Company will pay to
Infusion the sum of $50,000, payable as follows: (i) $10,000 was paid at
closing; (ii) the sum of $15,000 is payable in three consecutive monthly
installments of $5,000 each; and (iii) the remaining $25,000 is payable
upon and subject to the consummation of the Second Stock Purchase Agreement
in the same manner as the initial $25,000 in payments. In addition,
subject to consummation of the Second Stock Purchase Agreement, the Company
has also agreed to issue to Infusion as an additional financing fee a
warrant exercisable for three years to purchase 50,000 shares of the
Company's Common Stock at an exercise price of $.625 per share. In the
event the Second Stock Purchase Agreement does not close, Infusion's cash
compensation under the Management Services Agreement and the number of
shares issuable under Infusion's Warrant will be reduced by a factor of
56%.
First Stock Purchase Agreement
The Company also consummated the First Stock Purchase Agreement pursuant
to which Equisition purchased a total of 353,230 shares of the Company's
Common Stock for $.625 per share, or a total purchase price of $220,768.75.
The shares issued to Equisition represented immediately prior to their
issuance 19.9% of the Company's then issued and outstanding shares of
Common Stock. In addition, under the First Stock Purchase Agreement,
Equisition had the right to designate one person to serve as a member of
the Company's Board of Directors, which Equisition exercised by designating
John M. Gerber as a director of the Company. Mr. Gerber was elected as a
member of the Company's Board of Directors effective March 12, 1999. Mr.
Gerber serves as legal counsel to Infusion, Equisition and its other
affiliated entities.
E-Commerce Services Agreement
Under the E-Commerce Services Agreement, MeridianTelesis, LLC will assist
the Company in developing its e-commerce marketing. MeridianTelesis, LLC
is an affiliated entity of Infusion and Equisition in which Mr. David M. M.
Taffet serves as a control person. While the total scope of services to be
performed under the E-Commerce Services Agreement has yet to be determined,
the Company has agreed to pay at least $175,000 to develop its e-commerce
marketing in consultation with MeridianTelesis, LLC.
Second Stock Purchase Agreement
Concurrently with the execution and delivery of the First Stock Purchase
Agreement and Management Services Agreement, the Company also entered into
the Second Stock Purchase Agreement with Infusion, the material terms of
which will be summarized below. However, while the First Stock Purchase
Agreement and Management Services Agreement became effective and operative
immediately upon execution, actual performance and consummation of the
transactions provided for under the Second Stock Purchase Agreement is
expressly subject to and contingent upon the approval of such transactions
by the Company's shareholders. The Company is seeking shareholder approval
of the Second Stock Purchase Agreement in order to comply with the
requirements of the Nasdaq Stock Market Rules of Governance. Management of
the Company is seeking such shareholder approval at the Special Meeting.
Summary of Second Stock Purchase Agreement
The following is a summary of certain provisions of the Second Stock
Purchase Agreement, a copy of which is attached as Appendix A to this
Statement and incorporated herein by this reference. This summary is
qualified in its entirety by reference to the Second Stock Purchase
Agreement. Unless otherwise indicated, the capitalized terms set forth
below shall have the meanings ascribed to them in the Second Stock Purchase
Agreement.
General
If consummated, the Second Stock Purchase Agreement contemplates the sale
by the Company of (i) 446,770 shares of Series A Convertible Preferred
Stock, par value $.10 per share (the "Preferred Stock") and (ii) a warrant
exercisable for three years to purchase 160,000 shares of the Company's
Common Stock at an exercise price of $2.05 per share (the "Warrant"). The
purchase price for the Preferred Stock and Warrant will be $279,231.25.
The Second Stock Purchase Agreement was entered into between the Company
and Infusion. Upon demand by the Company, Infusion will identify an
investor to consummate the transactions covered by the agreement
("Investor"). The Investor may be Equisition or some other entity
identified by Infusion. No determination has been made as to the identity
of the Investor, although it is expected that the Investor will be
Equisition.
Rights and Preferences of Series A Convertible Preferred Stock
Stated Value: $.625 per share
Dividends: Holders of the Preferred Stock shall be entitled to
receive dividends at the annual rate of 10% per annum
based upon the Stated Value per share. The dividend
will be payable by the issuance by the Company of
shares of Common Stock valued at their fair market
value on the dividend payment date. Fair market
value shall be deemed the average closing bid price
of the Company's Common Stock on the over-the-counter
market for the 15 trading days immediately preceding
the dividend payment date.
Liquidation Rights: Holders of the Preferred Stock shall be entitled to a
liquidation preference equal to the Stated Value per
share in the event of the dissolution and liquidation
of the Company.
Redemption: The Company shall neither have the right nor the
obligation to redeem any of the outstanding Preferred
Stock, and holders of the Preferred Stock shall not
have the right to demand the redemption of any of the
outstanding Preferred Stock.
Voting Rights: Holders of the shares of Preferred Stock shall be
entitled to vote with the holders of shares of Common
Stock as a single class on all matters presented for
a vote to the shareholders of the Company.
Conversion: Holders of the shares of Preferred Stock shall have
the option at any time to convert each share of
Preferred Stock into one share of the Company's
Common Stock. In addition, the Company shall have
the right to compel the conversion of all outstanding
shares of Preferred Stock into an equal number of
shares of Common Stock in the event there exists an
effective registration statement registering for sale
under the Securities Act the shares of the Company's
Common Stock issuable upon such conversion, and the
closing bid price of the Company's Common Stock has
been equal to or greater than $.9375 per share for 20
or more consecutive trading days.
Terms of Warrant
The Warrant shall be exercisable for three years to purchase 160,000
shares of the Company's Common Stock at an exercise price of $2.05 per
share. It is anticipated, although there is no commitment, that the
Investor, if not Equisition, will reassign a portion of the Warrant to
Equisition in proportion of the percentage ownership of each in the
Company's Common Stock.
Registration Rights
Equisition, Infusion and the Investor have been granted certain
registration rights with respect to the securities of the Company issued
pursuant to the Infusion Agreements. All registration rights are
exercisable at the sole cost and expense of the Company.
Conditions Precedent
In addition to the approval of the consummation of the Second Stock
Purchase Agreement by the Company's shareholders, the obligations of the
parties under the Second Stock Purchase Agreement are contingent upon the
receipt of customary consents and approvals of governmental bodies and
third parties, that there be no material adverse change in the business,
operations or assets of the Company prior to the closing, the receipt of
customary documents and other conditions customary in transactions of this
nature. Additionally, consummation of the sale is subject to certain other
conditions, including the accuracy of the Company's representations and
warranties in the Second Stock Purchase Agreement.
Representations and Warranties; Covenants
The Second Stock Purchase Agreement contains representations and
warranties with respect to the Company which are generally typical in a
transaction of this type. The Company has represented and warranted, among
other things, that it has good and marketable title to its assets and
certain other matters. The Company has covenanted, among other things, to
grant Infusion and the Investor access to its operations and records during
the period prior to the closing and to conduct its business prior to the
closing only in the ordinary course and to use its best efforts to preserve
and maintain good relationships with its clients, customers, vendors and
employees.
Use of Proceeds
The Company has agreed to use at least $175,000 of the combined proceeds
of the First and Second Stock Purchase Agreements to engage the services of
MeridianTelesis, LLC under the E-Commerce Services Agreement in order to
establish and expand the Company's e-commerce capabilities. The remaining
proceeds of such transactions will be used to cover expenses of the
transactions, to pay Infusion pursuant to the Management Services
Agreement, to reduce the Company's outstanding bank indebtedness, to
acquire new stores and renovate existing stores and for general working
capital.
Management Employment Agreements - Interest of Management in Infusion
Transactions
Concurrently with the execution and delivery of the First Stock Purchase
Agreement, the Company entered into new written Employment Agreements with
Sissel Greenberg, as President, Todd Huss, as Chief Financial Officer, and
Kevin O'Brien, as Chief Operating Officer. Summarized below, those written
Employment Agreements may be deemed to constitute or represent a financial
interest of management in the Infusion transactions:
The Company's Employment Agreement with Sissel Greenberg has an initial
term of three years and provides for payment of a base salary of $130,000
per year. In addition, Ms. Greenberg will be entitled to receive a bonus
equal to 5% of the Company's annual pre-tax net income, not to exceed
$50,000 per year. Finally, the agreement provides for the grant to Ms.
Greenberg of incentive stock options exercisable to purchase up to 150,000
shares of the Company's Common Stock as follows: (i) 50,000 options
exercisable at a price of $.6875 per share were granted and vested
immediately upon execution of the agreement; (ii) 50,000 options will be
granted on the first anniversary of the date of the agreement having an
exercise price equal to the current market price of the Company's Common
Stock on the date of grant; and (iii) 50,000 will be granted on the second
anniversary date of the date of the agreement having an exercise price
equal to the current market price of the Company's Common Stock on that
date of grant.
The Company's Employment Agreement with Todd Huss also has an initial
term of three years and provides for payment of a base salary of $60,000
per year. In addition, Mr. Huss will be entitled to receive a bonus equal
to 5% of the Company's annual pre-tax net income, not to exceed $25,000 per
year. The agreement also provides for the grant to Mr. Huss of incentive
stock options exercisable to purchase up to 75,000 shares of the Company's
Common Stock as follows: (i) 25,000 options exercisable at a price of
$.6875 per share were granted and vested immediately upon execution of the
agreement; (ii) 25,000 options will be granted on the first anniversary of
the date of the agreement having an exercise price equal to the current
market price of the Company's Common Stock on the date of grant; and (iii)
25,000 will be granted on the second anniversary date of the date of the
agreement having an exercise price equal to the current market price of the
Company's Common Stock on that date of grant.
The Company's Employment Agreement with Kevin O'Brien has an initial term
of three years and provides for payment of an annual base salary of $69,000
per year. In addition, Mr. O'Brien will be entitled to receive a bonus
during the first full fiscal year of employment, subject to and contingent
upon the Company achieving a 5% increase in comparable same store sales
during the fiscal year ending January 28, 2000 over the prior fiscal year,
equal to $5,000. During the remaining two years of the agreement's three
year term, Mr. O'Brien will be entitled to receive a bonus equal to 5% of
the increase in comparable same store sales compared to the previous fiscal
year's sales up to a maximum of $25,000 per year. Finally, the agreement
provides for the grant to Mr. O'Brien of incentive stock options
exercisable to purchase up to 60,000 shares of the Company's Common Stock
as follows: (i) 20,000 options exercisable at a price of $.6875 per share
were granted and vested immediately upon execution of the agreement; (ii)
20,000 options will be granted on the first anniversary of the date of the
agreement having an exercise price equal to the current market price of the
Company's Common Stock on the date of grant; and (iii) 20,000 will be
granted on the second anniversary date of the date of the agreement having
an exercise price equal to the current market price of the Company's Common
Stock on that date of grant.
Governance - Board of Directors
Under the terms of the Second Stock Purchase Agreement, upon consummation
of the transactions covered thereby, the Company's Board of Directors shall
be constituted to consist of five directors, of which the Investor under
the Second Stock Purchase Agreement shall be entitled to designate a number
of directors in proportion to its percentage equity interest in the
Company, but in no event less than one person. Initially, the Investor
shall have the right to designate one member to the Board of Directors in
addition to Mr. Gerber who was elected to serve as a member of the Board of
Directors by Equisition under the First Stock Purchase Agreement. As a
result, immediately following the consummation of the Second Stock Purchase
Agreement, the Infusion affiliates will have the right to designate two out
of the five members of the Company's Board of Directors.
Recommendation of the Board of Directors
The Board of Directors of the Company has approved the execution of the
Second Stock Purchase Agreement and recommends the approval by the
Company's shareholders of the transactions provided for therein. The Board
of Directors has concluded that the terms of the Second Stock Purchase
Agreement are fair and reasonable under the circumstances.
The Company has neither obtained nor intends to obtain a fairness opinion
from a qualified business appraiser, certified public accountant or
investment banker regarding the fairness of the terms of the Second Stock
Purchase Agreement. The terms of the Second Stock Purchase Agreement are
the result of arms-length negotiations by the Company's management and its
advisors and does not reflect terms as they have been determined by an
independent expert.
FOR THE REASONS SET FORTH ABOVE, THE BOARD OF DIRECTORS RECOMMENDS A VOTE
IN FAVOR OF THE AUTHORIZATION AND APPROVAL OF THE SECOND STOCK PURCHASE
AGREEMENT AND THE CONSUMMATION BY THE COMPANY OF THE TRANSACTIONS PROVIDED
FOR THEREIN, ALL IN ACCORDANCE WITH AND SUBJECT TO ITS TERMS AND
CONDITIONS.
3. EQUISITION WARRANTS
Under the terms of the First Stock Purchase Agreement, in the event the
Company is unable to obtain Shareholder approval for or otherwise fails to
complete the second financing covered by the Second Stock Purchase
Agreement, then the Company has agreed to issue Equisition a pro rata
portion of the 160,000 warrants issuable under the Second Stock Purchase
Agreement equal to the percent that the funding under the First Stock
Purchase Agreement ($220,768.75) bears to the total agreed upon funding of
$500,000. This would represent 44%, or 70,400 of the total 160,000
warrants provided for under the Second Stock Purchase Agreement.
However, Rules of Governance of the Nasdaq Stock Market preclude the
Company from issuing, without shareholder approval, equity securities
representing or securities exercisable to acquire equity securities
representing more than 20% of the Company's total outstanding shares of
Common Stock at a price below the greater of the Company's book value or
the prevailing market price of the Company's Common Stock without
shareholder approval. Accordingly, in order for the Company to be
permitted under the Nasdaq rules of governance to issue to Equisition
70,400 of the 160,000 warrants bargained for, such issuance can only be
undertaken pursuant to the approval of the Company's Shareholders.
In view of the foregoing, the Company is herewith soliciting proxies to
obtain shareholder approval for the issuance to Equisition of 70,400
warrants, each exercisable for three years to purchase one share of the
Company's Common Stock at an exercise price of $2.05 per share, which
shareholder approval, if obtained, would become operative only in the event
the shareholders fail to approve or the Company otherwise is unable to
consummate the financing under the Second Stock Purchase Agreement.
Recommendation of the Board of Directors
The Board of Directors of the Company has approved the issuance to
Equisition of the 70,400 warrants described above and has concluded that
the terms of such warrants are fair and reasonable under the circumstances.
FOR THE REASONS SET FORTH ABOVE, THE BOARD OF DIRECTORS RECOMMENDS A VOTE
IN FAVOR OF THE AUTHORIZATION AND APPROVAL OF THE COMPANY'S AGREEMENT TO
ISSUE TO EQUISITION 70,400 WARRANTS IN ACCORDANCE WITH THE FOREGOING IN THE
EVENT IT IS OTHERWISE UNABLE TO CONSUMMATE THE TRANSACTIONS PROVIDED FOR IN
THE SECOND STOCK PURCHASE AGREEMENT.
4. OTHER MATTERS
We are not aware of other matters which may come before the Meeting. The
Directors' designees or other persons named in the accompanying form of
proxy will vote said proxy in accordance with their judgment if any other
matter does properly come before the Meeting. A majority of those votes
present at the Meeting cast in favor of any such matter will result in the
passage of such matter.
PREMIER CONCEPTS, INC.
By: /s/ Todd Huss
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Todd Huss, Secretary
