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FORM 10-KSB
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended January 31, 1999
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from to
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Commission file number 33-42701
PREMIER CONCEPTS, INC.
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(Exact Name of Registrant as Specified in its Charter)
Colorado 84-1186026
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(State or other jurisdiction I.R.S. Employer
of incorporation or organization) Identification
number
3033 South Parker Road, Suite 120, Aurora, Colorado 80014
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (303) 338-1800
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which registered
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None None
Securities registered pursuant to Section 12(g) of the Act:
Title of Each Class
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None
Check whether the Issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for
such shorter period that the Issuer was required to file such reports), and
(2) has been subject to such filing requirements for the past 90 days.
Yes [X] No [ ]
Check if there is no disclosure of delinquent filers in response to Item
405 of Regulation S-B contained in this form, and no disclosure will be
contained, to the best of Issuer's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form
10-KSB or any amendment to this Form 10-KSB.
[ ]
The Issuer's revenues for the fiscal year ended January 31, 1999 were
$12,705,602.
As of May 12, 1999, the aggregate market value of the Common Stock of the
Issuer based upon the closing bid price of the Common Stock as quoted on
the NASDAQ held by non-affiliates of the Issuer was $1,366,585. As of May
12, 1999, 1,064,128 shares of Common Stock of the Issuer were outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
The Registrant incorporates by this reference the following documents:
Part III
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Item 9. Directors, Executive Officers, Promotions and Control
Persons, Compliance with Section 16(a) of the Exchange
Agreement
Item 10. Executive Compensation
Item 11. Security Ownership of Certain Beneficial Owners and
Management
Item 12. Certain Relationships and Related Transactions
The foregoing are incorporated by reference from the Registrant's
Definitive Proxy Statement relating to its Annual Meeting of Shareholders
which will be filed as an amendment within 120 days of January 31, 1999.
Item 13. Exhibits
1. Incorporated by reference from the Company's Registration
Statement on Form SB-2; SEC File No. 333-08741.
2. Incorporated by reference from the Company's Registration
Statement on Form SB-2; SEC File No. 333-19901.
3. Incorporated by reference from the Company's Registration
Statement on Form S-1; SEC File No. 33-42701.
4. Incorporated by reference from the Company's Annual Report
on Form 10-KSB for the year ended January 25, 1998.
Forward-Looking Statements
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In addition to historical information, this Annual Report contains
"forward-looking statements" within the meaning of the Private Securities
Litigation Reform Act of 1995, and are thus prospective. The forward-
looking statements contained herein are subject to certain risks and
uncertainties that could cause actual results to differ materially from
those reflected in the forward-looking statements. Factors that might
cause such a difference include, but are not limited to, competitive
pressures, changing economic conditions, those discussed in the Section
entitled "Management's Discussion and Analysis of Financial Condition and
Results of Operations," and other factors, some of which will be outside
the control of the Company. Readers are cautioned not to place undue
reliance on these forward-looking statements, which reflect management's
analysis only as of the date hereof. The Company undertakes no obligation
to publicly revise these forward-looking statements to reflect events or
circumstances that arise after the date hereof. Readers should refer to
and carefully review the information in future documents the Company files
with the Securities and Exchange Commission.
Reverse Split
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On April 24, 1999, the Company effected a 1-for-2 Reverse Split (the
"Reverse Split") of its outstanding shares of Common Stock, Warrants,
Options and other securities. All share and per share information
contained in this Annual Report relating to the Company's Common Stock and
other securities has been adjusted to give retroactive effect to the
Reverse Split.
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PART I
BUSINESS
OVERVIEW
Operating under the names "Impostors" and "Elegant Pretenders,"
Premier Concepts, Inc. (the "Company" or "Premier") 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 a national chain of 36 operating retail stores, the Company sells
jewelry that emulates classic fine jewelry as well as pieces designed by
famous jewelers such as Tiffany & Co.(-TM-), Cartier(-TM-), Bulgari(-
Registered Mark-) and Harry Winston. The product line also includes
replicas of jewelry owned by celebrities. Faux jewelry is created with
layered gold, cubic zirconia and Austrian crystal to simulate the look of
fine jewelry. Also recently introduced is a new collection of genuine
sterling silver jewelry featuring semi-precious and synthetic stones. The
products are purchased from several domestic vendors and from vendors in
China, Hong Kong, Italy, Korea, Spain, Taiwan and Thailand.
The Impostors and Elegant Pretenders 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 stores
are located in shopping malls and tourist locations, currently in Southern
California, Northern California, the states of Arizona, Colorado, Florida,
Louisiana, Maryland, Nevada, New Jersey, New York, Pennsylvania, Virginia,
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.
Since January 27, 1997, the Company has opened thirteen (13) additional
retail locations. During the same period, nine (9) retail stores were
closed due to lease expirations and unprofitable operations, bringing the
total number of stores currently operating to thirty-six (36).
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 merchandising strategies.
Premier's business strategy the past four years has included growing
the retail chain in profitable markets, closing unprofitable stores,
remodeling existing stores, development of new marketing channels including
direct mail, and the marketing of its high-end jewelry reproductions and
store concept internationally through licensing arrangements. Although
record revenues of $12,705,602 were achieved in its fiscal 1999 year, loss
from operations increased from $484,030 for the year ended January 25,
1998, to $1,051,573 for the year ended January 31, 1999. The Company's
strategies continue to focus on the leveraging on its name and goodwill to
achieve additional distribution for its products as well as seeking new
retail locations that offer potential for above average return on
investment.
PRINCIPAL PRODUCTS
The Company's products are comprised of approximately 55% fine jewelry
reproductions and emulations of merchandise inspired by classic designers
such as Cartier(-TM-), Tiffany & Co.(-TM-), Bulgari(-Registered Mark-) and
Harry Winston, and approximately 35% of 14-karat gold featuring cubic
zirconia and other synthetic stones and 5% sterling silver with semi-
precious stones and cubic zirconia. The jewelry ranges from solitaire
rings and faux pearl necklaces to earrings, pendants and bracelets. Since
the 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.
Approximately 2,500 different jewelry items are offered, with none
representing more than 10% of the 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 products are selected from existing inventory offered by
vendors. However, from time to time, purchases are made of exclusive items
that are manufactured under special order for the Company. Because the
products are high-quality emulations of classic fine jewelry designs that
change little from year to year, no significant problems associated with
inventory obsolescence have been experienced.
REMODELING AND EXPANSION STRATEGY
During the past three years, nine existing stores have been remodeled
at an average cost of $30,000 per store. Further remodeling of existing
locations will depend upon the availability of working capital from future
operations, or additional capital infusion, of which there can be no
assurance. Further remodeling of existing locations will also depend on the
lease terms, as well as the expected return on such leasehold improvements.
Since January 26, 1998, the Company has opened five additional retail
stores and closed six locations due to unprofitable operations and lease
expirations. Further expansion of the retail chain beyond the current 36
locations will require additional capital infusion.
In selecting and evaluating new sites, Premier has developed criteria
that consider local population demographics, customer base, sales per
square foot of other retailers in the area, and most significantly,
location. Of particular focus are centers and malls with a heavy tourist
trade. Absent a high 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 continues to pursue
opportunities in casinos and high-profile hotels. Financial projections
for any new proposed site are prepared and any location where management
believes break-even operations cannot be achieved within a six to twelve
month period are rejected. 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, management believes that it has the present capacity to
handle the accounting, informational and inventory tracking needs for up to
100 stores. In addition to developing new store locations, Premier 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. Management is also evaluating merger and acquisition
opportunities beyond its core business that would potentially enhance
shareholder value. 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, nearly 99% of total revenues are derived from retail store
sales. The Company also wholesales products nationally and internationally
to licensees and a few smaller retailers. Limited resources exist to focus
on the international demand, however, products have been sold in limited
amounts to accounts in Australia, Brazil, Chile, and Taiwan. Plans to
increase the international wholesale business by hiring additional persons
and/or agents to represent the line of products internationally are subject
to the availability of working capital. The ability to fully develop the
business opportunities 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.
In November 1997, a catalogue was launched featuring approximately 200
jewelry styles, which initially has been distributed through the Company's
tourist retail stores. As the catalogue generates sales both at the
corporate office and at the store level, it is difficult to measure the
total sales generated by the catalogue to date. However, although direct
sales from the catalogue independent of the stores have been minimal, plans
are to continue to market a new catalogue annually featuring best sellers.
Although, in the future, distribution of the catalogue may broaden to
include direct mailings to new potential customers, the current plans call
for continued distribution primarily through the tourist locations.
The Company has also explored multimedia distribution of its jewelry.
In October 1996, an Internet web site and catalogue (www.impostors.com) was
developed and completed. Subject to availability of capital, plans are to
continue to update the site and expand the Internet distribution channels,
as new technology becomes available. Additionally, discussions have been
initiated to market the concept and products to the home shopping networks.
However, as of the date of this filing, no contracts have been signed.
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. Faux jewelry
distinguishes itself 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 Premier's faux jewelry is priced in the $30 to $100
range. The 14-karat gold collection has price points 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 target market is 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.
This target market is expected to continue to grow in accordance with the
continued increases in the number of women entering the professional
workplace. The Company also expects to benefit from the maturation of the
baby boomer generation that, according to the United States Census Bureau,
will have reached the average 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 manufacture certain products specifically for Premier, for which
the Company will typically be given a 12 to 18 month exclusivity for that
item by the vendor. Premier's relationships with its vendors of high-
quality product are 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 60% from domestic
vendors and 40% from vendors in 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
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 department stores and other
retailers of faux jewelry, including home shopping channels, 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. The Company's exclusive emphasis on the faux jewelry specialty
market niche is designed to attract the customer who has already decided to
purchase designer inspired jewelry rather than either costume jewelry or
the high cost piece of genuine 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, which 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 25 faux jewelry stores,
Mystique which has 4 stores in Florida, and Diamond Essence which has a
retail store in New York and another in 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 distribution channels, and
continue to develop strong vendor relations, none 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 Mark-, Impostors De Classique Copy Jewels(-Registered Mark-),
Impostors Copy Jewels(-Registered Mark-), Elegant Pretenders(-Registered
Mark-), and The Latest In Faux(-Registered Mark-). 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, it 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, there is 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 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 four licenses to former Impostors
franchisees granting to them the right to use the Impostors trademark in a
total of four 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. The Company has also licensed the use of the Impostors
name to individuals in Brazil who markets the company's products on a
retail and wholesale basis.
EMPLOYEES AND CONSULTANTS
The Company currently has approximately 85 full-time and 110 part-time
employees, of which 19 are employed in the Company's corporate offices.
Additional part-time employees are typically hired during the peak holiday
season. A manager and assistant manager, as well as one or more sales
personnel, staff each retail store. The Company also has two regional
store managers (East and West Coasts). Store managers are hired and
supervised by the regional managers. All management and staff personnel
are employed directly by the Company.
In March 1999, the Company entered into Employment Agreements with its
President, Sissel Greenberg, its Chief Financial Officer, Todd Huss, and
its Chief Operating Officer, Kevin O'Brien. Each Employment Agreement has
a term of three years.
In March 1999, the Company entered into an Agreement Regarding Basic
Terms (the "Basic Agreement") with Infusion Capital Partners, LLC
("Infusion"). Under the Basic Agreement, the Company also entered into a
Management Services Agreement with Infusion, a First Stock Purchase
Agreement with Equisition Capital, LLC ("Equisition"), an affiliate of
Infusion and has agreed to enter into a Second Stock Purchase Agreement
with Infusion and an E-Commerce Services Agreement with Meridian Telesis,
LLC, also an affiliate of Infusion.
SEASONALITY
The Company's business is highly seasonal with its mall locations
generating approximately 20% of revenues during the December holiday
season. The Company's 15 tourist locations experience fluctuations, based
upon such factors as seasonality, economic conditions and other factors
affecting tourism in their particular locations.
PROPERTIES
The Company currently maintains executive offices at 3033 S. Parker
Road, Suite 120, Aurora, Colorado 80014. The offices consist of 6,890
square feet, which the Company holds under a 5-year lease expiring in the
year 2003, for a rental of $7,464 per month. 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 36 current retail locations are operated under
commercial leases with expiration dates ranging from 1999 to 2012. Store
size varies from 310 to 1,200 square feet with annual sales ranging from
$200,000 to $1,400,000. Each lease requires the payment of a minimum base
rent and additional payments for operating expenses, taxes, insurance, and
in some cases an additional rent based upon a percent of gross sales. On a
daily basis, sales, margin and inventory turnover for each store location
are monitored. 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 existing commercial retail leases are in full force and effect as of
the date of this Report.
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.
MATTERS SUBMITTED TO VOTE OF SECURITY HOLDERS
The Company's 1998 Annual Meeting of Shareholders was held on January
21, 1999. At the meeting, the following matters were acted upon:
1. Election of Directors
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The following persons were elected to serve as members of the Board of
Directors:
Votes for Votes Against Abstentions
Sissel Greenberg 788,857 -0- 9,131
Simona Katz Yuffa 788,932 -0- 9,056
William Nandor 788,932 -0- 9,056
Jack Brandon 788,932 -0- 9,056
2. A proposal to increase the number of shares authorized to be issued
under the Company's Incentive Stock Option Plan by an additional 50,000
shares was approved:
Votes For Votes Against Abstentions
207,317 50,223 2,603
A proposal to adopt and approve a one-for-two reverse split of the issued
and outstanding shares of the Company's Common stock, and issued and
outstanding options, warrants and other rights convertible into shares of
Company Common Stock, at the Company's discretion in the future and subject
to the Company's determination was approved:
Votes For Votes Against Abstentions
771,107 26,378 503
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PART II
MARKET FOR THE REGISTRANT'S COMMON STOCK
AND RELATED SECURITY HOLDER MATTERS
Price Range of Common Stock.
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Since April 23, 1997, the Common Stock and Warrants have traded on The
Nasdaq Stock Market under the symbols "FAUX," and "FAUXW," respectively.
Those securities are temporarily trading under the symbols "FAUCD" and
"FWUCD" respectively, pursuant to a temporary exception. The reported high
and low trade information for the Common Stock is presented for the periods
beginning January 27, 1997, through May 2, 1999.
High Low
Fiscal Year 1998
First Quarter $7.00 $6.50
Second Quarter $8.76 $6.00
Third Quarter $8.50 $6.00
Fourth Quarter $7.12 $3.26
Fiscal Year 1999
First Quarter $5.50 $3.25
Second Quarter $4.75 $2.63
Third Quarter $3.50 $0.63
Fourth Quarter $1.125 $0.88
Fiscal Year 2000
First Quarter $2.375 $0.875
Second Quarter
(through May 12, 1999) $2.00 $1.375
(1) All prices have been adjusted to give retroactive effect to a
one-for-two reverse stock split that was effective on April 24, 1999.
The high and low sales prices of the Company's Common Stock on May 12,
1999, were $1.625 and $1.875, respectively, as listed on The Nasdaq Stock
Market. As of May 12, 1999 there were approximately 541 shareholders of
record of the Company's Common Stock.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITIONS 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
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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. Fiscal year ended January 31, 1999 contained fifty-three weeks
of operations.
Liquidity and Capital Resources
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On April 25, 1997 a secondary public offering was successfully
completed in which 550,000 units were sold, each unit consisting of one
share of Common Stock and one Class A Common Stock Purchase Warrant
(Warrant). Two Warrants entitle the holder to purchase one share of Common
Stock at a price of $10.00 during the three-year period ending April 21,
2000. The net proceeds of approximately $3.3 million was used to retire
$1,120,000 Convertible Promissory Notes (Convertible Notes). The
Convertible Notes were issued on December 27, 1997 as part of a bridge
financing which was used to repurchase shares of Common Stock from certain
shareholders and to provide working capital. An additional $273,887 of the
net proceeds was used to retire various other short-term notes. Of the
remaining $1.9 million, approximately $1.6 million was used to complete
payments for four stores opened in the fourth quarter of fiscal year ending
January 26, 1997, and to pay for the construction of eight new retail
stores and four stores remodeled during the fiscal year ending January 25,
1998.
At January 31, 1999 the cash balance of $221,273 was $584,776, or
approximately 73%, less than the cash balance of $806,049 at January 25,
1998. The reduction in the cash balance is mainly attributable to
approximately $629,000 in payments to construction vendors for projects
completed in the fourth quarter of fiscal year ended January 25, 1998, and
in connection with the construction and opening of five new locations and
three stores remodeled during the year ended January 31, 1999 as discussed
below.
The reduction in the cash balance also reflects a $75,000 principal
reduction on a Bank note payable. On May 28, 1998, the original lender was
paid in full and a new Bank Note was executed with a Colorado financial
institution. The Note bears interest at the Bank's prime lending rate plus
0.75%. A principal payment due on December 30, 1998 in the amount of
$112,000 was deferred until April 1, 1999 and paid on that date. The Note
matures on May 28, 1999, and discussions are ongoing with the lender
regarding renewal terms. As of January 31, 1999 the entire principal
balance of $560,000 is classified as a current liability. On September 11,
1998 a $50,000 short-term working capital loan was obtained to provide
funds for holiday inventory purchases. The Note bore interest at 12% and
matured on November 11, 1998. The Note was retired in November 1998.
During the year ended January 31, 1999 merchandise inventories
decreased $332,244, or approximately 14%, from $2,307,839 at January 25,
1998 to $1,975,595 at January 31, 1999. The decrease reflects tighter
inventory controls and a more focused merchandising effort put forth in the
fourth quarter of fiscal 1999.
Prepaid expenses and other current assets decreased $160,134, from
$257,429 at January 25, 1998, to $97,295 at January 31, 1999. The decrease
is primarily attributed to approximately $63,000 of federal and state
income tax payments made in fiscal 1998 that were refunded in fiscal 1999,
and approximately $70,000 of insurance claims collected in fiscal 1999 that
related to separate incidents involving a theft of merchandise from a
retail location, and a random firebombing incident. In addition,
approximately $48,000 of prepaid expenses associated with the openings of
stores in late fiscal 1998 and early fiscal 1999 were expensed during the
year ended January 31, 1999. Included in prepaid expenses and other current
assets at January 31, 1999 is a $25,000 leasehold improvement receivable
from a landlord for the new store located in West Nyack, New York.
As a result of the foregoing, current assets decreased by $1,077,154,
from $3,371,317 at January 25, 1998 to $2,294,163 at January 31, 1999.
During the year ended January 31, 1999, $835,347 was invested in
property and equipment, primarily associated with five new stores, and
remodeling of the existing Impostors locations at the Palm Desert Town
Center in Palm Desert, California, the Stoneridge Mall in Pleasonton,
California, and at Menlo Park in Edison, New Jersey. The following table
represents new stores opened during fiscal year ended January 31, 1999:
Store Location Date Opened
Elegant Pretenders The Riverwalk March, 8, 1998
New Orleans, LA
Impostors Franklin Mills March 19, 1998
Philadelphia, PA
Impostors Palisades Center April 3, 1998
West Nyack, NY
Impostors Fashion Outlet July 15, 1998
Las Vegas, NV
Impostors The Block at Orange November, 19, 1998
Orange, CA
In fiscal 1999, management enhanced its efforts to focus resources on
the retail locations that show positive performance trends. As part of
this strategy management has adopted an aggressive posture in regards to
lease re-negotiations to facilitate rent relief or lease terminations where
a turnaround in the sales performance appears unlikely. To this end, the
kiosk at Washington National Airport, Washington, D.C., and the stores
located in the Miami International Mall, Miami, Florida, and the St. Louis
Galleria in St. Louis, Missouri were closed due to continued poor sales
performance. As a result of these store closures, approximately $77,600 of
leasehold improvements was charged off during the year ended January 31,
1999. Also during the year ended January 31, 1999 the stores located at
Jackson Brewery in New Orleans, Louisiana, the Dallas Galleria in Dallas,
Texas, and the Brea Mall in Brea, California were closed upon expiration of
the lease terms.
As a result of the foregoing store openings and closings, property and
equipment, net of accumulated depreciation, increased $265,061, from
$2,434,315 at January 25, 1998 to $2,699,376 at January 31, 1999.
Trademark assets, representing the goodwill of the Impostors trademark
and other intellectual property, was acquired as part of the acquisition of
Impostors in March 1994. The asset is being amortized over a 10-year
period and had an amortized book value was $63,033 at January 31, 1999.
Deferred offering costs of $425,423 at January 26, 1997 increased by
$186,717 prior to completion of the secondary public offering on April 25,
1997, as noted above. These costs, totaling $612,140, were netted against
the offering proceeds.
On January 26, 1997, the Company recorded a $39,000 deferred tax asset
which resulted from certain net operating loss carry forwards used to
offset taxable book income for the year ended January 26, 1997. The net
loss recorded for the year ended January 25, 1998, resulted in a reversal
of the deferred tax asset due to the uncertainty of future benefits that
may result from the asset. No deferred tax assets have been recorded for
the year ended January 31, 1999.
As of January 31, 1999, total outstanding liabilities were $2,483,036
compared to $2,268,432 at January 25, 1998, an increase of $214,604.
Total current liabilities increased $140,774, from $2,091,986 at
January 25, 1998 to $2,232,760 at January 31, 1999, and is attributable to
the approximately $155,000 increase in accounts payable and other accrued
liabilities representing expenses incurred in the ordinary course of
business.
On January 31, 1999, $122,000 of accounts payable relating to the
spring 1998 construction of the store at Palisades Center in West Nyack,
New York was converted to a long-term note. The note requires monthly
installments of $5,000 including principal and interest at 10%, with a
single payment of $35,000 due January 1, 2000. Approximately $79,000 of
this note is due in fiscal 2000 and is classified as a current liability,
with the remaining $43,000 classified as long term debt.
As a result of the foregoing, working capital decreased by $1,217,928,
from $1,279,331 at January 25, 1998 to $61,403 at January 31, 1999.
Long-term debt, net of the current portion, was $49,032 at January 31,
1999, as compared to $14,600 at January 25, 1998. The increase reflects
the installment note discussed above.
As a result of the net loss for the year of $1,059,688, the
accumulated deficit increased from $1,948,682 at January 25, 1998 to
$3,008,370 at January 31, 1999. Also as a result of the net loss, total
stockholders' equity decreased from $3,713,356 at January 25, 1998 to
$2,653,668 at January 31, 1999.
Net cash provided by operating activities for the year ended January
31, 1999 was $352,329 compared with net cash used in operating activities
of $829,530 for the year ended January 25, 1998. The change was primarily
the result of the decreases in merchandise inventories and other assets,
and the increases in accounts payable and other accrued liabilities.
Cash used in investing activities of $835,347, represents investments
in stores as discussed above. This compares with net cash used by
investing activities of $864,520 during the year ended January 25, 1998,
which also represents investments in new stores and remodeled retail
locations.
Net cash used in financing activities for the year ended January 31,
1999, was $101,788, primarily representing the $75,000 principal reduction
and refinancing of the Bank note as discussed above, and payments on other
notes payable that were part of the acquisition of the Impostors retail
chain in March, 1994. The $101,788 used in financing activities compares
to net cash provided by financing activities of $2,288,524 for the year
ended January 25, 1998 which reflects the completion of the secondary
offering in April, 1997, and the retirement of the Convertible Notes and
other long term debt as discussed above.
The foregoing resulted in a decrease in cash and cash equivalents of
$584,776, from $806,049 at January 25, 1998, to $221,273 at January 31,
1999.
At January 31, 1999 the Company had a net operating loss carry forward
("NOL") for federal tax purposes of approximately $995,000 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.
On March 11, 1999 approximately $221,000 was received from an entity
in exchange for 176,615 shares of common stock. A commitment for an
additional funding during fiscal 2000 of approximately $279,000 has been
obtained from the same investment group, and is subject to shareholder
approval and agreement by the parties of final terms. The proceeds from the
funding will be used to expand the Company's e-commerce business, and
provide funds for possible retail expansion and general working capital.
As of the date of this report, no new leases have been executed to
open new retail locations in fiscal 2000, although potential sites are
currently being evaluated. Depending on location and size, the opening of
a new retail location represents an aggregate capital commitment of
approximately $75,000 to $200,000, which includes leasehold improvements,
furniture, fixtures, equipment and inventory.
The ability to further expand the retail chain and take advantage of
other distribution opportunities will be dependent upon the availability of
additional capital. Although new sources of capital, as noted above, are
being sought to finance such expansion, there can be no assurance of the
availability of capital, which may have a material adverse effect on future
operations and growth.
Results of Operations
- ---------------------
Set forth below is selected summary financial data derived from the
financial statements and financial records:
<PAGE>
<TABLE>
<CAPTION>
Fiscal Year Ended Fiscal Year Ended
January 31, 1999 January 25, 1998
----------------- -----------------
<S> <C> <C>
STATEMENTS OF OPERATIONS DATA:
Total Revenues $ 12,705,602 $ 12,578,683
Operating income (loss) (1,051,573) (484,030)
Net income (loss) (1,059,688) (587,175)
Net income (loss) available
to common shareholders (1,059,688) (587,175)
Net income (loss) per common
share (basic) (1.19) (.80)
Weighted average shares
outstanding (basic) 887,513 735,745
Net income (loss) per common
share (diluted) (1.19) (.80)
Weighted average shares
outstanding (diluted) 887,513 735,745
STATISTICAL DATA:
Store revenues $ 12,525,435 $ 12,513,058
Store gross margin 8,505,483 8,746,130
Store operating expenses 7,843,427 7,560,923
Store operating profit 662,056 1,185,207
Corporate overhead operating
expenses 1,616,834 1,644,877
Gross margin percentage 67.3% 69.7%
Comparable same store sales
(36 stores) 10,873,262 11,515,725
Comparable same store sales
growth (5.6)% N/A
</TABLE>
Total revenues for the year ended January 31, 1999 were $12,705,602 as
compared to $12,578,683 for the year ended January 25, 1998, an increase of
$126,919. The increase is primarily due to an increase in wholesale sales
of $108,408, from $56,152 for the year ending January 25, 1998 to $164,560
for the year ended January 31, 1999. Comparable same store sales were
$10,873,262 for the year ended January 31, 1999 as compared to $11,515,725,
a decrease of approximately $642,463, or 5.6%. Approximately $495,000 of
this decrease occurred during the four months of July through October 1998
and was primarily attributed to a decrease in traffic in our seasonal and
tourist locations in California and Florida.
For the year ended January 25, 1998 cost of goods sold was $3,816,330
and the gross margin was $8,762,353, or approximately 69.7%. For the year
ended January 31, 1999, cost of goods sold was $4,158,271 and the gross
margin was $8,547,331, or approximately 67.3%. The 2.4% decrease in gross
margin is attributed to increased promotional activity to stimulate sales
during the first and second quarters of fiscal 1999.
For the year ended January 31, 1999, total selling, general and
administrative expenses were $8,982,837, compared to $8,769,879 for the
year ended January 25, 1998, or 70.7% and 69.7% of revenues, respectively.
A significant portion of these expenses were comprised of personnel
expenses, which amounted to $4,110,433, or 32.4% of revenues for the year
ended January 31, 1999, as compared to $3,999,162, or 31.8% of revenues for
the years ended January 25, 1998. Occupancy costs were $2,935,159 for the
year ended January 31, 1999, and $2,832,770 for the year ended January 25,
1998, or 23.1% and 22.5% of revenues, respectively. Other selling, general
and administrative expenses were $1,937,245, or 15.2% of revenues for the
year ended January 31, 1999, as compared to $1,937,947 for the year ended
January 25, 1998 or 15.4% of revenues.
Included in total selling, general and administrative expenses are
corporate overhead expenses of $1,616,834, or 12.7% of total revenues for
the year ended January 31, 1999, as compared to $1,644,877, or 13.1% of
total revenues, for year ended January 25, 1998. It is expected that
corporate overhead will continue to decrease as a percentage of sales as
new retail stores and additional product distribution are added. Efforts to
continue to improve and utilize technological resources and control
administrative costs are ongoing.
Depreciation and amortization expense was $501,607 for the year ended
January 31, 1999, and $448,620 for the year ended January 25, 1998. The
increase is due to the five new stores opened in fiscal 1999. Store
closing costs of $114,370 and $27,884 for the years ended January 31, 1999
and January 25, 1998, respectively, include the write off of leasehold
improvements and other fees associated with the closing of the six retail
locations during fiscal 1999 and the three locations in fiscal 1998, as
discussed above.
As a result of the foregoing, the loss from operations for the year
ended January 31, 1999 was $1,051,573, as compared with the loss from
operations for the year ended January 31, 1998 of $484,030.
Interest expense was approximately $62,600 and $143,300 for the years
ended January 31, 1999, and January 25, 1998, respectively. Interest
expense for the year ended January 31, 1999 is comprised primarily of
interest r elated to the $560,000 bank note as discussed above and was
partially offset with approximately $18,000 of interest income earned from
the daily investing of available cash balances. Included in interest
expense for the year ended January 25, 1998, was approximately $66,500
attributed to non-recurring interest paid and deferred financing costs
written off upon retirement of the Convertible Notes on April 25, 1997.
Interest expense for the year ended January 25, 1998 was partially offset
by approximately $41,000 of interest income realized from the short-term
investment of cash proceeds from the public offering completed on April 25,
1997.
For the year ended January 31, 1999 other income was $36,312.
Included in other income is approximately $25,000 of license fees
associated with an annual renewal of license agreements that allows certain
former franchisees to use the Impostors trademark. The license agreements
have a one-year term expiring in January 1999, and are renewable at our
option. Also included in other income is approximately $13,000 receivable
from the U.S. government for the overpayment of taxes for fiscal 1997
resulting from the carry back of available net operating losses.
For the year ended January 25, 1998, other income was $37,738.
Approximately $45,600 represents a refund from the State of California for
an adjustment to sales taxes paid in 1994. In addition, other income also
included license fees of $28,500 associated with license agreements that
allows certain former franchisees to use the Impostors trademark.
In the third quarter of fiscal 1998, the Company was named as a
defendant in a civil action brought in the District Court of the Southern
District of New York. While the Company believes that it would have been
successful in its defense of this civil action, Management's efforts and
costs of such defense could have been significant and may have represented
a material commitment of the Company's limited working capital. In May
1998, the litigation was therefore settled by mutual agreement of the
parties. Included in other expenses is $35,000 representing the settlement
consummated in May 1998.
Deferred income tax expense of $39,000 for the year ended January 25,
1998 represents the reversal of a deferred tax asset recorded on January
26, 1997, as discussed above. Because of the uncertainty that future
benefits may result from current operating losses no tax assets have been
recorded for the years ended January 31, 1999, or January 25, 1998.
Based on the foregoing, the net loss available to common shareholders
for the year ended January 31, 1999 was $1,059,688, which translates to a
net loss per common share (basic) of $(1.19) based on 887,513 weighted
average common shares outstanding (basic). This compares with a net loss
available to common shareholders for year ended January 25, 1998 of
$587,175, or $(.80) per common share (basic), based on 735,745 weighted
average common shares outstanding (basic), as of that date.
Future profitability will depend on the ability to further expand the
number of retail locations in profitable markets, the ability to generate
favorable lease cost/sales ratios, the ability to continue to control
overhead expenses and the capability to 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.
Year 2000
- ---------
The Year 2000 Issue is the result of computer programs being written
using two digits rather than four to define the applicable year. Any of
the Company's computer programs that have date sensitive software may
recognize a date using "00" as the year 1900 rather than the year 2000.
This could result in a system failure or miscalculations causing
disruptions of operations, including, among other things, a temporary
inability to process transactions, send invoices, or engage in similar
normal business activities. The Company is working to resolve the
potential impact of the year 2000 by upgrading certain aspects of its
computer hardware and software systems, and presently believes that these
efforts will mitigate the year 2000 issue. A timeline has been established
to complete the project prior to any potential impact and completion of the
project is expected to occur timely. However, if such upgrades and
conversions are not made, or are not completed or available timely, the
Year 2000 Issue could have a material impact on the operations of the
Company. The Company has also initiated formal communications with its
significant suppliers and large customers to determine the extent to which
the Company is vulnerable to those third parties' failure to remedy their
own Year 2000 Issue. Expenditures in fiscal 1999 for the year 2000 project
were nominal and management expects that completion of the project may
result in additional expenditures which should not be material. In view of
the foregoing, there is reasonable assurance that the Year 2000 Issue will
not have a material adverse effect upon the Company. However, there can be
no guarantee that the systems of other companies on which the Company's
business relies will be timely converted, or that failure to convert by
another company, or a conversion that is incompatible with the Company's
systems, would not have a material adverse effect on the Company.
Impact of Recently Issued Accounting Standards
- ----------------------------------------------
In 1998, SFAS No. 133, ACCOUNTING FOR DERIVATIVE INSTRUMENTS AND HEDGING
ACTIVITIES, and No. 134, ACCOUNTING FOR MORTGAGE-BACKED SECURITIES RETAINED
AFTER THE SECURITIZATION OF MORTGAGE LOANS HELD FOR SALE BY A MORTGAGE
BANKING ENTERPRISES were issued. These pronouncements are not expected to
impact the Company.
FINANCIAL STATEMENTS
The following financial statements are filed as part of this report
beginning on page F-1.
1. Independent Auditor's Reports
2. Balance Sheet - For the Year Ended January 31, 1999
3. Statements of Operations and Comprehensive Loss - For the Fiscal
Years Ended January 31, 1999 and January 25, 1998
4. Statements of Changes In Stockholders' Equity - For the Period
from January 26, 1997 through January 31, 1999
5. Statements of Cash Flows - For the Fiscal Years Ended January 31,
1999 and January 25, 1998
6. Notes to Financial Statements
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
ON ACCOUNTING AND FINANCIAL DISCLOSURE
There were neither changes in accountants nor disagreements of the
type required to be reported under this Item between the Company and its
independent accountants, Hein + Associates LLP, during the fiscal years
ended January 31, 1999, or January 25, 1998.
<PAGE>
<PAGE>
PART III
Part III, Items 9, 10, 11 and 12 are incorporated herein by reference
from the Registrant's definitive proxy statement relating to its Annual
Meeting of Shareholders which will be filed in an amendment within 120 days
of January 31, 1999.
PART IV
EXHIBITS AND REPORTS ON FORM 8-K
Exhibits
--------
Exhibit No. Title
---------- -----
** 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 Certificate of 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
** 10.1 Copy of signed Stock Transfer Agent Agreement
** 10.2 Warrant Agreement
10.3 Employment Agreement with Sissel Greenberg
10.4 Employment Agreement with Todd Huss
10.5 Employment Agreement with Kevin O'Brien
** 10.6 Consulting Agreement with Cohig & Associates, Inc.
10.7 Agreement Regarding Basic Terms with Infusion Capital
Partners, LLC
10.8 First Stock Purchase Agreement with Equisition Capital, LLC
10.9 Second Stock Purchase Agreement with Infusion Capital
Partners, LLC
10.10 Management Services Agreement with Infusion Capital
Partners, LLC
--------------------------------
* 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.
Financial Statement Schedules
None
Current Reports on Form 8-K
None
<PAGE>
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this annual report to
be signed on its behalf by the undersigned, thereunto duly authorized.
PREMIER CONCEPTS, INC.
Date: 5/13 /99 By: /s/ Sissel Greenberg
----------------------------
Sissel Greenberg, President
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
SIGNATURE TITLE DATE
/s/ Sissel Greenberg President, Chief Executive 5/13/99
-------------------- Officer and Director -------
Sissel Greenberg
/s/ William Nandor Director 5/13/99
-------------------- -------
William Nandor
/s/ Simona Katz Yuffa Director 5/13/99
--------------------- -------
Simona Katz Yuffa
/s/ John M. Gerber Director 5/13/99
--------------------- -------
John M. Gerber
/s/ Todd Huss Chief Financial Officer 5/13/99
--------------------- Principal Accounting Officer -------
Todd Huss
<PAGE>
INDEX TO FINANCIAL STATEMENTS
PAGE
Independent Auditor's Report F-2
Balance Sheet - As of January 31, 1999 F-3
Statements of Operations and Comprehensive Loss - For the Fiscal
Years Ended January 31, 1999 and January 25, 1998 F-4
Statement of Changes in Stockholders' Equity - For the Fiscal
Years Ended January 25, 1998 and January 31, 1999 F-5
Statements of Cash Flows - For the Fiscal Years Ended January 31,
1999 and January 25, 1998 F-6
Notes to Financial Statements F-7
<PAGE>
<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 31, 1999, and the related statements of operations and
comprehensive loss, changes in stockholders' equity, and cash flows for the
fiscal years ended January 31, 1999 and January 25, 1998. 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 state-
ments. 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 31, 1999, and the results of its operations and its cash
flows for the fiscal years ended January 31, 1999 and January 25, 1998, in
conformity with generally accepted accounting principles.
HEIN + ASSOCIATES LLP
Denver, Colorado
April 2, 1999
<PAGE>
PREMIER CONCEPTS, INC.
BALANCE SHEET
January 31, 1999
ASSETS
------
CURRENT ASSETS:
Cash and cash equivalents $ 221,273
Merchandise inventories 1,975,595
Prepaid expenses and other 97,295
----------
Total current assets 2,294,163
PROPERTY AND EQUIPMENT, net 2,699,376
OTHER ASSETS:
Trademarks, net of accumulated amortization of $80,967 63,033
Other 80,132
----------
TOTAL ASSETS $5,136,704
==========
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
CURRENT LIABILITIES:
Notes payable and current portion of long-term debt $ 683,110
Accounts payable 965,189
Accrued liabilities 584,461
----------
Total current liabilities 2,232,760
LONG-TERM DEBT, less current portion 49,032
DEFERRED RENT 201,244
----------
Total liabilities 2,483,036
----------
COMMITMENTS (Note 5)
STOCKHOLDERS' EQUITY:
Preferred stock, $.10 par value, 20,000,000 shares
authorized; no shares issued and outstanding -
Common stock, $.002 par value; 850,000,000 shares
authorized; 887,513 shares issued and outstanding 1,775
Additional paid-in capital 5,660,263
Accumulated deficit (3,008,370)
----------
Total Stockholders' Equity 2,653,668
----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 5,136,704
==============
See accompanying notes to these financial statements.
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
PREMIER CONCEPTS, INC.
STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
For the Fiscal
Years Ended
-------------------------------
January 31, January 25,
1999 1998
-------------- ------------
<S> <C> <C>
Net Revenues:
Retail $ 12,541,042 $12,522,531
Wholesale 164,560 56,152
------------- ------------
Total revenues 12,705,602 12,578,683
Cost of Goods Sold 4,158,271 3,816,330
------------- ------------
Gross margin 8,547,331 8,762,353
Operating Expenses:
Personnel 4,110,433 3,999,162
Occupancy 2,935,159 2,832,770
Other selling, general and
administrative 1,937,245 1,937,947
Depreciation and amortization 501,697 448,620
Store closing costs 114,370 27,884
------------- -----------
Total operating expenses 9,598,904 9,246,383
------------- -----------
Operating Loss (1,051,573) (484,030)
Other Income (Expense):
Interest expense, net (44,427) (101,883)
Other 36,312 37,738
------------- ---------
Other income (expense), net (8,115) (64,145)
------------- ----------
Income (Loss) Before Income Tax Expense (1,059,688) (548,175)
Deferred income tax expense - (39,000)
-------------- -----------
Net Loss and Comprehensive Loss $ (1,059,688) $(587,175)
============== ===========
Net Loss Per Common Share (Basic and
Diluted) $ (1.19) $ (.80)
=============== ============
Weighted Average Common Shares
Outstanding (Basic and Diluted) 887,513 735,745
=============== ============
</TABLE>
See accompanying notes to these financial statements.
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
PREMIER CONCEPTS, INC.
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE FISCAL YEARS ENDED JANUARY 25, 1998 AND JANUARY 31, 1999
ADDITIONAL
PREFERRED STOCK COMMON STOCK PAID-IN ACCUMULATED TOTAL
--------------- ------------ CAPITAL DEFICIT -----
SHARES AMOUNT SHARES AMOUNT ----------- ---------
------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C>
Balances, January 26,
1997 416,670 $ 41,667 280,084 $ 560 $2,316,683 $(1,361,507) $ 997,403
Proceeds from sale
of units in public
offering, net - - 550,000 1,100 3,269,393 - 3,270,493
Conversion of
preferred stock (416,670) (41,667) 51,020 102 41,565 - -
Shares issued to
employees - - 6,325 12 32,125 - 32,137
Shares issued under
employee stock
purchase plan - - 84 1 497 - 498
Net loss - - - - - (587,175) (587,175)
--------- --------- --------- --------- ----------- --------- ----------
Balances, January 25,
1998 - - 887,513 1,775 5,660,263 (1,948,682) 3,713,356
Net loss - - - - - (1,059,688)(1,059,688)
--------- --------- --------- --------- --------- ----------- ---------
Balances, January 31,
1999 - $ - 887,513 $1,775 $5,660,263 $(3,008,370) $2,653,668
======== ======== ======== ====== ========== ============ ==========
</TABLE>
See accompanying notes to these financial statements.
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
PREMIER CONCEPTS, INC.
STATEMENTS OF CASH FLOWS
For the Fiscal
Years Ended
--------------------------
January 31, January 25,
1999 1998
----------- -----------
<S> <C> <C>
Cash Flows from Operating Activities:
Net loss $(1,059,688) $(587,175)
Adjustments to reconcile net
loss to net cash from operating
activities:
Depreciation and amortization 501,697 448,620
Store closing costs 77,586 27,884
Stock compensation to employees - 32,137
Gain on settlements of debt - (3,420)
Deferred tax asset - 39,000
Other, net - 38,026
Changes in operating assets and
liabilities:
(Increase) decrease in:
Merchandise inventories 332,244 (558,196)
Other assets 184,128 (138,891)
Increase (decrease) in:
Accounts payable and accrued
liabilities 276,994 (186,122)
Other liabilities 39,398 58,607
----------- ----------
Net cash provided by (used in)
operating activities 352,359 (829,530)
Cash Flows from Investing Activities -
Capital expenditures for property and
equipment (835,347) (864,520)
Cash Flows from Financing Activities:
Proceeds from sales of marketable
securities - 7,116
Deferred offering costs - (186,717)
Proceeds from issuance of common stock - 3,883,131
Proceeds from issuance of notes payable 610,000 -
Payment on notes payable (711,788) (1,415,006)
----------- ---------
Net cash provided by (used in)
financing activities (101,788) 2,288,524
----------- ----------
Increase (Decrease) in Cash and Cash
Equivalents (584,776) 594,474
Cash and Cash Equivalents, beginning of
period 806,049 211,575
----------- ----------
Cash and Cash Equivalents, end of period $ 221,273 $ 806,049
=========== ==========
Supplemental Schedule of Cash Flow
Information - Cash paid for interest $ 72,203 $ 147,614
=========== ==========
Supplemental Non-Cash Financing Activity -
Conversion of accounts payable to note
payable $ 122,000 $ -
=========== ===========
See accompanying notes to these financial statements.
</TABLE>
<PAGE>
<PAGE>
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 (see 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 January 31, 1999, the Company operated 36 retail stores
with a geographic concentration of stores in California, including one
store in San Francisco, California that accounted for approximately
11% total revenues during the fiscal years ended January 31, 1999 and
January 25, 1998.
LIQUIDITY - The Company's business strategy has been to grow the
retail chain in profitable markets as to leverage its name and
goodwill to achieve additional distribution for its products. The
Company is not in compliance on all financial covenants on its
principal debt, however, is currently negotiating a renewal of the
note. Although it has approximately $60,000 in working capital and
has incurred over $1.5 million in operating losses over the last two
years, measures are being taken to return the Company to
profitability. Those measures include closing unprofitable stores and
restructuring store operations through the enhancement of executive
and senior management. Subsequent to the fiscal year-end, the Company
raised over $220,000 in a private equity funding. The Company is
negotiating with a bank to renew a note payable that is due on May 28,
1999.
Although management cannot assure that future operations will be
profitable nor that additional debt and/or equity capital will be
raised, it believes that its capital resources will be adequate to
maintain and realize its business strategy. Should, however, losses
continue or the Company be unable to refinance its note agreement, it
could adversely affect future operations.
FISCAL YEAR - The Company's year is a 52/53-week period ending on the
last Sunday in January. Fiscal years ended January 31, 1999 (fiscal
1999) and January 25, 1998 (fiscal 1998) contained 371 and 364 days of
activity, respectively.
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.
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 lesser of the lease term on each
location that the assets reside or 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 or the useful life.
Expenditures for ordinary maintenance and repairs are charged to
expense as incurred. Upon retirement or disposal of assets, the cost
and 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.
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.
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
accounts 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.
LICENSE AGREEMENTS - The Company grants license agreements to entities
for the use of the Impostors' 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 Statement
of Financial Accounting Standards (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 AND TRADEMARKS - 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 determine if a write-down to market
value or discounted cash flow value is required. No impairment has
been taken for the year ended January 31, 1999 or January 25, 1998.
COMPREHENSIVE LOSS - Comprehensive loss is defined as all changes in
stockholders' equity, exclusive of transactions with owners, such as
capital investments. Comprehensive loss includes net loss, changes in
certain assets and liabilities that are reported directly in equity
such as translation adjustments on investments in foreign
subsidiaries, and certain changes in minimum pension liabilities. The
Company's comprehensive loss was equal to its net loss for all periods
presented in these financial statements.
STOCK-BASED COMPENSATION - As permitted under the SFAS No. 123,
ACCOUNTING FOR STOCK-BASED COMPENSATION, the Company accounts for its
stock-based compensation in accordance with the provisions of
Accounting Principles Board (APB) Opinion No. 25, ACCOUNTING FOR STOCK
ISSUED TO EMPLOYEES. As such, compensation expense is recorded on the
date of grant only if the current market price of the underlying stock
exceeded the exercise price. Certain pro forma net income and EPS
disclosures for employee stock option grants are also included in the
notes to the financial statements as if the fair value method as
defined in SFAS No. 123 had been applied. Transactions in equity
instruments with non-employees for goods or services are accounted for
by the fair value method.
IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS - In 1998, SFAS Nos.
133, ACCOUNTING FOR DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES and
No. 134, ACCOUNTING FOR MORTGAGE-BACKED SECURITIES RETAINED AFTER THE
SECURITIZATION OF MORTGAGE LOANS HELD FOR SALE BY A MORTGAGE BANKING
ENTERPRISES were issued. These pronouncements are not expected to
impact the Company.
RECLASSIFICATION - Certain reclassifications have been made to conform
fiscal 1998 financial statements to the presentation in fiscal 1999.
The reclassification had no effect on net income.
2. 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 31, 1999
and January 25, 1998, the Company had accounts payable of
approximately $40,000 that related to the prior activities of the
Company.
3. PROPERTY AND EQUIPMENT:
At January 31, 1999, property and equipment consists of the following:
Furniture, fixtures and equipment $ 1,725,840
Leasehold improvements 2,449,160
---------------
4,175,000
Less accumulated depreciation and
amortization (1,475,624)
---------------
$ 2,699,376
===============
Related depreciation and amortization expense for the years ended
January 31, 1999 and January 25, 1998 was $489,298 and $436,180,
respectively.
4. NOTES PAYABLE AND LONG-TERM DEBT:
At January 31, 1999, notes payable and long-term debt consist of the
following:
Note payable to a bank, interest payable
monthly at prime rate plus .75%, (8.5% at
January 31, 1999), one principal payment of
$112,000 due December 1998 and the remaining
balance due May 1999, collateralized by cash
and inventory. As of January 31, 1999, the
Company was not in compliance on all
financial covenants and on the principal
payment due December 1998. Subsequent to
fiscal year-end, the December 1998 payment of
$112,000 was made to the bank.
$ 560,000
Note payable to an entity for services
rendered in connection with the build-out of
the Company's store in West Nyack, New York.
Payable in monthly installments of $5,000
(single payment of $35,000 due January 1,
2000) including interest at 10%, maturing in
November 2000.
122,000
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.
50,142
----------
732,142
Less current portion (683,110)
----------
$ 49,032
==========
Principal payments on the above obligations at January 31, 1999 are
due as follows:
2000 $ 683,110
2001 49,032
----------
$ 732,142
==========
On December 27, 1996, the Company completed the sale of $1,120,000 in
Convertible Notes and 100,000 Class B Warrants, realizing net proceeds
of $1,041,600. From the net proceeds, the Company utilized $624,325
to redeem an aggregate of 94,590 shares of Common Stock and 16,250
Class C Warrants from certain former security holders. The Company
retired the Convertible Notes from the proceeds of the public offering
which occurred April 25, 1997.
Each Class B warrant entitled the holder to purchase one share of
common stock at a price or $10. Upon completion of the public
offering (see Note 6), each Class B warrant was automatically
exchanged for two Class A warrants.
5. COMMITMENTS:
LEASE COMMITMENTS - The Company leases its offices and retail
facilities under operating leases for terms expiring at various dates
from 1999 to 2012. The corporate office lease has been guaranteed by
a director and certain former directors of the Company. The aggregate
minimum annual lease payments under leases for the fiscal years are as
follows:
2000 $ 2,289,844
2001 2,126,167
2002 1,992,637
2003 1,449,303
Thereafter 4,112,785
-----------
Total minimum lease payments $11,970,736
============
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 $2,935,159 and $2,832,770 for
the years ended January 31, 1999 and January 25, 1998, respectively.
6. Stockholders' Equity:
COMMON SHARES - In January 1999, the Company's stockholders approved a
1 for 2 reverse stock split at a future date at the discretion of the
Company. In April 1999, the Company's Board of Directors approved the
reverse split effective immediately. Accordingly, all common stock
reflected in the accompanying financial statements and notes reflect
this reverse split for all periods presented.
PUBLIC OFFERING - In April 1997, the Company completed a secondary
public offering of 550,000 units and received net proceeds of
$3,270,493. Each unit sold for $7.80 and consisted of one share of
common stock and one redeemable warrant. The common stock and
redeemable warrants began trading separately after the offering. Two
redeemable warrants entitle the holder to purchase one share of common
stock at a price of $10.00 through April 21, 2000, unless extended by
the Company. The warrants are redeemable under certain circumstances
by the Company. In connection with this offering, the underwriter
received an option to purchase 55,000 shares of common stock and
55,000 warrants at $9.00 per share and $.36 per share, respectively.
This option is exercisable through April 2001. Also in connection
with this offering, the underwriter received and exercised an over-
allotment option to purchase 82,500 warrants at $.30 per warrant on
the same terms as described above. No redeemable warrants have been
exercised as of January 31, 1999.
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 208,335 units at $1.20 per unit in
a private offering. Each unit included two shares of Series A
Convertible Preferred Stock and one warrant. Ten warrants entitled
the holder to purchase one share of common stock at $10 per share and
were exercisable through June 1998. Each share of Series A Preferred
Stock was entitled to $.051 per annum cumulative dividends and was
convertible commencing in June 1997 at a rate of 10 shares of
preferred stock for one share of common stock. Upon completion of the
public offering in April 1997, the preferred shares were automatically
converted into 51,020 shares of common stock and five warrants were
automatically exchanged for one redeemable warrant offered in the
public offering.
EMPLOYEE STOCK PURCHASE PLAN - In June 1995, the Company adopted a
qualified Employee Stock Purchase Plan (ESPP). The Company has been
authorized through the ESPP to offer up to 10,000 shares per year over
a three-year term which expired in fiscal 1999, or a total of 30,000
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. For the years ended January
31, 1999 and January 25, 1998, -0- and 84 shares, respectively, of
common stock have been issued under the ESPP.
STOCK OPTIONS - In 1993, the Company adopted the 1993 Incentive Stock
Option Plan (the "Plan") which provides for the Company to grant
options to purchase up to 115,000 shares of the Company's common stock
to officers, employees, and directors of the Company. In fiscal 1999,
the Company increased the number of authorized shares to 165,000.
Pursuant to the Plan, the Company may grant incentive stock options
(intended to qualify under Section 422 of the Internal Revenue Code of
1986, as amended) and non-qualified stock options.
Incentive and non-qualified stock options may not be granted at an
exercise price of less than the fair market value of the common stock
on the date of grant (except for holders of more than 10% of common
stock, whereby the exercise price must be at least 110% of the fair
market value at the date of grant for incentive stock options). The
term of the options may not exceed 10 years. Under a formula approved
by the Board of Directors, each outside director is automatically
granted stock options on their anniversary date 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. Each option is exercisable one year after the
date of grant and expires two years thereafter. At January 31, 1999,
the Company had granted options under the Plan to purchase 125,000
shares of which 107,500 options are vested and the balance will vest
over the next year. Options outstanding for the Plan at January 31,
1999 have exercise prices that range from $1.00 to $7.00.
During fiscal 1996, the Company issued to directors of the Company
options outside the Plan to purchase 12,500 shares of common stock.
In addition, the Company granted to directors of the Company 6,000
options to purchase common stock in return for guaranteeing the
Company's corporate office lease. These options have an exercise
price of $5.00 per share and expire in fiscal 2001.
<TABLE>
<CAPTION>
The following is a table of activity of the Plan:
Fiscal 1999 Fiscal 1998
Weighted Weighted
Average Average
Number Exercise Number Exercise
of Shares Price of Shares Price
--------- -------- --------- --------
<S> <C> <C> <C> <C>
Outstanding, beginning of
year 115,500 $5.528 66,500 $4.672
Granted to:
Employees - - 39,000 6.680
Directors 15,000 1.166 15,000 6.334
Forfeited (5,500) 5.068 (5,000) 6.636
-------- ------- ------- -------
Outstanding, end of year 125,000 $5.026 115,500 $5.528
========== ======== ======= =======
</TABLE>
For all options granted during fiscal 1999 and 1998, the weighted average
market price of the Company's common stock on the grant date was
approximately equal to the weighted average exercise price. The fair
market value of the Company's common stock is determined by the quoted
closing price on the date of grant. The weighted average contractual life
for all options as of January 31, 1999 was approximately 2.2 years, with
the exercise prices ranging from $1.00 to $7.00. At January 31, 1999,
options for 126,000 shares were exercisable and options for the remaining
shares become exercisable pro rata through fiscal 2000. If not previously
exercised, all options outstanding at January 31, 1999, will expire as
follows:
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
Weighted
Average
Number Exercise
Fiscal Years of Shares Price
---------- --------- ---------
<S> <C> <C>
2000 12,500 $6.700
2001 26,000 4.880
2001 15,000 5.000
2002 50,000 4.500
2002 15,000 1.166
2003 25,000 6.500
-------- --------
143,500 $5.022
======== ========
</TABLE>
PRO FORMA STOCK-BASED COMPENSATION DISCLOSURES - The Company applies
APB Opinion 25 and related interpretations in accounting for its stock
options which are granted to employees. Accordingly, no compensation
cost has been recognized for grants of options to employees since the
exercise prices were not less than the fair value of the Company's
common stock on the grant dates. Had compensation cost been determined
based on the fair value at the grant dates for awards under those plans
consistent with the method of SFAS No. 123, the Company's net loss and
loss per share would have been increased to the pro forma amount
indicated below.
<TABLE>
<CAPTION>
Fiscal Years Ended
--------------------------------
January 31, January 25,
1999 1998
--------------------------------
<S> <C> <C>
Net loss applicable to common
shareholders:
As reported $ (1,059,688) $ (587,175)
Pro forma $ (1,111,468) $ (772,750)
Net loss per common share
(basic) and diluted:
As reported $ (1.19) $ (.80)
Pro forma $ (1.25) $ (1.05)
</TABLE>
For purposes of this disclosure, the weighted average fair value of the
options granted in fiscal 1999 and fiscal 1998 was $.900 and $4.086,
respectively. The fair value of each employee option granted in fiscal
years 1999 and 1998, was estimated on the date of grant using the Black-
Scholes option pricing model with the following weighted average
assumptions:
<TABLE>
<CAPTION>
Fiscal Years Ended
--------------------------------
January 31, January 25,
1999 1998
--------------------------------
<S> <C> <C>
Expected volatility 133% 81%
Risk-Free interest rate 4.2% 6.1%
Expected dividends - -
Expected terms (in years) 3 3.5
</TABLE>
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 years ended:
January 31, January 26,
1999 1998
Statutory rate (34.0%) (34.0%)
State income taxes, net of Federal
income tax benefit (3.3%) (3.3%)
Increase (reduction) in valuation
allowance related to of net
operating loss carryforwards and
change in temporary differences 37.3% 37.3%
------- -------
0% 0%
======= =======
The components of the net deferred tax asset recognized as of January 31,
1999 are as follows:
Deferred tax assets (liabilities):
Current -
Capitalized inventory $ 86,000
Non-current -
Net operating loss carryforwards 371,000
Other 37,000
Valuation allowance (494,000)
------------
Net deferred tax asset $ -
============
The valuation allowance was $236,000 at January 25, 1998 increased by
$258,000 for the year ended January 31, 1999.
At January 31, 1999, the Company had net operating loss carryforwards for
Federal tax purposes of approximately $995,000. Certain of the loss
carryforwards are subject to restrictions due to a greater than 50% change
in ownership in prior years. The loss carryforwards, unless utilized, will
expire from 2009 through 2019.
8. SUBSEQUENT EVENT (UNAUDITED):
Subsequent to January 31, 1999, the Company received $220,769 from an
entity for 176,615 shares of the Company's common stock. Concurrent with
this transaction, the entity also received the right to elect one member to
the Company's Board of Directors.
The Company has also agreed to a second funding with the same entity, at
the option of either the Company or the entity, and subject to shareholder
approval, to receive $279,231 for convertible preferred stock. The
preferred stock will be converted into shares of common stock at $1.25 per
share. Upon completion of the second funding, the Company will issue the
entity as a financing fee a warrant to purchase 25,000 shares of common
stock at an exercise price of $1.25 per share and exercisable for three
years. If the second funding does not occur, the Company will issue a
warrant with reduced shares of common stock in proportion to the total
funding (approximately 11,039 shares).
<PAGE>
CERTIFICATE OF DESIGNATION OF
RIGHTS AND PREFERENCES OF SERIES A
CONVERTIBLE PREFERRED STOCK
OF PREMIER CONCEPTS, INC.
- ---------------------------------------------------------------------------
Pursuant to Section 7-106-102 of the
Colorado Business Corporation Act
- ---------------------------------------------------------------------------
PREMIER CONCEPTS, INC., a corporation organized and existing under the
laws of the State of Colorado (the "Company"), DOES HEREBY CERTIFY that
pursuant to the authority contained in its Articles of Incorporation, as
amended, and in accordance with the provisions of the Colorado Business
Corporation Act, the Company's Board of Directors has duly adopted the
following resolution creating a series of the class of its authorized
Preferred Stock, designated as Series A Convertible Preferred Stock:
RESOLVED THAT:
Whereas, by virtue of the authority contained in its Articles of
Incorporation, as amended, the Company has the authority to issue
Twenty Million (20,000,000) shares of $.10 par value Preferred Stock,
the designation and amount thereof and series, together with the
powers, preferences, rights, qualifications, limitations or
restrictions thereof, to be determined by the Board of Directors
pursuant to the applicable law of the State of Colorado;
Now therefore, the Company's Board of Directors hereby
establishes a series of the class of Preferred Stock authorized to be
issued by the Company as above stated, with the designations and
amounts thereof, together with the voting powers, preferences and
relative, participating, optional and other special rights of the
shares of each such series, and the qualifications, limitations or
restrictions thereof, to be as follows:
1. Designations and Amounts.
Five Hundred Thousand (500,000) shares of the Company's
authorized Preferred Stock are designated as Series A Convertible
Preferred Stock, having a Stated Value of $.625 per share.
2. Definitions.
For the purposes of this Resolution the following definitions
shall apply:
(a) "Board" shall mean the Board of Directors of the Company.
(b) "Company" shall mean Premier Concepts, Inc., a Colorado
corporation.
(c) "Original Issue Date" for a series of Preferred Stock shall
mean the date on which the first share of such series of
Preferred Stock was originally issued.
(d) "Preferred Stock" shall refer to Series A Convertible
Preferred Stock.
(e) "Common Stock" shall refer to the Company's $.002 par value
common stock.
(f) "Stated Value" shall be $.625 per share.
(g) "Subsidiary" shall mean any corporation at least 50% of
whose outstanding voting stock shall at the time be owned
directly or indirectly by the Company or by one or more
Subsidiaries.
(h) "Securities Act" shall mean the Securities Act of 1933, as
amended.
(i) "Exchange Act" shall mean the Securities Exchange Act of
1934, as amended.
3. Dividends.
(a) The holders of outstanding Preferred Stock shall be entitled
to receive dividends at the annual rate of 10% per annum based on
the Stated Value Per Share computed on the basis of a 360-day
year and twelve 30-day months. Dividends shall be calculated
from the date of issue and shall be payable only upon the
conversion of the Preferred Stock into shares of Common Stock as
provided for in Paragraph 7 hereof (the "Dividend Payment Date").
Dividends shall be payable only to the record holders of the
shares of Preferred Stock on the date of conversion; and prior
record holders of the shares of Preferred Stock shall have no
right, title or interest or divisible share in such dividend.
(b) The dividends payable on the Preferred Stock provided for in
Paragraph 3(a) above shall be paid exclusively by the issuance by
the Company to the record holder entitled to such dividend of
shares of the Company's Common Stock valued at Fair Market Value
on the Dividend Payment Date. For the purposes of the dividend,
Fair Market Value shall be 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.
(c) In addition to the Common Stock dividend, the holders of
outstanding Preferred Stock shall be entitled to participate, pro
rata, in dividends paid on outstanding shares of Common Stock,
if, when and as the Board of Directors shall in their sole
discretion deem advisable, and only from the net profits or
surplus of the Company as such shall be fixed and determined by
the Board of Directors. The determination of the Board of
Directors at any time of the amount of net profits or surplus
available for dividend shall be binding and conclusive on the
holders of all the stock of the Company at the time outstanding.
4. Liquidation Rights.
(a) In the event of any liquidation, dissolution, or winding up
of the Company, whether voluntary or involuntary, the holders of
each share of Preferred Stock then outstanding shall be entitled
to be paid out of the assets of the Company available for
distribution to its shareholders before any payment or
declaration and setting apart for payment of any amount shall be
made in respect to any outstanding preferred stock ranking junior
to the Preferred Stock or the Common Stock, an amount equal to
$.625 per share. If upon any liquidation, dissolution, or
winding up of the Company, whether voluntary or involuntary, the
assets to be distributed to the holders of the Preferred Stock
shall be insufficient to permit the payment to such shareholders
of the full preferential amount aforesaid, then all of the assets
of the Company available to be distributed shall be distributed
ratably to the holders of the Preferred Stock.
(b) After the payment or distribution to the holders of the
Preferred Stock of the full preferential amounts aforesaid, the
holders of any preferred stock rank junior to the Preferred Stock
and the Common Stock then outstanding shall be entitled to
receive all of the remaining assets of the Company.
(c) Neither a consolidation, merger or reorganization of the
Company, a sale or other transfer of all or substantially all of
its assets, nor a sale of fifty percent (50%) or more of the
Company's capital stock then issued and outstanding nor the
purchase or redemption by the Company of stock of any class, nor
the payment of a dividend or distribution from net profits or
surplus of the Company shall be treated as or deemed to be a
liquidation hereunder.
5. Redemption.
The Company shall have neither 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.
6. Voting Rights.
Upon issuance, and subject to increase and additional rights as
provided below, holders of shares of this series 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. The number of votes per
share of this series of Preferred Stock which can be cast shall
be adjusted at such time or times as the conversion price is
adjusted so that the number of votes per share of this series of
Preferred Stock which may be cast shall always be equal to the
full number of shares of Common Stock into which each share of
this series of Preferred Stock may be converted when voting with
the holders of Common Stock as a single class.
7. Conversion.
The Preferred Stock shall have the following conversion rights
(the "Conversion Rights"):
(a) Holder's Optional Conversion. Holders of outstanding shares
of Preferred Stock shall have an option at any time after
issuance to convert each share of Preferred Stock into one share
of the Company's Common Stock (the "Initial Conversion Value").
(b) Company's Optional Conversion. 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
Company's Common Stock issuable upon such conversion (the
"Conversion Stock"), and the closing bid price of the Company's
Common Stock on the over-the-counter market has been equal to or
greater than $.9375 per share for twenty (20) or more consecutive
trading days.
(c) Mechanics of Conversion. The Company shall, within ten (10)
days of its decision to exercise its rights under Paragraph 7(b)
above, provide written notice, first class postage pre-paid, to
each holder of record of the Preferred Stock to be converted, at
his post office address last shown on the records of the Company,
of the conversion (the "Conversion Notice"). The Conversion
Notice shall state:
(i) That all of the holder's outstanding shares of
Preferred Stock were converted;
(ii) The number of shares of Preferred Stock held by the
holder that were converted;
(iii) The effective date of the Conversion (the
"Conversion Date") and the number of shares of Common Stock
which the holder will receive; and
(iv) That the holder is to surrender to the Company, in the
manner and at the place designated, his certificate or
certificates representing the shares of Preferred Stock
converted.
Thereafter, each holder of Preferred Stock to be converted shall
surrender the certificate or certificates representing such
shares to the Company, in the manner and at the place designated
in the Conversion Notice, and thereupon the requisite number of
shares of Common Stock shall be issued in the name of the person
whose name appears on the surrendered certificate or certificates
as the owner thereof, and each surrendered certificate shall be
canceled and retired. Notwithstanding that the certificates
evidencing any of the shares of Preferred Stock shall not have
been surrendered, all rights with respect to such shares shall
forthwith after the Conversion Date, terminate, except only the
right of the holders to receive the appropriate number of shares
of Common Stock upon surrender of their certificate or
certificates therefor.
(d) Adjustment for Stock Splits, Stock Dividends and
Combinations. If the Company shall at any time or from time to
time after the Original Issue Date for a series of the Preferred
Stock effect a subdivision of the outstanding Common Stock or
declares a stock dividend on outstanding shares of Common Stock,
the Conversion Value then in effect immediately before that
subdivision shall be proportionately decreased, and conversely,
if the Company shall at any time or from time to time after the
Original Issue Date for a series of the Preferred Stock combine
the outstanding shares of Common Stock, the Conversion Value then
in effect immediately before the combination shall be
proportionately increased. Any adjustment under this
Paragraph 7(d) shall become effective at the close of business on
the date the subdivision, stock dividend or combination becomes
effective.
(e) Adjustment for Reclassification, Exchange, or Substitution.
If the Common Stock issuable upon the conversion of the Preferred
Stock shall be changed into the same or a different number of
shares of any class or classes of stock, whether by capital
reorganization, reclassification, or otherwise (other than a
subdivision or combination of shares or stock dividend provided
for above, or a reorganization, merger, consolidation, or sale of
assets provided for elsewhere in this Paragraph 7), then and in
each such event the holder of each share of Preferred Stock shall
have the right thereafter to convert such share into the kind and
amount of shares of stock and other securities and property
receivable upon such reorganization, reclassification, or other
change, by holders of the number of shares of Common Stock into
which such shares of Preferred Stock might have been converted
immediately prior to such reorganization, reclassification, or
change, all subject to further adjustments as provided herein.
(f) Reorganization, Mergers, Consolidations, or Sales of Assets.
If at any time or from time to time there shall be a capital
reorganization of the Common Stock (other than a subdivision,
combination, reclassification, or exchange of shares provided for
elsewhere in this Paragraph 7) or a merger or consolidation of
the Company with or into another corporation, or the sale of all
or substantially all of the company's assets to any other person,
then, as a part of such reorganization, merger, consolidation, or
sale, provision shall be made so that the holders of the
Preferred Stock shall thereafter be entitled to receive upon
conversion of the Preferred Stock, the number of shares of stock
or other securities or property of the Company, or of the
successor corporation resulting form such merger or consolidation
or sale, to which a holder of Common Stock deliverable upon
conversion would have been entitled on such capital
reorganization, merger, consolidation, or sale. In any such
case, appropriate adjustment shall be made in the application of
the provisions of this Paragraph 7 with respect to the rights of
the holders of the Preferred Stock after the reorganization,
merger, consolidation, or sale to the end that the provisions of
this Paragraph 7 (including adjustment of the Conversion Value
then in effect and the number of shares purchasable upon
conversion of the Preferred Stock) shall be applicable after that
event as nearly equivalent as may be practicable.
(g) Definition. The term "Additional Shares of Common Stock" as
used herein shall mean all shares of Common Stock issued or
deemed issued (including a right or option to purchase Common
Stock, or shares of stock or an obligation convertible into
Common Stock) by the Company after the Original Issue Date for a
series of Preferred Stock, whether or not subsequently reacquired
or retired by the Company, other than (1) shares of Common Stock,
and (2) shares or other securities issued to employees, officers,
directors, consultants or other persons performing services for
the Company pursuant to any stock offering, option, plan, or
arrangement approved by the Board of Directors of the Company.
(h) Notices of Record Date. In the event of (i) any taking by
the Company of a record of the holders of any class or series of
securities for the purpose of determining the holders thereof who
are entitled to receive any dividend or other distribution or
(ii) any reclassification or recapitalization of the capital
stock of the Company, any merger or consolidation of the Company,
or any transfer of all or substantially all of the assets of the
Company to any other corporation, entity, or person, or any
voluntary or involuntary dissolution, liquidation, or winding up
of the Company, the Company shall mail to each holder of
Preferred Stock at least 30 days prior to the record date
specified therein, a notice specifying (A) the date on which any
such record is to be taken for the purpose of such dividend or
distribution and a description of such dividend or distribution,
(B) the date on which any such reorganization, reclassification,
transfer, consolidation, merger, dissolution, liquidation, or
winding up is expected to become effective, and (C) the time, if
any is to be fixed, as to when the holders of record of Common
Stock (or other securities) shall be entitled to exchange their
shares of Common Stock (or other securities) for securities or
other property deliverable upon such reorganization,
reclassification, transfer, consolidation, merger, dissolution,
liquidation, or winding up.
(i) Fractional Shares. No fractional shares of Common Stock
shall be issued upon conversion of Preferred Stock. In lieu of
any fractional shares to which the holder would otherwise be
entitled, the Company shall pay cash equal to the product of such
fraction multiplied by the fair market value of one share of the
Company's Common Stock on the date of conversion, as determined
in good faith by the Board.
(j) Notices. Any notice required by the provisions of this
Paragraph 7 to be given to the holder of shares of the Preferred
Stock shall be deemed given when personally delivered to such
holder or five (5) business days after the same has been
deposited in the United States mail, certified or registered
mail, return receipt requested, postage prepaid, and addressed to
each holder of record at his address appearing on the books of
the Company.
(k) Payment of Taxes. The Company will pay all taxes and other
governmental charges that may be imposed in respect of the issue
or delivery of shares of Common Stock upon conversion of shares
of Preferred Stock.
(l) No Dilution or Impairment. The Company shall not amend its
Articles of Incorporation or participate in any reorganization,
transfer of assets, consolidation, merger, dissolution, issue, or
sale of securities or any other voluntary action, for the purpose
of avoiding or seeking to avoid the observance or performance of
any of the terms to be observed or performed hereunder by the
Company, but will at all times in good faith assist in carrying
out all such action as may be reasonably necessary or appropriate
in order to protect the conversion rights of the holders of the
Preferred Stock against dilution or other impairment.
(m) Reservation of Common Stock. The Company agrees that the
number of shares of Common Stock sufficient to provide for the
conversion of the Preferred Stock upon the basis herein set forth
will at all times that the shares of Preferred Stock are issued
and outstanding be reserved for the conversion thereof.
8. No Preemptive Rights.
No holder of the Series A Preferred Stock of the Corporation
shall be entitled, as of right, to purchase or subscribe for any
part of the unissued stock of the Corporation or of any stock of
the Corporation to be issued by reason of any increase of the
authorized capital stock of the Corporation, or to purchase or
subscribe for any bonds, certificates of indebtedness, debentures
or other securities convertible into or carrying options or
warrants to purchase stock or other securities of the Corporation
or to purchase or subscribe for any stock of the Corporation
purchased by the Corporation or by its nominee or nominees, or to
have any other preemptive rights now or hereafter defined by the
laws of the State of Colorado.
9. No Reissuance of Preferred Stock.
No share or shares of Preferred Stock acquired by the Company by
reason of purchase, conversion, or otherwise shall be reissued,
and all such shares shall be canceled, retired, and eliminated
from the shares which the Company shall be authorized to issue.
IN WITNESS WHEREOF, said PREMIER CONCEPTS, INC, has caused this
Certificate of Designations, Preferences and Rights of Series A Convertible
Preferred Stock to be duly executed by its President and attested by its
Secretary and has caused its corporate seal to be affixed hereto, this
day of , 1999.
- ------ ---------------
PREMIER CONCEPTS, INC.
Attest:
By:
- ------------------------------ --------------------------------
Secretary Sissel Greenberg, President
[Corporate Seal]
<PAGE>
EMPLOYMENT AGREEMENT
THIS AGREEMENT, dated effective as of February , 1999, is made and
entered into by and between PREMIER CONCEPTS, INC., a Colorado corporation,
("Company" or the "Corporation") and SISSEL GREENBERG ("Employee"). For
the definition of certain terms used in this Agreement, see Section 8
below.
WITNESSETH
WHEREAS, the Company and Employee desire that Employee become
President and C.E.O. of, and employed by, the Company.
NOW, THEREFORE, in consideration of the mutual covenants and
agreements hereinbelow set forth, the parties agree as follows:
Section 1. Employment.
----------
1.1 Engagement.
The Company will employ Employee, and Employee will accept
employment, as an Employee of Company for the Term, subject to and in
accordance with the provisions of this Agreement.
1.2 Duties.
During the Term, Employee will serve Company in the capacity of
President and Chief Executive Officer. Employee's duties as an Employee of
Company include all of the duties normally associated with such capacities.
Without in any way limiting the generality of the foregoing, Employee shall
be responsible for the day-to-day supervision and operation of the
Company's nationwide chain of faux jewelry retail stores operating under
the trademark "Impostors". Employee's duties will also include such other
activities, responsibilities and duties as may reasonably be assigned from
time to time by the Board. Employee will also perform the duties of the
President as described in the Company's bylaws or as determined from time
to time by the Board.
1.3 Attention and Effort.
During normal business hours Employee will devote Employee's best
efforts, entire productive time, ability and attention to the business of
Company. Further, during the Term, Employee will not, without Company's
prior written consent, directly or indirectly engage in any employment,
consulting or other activity which would interfere or conflict with the
performance of Employee's duties or obligations to Company or which would
directly or indirectly compete with Company.
Section 2. Compensation.
------------
2.1 Base Salary.
During the Term, Company will pay Employee an annual Base Salary
of $130,000, payable no less frequently than bi-weekly.
2.2 Bonus.
During the Term, and in addition to the Base Salary provided for
in Section 2.1 above, the Company shall pay to Employee an annual bonus
equal to 5% of the Company's annual pre-tax net income, not to exceed
$50,000 per year. The bonus shall be payable within fifteen (15) days of
the completion by the Company of its audited financial statements for each
fiscal year during the Term and, if not paid when due, shall accrue
interest at the rate of 10% per annum until paid in full.
2.3 Benefits.
During the Term, Employee will be entitled to participate in such
health and major medical insurance programs and such other fringe benefit
programs as may be provided from time to time by the Board or any person or
committee appointed by the Board to determine fringe benefit programs, all
subject to and in accordance with the eligibility and other requirements of
such programs.
2.4 Stock Incentive Plan.
The Company has adopted and implemented a Stock Incentive Plan
pursuant to which the Company is authorized to issue incentive stock
options qualified under Section 422 of the Internal Revenue Code of 1986,
as amended, (the "ISOP"). As additional compensation for services
hereunder, the Company agrees to grant and issue to Employee on the date of
execution of this Agreement incentive stock options pursuant to the ISOP
exercisable to purchase, in the aggregate, 150,000 shares of the $0.002 par
value common stock ("Common Stock"); 50,000 of which shall have an exercise
price of $.6875 per share and shall be granted and vest immediately upon
execution of this Agreement; 50,000 of which will be granted and vest
immediately upon the first anniversary of the date of this Agreement having
an exercise price equal to 100% of the current market price of the
Company's Common Stock on the date of grant; and 50,000 of which will be
granted and vest on the second anniversary date of this Agreement having an
exercise price equal to 100% of the current market price of the Company's
Common Stock on the date of grant. In the event Employee's employment with
the Company is terminated by the Company without cause prior to the grant
and vesting of the ISO's described in Section 2.4, then and in such event
those ISO's shall be deemed automatically granted and vested and
exercisable by Employee in accordance with their respective terms and
conditions.
2.5 Expenses.
During the Term, Company will reimburse Employee for reasonable
out-of-pocket expenses incurred by Employee in performance of service for
Company under this Agreement (e.g., transportation, lodging and food
expenses incurred while traveling on Company business), all subject to such
policies and other requirements as Company may from time to time establish
for its Employees generally.
2.6 Withholding and Offset.
Payment of the base salary and any other amounts to Employee will
be subject to such withholding and offset as may be provided by applicable
law (e.g., for income tax purposes) or consented to by Employee.
2.7 Indemnification.
The Company shall indemnify Employee and shall advance expenses
to the Employee in advance of the final disposition of any matter to the
full extent permitted and/or required by applicable law, and subject to
such rights of reimbursement and restitution as may be provided by
applicable law, from and against any and all judgments, penalties, fines,
amounts paid in settlement and reasonable expenses, including, but not
limited to, attorneys' fees and court costs.
Section 3. Term and Termination.
--------------------
3.1 Commencement.
The Term of this Employment Agreement shall begin on the day
of February, 1999, (the "Commencement Date").
3.2 Termination.
The Term will terminate upon the first of the following to occur:
(a) three (3) years from the Commencement Date; (b) Company's termination
of Employee's Employment for Cause pursuant to Paragraph 3.3; (c) Company's
termination of Employee's employment without Cause pursuant to Paragraph
3.4; (d) Employee resigns from employment as an Employee of Company
pursuant to Paragraph 3.5; (e) Employee's termination of Employee's
employment for cause pursuant to Paragraph 3.6 (f) the death of Employee;
(g) ninety (90) days after the disability of Employee resulting from
injury, illness or disease, whether of a mental or physical nature, which
substantially impairs or prevents the ability of Employee to satisfactorily
perform Employee's duties and obligation is under this Agreement for a
period which can reasonably be expected to be of long, continued or
indefinite duration, as determined in good faith by the Board of Directors;
or (h) a Change in Control of the Company.
3.3 Termination for Cause.
Company may at any time terminate Employee's employment for Cause
without prior notice.
3.4 Termination Without Cause.
At any time after six (6) months from the commencement of the
Term, the Company may at any time terminate Employee's employment without
Cause by giving Employee notice of the same at least five (5) days prior to
the effective date of such termination.
3.5 Resignation.
Employee may at any time resign from employment with Company by
giving Company notice of thirty (30) days prior to the effective date of
such termination.
3.6 Employee's Termination for Cause.
Employee may at any time terminate Employee's employment for
cause without prior notice.
3.7 Disability.
If in the event of a disability described in Paragraph 3.2(e)
Company decides not to terminate Employee's employment and Employee is
entitled to receive payments (i.e., in lieu of wages or other compensation
for employment) on account of such disability under any fringe benefit
program provided by Company, then the base salary described in Paragraph
2.1 will be reduced to the extent of such entitlement.
3.8 Termination Due to a Change in Control.
Upon five (5) days' notice, Employee may terminate Employee's
employment due to a Change in Control of the Company.
3.9 Return of Company Property.
Upon termination of the Term, Employee will deliver to Company
any and all property of Company which is in Employee's possession or
control (including, but not limited to, any and all Materials).
3.10 Survival.
Sections 4 and 5, together with all other provisions of this
Agreement that may reasonably be interpreted or construed to survive any
termination of the Term, will survive any termination of the Term.
3.11 Termination Payments.
In the event of termination pursuant to Sections 3.2(a), (b),
(d), (f) or (g), Employee shall be entitled to no further payments
hereunder after the date of termination. In the event of termination
pursuant to Sections 3.2(b), (e) or (h), Employee shall be entitled to
receive and the Company shall be obligated to pay to Employee Termination
Payments equal to, in the aggregate, the product of (i) the Employee's
average annualized total compensation under this Agreement, or all prior
agreements with the Company, including base salary, incentive compensation,
commission, bonuses, fringe benefits, shares of Common Stock and options to
purchase shares of Common Stock and other forms of compensation, received
during the two most recent fiscal years, multiplied by (ii) the number of
years, and fractions of years, remaining in the Term of this Agreement as
defined in Section 3.2(a) above. Such Termination Payments shall be due
and payable in full within thirty (30) days following the date of such
termination.
Section 4. Confidentiality.
---------------
4.1 Confidential Information.
In the course of Employee's employment with Company, Employee
will have access to certain Confidential Information. Employee will use
and disclose Confidential Information solely for the purposes for which it
is provided and will take reasonable precautions to prevent any
unauthorized use or disclosure of the same. Employee will not use or
disclose any Confidential Information (a) other than as required in the
course of Employee's employment with Company, (b) for Employee's own
personal gain, or (c) in any manner contrary to the best interests of
Company.
4.2 Work Product.
All Work Product which Employee conceives, develops or first
reduces to practice, either alone or with others, during the Term will be
the sole and exclusive property of Company, together with any and all
related Intellectual Property Rights. The foregoing applies to all Work
Product which relates to Employee's performance of services under this
Agreement, Company's Field of Business or Company's actual or demonstrably
anticipated research or development and whether or not such Work Products
are conceived, developed or first reduced to practice during normal
business hours or with the use of any equipment, supplies, facilities,
personnel, Confidential Information or other resource of Company.
4.3 Disclosures and Protection of Work Product.
Employee will disclose all Work Products described in
paragraph 4.3 to Company, promptly and in writing. At Company's request
and at Company's expense, Employee will assist Company or its designee in
efforts to protect such Work Products. Such assistance may include, but is
not necessarily limited to, the following: (a) making application in the
United States and in foreign countries for a patent or copyright on any
Work Products specified by Company; (b) executing documents of assignment
to Company or its designee of all Employee's right, title and interest in
and to any Work Product and related Intellectual Property Rights; and
(c) taking such additional action (including, but not limited to, the
execution and delivery of documents) to perfect, evidence or vest in
Company or its designee all rights, title and interest in and to any Work
Product and any related Intellectual Property Right.
4.4 Proprietary Information of Others.
Employee will not use in the course of Employee's employment with
Company, or disclose or otherwise make available to Company any
information, documents or other items which Employee may have received from
any other person (e.g., a prior employer) and which Employee is prohibited
from so using, disclosing or making available (e.g., by reason of any
contract, court order, law or obligation by which Employee is bound).
4.5 Materials.
All Materials and related Intellectual Property Rights will be
the sole and exclusive property of Company, whether or not such Materials
are marked with any Intellectual Property Right notice of Company or
Employee. All such Materials authored, made, conceived or developed by
Employee or made available to Employee (or any copies or extracts thereof)
will be held by Employee in trust solely for the benefit of Company.
Employee will use such Materials only as required in the course of
Employee's employment with Company or as otherwise authorized in writing by
Company.
4.6 Notice.
This Agreement does not apply to any invention for which no
equipment, supplies, facility or trade secret information of Company was
used, and which was developed entirely on Employee's own time, unless:
(a) the invention relates (i) directly to the Company or (ii) to Company's
actual or demonstrable anticipated research or development; or (b) the
invention results from any work performed by Employee for Company.
Section 5. Competition.
-----------
5.1 Employee covenants to and with the Company, its successors and
assigns, that during the term of this Agreement and for a period of six (6)
months from the date of the termination of this Agreement for any reason,
she will not directly or indirectly, either as principal, agent, manager,
employee, owner, partner (dominant or otherwise), stockholder, director or
other officer of a corporation, creditor, consultant or otherwise, engage
or become interested financially or otherwise, in any business, agency,
trade or occupation similar to or in competition with the Company or its
affiliates; nor shall Employee, during the term of this Agreement and for a
period of six (6) months from the date of the termination of this
Agreement, consult or enter into any agreement or arrangement with any
other person, firm, corporation or entity to conduct any research or
development, nor shall Employee directly or indirectly conduct such
research or development on her own behalf, related to the discovery of
processes, improvements, developments or commercialization of any service
or product developed or reduced to practice during the period of employment
with the Company, unless Employee shall have first obtained the Company's
expressed written consent thereto. Because of the nature of the business,
the parties agree that it is reasonable for the covenant to apply to the
entire geographic area of the United States. If the geographic area is
determined by a court to be overly broad in scope, it shall be modified
only to the extent necessary to bring it within the requirements of the law
and interpreted to give the Company the broadest protection allowed by law.
5.2 In the event of a breach or threatened breach by Employee of any
provisions of this Section 5, the Company shall be entitled to an
injunction restraining Employee from the commission of such breach.
Nothing herein contained shall be construed as prohibiting the Company from
pursuing any other remedies available to it for such breach or threatened
breach, including the recovery of money damages. The covenants contained
in this Section 5 shall be construed as independent of any other provisions
in this Agreement; and the existence of any claim or cause of action of
Employee against the Company, whether predicated on this Agreement or
otherwise, shall not constitute a defense to the enforcement by the Company
of said covenants.
5.3 The covenants contained in this Section 5 shall terminate and,
upon termination, shall be unenforceable and of no further legal force and
effect, in the event the Company, or any successor to the Company, becomes
insolvent or ceases for any reason to conduct business operations for a
continuous period of at least thirty (30) days.
5.4 The Company shall have the right to assign the aforesaid
covenants; and Employee agrees to remain bound by the terms of the
covenants to any and all subsequent purchasers and assignees of the assets
and business of the Company.
Section 6. Non-Interference.
----------------
6.1 Non-Interference with the Employees.
The Employee covenants with the Corporation that employees of or
consultants to the Corporation and employees of and consultants to firms,
corporations or entities affiliated with the Corporation have, of
necessity, been exposed to and have acquired certain knowledge,
understandings, and know-how concerning the Corporation's business
operations which is confidential information and proprietary to the
Corporation.
6.2 In order to protect the Corporation's confidential information
and to promote and insure the continuity of the Corporation's contractual
relations with its employees and consultants, the Employee covenants and
agrees that for so long as the Employee holds any position or affiliation
with the Corporation, including service to the Corporation as an officer,
director, employee, consultant, agent or contractor, and for a period of
six (6) months from the date the Employee ceases to hold any such position
or status with the Corporation or otherwise becomes disaffiliated with the
Corporation, she will not directly, or permit or encourage others to
directly (i) interfere in any manner whatsoever with the Corporation's
contractual or other relations with any or all of its employees or
consultants, or (ii) induce or attempt to induce any employee or consultant
to the Corporation to cease performing services for or on behalf of the
Corporation, or (iii) solicit, offer to retain, or retain, or in any other
manner engage or employ the services of, or conduct any business activity
in cooperation or association with, any person or entity who at any time
was employed by the Corporation, or any subsidiary of the Corporation,
except with the consent of the Corporation.
6.3 In the event any court of competent jurisdiction determines or
holds that all or any portion of the covenants contained in this Section 6
are unlawful, invalid, or unenforceable for any reasons, then the parties
hereto agree to modify the provisions of this Section 6 if and only to the
extent necessary to render the covenants herein contained enforceable and
otherwise in conformance with all legal requirements.
Section 7. Clients and Customers.
---------------------
7.1 In order to protect the Corporation's proprietary rights and to
promote and ensure the continuity of the Corporation's contractual
relations with its customers and clients, the Employee covenants and agrees
that, for so long as the Employee holds any position or affiliation with
the Corporation, including service to the Corporation as an officer,
director, employee, consultant, agent or contractor, and for a period of
six (6) months from the date the Employee ceases to hold any such position
or status with the Corporation or otherwise becomes disaffiliated with the
Corporation, she will not directly, or permit or encourage others to
directly (i) interfere in any manner whatsoever with the Corporation's
contractual or prospective relations with any clients or customers, or
(ii) induce or attempt to induce any client or customer of the Corporation
to cease doing business with the Corporation, or (iii) solicit, offer to
retain, or retain, or in any other manner engage or enter into any business
or other arrangement with any of the Corporation's customers or clients to
provide any services or products to any of such customers or clients as
they may from time to time exist or be constituted, except and unless such
arrangement for the provision of products or services is not in any way
competitive with the products or services actually provided by the
Corporation to its clients or customers or proposed to be provided by the
Corporation to its clients or customers, or except under circumstances to
which the Corporation has consented in writing, which consent shall not be
unreasonably withheld.
7.2 In the event any court of competent jurisdiction determines or
holds that all or any portions of the covenants contained in this Section 7
are unlawful, invalid or unenforceable for any reason, then the parties
hereto agree to modify the provisions of this Section 7 if and only to the
extent necessary to render the covenants herein contained enforceable and
otherwise in conformance with all legal requirements.
Section 8. Definitions.
-----------
Whenever used in this Agreement with initial letters capitalized, the
following terms will have the following specified meanings:
8.1 "Board" means Company's Board of Directors.
8.2 "Cause," for purposes of Paragraph 3.3, shall include the
occurrence of any of the following:
8.2.1 The Employee breaches or violates any of the material
terms of this Agreement and fails to cure such breach or violation within
thirty (30) days of receipt of written notice by Company, which notice
shall specify in detail each alleged breach and specify in detail the
actions necessary to cure; provided, further, that the specification for
cure by the Company shall not obligate the Employee to effect the cure in
the manner stated if cure is otherwise timely completed by or on behalf of
Employee;
8.2.2 The Employee is shown to have engaged in any material
act of dishonesty or fraud upon the Company, any of its affiliated
companies, or any of its customers or clients;
8.2.3 The Employee fails to devote her full time, attention
and efforts to the business and affairs of the Company or its affiliated
companies; provided that the Company shall have first provided the Employee
with thirty (30) days' prior written notice specifying in detail the
instance or instances in which Employee has failed to devote the time
required, and Employee thereafter fails to cure and correct the conduct
complained of within such thirty (30) day period; or
8.2.4 The Employee has been grossly negligent in the
performance of her employment duties or responsibilities; provided that the
Company shall have first provided the Employee with thirty (30) days' prior
written notice specifying in detail the instance or instances in which
Employee has been grossly negligent, and Employee thereafter fails to cure
and correct the conduct complained of within such thirty (30) day period.
8.3 "Cause," for purposes of Paragraph 3.6, shall include the
occurrence of any of the following:
8.3.1 The breach or violation by the Company of the any of
the material terms of this Agreement;
8.3.2 Any significant change in position, duties and
responsibilities of Employee to which the Employee does not consent,
including, without limitation, imposing the duty upon Employee to be,
directly or indirectly, subordinate (either organizationally or
functionally) to any other executive officer of the Company;
8.3.3 Any move of the Company or its principal officers
resulting in or any other requirement that the Employee, without her
consent, change her principal residence.
8.3.4 The Company has shown to have engaged in any active
material dishonesty or fraud upon the Employee.
8.3.5 There shall occur a Change in Control of the Company.
8.4 "Change in Control" means any transaction of the Company
involving (i) the merger or consolidation of the Company into or with
another entity where the Company's shareholders receive less than 50% of
the outstanding voting securities of the new or continuing entity, (ii) the
sale of all or substantially all of the Company's assets, (iii) any person
not already a stockholder of the Company becoming a beneficial owner,
directly or indirectly, of the securities of the Company representing 50%
or more of the combined voting power of the Company's then outstanding
securities, (iv) a change in the majority of the Board of Directors of the
Company, or (v) the Company terminating its business or liquidating its
assets.
8.5 "Company's Field of Business" means any of the fields of the
Company's business. On the date of the Agreement, Company's Field of
Business includes, but is not necessarily limited to, the following: the
ownership and operation of a nationwide chain of faux jewelry retail stores
operating under the trademark "Impostors".
8.6 "Confidential Information" means any information that is
confidential, proprietary or trade secret information of Company or any of
its customer or clients or any other information the use of disclosure of
which by Company is prohibited or restricted (e.g., by reason of any
contract, court order, law or other obligation by which Company is not
bound). "Confidential Information" may include, but is not necessarily
limited to, technology, computer programs, business plans, marketing plans,
information as to existing or future products or services of Company,
financial projections, unpublished works of original authorship, customer
lists, financial information, and trade secrets.
Notwithstanding the foregoing, the restrictions on disclosure and
use of information and materials as set forth in Section 4 shall not apply
to the following, and the following is not confidential or proprietary
information: (1) any information or materials which were generally
available to the public at the time made available to Employee by the
Company; (2) any information or materials which become, without breach of
Section 4 and through no fault of Employee, generally available to the
public; (3) any information or materials which Employee has received from
other sources prior to the date of this Agreement, subject to no
restrictions on disclosure applicable to Employee; and (4) any information
or materials which Employee at any time lawfully obtains from a third party
who is not under any obligation of secrecy or confidentiality to the
Company, under circumstances permitting disclosure by Employee to others
without restriction.
8.7 "Intellectual Property Right" means any patent, copyright, trade
secret, trade name, trademark or other intellectual property right.
8.8 "Materials" means hardware, software, programs, manuals,
drawings, designs, articles, writings, data, notes, memorandum,
manuscripts, notebooks, proposals, work plans, interim and final reports,
project files, client contract records and other tangible manifestations of
any Confidential Information or Work Products.
8.9 "President" means Company's President.
8.10 "Term" means the term of Employee's employment as an Employee of
Company pursuant to this Agreement.
8.11 "Work Product" means any invention, discovery, concept or idea
(including, but not necessarily limited to, hardware, software programs, or
processes, techniques, know-how, methods, systems, improvements, analytical
reports, and other developments).
Section 9. Miscellaneous.
-------------
9.1 Compliance with Laws.
In the performance of this Agreement, each party will comply with
all applicable laws, regulations, rules, orders and other requirements of
governmental authorities having jurisdiction.
9.2 Equitable Relief.
Employee acknowledges that: the provisions of Sections 4 and 5
are essential to Company; Company would not enter into this Agreement if it
did not include such provisions; the damages sustained by Company as a
result of any breach of such provisions cannot be adequately remedied by
damages; and, in addition to any other right or remedy that Company may
have (e.g., under this Agreement, by law or otherwise), Company will be
entitled to injunctive and other equitable relief to prevent or curtail any
breach of any such provisions.
9.3 Nonwaiver.
The failure of either party to insist upon or enforce strict
performance by the other of any provision of this Agreement or to exercise
any right, remedy or provision of this Agreement will not be interpreted or
construed as a waiver or relinquishment to any extent of such party's right
to consent or rely upon the same in that or any other instance; rather, the
same will be and remain in full force and effect.
9.4 Entire Agreement.
This Agreement constitutes the Entire Agreement, and supersedes
any and all prior Agreements, between Company and Employee. No amendment,
modification or waiver of any of the provisions of this Agreement will be
valid unless set forth in a written instrument signed by the party to be
bound thereby.
9.5 Applicable Law.
This Agreement will be interpreted, construed and enforced in all
respects in accordance with the local laws of the State of Colorado,
without reference to its choice of law rules.
9.6 Attorneys Fees.
In the event that either party consults or retains an attorney to
enforce the terms of this Agreement, the prevailing party in any such
dispute or litigation shall be entitled to recover from the other party its
reasonable attorneys fees and costs incurred.
9.7 Severability.
If any of the provisions of this Agreement are held to be invalid
or unenforceable, the remaining provisions shall nevertheless continue to
be valid and enforceable to the extent permitted by law.
IN WITNESS WHEREOF, this Agreement is executed as of the date first
above written.
Company: PREMIER CONCEPTS, INC., a Colorado
corporation
By:
----------------------------------------
Employee:
-------------------------------------------
SISSEL GREENBERG
<PAGE>
EMPLOYMENT AGREEMENT
THIS AGREEMENT effective as of February 26, 1999 is made and entered
into by and between PREMIER CONCEPTS, INC., a Colorado corporation
("Company" or the "Corporation") and TODD HUSS ("Employee"). For the
definition of certain terms used in this Agreement, see Section 8 below.
WITNESSETH
WHEREAS, the Company and Employee desire that Employee become Chief
Financial Advisor and Principal Accounting Officer of, and employed by, the
Company.
NOW, THEREFORE, in consideration of the mutual covenants and
agreements hereinbelow set forth, the parties agree as follows:
Section 1. Employment.
----------
1.1 Engagement.
----------
The Company will employ Employee, and Employee will accept employment,
as an Employee of Company for the Term, subject to and in accordance with
the provisions of this Agreement.
1.2 Duties.
------
During the Term, Employee will serve Company in the capacity of Chief
Financial Officer and Principal Accounting Officer. Employee's duties as
an Employee of Company include all of the duties normally associated with
such capacities. Without in any way limiting the generality of the
foregoing, Employee shall be responsible for the financial operation of the
Company's nationwide chain of faux jewelry stores operating under the
trademark "Impostors." Employee will be responsible for cash management,
internal controls and financial statement preparation including the
required SEC reports, Forms 10-Q and 10-K, preparations of departmental and
consolidated budgets and also preparation of financial forecasts and
projections as required. Employee's duties will also include such other
activities, responsibilities and duties as may be reasonably assigned from
time to time by the Company's President and CEO. Employee will also
perform the duties of the Chief Financial Officer and Principal Accounting
Officer as described in the Company's By-Laws or as determined from time to
time by the Company's President and CEO.
1.3 Attention and Effort.
--------------------
During normal business hours Employee will devote Employee's best
efforts, entire productive time, ability and attention to the business of
Company. Further, during the Term, Employee will not, without Company's
prior written consent, directly or indirectly engage in any employment,
consulting or other activity which would interfere or conflict with the
performance of Employee's duties or obligations to Company or which would
directly or indirectly compete with Company.
Section 2. Compensation.
------------
2.1 Base Salary.
-----------
During the Term, Company will pay Employee an annual Base Salary of
$60,000, payable no less frequently than bi-weekly.
2.2 Bonus.
-----
During the Term, and in addition to the Base Salary provided for in
Section 2.1 above, the Company shall pay to Employee an annual bonus equal
to 5% of the Company's annual pre-tax net income, not to exceed $25,000 per
year. The bonus shall be payable within fifteen (15) days of the
completion by the Company of its audited financial statements for each
fiscal year during the Term and, if not paid when due, shall accrue
interest at the rate of 10% per annum until paid in full.
2.3 Benefits.
--------
During the Term, Employee will be entitled to participate in such
health and major medical insurance programs and such other fringe benefit
programs as may be provided from time to time by the Board or any person or
committee appointed by the Board to determine fringe benefit programs, all
subject to and in accordance with the eligibility and other requirements of
such programs.
2.4 Stock Incentive Plan.
--------------------
The Company has adopted and implemented a Stock Incentive Plan
pursuant to which the Company is authorized to issue incentive stock
options qualified under Section 422 of the Internal Revenue Code of 1986,
as amended, (the "ISOP"). As additional compensation for services
hereunder, the Company agrees to grant and issue to Employee on the date of
execution of this Agreement incentive stock options pursuant to the ISOP
exercisable to purchase, in the aggregate, 75,000 shares of the $0.002 par
value common stock ("Common Stock"); 25,000 of which shall have an exercise
price of $.6875 per share and shall be granted and vest immediately upon
execution of this Agreement; 25,000 of which will be granted and vest
immediately upon the first anniversary of the date of this Agreement having
an exercise price equal to 100% of the current market price of the
Company's Common Stock on the date of grant; and 25,000 of which will be
granted and vest on the second anniversary date of this Agreement having an
exercise price equal to 100% of the current market price of the Company's
Common Stock on the date of grant. In the event Employee's employment with
the Company is terminated by the Company without cause prior to the grant
and vesting of the ISO's described in Section 2.4, then and in such event
those ISO's shall be deemed automatically granted and vested and
exercisable by Employee in accordance with their respective terms and
conditions.
2.5 Expenses.
--------
During the Term, Company will reimburse Employee for reasonable out-
of-pocket expenses incurred by Employee in performance of service for
Company under this Agreement (e.g., transportation, lodging and food
expenses incurred while traveling on Company business), all subject to such
policies and other requirements as Company may from time to time establish
for its Employees generally.
2.6 Withholding and Offset.
----------------------
Payment of the base salary and any other amounts to Employee will be
subject to such withholding and offset as may be provided by applicable law
(e.g., for income tax purposes) or consented to by Employee.
2.7 Indemnification.
---------------
The Company shall indemnify Employee and shall advance expenses to the
Employee in advance of the final disposition of any matter to the full
extent permitted and/or required by applicable law, and subject to such
rights of reimbursement and restitution as may be provided by applicable
law, from and against any and all judgments, penalties, fines, amounts paid
in settlement and reasonable expenses, including, but not limited to,
attorneys' fees and court costs.
Section 3. Term and Termination.
--------------------
3.1 Commencement.
The Term of this Employment Agreement shall begin on the 26th day of
February, 1999 (the "Commencement Date").
3.2 Termination.
-----------
The Term will terminate upon the first of the following to occur: (a)
February 26, 2002, (b) Company's termination of Employee's Employment for
Cause pursuant to paragraph 3.3; (c) Company's termination of Employee's
employment without Cause pursuant to Paragraph 3.4; (d) Employee's
termination of Employee's employment for cause pursuant to Paragraph 3.5;
(e) the death of Employee; or (f) ninety (90) days after the disability of
Employee resulting from injury, illness or disease, whether of a mental or
physical nature, which substantially impairs or prevents the ability of
Employee to satisfactorily perform Employee's duties and obligation is
under this Agreement for a period which can reasonably be expected to be of
long, continued or indefinite duration, as determined in good faith by the
Board.
In the event of termination pursuant to Sections 3.2(a), (b),
(e), or (f), Employee shall be entitled to no further payments hereunder
after the date of termination. In the event of termination pursuant to
Sections 3.2(c) or (d), Employee shall be entitled to receive all
compensation and benefits provided for herein for the remaining balance of
the term defined in Section 3.2(a).
3.3 Termination for Cause.
---------------------
Company may at any time terminate Employee's employment for Cause
without prior notice.
3.4 Termination Without Cause.
-------------------------
At any time after six (6) months from the commencement of the Term,
the Company may at any time terminate Employee's employment with or without
Cause by giving Employee notice of the same at least five (5) days prior to
the effective date of such termination. Upon such termination, the Company
shall be obligated to pay the remaining balance of Base Salary (Item 2.1)
for the remaining term of the Agreement.
3.5 Resignation.
-----------
Employee may at any time resign from employment with Company by giving
Company notice of thirty (30) days prior to the effective date of such
termination.
3.6 Employee's Termination for Cause.
--------------------------------
Employee may at any time terminate Employee's employment for cause
without prior notice.
3.7 Disability.
----------
If in the event of a disability described in paragraph 3.2(e) Company
decides not to terminate Employee's employment and Employee is entitled to
receive payments (i.e., in lieu of wages or other compensation for
employment) on account of such disability under any fringe benefit program
provided by Company, then the base salary described in paragraph 2.1 will
be reduced to the extent of such entitlement.
3.8 Termination Due to a Change in Control.
--------------------------------------
Upon five (5) days' notice, Employee may terminate Employee's
employment due to a Change in Control of the Company.
3.9 Return of Company Property.
--------------------------
Upon termination of the Term, Employee will deliver to Company any and
all property of Company which is in Employee's possession or control
(including, but not limited to, any and all Materials).
3.10 Survival.
--------
Sections 4 and 5, together with all other provisions of this Agreement
that may reasonably be interpreted or construed to survive any termination
of the Term, will survive any termination of the Term.
3.11 Termination Payments.
--------------------
In the event of termination pursuant to Sections 3.2(a), (b), (d), (f)
or (g), Employee shall be entitled to no further payments hereunder after
the date of termination. In the event of termination pursuant to Sections
3.2(b), (e) or (h), Employee shall be entitled to receive and the Company
shall be obligated to pay to Employee Termination Payments equal to, in the
aggregate, the product of (i) the Employee's average annualized total
compensation under this Agreement, or all prior agreements with the
Company, including base salary, incentive compensation, commission,
bonuses, fringe benefits, shares of Common Stock and options to purchase
shares of Common Stock and other forms of compensation, received during the
two most recent fiscal years, multiplied by (ii) the number of years, and
fractions of years, remaining in the Term of this Agreement as defined in
Section 3.2(a) above. Such Termination Payments shall be due and payable
in full within thirty (30) days following the date of such termination.
Section 4. Confidentiality.
---------------
4.1 Confidential Information.
------------------------
In the course of Employee's employment with Company, Employee will have
access to certain Confidential Information. Employee will not use or
disclose any Confidential Information (a) other than as required in the
course of Employee's employment with Company, (b) for Employee's own
personal gain, or (c) in any manner contrary to the best interests of
Company.
4.2 Work Product.
------------
All Work Product which Employee conceives, develops or first reduces
to practice, either alone or with others, during the Term will be the sole
and exclusive property of Company, together with any and all related
Intellectual Property Rights. The foregoing applies to all Work Product
which relates to Employee's performance of services under this Agreement,
Company's Field of Business or Company's actual or demonstrably anticipated
research or development and whether or not such Work Products are
conceived, developed or first reduced to practice during normal business
hours or with the use of any equipment, supplies, facilities, personnel,
Confidential Information or other resource of Company.
4.3 Disclosures and Protection of Work Product.
------------------------------------------
Employee will disclose all Work Products described in paragraph 4.3 to
Company, promptly and in writing. At Company's request and at Company's
expense, Employee will assist Company or its designee in efforts to protect
such Work Products. Such assistance may include, but is not necessarily
limited to, the following: (a) making application in the United States and
in foreign countries for a patent or copyright on any Work Products
specified by Company; (b) executing documents of assignment to Company or
its designee of all Employee's right, title and interest in and to any Work
Product and related Intellectual Property Rights; and (c) taking such
additional action (including, but not limited to, the execution and
delivery of documents) to perfect, evidence or vest in Company or its
designee all rights, title and interest in and to any Work Product and any
related Intellectual Property Right.
4.4 Proprietary Information of Others.
---------------------------------
Employee will not use in the course of Employee's employment with
Company, or disclose or otherwise make available to Company any
information, documents or other items which Employee may have received from
any other person (e.g., a prior employer) and which Employee is prohibited
from so using, disclosing or making available (e.g., by reason of any
contract, court order, law or obligation by which Employee is bound).
4.5 Materials.
---------
All Materials and related Intellectual Property Rights will be the
sole and exclusive property of Company, whether or not such Materials are
marked with any Intellectual Property Right notice of Company or Employee.
All such Materials authored, made, conceived or developed by Employee or
made available to Employee (or any copies or extracts thereof) will be held
by Employee in trust solely for the benefit of Company. Employee will use
such Materials only as required in the course of Employee's employment with
Company or as otherwise authorized in writing by Company.
4.6 Notice.
------
This Agreement does not apply to any invention for which no equipment,
supplies, facility or trade secret information of Company was used, and
which was developed entirely on Employee's own time, unless: (a) the
invention relates (i) directly to the Company or (ii) to Company's actual
or demonstrable anticipated research or development; or (b) the invention
results from any work performed by Employee for Company.
Section 5. Competition.
-----------
5.1 Employee covenants to and with the Company, its successors and
assigns, that during the term of this Agreement and for a period of six (6)
months from the date of the termination of this Agreement for any reason,
he will not directly or indirectly, either as principal, agent, manager,
employee, owner, partner (dominant or otherwise), stockholder, director or
other officer of a corporation, creditor, consultant or otherwise, engage
or become interested financially or otherwise, in any business, agency,
trade or occupation similar to or in competition with the Company or its
affiliates; nor shall Employee, during the term of this Agreement and for a
period of six (6) months from the date of the termination of this
Agreement, consult or enter into any agreement or arrangement with any
other person, firm, corporation or entity to conduct any research or
development, nor shall Employee directly or indirectly conduct such
research or development on his own behalf, related to the discovery of
processes, improvements, developments or commercialization of any service
or product developed or reduced to practice during the period of employment
with the Company, unless Employee shall have first obtained the Company's
expressed written consent thereto. Because of the nature of the business,
the parties agree that it is reasonable for the covenant to apply to the
entire geographic area of the United States. If the geographic area is
determined by a court to be overly broad in scope, it shall be modified
only to the extent necessary to bring it within the requirements of the law
and interpreted to give the Company the broadest protection allowed by law.
5.2 In the event of a breach or threatened breach by Employee of any
provisions of this Section 5, the Company shall be entitled to an
injunction restraining Employee from the commission of such breach.
Nothing herein contained shall be construed as prohibiting the Company from
pursuing any other remedies available to it for such breach or threatened
breach, including the recovery of money damages. The covenants contained
in this Section 5 shall be construed as independent of any other provisions
in this Agreement; and the existence of any claim or cause of action of
Employee against the Company, whether predicated on this Agreement or
otherwise, shall not constitute a defense to the enforcement by the Company
of said covenants.
5.3 The covenants contained in this Section 5 shall terminate and,
upon termination, shall be unenforceable and of no further legal force and
effect, in the event the Company, or any successor to the Company, becomes
insolvent or ceases for any reason to conduct business operations for a
continuous period of at least thirty (30) days.
5.4 The Company shall have the right to assign the aforesaid
covenants; and Employee agrees to remain bound by the terms of the
covenants to any and all subsequent purchasers and assignees of the assets
and business of the Company.
Section 6. Non-Interference.
----------------
6.1 Non-Interference with the Employees.
-----------------------------------
The Employee covenants with the Corporation that employees of or
consultants to the Corporation and employees of and consultants to firms,
corporations or entities affiliated with the Corporation have, of
necessity, been exposed to and have acquired certain knowledge,
understandings, and know-how concerning the Corporation's business
operations which is confidential information and proprietary to the
Corporation.
6.2 In order to protect the Corporation's confidential information
and to promote and insure the continuity of the Corporation's contractual
relations with its employees and consultants, the Employee covenants and
agrees that for so long as the Employee holds any position or affiliation
with the Corporation, including service to the Corporation as an officer,
director, employee, consultant, agent or contractor, and for a period of
six (6) months from the date the Employee ceases to hold any such position
or status with the Corporation or otherwise becomes disaffiliated with the
Corporation, he will not directly, or permit or encourage others to
directly (i) interfere in any manner whatsoever with the Corporation's
contractual or other relations with any or all of its employees or
consultants, or (ii) induce or attempt to induce any employee or consultant
to the Corporation to cease performing services for or on behalf of the
Corporation, or (iii) solicit, offer to retain, or retain, or in any other
manner engage or employ the services of, or conduct any business activity
in cooperation or association with, any person or entity who at any time
was employed by the Corporation, or any subsidiary of the Corporation,
except with the consent of the Corporation.
6.3 In the event any court of competent jurisdiction determines or
holds that all or any portion of the covenants contained in this Section 6
are unlawful, invalid, or unenforceable for any reasons, then the parties
hereto agree to modify the provisions of this Section 6 if and only to the
extent necessary to render the covenants herein contained enforceable and
otherwise in conformance with all legal requirements.
Section 7. Clients and Customers.
---------------------
7.1 In order to protect the Corporation's proprietary rights and to
promote and ensure the continuity of the Corporation's contractual
relations with its customers and clients, the Employee covenants and agrees
that, for so long as the Employee holds any position or affiliation with
the Corporation, including service to the Corporation as an officer,
director, employee, consultant, agent or contractor, and for a period of
six (6) months from the date the Employee ceases to hold any such position
or status with the Corporation or otherwise becomes disaffiliated with the
Corporation, he will not directly, or permit or encourage others to
directly (i) interfere in any manner whatsoever with the Corporation's
contractual or prospective relations with any clients or customers, or
(ii) induce or attempt to induce any client or customer of the Corporation
to cease doing business with the Corporation, or (iii) solicit, offer to
retain, or retain, or in any other manner engage or enter into any business
or other arrangement with any of the Corporation's customers or clients to
provide any services or products to any of such customers or clients as
they may from time to time exist or be constituted, except and unless such
arrangement for the provision of products or services is not in any way
competitive with the products or services actually provided by the
Corporation to its clients or customers or proposed to be provided by the
Corporation to its clients or customers, or except under circumstances to
which the Corporation has consented in writing, which consent shall not be
unreasonably withheld.
7.2 In the event any court of competent jurisdiction determines or
holds that all or any portions of the covenants contained in this Section 7
are unlawful, invalid or unenforceable for any reason, then the parties
hereto agree to modify the provisions of this Section 7 if and only to the
extent necessary to render the covenants herein contained enforceable and
otherwise in conformance with all legal requirements.
Section 8. Definitions.
-----------
Whenever used in this Agreement with initial letters capitalized, the
following terms will have the following specified meanings:
8.1 "Board" means Company's Board of Directors.
8.2 "Cause," for purposes of Paragraph 3.3, shall include the
occurrence of any of the following:
8.2.1 The Employee breaches or violates any of the material
terms of this Agreement and fails to cure such breach or violation within
thirty (30) days of receipt of written notice by Company, which notice
shall specify in detail each alleged breach and specify in detail the
actions necessary to cure; provided, further, that the specification for
cure by the Company shall not obligate the Employee to effect the cure in
the manner stated if cure is otherwise timely completed by or on behalf of
Employee;
8.2.2 The Employee is shown to have engaged in any material
act of dishonesty or fraud upon the Company, any of its affiliated
companies, or any of its customers or clients;
8.2.3 The Employee fails to devote his full time, attention
and efforts to the business and affairs of the Company or its affiliated
companies; provided that the Company shall have first provided the Employee
with thirty (30) days' prior written notice specifying in detail the
instance or instances in which Employee has failed to devote the time
required, and Employee thereafter fails to cure and correct the conduct
complained of within such thirty (30) day period; or
8.2.4 The Employee has been grossly negligent in the
performance of his employment duties or responsibilities; provided that the
Company shall have first provided the Employee with thirty (30) days' prior
written notice specifying in detail the instance or instances in which
Employee has been grossly negligent, and Employee thereafter fails to cure
and correct the conduct complained of within such thirty (30) day period.
8.3 "Cause," for purposes of Paragraph 3.6, shall include the
occurrence of any of the following:
8.3.1 The breach or violation by the Company of the any of
the material terms of this Agreement;
8.3.2 Any significant change in position, duties and
responsibilities of Employee to which the Employee does not consent,
including, without limitation, imposing the duty upon Employee to be,
directly or indirectly, subordinate (either organizationally or
functionally) to any other executive officer of the Company;
8.3.3 Any move of the Company or its principal officers
resulting in or any other requirement that the Employee, without his
consent, change his principal residence.
8.3.4 The Company has shown to have engaged in any active
material dishonesty or fraud upon the Employee.
8.3.5 There shall occur a Change in Control of the Company.
8.4 "Change in Control" means any transaction of the Company
involving (i) the merger or consolidation of the Company into or with
another entity where the Company's shareholders receive less than 50% of
the outstanding voting securities of the new or continuing entity, (ii) the
sale of all or substantially all of the Company's assets, (iii) any person
not already a stockholder of the Company becoming a beneficial owner,
directly or indirectly, of the securities of the Company representing 50%
or more of the combined voting power of the Company's then outstanding
securities, (iv) a change in the majority of the Board of Directors of the
Company, or (v) the Company terminating its business or liquidating its
assets.
8.5 "Company's Field of Business" means any of the fields of the
Company's business. On the date of the Agreement, Company's Field of
Business includes, but is not necessarily limited to, the following:
wholesale and retail sales of jewelry and accessories.
8.6 "Confidential Information" means any information that is
confidential, proprietary or trade secret information of Company or any of
its customer or clients or any other information the use of disclosure of
which by Company is prohibited or restricted (e.g., by reason of any
contract, court order, law or other obligation by which Company is not
bound). "Confidential Information" may include, but is not necessarily
limited to, technology, computer programs, business plans, marketing plans,
information as to existing or future products or services of Company,
financial projections, unpublished works of original authorship, customer
lists, financial information, and trade secrets.
Notwithstanding the foregoing, the restrictions on disclosure and
use of information and materials as set forth in Section 4 shall not apply
to the following, and the following is not confidential or proprietary
information: (1) any information or materials which were generally
available to the public at the time made available to Employee by the
Company; (2) any information or materials which become, without breach of
Section 4 and through no fault of Employee, generally available to the
public; (3) any information or materials which Employee has received from
other sources prior to the date of this Agreement, subject to no
restrictions on disclosure applicable to Employee; and (4) any information
or materials which Employee at any time lawfully obtains from a third party
who is not under any obligation of secrecy or confidentiality to the
Company, under circumstances permitting disclosure by Employee to others
without restriction.
8.7 "Intellectual Property Right" means any patent, copyright, trade
secret, trade name, trademark or other intellectual property right.
8.8 "Materials" means hardware, software, programs, manuals,
drawings, designs, articles, writings, data, notes, memorandum,
manuscripts, notebooks, proposals, work plans, interim and final reports,
project files, client contract records and other tangible manifestations of
any Confidential Information or Work Products.
8.9 "Chief Financial Officer and Principal Accounting Officer" means
Company's Chief Financial Officer and Principal Accounting Officer.
8.10 "Term" means the term of Employee's employment as an Employee of
Company pursuant to this Agreement.
8.11 "Work Product" means any invention, discovery, concept or idea
(including, but not necessarily limited to, hardware, software programs, or
processes, techniques, know-how, methods, systems, improvements, analytical
reports, and other developments).
Section 9. Miscellaneous.
-------------
9.1 Compliance with Laws.
--------------------
In the performance of this Agreement, each party will comply with all
applicable laws, regulations, rules, orders and other requirements of
governmental authorities having jurisdiction.
9.2 Equitable Relief.
----------------
Employee acknowledges that: the provisions of Sections 4 and 5 are
essential to Company; Company would not enter into this Agreement if it did
not include such provisions; the damages sustained by Company as a result
of any breach of such provisions cannot be adequately remedied by damages;
and, in addition to any other right or remedy that Company may have (e.g.,
under this Agreement, by law or otherwise), Company will be entitled to
injunctive and other equitable relief to prevent or curtail any breach of
any such provisions.
9.3 Nonwaiver.
---------
The failure of either party to insist upon or enforce strict
performance by the other of any provision of this Agreement or to exercise
any right, remedy or provision of this Agreement will not be interpreted or
construed as a waiver or relinquishment to any extent of such party's right
to consent or rely upon the same in that or any other instance; rather, the
same will be and remain in full force and effect.
9.4 Entire Agreement.
----------------
This Agreement constitutes the Entire Agreement, and supersedes any
and all prior Agreements, between Company and Employee. No amendment,
modification or waiver of any of the provisions of this Agreement will be
valid unless set forth in a written instrument signed by the party to be
bound thereby.
9.5 Applicable Law.
--------------
This Agreement will be interpreted, construed and enforced in all
respects in accordance with the local laws of the State of Colorado,
without reference to its choice of law rules.
9.6 Attorneys Fees.
--------------
In the event that either party consults or retains an attorney to
enforce the terms of this Agreement, the prevailing party in any such
dispute or litigation shall be entitled to recover from the other party its
reasonable attorneys fees and costs incurred.
9.7 Severability.
------------
If any of the provisions of this Agreement are held to be invalid or
unenforceable, the remaining provisions shall nevertheless continue to be
valid and enforceable to the extent permitted by law.
IN WITNESS WHEREOF, this Agreement is executed as of the date first
above written.
Company: PREMIER CONCEPTS, INC., a Colorado
corporation
By:
---------------------------------
Sissel Greenberg, President
Employee:
------------------------------------
TODD HUSS
<PAGE>
EMPLOYMENT AGREEMENT
THIS AGREEMENT effective as of February 26, 1999 is made and entered
into by and between PREMIER CONCEPTS, INC., a Colorado corporation
("Company" or the "Corporation") and KEVIN O'BRIEN ("Employee"). For the
definition of certain terms used in this Agreement, see Section 8 below.
WITNESSETH
WHEREAS, the Company and Employee desire that Employee become Chief
Operating Officer of, and employed by, the Company.
NOW, THEREFORE, in consideration of the mutual covenants and
agreements hereinbelow set forth, the parties agree as follows:
Section 1. Employment.
----------
1.1 Engagement.
----------
The Company will employ Employee, and Employee will accept employment,
as an Employee of Company for the Term, subject to and in accordance with
the provisions of this Agreement.
1.2 Duties.
------
During the Term, Employee will serve Company in the capacity of Chief
Operating Officer. Employee's duties as an Employee of Company include all
of the duties normally associated with such capacities. Without in any way
limiting the generality of the foregoing, Employee shall be responsible for
the operations of the Company's nationwide chain of faux jewelry stores
operating under the trademark "Impostors." Employee will be responsible
for store operations and profitability including budgeting and cost
control, hiring, training and development of regional managers and
development of incentive based field compensation and bonus plans.
Employee's duties will also include such other activities, responsibilities
and duties as may be reasonably assigned from time to time by the Company's
President and CEO. Employee will also perform the duties of the Chief
Operating Officer as described in the Company's By-Laws or as determined
from time to time by the Company's President and CEO.
1.3 Attention and Effort.
--------------------
During normal business hours Employee will devote Employee's best
efforts, entire productive time, ability and attention to the business of
Company. Further, during the Term, Employee will not, without Company's
prior written consent, directly or indirectly engage in any employment,
consulting or other activity which would interfere or conflict with the
performance of Employee's duties or obligations to Company or which would
directly or indirectly compete with Company.
Section 2. Compensation.
------------
2.1 Base Salary.
-----------
During the Term, Company will pay Employee an annual Base Salary of
$69,000, payable no less frequently than bi-weekly.
2.2 Bonus.
-----
In addition to the Base Salary provided for in Section 2.1 above, the
Company shall pay to Employee 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 fiscal year ending January
28, 2000 over the prior fiscal year, the Company shall pay Employee a cash
bonus of $5,000. During the remainder of the term of this Agreement, the
Company shall pay Employee an annual bonus if the Company achieves its
annual sales plan for retail stores, which bonus shall be equal to 5% of
the increase in comparable same store sales compared to the previous fiscal
year, up to a maximum of $25,000 per year. The bonus shall be payable
within fifteen (15) days of the completion by the Company of its audited
financial statements for each fiscal year during the Term and, if not paid
when due, shall accrue interest at the rate of 10% per annum until paid in
full.
2.3 Benefits.
--------
During the Term, Employee will be entitled to participate in such
health and major medical insurance programs and such other fringe benefit
programs as may be provided from time to time by the Board or any person or
committee appointed by the Board to determine fringe benefit programs, all
subject to and in accordance with the eligibility and other requirements of
such programs.
2.4 Stock Incentive Plan.
--------------------
The Company has adopted and implemented a Stock Incentive Plan
pursuant to which the Company is authorized to issue incentive stock
options qualified under Section 422 of the Internal Revenue Code of 1986,
as amended, (the "ISOP"). As additional compensation for services
hereunder, the Company agrees to grant and issue to Employee on the date of
execution of this Agreement incentive stock options pursuant to the ISOP
exercisable to purchase, in the aggregate, 60,000 shares of the $0.002 par
value common stock ("Common Stock"); 20,000 of which shall have an exercise
price of $.6875 per share and shall be granted and vest immediately upon
execution of this Agreement; 20,000 of which will be granted and vest
immediately upon the first anniversary of the date of this Agreement having
an exercise price equal to 100% of the current market price of the
Company's Common Stock on the date of grant; and 20,000 of which will be
granted and vest on the second anniversary date of this Agreement having an
exercise price equal to 100% of the current market price of the Company's
Common Stock on the date of grant. In the event Employee's employment with
the Company is terminated by the Company without cause prior to the grant
and vesting of the ISO's described in Section 2.4, then and in such event
those ISO's shall be deemed automatically granted and vested and
exercisable by Employee in accordance with their respective terms and
conditions.
2.5 Expenses.
--------
During the Term, Company will reimburse Employee for reasonable out-
of-pocket expenses incurred by Employee in performance of service for
Company under this Agreement (e.g., transportation, lodging and food
expenses incurred while traveling on Company business), all subject to such
policies and other requirements as Company may from time to time establish
for its Employees generally.
2.6 Withholding and Offset.
----------------------
Payment of the base salary and any other amounts to Employee will be
subject to such withholding and offset as may be provided by applicable law
(e.g., for income tax purposes) or consented to by Employee.
2.7 Indemnification.
---------------
The Company shall indemnify Employee and shall advance expenses to the
Employee in advance of the final disposition of any matter to the full
extent permitted and/or required by applicable law, and subject to such
rights of reimbursement and restitution as may be provided by applicable
law, from and against any and all judgments, penalties, fines, amounts paid
in settlement and reasonable expenses, including, but not limited to,
attorneys' fees and court costs.
Section 3. Term and Termination.
--------------------
3.1 Commencement.
------------
The Term of this Employment Agreement shall begin on the 26th day of
February, 1999 (the "Commencement Date").
3.2 Termination.
-----------
The Term will terminate upon the first of the following to occur: (a)
February 26, 2002, (b) Company's termination of Employee's Employment for
Cause pursuant to paragraph 3.3; (c) Company's termination of Employee's
employment without Cause pursuant to Paragraph 3.4; (d) Employee's
termination of Employee's employment for cause pursuant to Paragraph 3.5;
(e) the death of Employee; or (f) ninety (90) days after the disability of
Employee resulting from injury, illness or disease, whether of a mental or
physical nature, which substantially impairs or prevents the ability of
Employee to satisfactorily perform Employee's duties and obligation is
under this Agreement for a period which can reasonably be expected to be of
long, continued or indefinite duration, as determined in good faith by the
Board.
In the event of termination pursuant to Sections 3.2(a), (b),
(e), or (f), Employee shall be entitled to no further payments hereunder
after the date of termination. In the event of termination pursuant to
Sections 3.2(c) or (d), Employee shall be entitled to receive all
compensation and benefits provided for herein for the remaining balance of
the term defined in Section 3.2(a).
3.3 Termination for Cause.
---------------------
Company may at any time terminate Employee's employment for Cause
without prior notice.
3.4 Termination Without Cause.
-------------------------
At any time after six (6) months from the commencement of the Term,
the Company may at any time terminate Employee's employment with or without
Cause by giving Employee notice of the same at least five (5) days prior to
the effective date of such termination. Upon such termination, the Company
shall be obligated to pay the remaining balance of Base Salary (Item 2.1)
for the remaining term of the Agreement.
3.5 Resignation.
-----------
Employee may at any time resign from employment with Company by giving
Company notice of thirty (30) days prior to the effective date of such
termination.
3.6 Employee's Termination for Cause.
--------------------------------
Employee may at any time terminate Employee's employment for cause
without prior notice.
3.7 Disability.
----------
If in the event of a disability described in Paragraph 3.2(e) Company
decides not to terminate Employee's employment and Employee is entitled to
receive payments (i.e., in lieu of wages or other compensation for
employment) on account of such disability under any fringe benefit program
provided by Company, then the base salary described in paragraph 2.1 will
be reduced to the extent of such entitlement.
3.8 Termination Due to a Change in Control.
--------------------------------------
Upon five (5) days' notice, Employee may terminate Employee's
employment due to a Change in Control of the Company.
3.9 Return of Company Property.
--------------------------
Upon termination of the Term, Employee will deliver to Company any and
all property of Company which is in Employee's possession or control
(including, but not limited to, any and all Materials).
3.10 Survival.
--------
Sections 4 and 5, together with all other provisions of this Agreement
that may reasonably be interpreted or construed to survive any termination
of the Term, will survive any termination of the Term.
3.11 Termination Payments.
--------------------
In the event of termination pursuant to Sections 3.2(a), (b), (d), (f)
or (g), Employee shall be entitled to no further payments hereunder after
the date of termination. In the event of termination pursuant to Sections
3.2(b), (e) or (h), Employee shall be entitled to receive and the Company
shall be obligated to pay to Employee Termination Payments equal to, in the
aggregate, the product of (i) the Employee's average annualized total
compensation under this Agreement, or all prior agreements with the
Company, including base salary, incentive compensation, commission,
bonuses, fringe benefits, shares of Common Stock and options to purchase
shares of Common Stock and other forms of compensation, received during the
two most recent fiscal years, multiplied by (ii) the number of years, and
fractions of years, remaining in the Term of this Agreement as defined in
Section 3.2(a) above. Such Termination Payments shall be due and payable
in full within thirty (30) days following the date of such termination.
Section 4. Confidentiality.
---------------
4.1 Confidential Information.
------------------------
In the course of Employee's employment with Company, Employee will
have access to certain Confidential Information. 12Employee will not use
or disclose any Confidential Information (a) other than as required in the
course of Employee's employment with Company, (b) for Employee's own
personal gain, or (c) in any manner contrary to the best interests of
Company.
4.2 Work Product.
------------
All Work Product which Employee conceives, develops or first reduces
to practice, either alone or with others, during the Term will be the sole
and exclusive property of Company, together with any and all related
Intellectual Property Rights. The foregoing applies to all Work Product
which relates to Employee's performance of services under this Agreement,
Company's Field of Business or Company's actual or demonstrably anticipated
research or development and whether or not such Work Products are
conceived, developed or first reduced to practice during normal business
hours or with the use of any equipment, supplies, facilities, personnel,
Confidential Information or other resource of Company.
4.3 Disclosures and Protection of Work Product.
------------------------------------------
Employee will disclose all Work Products described in paragraph 4.3 to
Company, promptly and in writing. At Company's request and at Company's
expense, Employee will assist Company or its designee in efforts to protect
such Work Products. Such assistance may include, but is not necessarily
limited to, the following: (a) making application in the United States and
in foreign countries for a patent or copyright on any Work Products
specified by Company; (b) executing documents of assignment to Company or
its designee of all Employee's right, title and interest in and to any Work
Product and related Intellectual Property Rights; and (c) taking such
additional action (including, but not limited to, the execution and
delivery of documents) to perfect, evidence or vest in Company or its
designee all rights, title and interest in and to any Work Product and any
related Intellectual Property Right.
4.4 Proprietary Information of Others.
---------------------------------
Employee will not use in the course of Employee's employment with
Company, or disclose or otherwise make available to Company any
information, documents or other items which Employee may have received from
any other person (e.g., a prior employer) and which Employee is prohibited
from so using, disclosing or making available (e.g., by reason of any
contract, court order, law or obligation by which Employee is bound).
4.5 Materials.
---------
All Materials and related Intellectual Property Rights will be the
sole and exclusive property of Company, whether or not such Materials are
marked with any Intellectual Property Right notice of Company or Employee.
All such Materials authored, made, conceived or developed by Employee or
made available to Employee (or any copies or extracts thereof) will be held
by Employee in trust solely for the benefit of Company. Employee will use
such Materials only as required in the course of Employee's employment with
Company or as otherwise authorized in writing by Company.
4.6 Notice.
------
This Agreement does not apply to any invention for which no equipment,
supplies, facility or trade secret information of Company was used, and
which was developed entirely on Employee's own time, unless: (a) the
invention relates (i) directly to the Company or (ii) to Company's actual
or demonstrable anticipated research or development; or (b) the invention
results from any work performed by Employee for Company.
Section 5. Competition.
-----------
5.1 Employee covenants to and with the Company, its successors and
assigns, that during the term of this Agreement and for a period of six (6)
months from the date of the termination of this Agreement for any reason,
he will not directly or indirectly, either as principal, agent, manager,
employee, owner, partner (dominant or otherwise), stockholder, director or
other officer of a corporation, creditor, consultant or otherwise, engage
or become interested financially or otherwise, in any business, agency,
trade or occupation similar to or in competition with the Company or its
affiliates; nor shall Employee, during the term of this Agreement and for a
period of six (6) months from the date of the termination of this
Agreement, consult or enter into any agreement or arrangement with any
other person, firm, corporation or entity to conduct any research or
development, nor shall Employee directly or indirectly conduct such
research or development on his own behalf, related to the discovery of
processes, improvements, developments or commercialization of any service
or product developed or reduced to practice during the period of employment
with the Company, unless Employee shall have first obtained the Company's
expressed written consent thereto. Because of the nature of the business,
the parties agree that it is reasonable for the covenant to apply to the
entire geographic area of the United States. If the geographic area is
determined by a court to be overly broad in scope, it shall be modified
only to the extent necessary to bring it within the requirements of the law
and interpreted to give the Company the broadest protection allowed by law.
5.2 In the event of a breach or threatened breach by Employee of any
provisions of this Section 5, the Company shall be entitled to an
injunction restraining Employee from the commission of such breach.
Nothing herein contained shall be construed as prohibiting the Company from
pursuing any other remedies available to it for such breach or threatened
breach, including the recovery of money damages. The covenants contained
in this Section 5 shall be construed as independent of any other provisions
in this Agreement; and the existence of any claim or cause of action of
Employee against the Company, whether predicated on this Agreement or
otherwise, shall not constitute a defense to the enforcement by the Company
of said covenants.
5.3 The covenants contained in this Section 5 shall terminate and,
upon termination, shall be unenforceable and of no further legal force and
effect, in the event the Company, or any successor to the Company, becomes
insolvent or ceases for any reason to conduct business operations for a
continuous period of at least thirty (30) days.
5.4 The Company shall have the right to assign the aforesaid
covenants; and Employee agrees to remain bound by the terms of the
covenants to any and all subsequent purchasers and assignees of the assets
and business of the Company.
Section 6. Non-Interference.
----------------
6.1 Non-Interference with the Employees.
-----------------------------------
The Employee covenants with the Corporation that employees of or
consultants to the Corporation and employees of and consultants to firms,
corporations or entities affiliated with the Corporation have, of
necessity, been exposed to and have acquired certain knowledge,
understandings, and know-how concerning the Corporation's business
operations which is confidential information and proprietary to the
Corporation.
6.2 In order to protect the Corporation's confidential information
and to promote and insure the continuity of the Corporation's contractual
relations with its employees and consultants, the Employee covenants and
agrees that for so long as the Employee holds any position or affiliation
with the Corporation, including service to the Corporation as an officer,
director, employee, consultant, agent or contractor, and for a period of
six (6) months from the date the Employee ceases to hold any such position
or status with the Corporation or otherwise becomes disaffiliated with the
Corporation, he will not directly, or permit or encourage others to
directly (i) interfere in any manner whatsoever with the Corporation's
contractual or other relations with any or all of its employees or
consultants, or (ii) induce or attempt to induce any employee or consultant
to the Corporation to cease performing services for or on behalf of the
Corporation, or (iii) solicit, offer to retain, or retain, or in any other
manner engage or employ the services of, or conduct any business activity
in cooperation or association with, any person or entity who at any time
was employed by the Corporation, or any subsidiary of the Corporation,
except with the consent of the Corporation.
6.3 In the event any court of competent jurisdiction determines or
holds that all or any portion of the covenants contained in this Section 6
are unlawful, invalid, or unenforceable for any reasons, then the parties
hereto agree to modify the provisions of this Section 6 if and only to the
extent necessary to render the covenants herein contained enforceable and
otherwise in conformance with all legal requirements.
Section 7. Clients and Customers.
---------------------
7.1 In order to protect the Corporation's proprietary rights and to
promote and ensure the continuity of the Corporation's contractual
relations with its customers and clients, the Employee covenants and agrees
that, for so long as the Employee holds any position or affiliation with
the Corporation, including service to the Corporation as an officer,
director, employee, consultant, agent or contractor, and for a period of
six (6) months from the date the Employee ceases to hold any such position
or status with the Corporation or otherwise becomes disaffiliated with the
Corporation, he will not directly, or permit or encourage others to
directly (i) interfere in any manner whatsoever with the Corporation's
contractual or prospective relations with any clients or customers, or
(ii) induce or attempt to induce any client or customer of the Corporation
to cease doing business with the Corporation, or (iii) solicit, offer to
retain, or retain, or in any other manner engage or enter into any business
or other arrangement with any of the Corporation's customers or clients to
provide any services or products to any of such customers or clients as
they may from time to time exist or be constituted, except and unless such
arrangement for the provision of products or services is not in any way
competitive with the products or services actually provided by the
Corporation to its clients or customers or proposed to be provided by the
Corporation to its clients or customers, or except under circumstances to
which the Corporation has consented in writing, which consent shall not be
unreasonably withheld.
7.2 In the event any court of competent jurisdiction determines or
holds that all or any portions of the covenants contained in this Section 7
are unlawful, invalid or unenforceable for any reason, then the parties
hereto agree to modify the provisions of this Section 7 if and only to the
extent necessary to render the covenants herein contained enforceable and
otherwise in conformance with all legal requirements.
Section 8. Definitions.
-----------
Whenever used in this Agreement with initial letters capitalized, the
following terms will have the following specified meanings:
8.1 "Board" means Company's Board of Directors.
8.2 "Cause," for purposes of Paragraph 3.3, shall include the
occurrence of any of the following:
8.2.1 The Employee breaches or violates any of the material
terms of this Agreement and fails to cure such breach or violation within
thirty (30) days of receipt of written notice by Company, which notice
shall specify in detail each alleged breach and specify in detail the
actions necessary to cure; provided, further, that the specification for
cure by the Company shall not obligate the Employee to effect the cure in
the manner stated if cure is otherwise timely completed by or on behalf of
Employee;
8.2.2 The Employee is shown to have engaged in any material
act of dishonesty or fraud upon the Company, any of its affiliated
companies, or any of its customers or clients;
8.2.3 The Employee fails to devote his full time, attention
and efforts to the business and affairs of the Company or its affiliated
companies; provided that the Company shall have first provided the Employee
with thirty (30) days' prior written notice specifying in detail the
instance or instances in which Employee has failed to devote the time
required, and Employee thereafter fails to cure and correct the conduct
complained of within such thirty (30) day period; or
8.2.4 The Employee has been grossly negligent in the
performance of his employment duties or responsibilities; provided that the
Company shall have first provided the Employee with thirty (30) days' prior
written notice specifying in detail the instance or instances in which
Employee has been grossly negligent, and Employee thereafter fails to cure
and correct the conduct complained of within such thirty (30) day period.
8.3 "Cause," for purposes of Paragraph 3.6, shall include the
occurrence of any of the following:
8.3.1 The breach or violation by the Company of the any of
the material terms of this Agreement;
8.3.2 Any significant change in position, duties and
responsibilities of Employee to which the Employee does not consent,
including, without limitation, imposing the duty upon Employee to be,
directly or indirectly, subordinate (either organizationally or
functionally) to any other executive officer of the Company;
8.3.3 Any move of the Company or its principal officers
resulting in or any other requirement that the Employee, without his
consent, change his principal residence.
8.3.4 The Company has shown to have engaged in any active
material dishonesty or fraud upon the Employee.
8.3.5 There shall occur a Change in Control of the Company.
8.4 "Change in Control" means any transaction of the Company
involving (i) the merger or consolidation of the Company into or with
another entity where the Company's shareholders receive less than 50% of
the outstanding voting securities of the new or continuing entity, (ii) the
sale of all or substantially all of the Company's assets, (iii) any person
not already a stockholder of the Company becoming a beneficial owner,
directly or indirectly, of the securities of the Company representing 50%
or more of the combined voting power of the Company's then outstanding
securities, (iv) a change in the majority of the Board of Directors of the
Company, or (v) the Company terminating its business or liquidating its
assets.
8.5 "Company's Field of Business" means any of the fields of the
Company's business. On the date of the Agreement, Company's Field of
Business includes, but is not necessarily limited to, the following:
wholesale and retail sales of jewelry and accessories.
"Confidential Information" means any information that is
confidential, proprietary or trade secret information of Company or any of
its customer or clients or any other information the use of disclosure of
which by Company is prohibited or restricted (e.g., by reason of any
contract, court order, law or other obligation by which Company is not
bound). "Confidential Information" may include, but is not necessarily
limited to, technology, computer programs, business plans, marketing plans,
information as to existing or future products or services of Company,
financial projections, unpublished works of original authorship, customer
lists, financial information, and trade secrets.
Notwithstanding the foregoing, the restrictions on disclosure and
use of information and materials as set forth in Section 4 shall not apply
to the following, and the following is not confidential or proprietary
information: (1) any information or materials which were generally
available to the public at the time made available to Employee by the
Company; (2) any information or materials which become, without breach of
Section 4 and through no fault of Employee, generally available to the
public; (3) any information or materials which Employee has received from
other sources prior to the date of this Agreement, subject to no
restrictions on disclosure applicable to Employee; and (4) any information
or materials which Employee at any time lawfully obtains from a third party
who is not under any obligation of secrecy or confidentiality to the
Company, under circumstances permitting disclosure by Employee to others
without restriction.
8.7 "Intellectual Property Right" means any patent, copyright, trade
secret, trade name, trademark or other intellectual property right.
8.8 "Materials" means hardware, software, programs, manuals,
drawings, designs, articles, writings, data, notes, memorandum,
manuscripts, notebooks, proposals, work plans, interim and final reports,
project files, client contract records and other tangible manifestations of
any Confidential Information or Work Products.
8.9 "Chief Operating Officer" means the Company's Chief Operating
Officer.
8.10 "Term" means the term of Employee's employment as an Employee of
Company pursuant to this Agreement.
8.11 "Work Product" means any invention, discovery, concept or idea
(including, but not necessarily limited to, hardware, software programs, or
processes, techniques, know-how, methods, systems, improvements, analytical
reports, and other developments).
Section 9. Miscellaneous.
-------------
9.1 Compliance with Laws. In the performance of this Agreement, each
party will comply with all applicable laws, regulations, rules, orders and
other requirements of governmental authorities having jurisdiction.
9.2 Equitable Relief. Employee acknowledges that: the provisions of
Sections 4 and 5 are essential to Company; Company would not enter into
this Agreement if it did not include such provisions; the damages sustained
by Company as a result of any breach of such provisions cannot be
adequately remedied by damages; and, in addition to any other right or
remedy that Company may have (e.g., under this Agreement, by law or
otherwise), Company will be entitled to injunctive and other equitable
relief to prevent or curtail any breach of any such provisions.
9.3 Nonwaiver. The failure of either party to insist upon or enforce
strict performance by the other of any provision of this Agreement or to
exercise any right, remedy or provision of this Agreement will not be
interpreted or construed as a waiver or relinquishment to any extent of
such party's right to consent or rely upon the same in that or any other
instance; rather, the same will be and remain in full force and effect.
9.4 Entire Agreement. This Agreement constitutes the Entire
Agreement, and supersedes any and all prior Agreements, between Company and
Employee. No amendment, modification or waiver of any of the provisions of
this Agreement will be valid unless set forth in a written instrument
signed by the party to be bound thereby.
9.5 Applicable Law. This Agreement will be interpreted, construed
and enforced in all respects in accordance with the local laws of the State
of Colorado, without reference to its choice of law rules.
9.6 Attorneys Fees. In the event that either party consults or
retains an attorney to enforce the terms of this Agreement, the prevailing
party in any such dispute or litigation shall be entitled to recover from
the other party its reasonable attorneys fees and costs incurred.
9.7 Severability. If any of the provisions of this Agreement are
held to be invalid or unenforceable, the remaining provisions shall
nevertheless continue to be valid and enforceable to the extent permitted
by law.
IN WITNESS WHEREOF, this Agreement is executed as of the date first
above written.
Company: PREMIER CONCEPTS, INC., a Colorado
corporation
By:
-----------------------------------
Sissel Greenberg, President
Employee:
--------------------------------------
KEVIN O'BRIEN
<PAGE>
AGREEMENT REGARDING BASIC TERMS
Based upon information furnished to the parties as of the date of this
Agreement, Infusion Capital Partners, LLC ("Infusion") and Premier
Concepts, Inc. ("Premier") would be interested in pursuing the following
transactions with each other on the terms and conditions described herein:
1. Infusion Management Services
a. Management Services Agreement. Premier and Infusion will
enter into a mutually satisfactory Management Services Agreement (the
"Management Services Agreement"). Pursuant to the Management Services
Agreement, among other things, Premier will engage Infusion to (i) arrange
the First Funding (defined in Section 2 below) and the Second Funding
(defined in Section 3 below), (ii) coordinate the drafting of an analytical
document for distribution by Premier to broker-dealers, (iii) supervise
public relations relating to the distribution of such analytical document
and to the financing and use of proceeds contemplated hereby and (iv)
provide strategic, operational and investment banking advice.
b. Limited Conditions to Second Funding. Premier may request
the Second Funding at any time within the six (6) month period after the
First Funding, and Infusion will arrange the Second Funding as soon as is
reasonably practicable (but in no event more than thirty (30) days) after
such request. Infusion will have no obligation to arrange the Second
Funding, however, unless (i) Premier shall have obtained stockholder
approval for the Second Funding (and any related transactions) on the basic
terms described herein (and on such other terms as may be reasonably
requested by Infusion or Second Investor (defined in Section 3 below)) and
(ii) there shall have occurred no breach or misrepresentation by Premier
under any of its agreements with Infusion, First Investor (defined in
Section 2 below) or MeridianTelesis, LLC ("Meridian"). If Premier does not
request Infusion to arrange the Second Funding within such period, Infusion
will have the option nonetheless to require Premier to obtain such
stockholder approval and accept the Second Funding within thirty (30) days
thereafter (subject to satisfaction of the conditions contained in the
Second Stock Purchase Agreement (defined in Section 3 below)). Premier
will solicit and use its best efforts to obtain the required stockholder
approval prior to its filing of its report on Form 10-K for its fiscal year
ended January 31, 1999.
c. Compensation. Premier will pay Infusion the sum of $50,000
for such services. Infusion will be entitled to $25,000 of such sum upon
signing the Management Services Agreement ($10,000 of which will be paid
upon such signing and the balance of which will be paid in 3 consecutive
monthly installments of $5,000 each) and to the remaining $25,000 of such
sum upon the Second Funding (which shall be paid in the same manner). Upon
the Second Funding, Premier will also issue Infusion as a financing fee a
warrant to purchase 50,000 shares of its common stock at the price per
share equal to$5/8 ($.625), which warrant shall be exercisable on a
cashless basis for a period of 3 years from issuance. Infusion may assign
all or any portion of such warrant. Infusion will also be entitled to
preemptive rights on subsequent capital raises by Premier on terms and
conditions to be determined by the parties. In the event the Second
Funding does not occur, Infusion's cash compensation and the number of
shares under Infusion's warrant will be reduced in proportion to the amount
by which the First Funding is less than $500,000.
2. First Funding
a. Purchase of Common Stock. Premier will enter into a
mutually satisfactory Stock Purchase Agreement (the "First Stock Purchase
Agreement") with an entity determined by Infusion (the "First Investor").
Pursuant to the First Stock Purchase Agreement, among other things, First
Investor will invest $220,768.75 (the "First Funding") to purchase 353,230
shares of Premier's common stock, which shall constitute 19.9% of the then
issued and outstanding shares of Premier's common stock .(1) Such First
Funding shall occur before the close of business on March 11, 1999.
b. Governance Rights. First Investor will have the right to
elect a number of members of Premier's Board of Directors in proportion to
its stake in Premier (rounded down for partial members, but not less than
one). Premier will cause the election of such person(s) to be effective on
the date of the First Funding and will compensate such Board members as it
compensates its other Board members. First Investor will be entitled to
other rights commonly accorded minority shareholders in similar
transactions.
3. Second Funding
a. Purchase of Convertible Preferred Stock. Premier will also
enter into a mutually satisfactory Stock Purchase Agreement (the "Second
Stock Purchase Agreement") with an entity or individuals determined by
Infusion (which entity may be the First Investor or its assignee(s), the
"Second Investor"). Pursuant to the Second Stock Purchase Agreement, among
other things, if the Second Funding is requested or required as provided
above and subject to the conditions therein, Second Investor will invest
the difference between $500,000 and the amount of the First Funding to
purchase shares of a new series of convertible preferred stock (the "Second
Funding").
b. Preferred Return. The preferred stock will be entitled to
receive preferential cumulative distributions at an annual rate of ten
percent (10%), which will be paid in common stock upon conversion at the
average closing bid price for Premier's common stock for the fifteen (15)
trading days preceding the conversion date.
c. Conversion. The preferred stock will be converted into
shares of Premier's common stock at the conversion price of $5/8 ($.625)
per share of common stock. The preferred stock will convert any time after
six (6) months following the date of the Second Funding either (i) at
Second Investor's option or (ii) at Premier's option if the shares of
common stock underlying such conversion are subject to an effective
registration statement and have traded for a period of 20 consecutive days
at a price in excess of 150% of the conversion price.
d. Governance Rights. Second Investor will have the right to
elect a number of members of Premier's Board of Directors in proportion to
its stake in Premier (assuming conversion) (rounded down for partial
members, but not less than one). Premier will cause the election of such
person(s) to be effective on the date of the Second Funding and will
compensate such Board members as it compensates its other Board members.
Second Investor will be entitled to other rights commonly accorded minority
shareholders in similar transactions.
- -------------------------
(1)Computed as follows: 1,775,025 shares of common stock outstanding x
19.9% = 353,230 shares @ $5/8 ($.625) per share = $220,768.75
e. Additional Warrant. Upon the Second Funding, Premier will
issue warrants to the First Investor and the Second Investor to purchase an
aggregate of 100,000 shares of its common stock at the price per share
equal to the average exercise price of Premier's Incentive Stock Options
and Non-Plan Stock Options outstanding as of the date of the Second Funding
(but not to exceed $ ), which warrants shall be
exercisable on a cashless basis for a period of 3 years from issuance. The
allocation of the 100,000 aggregate shares under such warrants will be
determined by First Investor, Second Investor and Infusion. In the event
the Second Funding does not occur, Premier will issue the warrant for
50,000 shares to the First Investor.
4. Registration Rights. Premier will file an appropriate
registration statement to register, at its expense, for sale or resale
under the Securities Act, the shares of common stock purchased by First
Investor, the shares of common stock underlying the preferred stock
purchased by Second Investor and the shares of common stock underlying the
additional warrants of First Investor and Second Investor and the warrant
issued to Infusion as soon as practicable after Premier files its report on
Form 10-K for its fiscal year ended January 31, 1999 (but not later than
May 31, 1999). Premier will use its best diligent efforts to cause such
registration statement to become effective as soon as possible after filing
and, in any event, not later than September 15, 1999. After registration,
Premier will maintain a continuously effective registration statement
covering such shares until all such shares of common stock have been sold
(or with respect to warrant shares, the expiration of the warrant without
exercise).
5. Use of Proceeds. Premier will use at least $175,000 of the
proceeds of the First Funding and Second Funding (in the aggregate) to
engage Meridian to establish and expand Premier's e-commerce capabilities.
As a condition to closing under the First Stock Purchase Agreement, Premier
and Meridian will enter into a mutually satisfactory Services Agreement
(the "Meridian Services Agreement") with respect to such matters. The
parties will determine a schedule for the expenditure of such funds based
on the strategic rollout of Premier's e-commerce platform. The remaining
proceeds will be used for expenses of the transactions, to pay Infusion, to
reduce the outstanding principal of Premier's bank debt, to acquire new
stores and renovate existing stores and for working capital (all in
accordance with a budget to be determined by the parties).
6. Definitive Agreements. Promptly after execution of this
Agreement by both parties, Infusion and Premier will work towards the
preparation and execution of a definitive Management Services Agreement,
First Stock Purchase Agreement, Second Stock Purchase Agreement and
Meridian Services Agreement (the "Definitive Agreements"), together with
ancillary documents necessary to accomplish the transactions and
appropriate schedules disclosing requested information, all of which must
be, as to form and substance, mutually satisfactory and acceptable to the
applicable parties.
7. Due Diligence. Premier will use reasonable efforts to cooperate
with and assist Infusion, First Investor, Meridian and Second Investor in
conducting a due diligence investigation between the date hereof and the
date of the First Funding. Without limiting the foregoing, Premier will
provide such parties and their authorized representatives, agents, auditors
and counsel with copies of, or complete and unrestricted access during
normal business hours to, all books, records, projections, financial
information, agreements, governmental filings and correspondence,
operations, properties, equipment and personnel of Premier, so long as the
request therefor is reasonable and will not disrupt Premier's business.
Such parties and persons will also have the right to discuss operating and
financial matters with the accountants, attorneys, consultants, employees
and former employees of Premier and others having an interest in Premier,
including, without limitation, creditors and direct or indirect
shareholders therein.
8. Representations and Covenants. The Definitive Agreements will
provide for Premier to make representations and warranties, and to agree to
covenants, concerning all matters which could reasonably affect Infusion's,
First Investor's, Meridian's or Second Investor's decision to consummate
the transactions contemplated hereby.
9. Conditions Precedent. The Definitive Agreements will not be
effective, and Premier, Infusion and the other parties will have no
obligations thereunder, unless and until, among other things, the following
conditions have been satisfied or waived:
a. Infusion and the other parties and persons entitled to
conduct due diligence shall have completed their due diligence with respect
to Premier and the transactions contemplated hereby, and the results of
such due diligence shall have been satisfactory to such parties in their
sole discretion.
b. There shall have occurred no event or action which could
result in a dilution in the percentage ownership in Premier to be acquired
by Infusion, First Investor or Second Investor (whether at the time of
issuance, conversion or exercise), except for the stock split referenced in
Premier's December 18, 1998 Form 14-A filing, in which event the amounts of
stock and warrants hereunder will be appropriately adjusted.(2) The
Definitive Agreements will contain appropriate anti-dilution terms covering
all shares of stock and warrants referred to herein.
c. Premier will have obtained all necessary consents,
authorizations and approvals (including, without limitation, those of its
Board of Directors and stockholders (as provided herein)) for it to enter
into and carry out these transactions and, if necessary, will have amended
its organizational documents in order to effectuate these transactions.
d. The representations and warranties of the parties contained
in the Definitive Agreements will be true and correct as of the closing
date thereunder and all covenants required to be performed by the parties
shall have been performed.
e. Premier shall have entered into Employment Agreements with
its CEO, CFO and COO on terms and conditions acceptable to the parties.
10. Indemnification and Remedies. Each party will indemnify and hold
harmless the other from and against any misrepresentation, breach of
warranty or failure to fulfill a covenant, condition or obligation
contained in the Definitive Agreements. The rights and remedies of the
parties will be cumulative.
11. Non-disclosure. Each of the parties agrees that the information
contained in this letter is confidential in nature and, except as may be
required by subpoena, civil investigative demand or other similar process,
- ----------------------------
(2)Without limiting the foregoing, dilution will be deemed to have occurred
in respect of Premier's Class A Warrants if its common stock price exceeds
$5.00. Dilution will also be deemed to have occurred in the event of any
other capital investment being made in Premier.
each agrees not to disclose to any person (excluding its members,
shareholders, partners, managers, directors, officers, employees, agents,
representatives, consultants and counsel, all on a need-to-know basis) the
fact that discussions or negotiations are taking place between the parties,
any of the terms or conditions of this or any prior or subsequent letter or
document or any discussions or negotiations of transactions (including the
identity of any party referred to herein) or information furnished in
connection herewith or therewith without the prior written consent of such
party. Each of the parties shall use such information only for the purpose
of engaging in such negotiations with each other. Further, except to the
extent required otherwise by any governmental authority, subpoena, civil
investigative demand or other similar process, each of the parties shall
treat confidentially, and not disclose except as contemplated hereby, any
information provided to it by the other party and designated as
confidential. No information will be deemed confidential and subject to
this Section 11 if it is developed independently by a party, was available
to a party prior to the date hereof or becomes generally available to the
public other than as a result of a breach by a party of its obligations
hereunder. The provisions of this Section 11 will survive the termination
hereof and any negotiations and discussions between the parties hereto.
12. Termination Date. This Agreement may be terminated by either
party in writing without liability or obligation if Definitive Agreements
containing representations, covenants, conditions and other terms mutually
acceptable to the parties have not, for whatever reason, been executed and
become effective on or prior to the close of business on March 11, 1999,
unless extended in writing by the parties hereto (such original or extended
date, the "Termination Date"). The parties agree to proceed in good faith
and with reasonable diligence to execute and make effective Definitive
Agreements by such date.
13. Exclusivity. From the date hereof until the Termination Date,
Premier shall not directly or indirectly (including, without limitation,
through any director, officer, employee, agent, representative, broker or
affiliate, or any other intermediary whatsoever) solicit, engage in
negotiations with or provide information to any person or entity
whatsoever, other than as referred to herein, concerning any transaction(s)
regarding, or similar to, the subject matter hereof.
14. Entire Understanding. These terms supersede all prior
correspondence, agreements, understandings and discussions of the parties
relevant to the subject matter hereof. This is not intended to confer, nor
does it confer, any third-party beneficiary rights.
15. Expenses. Except as to be provided in the Management Services
Agreement, each party shall bear its own costs and expenses (including all
legal, accounting, investment banking and other costs) with respect to
these transactions, whether the transactions are consummated or not, and
the Definitive Agreements will so provide.
16. Binding Effect. Except for Sections 6,7 and 11- this Section 16,
this Agreement is subject to the proper execution and effectiveness of
Definitive Agreements not later than the Termination Date. The Definitive
Agreements will be prepared by counsel to Infusion and will include
additional terms and provisions not specified above which are customary for
similar transactions or required by any party based on information or
circumstances of which it becomes aware after the date hereof. These terms
are merely a guide to the preparation of mutually satisfactory Definitive
Agreements. Nothing herein shall be construed to preclude other provisions
consistent with the financial terms of these transactions from being
inserted in the Definitive Agreements at the request of any party provided
the other party agrees. Except to the extent of damages arising from a
breach by either of Sections 11 or 13 above, neither party shall have any
liability hereunder or in connection herewith.
IN WITNESS WHEREOF, the parties have executed this Agreement by their
duly authorized officers this 26th day of February, 1999.
INFUSION CAPITAL PARTNERS, LLC
By:
----------------------------------------
David M. M. Taffet, President
PREMIER CONCEPTS, INC.
By:
----------------------------------------
Sissel B. Greenberg, President and CEO
<PAGE>
FIRST STOCK PURCHASE AGREEMENT
This Agreement is made this 11th day of March, 1999, by and between
Premier Concepts, Inc., a Colorado corporation ("Premier"), and Equisition
Capital, LLC, a Delaware limited liability company ("Equisition").
In consideration of the mutual covenants and agreements set forth in this
Agreement, the parties, intending to be legally bound, agree as follows:
1. Transactions at Closing
-----------------------
1.1 Purchase and Sale of Stock. Subject to the terms and
conditions set forth herein, at Closing (defined below), Equisition hereby
agrees to purchase from Premier, and Premier hereby agrees to issue and sell
to Equisition 353,230 shares of Premier's common stock (the "Stock") for the
purchase price of $220,768.75 (constituting $5/8 ($.625) per share).
1.2 The Closing. The closing of such purchase and sale (the
"Closing") shall take place on March 11, 1999, or on such other date as may be
mutually agreed upon by Premier and Equisition.
2. Use of Proceeds. Premier shall use at least $175,000 of the
proceeds of this transaction, together with the proceeds of the transactions
contemplated by the Second Stock Purchase Agreement (defined on Exhibit A), to
engage MeridianTelesis, LLC, a Delaware limited liability company
("MeridianTelesis"), to establish and expand Premier's e-commerce capabilities
(such funds to be expended in accordance with a schedule determined by
MeridianTelesis based on discussions with Premier regarding the strategic
rollout of Premier's e-commerce platform). Premier shall use the remaining
proceeds of such transactions for expenses of the transactions (including
expenses associated with necessary filings and to secure stockholder approval
for the consummation of the Second Stock Purchase Agreement), to pay Infusion
Capital Partners, LLC, a Delaware limited liability company ("Infusion"),
pursuant to the Management Services Agreement (defined on Exhibit A), to
reduce the outstanding principal of Premier's bank debt, to acquire new stores
and renovate existing stores and for working capital (all in accordance with a
budget to be adopted by Premier satisfactory to Equisition and Infusion (the
"Proceeds Budget").
3. Conditions to Equisition's Obligations. The obligations of
Equisition to purchase and pay for the Stock and to consummate the Closing are
subject to the satisfaction or waiver as of the Closing of the following
conditions:
3.1 Due Diligence. Equisition shall have completed its due
diligence with respect to Premier and the transactions contemplated hereby,
and the results of such due diligence shall have been satisfactory to
Equisition in its sole discretion.
3.2 Other Agreements. Premier shall have entered into mutually
satisfactory agreements set forth on Exhibit A hereto with the parties
identified thereon, and each of such agreements shall be in full force and
effect as of the Closing.
3.3 Other Rights. Premier shall have taken all necessary actions
so that the terms and provisions set forth on Exhibit B (which are
incorporated into and made a part of this Agreement by this reference) shall
be valid, binding and enforceable against Premier.
3.4 Representations, Warranties and Covenants. Premier's
representations and warranties shall be true and correct at and as of the
Closing, and Premier shall have performed and complied with all agreements,
covenants and conditions contained herein (including, without limitation,
those on Exhibit B) and in the other agreements, instruments and documents to
be executed or delivered by Premier in connection herewith which are required
to be performed or complied with at or before the Closing.
3.5 No Defaults. There shall have occurred no breach, violation,
default, noncompliance, misrepresentation or untrue statement by Premier under
or in any of the agreements set forth on Exhibit A or the Agreement Regarding
Basic Terms dated February 26, 1999 between Premier and Infusion.
3.6 Adverse Proceedings. No action, suit, demand, proceeding,
appeal, order, investigation, inquiry or claim before any judicial, arbitral,
regulatory or governmental body shall be pending or threatened which, in the
judgment of Equisition, makes it inadvisable or undesirable to consummate the
transactions contemplated by this Agreement.
3.7 Legal Prohibitions. None of the transactions contemplated by
this Agreement shall be prohibited by any Applicable Law (defined below), and
the consummation of such transactions shall not subject Equisition to any
penalty, liability or onerous condition under or pursuant to any Applicable
Law. "Applicable Law" means, with respect to any Person, all provisions of
constitutions, statutes, rules, regulations, rulings, ordinances, codes,
requirements and orders of governmental bodies or regulatory agencies
applicable to or affecting such Person, and all orders, decisions, judgments
and decrees of all courts and arbitrators in proceedings or actions to which
the Person is a party or by which it (or any of its property) is bound.
3.8 Proceedings and Consents. Premier shall have taken all actions
and proceedings required in connection with the transactions contemplated
hereby to be consummated at or prior to the Closing (which shall be
satisfactory in form and substance to Equisition), and all necessary Consents
(defined below), filings and notices with respect to the transactions
contemplated by this Agreement shall have been obtained, made or given by
Premier. "Consent" means any consent, authorization, approval, order, decree,
permit, certification, license, registration or third party action of any
kind.
3.9 Receipt of Stock. Equisition shall have received evidence that
the Stock has been duly issued by Premier to Equisition. There shall have
occurred no event or action which could result in a dilution in the percentage
ownership in Premier to be acquired by Equisition.
3.10 Closing Documents. Premier shall have delivered to Equisition
the documents set forth on Exhibit C and such other documents, agreements,
Consents and other instruments relating to the transactions contemplated by
this Agreement as Equisition or its counsel may reasonably request.
Any condition specified in this Section 3 may be waived if expressly
consented to by Equisition, provided that no such waiver shall be effective
against Equisition, even if Closing occurs, unless it is set forth in a
writing executed by Equisition.
4. Conditions to Premier's Obligations. The obligations of Premier to
issue and sell the Stock to Equisition and to consummate the Closing are
subject to the satisfaction or waiver as of the Closing of the following
conditions:
4.1 Representations and Warranties. Equisition's representations
and warranties shall be true and correct at and as of the Closing.
4.2 Proceedings and Consents. All actions and proceedings taken or
required to be taken in connection with the transactions contemplated hereby
to be consummated at or prior to the Closing shall be satisfactory in form and
substance to Premier, and all necessary Consents, filings and notices to have
been obtained, made or given by Equisition with respect to the transactions
contemplated by this Agreement shall have been obtained, made or given by
Equisition.
4.3 Receipt of Purchase Price. Premier shall have received payment
for the Stock by wire transfer of immediately available funds in accordance
with written wire instructions provided by Premier.
4.4 Closing Documents. Equisition shall have delivered to Premier
an Officer's Certificate (defined on Exhibit C), dated the date of the
Closing, stating that the obligations of Equisition under Section 1 and the
conditions specified in this Section 4 have been fully satisfied.
5. Representations and Warranties of Premier. As a material inducement
to Equisition to enter into this Agreement, to purchase the Stock, and to
consummate the Closing, Premier hereby represents and warrants as follows:
5.1 Organization and Power. Premier is a corporation duly
organized, validly existing and in good standing under the laws of the
State of Colorado and is qualified to do business in every jurisdiction in
which its ownership of property or conduct of business requires it to qualify.
Premier has all requisite power and authority necessary to own and operate its
properties, to carry on its businesses as now conducted and presently proposed
to be conducted and to carry out the transactions contemplated by this
Agreement and the other agreements, instruments and documents to be executed
or delivered by Premier in connection with this Agreement.
5.2 Authorization. Premier has full power and authority (corporate
or otherwise) to enter into and carry out the terms of this Agreement and all
other agreements, instruments and documents contemplated hereby and to
consummate all transactions contemplated hereby and thereby. The execution,
delivery and performance of this Agreement and all other agreements,
instruments and documents contemplated hereby to which Premier is a party and
the consummation of all transactions contemplated hereby and thereby have been
duly authorized by Premier. This Agreement and all other agreements,
instruments and documents contemplated hereby to which Premier is a party
constitute the valid and binding obligations of Premier and are enforceable in
accordance with their respective terms.
5.3 No Breach. The execution and delivery by Premier of this
Agreement and all other agreements, instruments and documents contemplated
hereby to which Premier is a party, the offer, sale and issuance of the Stock
hereunder and the other securities contemplated hereby and the fulfillment of
and compliance with the respective terms hereof and thereof by Premier, do not
and shall not (a) conflict with or result in a breach of the terms, conditions
or provisions of, (b) constitute a default under, (c) result in the creation
of any lien, security interest, charge or encumbrance upon Premier's capital
stock or assets pursuant to, (d) give any third party the right to accelerate
any obligation under, (e) result in a violation of, or (f) require any
Consent, filing, exemption or other action pursuant to the Certificate of
Incorporation or Bylaws of Premier or any agreement, instrument or Applicable
Law to which Premier is subject or by which it is bound.
5.4 Subsidiaries. Premier does not own, directly or indirectly,
any shares of stock or other equity interests or security in any corporation,
partnership, limited liability company, association or other entity or
business enterprise (including individuals) (a "Person"), and Premier has no
obligation to make an investment or acquisition in any such Person.
5.5 Capital Stock and Related Matters
(i) As of the Closing and immediately thereafter, the
authorized capital stock of Premier shall consist of (i) twenty million
(20,000,000) shares of preferred stock, par value $.10 per share, of which
zero (0) shares shall be issued and outstanding and (ii) eight hundred fifty
million (850,000,000) shares of common stock, par value $.002 per share
(referred to herein as Premier's common stock), of which one million seven
hundred seventy-five thousand twenty-five (1,775,025) shares shall be issued
and outstanding, and the Stock shall constitute nineteen and nine tenths
percent (19.9%) of the then issued and outstanding shares of Premier's common
stock. Upon the Closing, all of the outstanding shares of the Company's
capital stock (including the Stock) shall be validly issued, fully paid and
nonassessable.
(ii) Except for Premier's Class A Warrants, Incentive Stock
Options, Non-Plan Options (referred to in (iii) below) and agreements to issue
no more than twenty-five thousand (25,000) shares of common stock, as of the
Closing, (a) Premier shall not have outstanding any stock, debt instrument or
securities convertible or exchangeable for any shares of its capital stock or
containing any profit participation features, (b) Premier shall not have
outstanding any rights or options to subscribe for or to purchase its capital
stock or any stock or securities convertible into or exchangeable for its
capital stock, (c) there shall be no anti-dilution or registration rights to
which any holder of securities of Premier is entitled and (d) Premier shall
not be subject to any obligation (contingent or otherwise) to repurchase or
otherwise acquire or retire any shares of its capital stock or any warrants,
options or other rights to acquire its capital stock.
(iii) As of the Closing and immediately thereafter (including
after giving effect to the Incentive Stock Options under the Executive
Employment Agreements (defined on Exhibit A), the number of shares of common
stock underlying the Class A Warrants shall be 1,858,334, under the Incentive
Stock Options shall be 350,000 and under the Non-Plan Options shall be 37,000,
and the average exercise price of the outstanding Incentive Stock Options and
the Non-Plan Options shall not exceed $2.05.
(iv) There are no statutory or contractual shareholders
preemptive rights or rights of refusal or similar rights with respect to
Premier's issuance and sale of the Stock hereunder or the issuance of common
stock upon exercise or conversion of the warrants and convertible preferred
stock to be issued pursuant to this Agreement, the Management Services
Agreement and the Second Stock Purchase Agreement.
(v) Premier has not violated, and has fully complied with, any
applicable federal or state securities laws in connection with the offer, sale
or issuance of any of its capital stock (including, without limitation, the
Stock). To the best of Premier's knowledge, there are no agreements between
its shareholders with respect to the voting or transfer of Premier's capital
stock or with respect to any other aspect of its affairs.
(vi) Premier has not granted any appreciation rights, phantom
rights or other rights or interests having profit participation or other
equity features or providing economic incentives or benefits based upon the
income or other measure of performance of Premier or any distribution on,
transaction involving or valuation of any capital stock of Premier.
5.6 Financial Statements. The books and records of Premier are in
all material respects complete and correct, have been prepared and maintained
in accordance with generally accepted accounting principles ("GAAP"),
consistently applied, and in accordance with sound business practices, and
they accurately reflect the basis for all disclosures made by Premier. The
financial statements attached hereto as Exhibit D ("Financial Statements")
include an audited balance sheet, statement of income and statement of changes
in financial position, all of which have been prepared in accordance with
GAAP, consistently applied, and fairly and accurately present the financial
condition and results of operations of Premier, as of the dates and for the
periods of time indicated.
5.7 Projections. All projections provided or made available to
Equisition by or on behalf of Premier have been prepared in good faith by
Premier (or by a third party acting on behalf of Premier and reasonably
believed by Premier to be competent as to the tasks performed) and are based
upon assumptions that were reasonable in light of the circumstances under
which they are made.
5.8 Material Adverse Changes. Since the date of the most recent
balance sheet included in the Financial Statements, (a) there has occurred no
material adverse change in (i) the existing or prospective business,
operations, assets or condition (financial or otherwise) of Premier or (ii)
relations with any employees or other personnel, joint venturer, customer,
supplier or party to a material contract of Premier (including, without
limitation, its store leases), (b) the business and affairs of Premier have
been conducted and carried on only in the ordinary course of business
consistent with past practices (and Premier has not engaged in any transaction
outside such ordinary course) and (c) the physical properties, inventory and
facilities owned or leased by Premier have suffered individually or in the
aggregate any material depletion, destruction or damage, regardless of whether
or not any loss suffered was insured. To Premier's knowledge, none of the
foregoing could reasonably be expected to occur, excluding changes in the
economy generally.
5.9 Undisclosed Matters. Except as set forth on the Financial
Statements:
(i) Premier has no obligation or liability (whether accrued,
absolute, contingent, unliquidated or otherwise, known or unknown, whether due
or to become due and regardless of when asserted) arising out of any
transaction, act, omission or state of fact existing at or prior to the
Closing, other than liabilities and obligations which arise on or after the
date of the Closing in the ordinary course of business (none of which is a
liability resulting from breach of contract, breach of warranty, tort,
infringement or any claim, asserted or unasserted), which either alone or in
the aggregate would have a material adverse effect on Premier.
(ii) The properties (real and otherwise) and assets (tangible
or intangible) owned or used by Premier or located on its premises are free
and clear of all liens, security interests, mortgages, pledges, assignments,
charges, assessments, adverse claims, easements, restrictions, title defects,
covenants, burdens and legal or equitable encumbrances of any kind.
(iii) There are no actions, suits, demands, proceedings,
orders, investigations, inquiries or claims pending or threatened against or
affecting Premier (or against or affecting any officer, director, employee
agents or other Person acting on behalf of Premier), at law or in equity, or
before or by any governmental department, commission, board, bureau, agency or
instrumentality (including, without limitation, any actions, suits,
proceedings or investigations with respect to the transactions contemplated by
this Agreement or any other agreement, instrument or document contemplated
hereby), and there is no judgment, order, decree or other ruling of any court,
arbitrator or governmental agency affecting Premier, which either alone or in
the aggregate would have a material adverse effect on Premier.
(iv) Premier has duly filed in proper form (or timely and
properly obtained an extension with respect to) all required federal, state,
local or foreign income, franchise, sales, use, property, excise, payroll and
other tax returns and has paid all taxes, fees, interest, penalties and
assessments of whatever nature due on or before the date of this Agreement,
and no audits of Premier's tax returns by any governmental authority are
pending or, to the knowledge of Premier, threatened.
(v) There are no pending, threatened or potential unasserted
claims (other than routine claims for benefits) by, on behalf of or against
any of the bonus, deferred compensation, stock option, severance and other
medical, life, insurance, profit-sharing, pension, retirement or other
employee benefit or welfare plans of or relating to Premier ("Plans"), and
none of the Plans provide benefits, including death or medical benefits
(whether or not insured), beyond retirement or other termination of service.
(vi) All obligations of Premier to pay salary, wages, benefits,
withholding, social security, unemployment insurance, business privilege or
payroll taxes have been paid or satisfied in full and there are outstanding no
such obligations, except for obligations which either alone or in the
aggregate would not have a material adverse effect on Premier or subject any
director, officer or employee of Premier to any liability.
(vii) There has been no loan, payment, transfer, assignment or
other disposition of assets or rights of any kind by Premier to, on account
of, or for the benefit of any Person affiliated with or otherwise related to
Premier, directly or indirectly, whether in the form of compensation,
dividends or other distributions in respect of shares of stock or otherwise,
and there is no outstanding offer or commitment to make, or any reasonable
expectation on the part of others that there will be, such a payment,
transfer, assignment or other disposition.
5.10 Premises. Premier has good and valid right, title or interest
in or to the real property, whether owned or leased, used for its existing
store locations. All such real property, buildings, equipment and other
tangible assets owned, leased or used by Premier (a) are in good operating
condition and are fit for use in the ordinary course of business, (b) do not
violate any present or proposed Applicable Laws, (c) are not subject to any
pending or threatened condemnation or eminent domain proceedings and (d) have
all Consents and all utilities and access rights necessary for full use in the
conduct of business as presently and proposed to be conducted.
5.11 Contracts and Leases. Premier is not a party or otherwise
bound by or subject to any written or oral material contract, agreement, lease
(including real property leases), license or commitment outside the ordinary
course of business. Premier has no reason to believe that any contract,
agreement, lease, license or commitment to which it is a party or otherwise
bound is likely to be terminated, canceled, adversely modified (including by
significant rent increase) or breached or that Premier's right, title and
interest therein may be challenged.
5.12 Proprietary Rights. Premier owns all right, title and interest
in and to, or has the right to use pursuant to a valid and binding license,
all Proprietary Rights (defined below) necessary for the operation of its
business as presently conducted and as presently proposed to be conducted.
"Proprietary Rights" means (in whatever form or medium) all patents and patent
applications, trademarks, service marks, trade dress, trade names and
corporate names and registrations and applications for registration thereof
(including, without limitation, "Imposters" and "Elegant Pretenders"),
copyrights and registrations and applications for registration thereof,
computer software, data and documentation, trade secrets and other
confidential information and other intellectual property rights and licenses.
Premier has not granted a license or other right to any third party with
respect to any Proprietary Rights. No loss or expiration of any Proprietary
Right or related group of Proprietary Rights is pending or, to Premier's
knowledge, threatened or is reasonably foreseeable, and Premier has made
reasonable and prudent efforts to maintain and protect the Proprietary Rights
which it owns and uses. To Premier's knowledge, no owners of any Proprietary
Rights licensed to Premier have failed to make reasonable and prudent efforts
to maintain and protect the Proprietary Rights which are subject to such
licenses. Except for those which arise in the ordinary course of Premier's
business and which either alone or in the aggregate would not have a material
adverse effect on Premier, there have been no claims made against Premier
asserting the invalidity, misuse or unenforceability of any of the Proprietary
Rights owned or used by Premier, and there are no reasonable grounds for any
such claim. Except for those which arise in the ordinary course of Premier's
business and which either alone or in the aggregate would not have a material
adverse effect on Premier, Premier has not received a notice of conflict with
the asserted rights of others, and the conduct of Premier's business
(including, without limitation, any particular product or product line) has
not infringed or misappropriated and does not infringe or misappropriate any
rights of other Persons, nor would any future conduct or product as presently
contemplated infringe any rights of other Persons and, to Premier's knowledge,
the Proprietary Rights owned or used by Premier have not been infringed or
misappropriated by other Persons.
5.13 Insurance. Premier maintains insurance policies with respect
to its assets and businesses against risks and liabilities to the extent and
in respect of amounts, types and risks insured, as are customary in Premier's
industries. All such policies are adequate to protect the assets and business
of Premier, and each policy is enforceable in accordance with its terms and in
full force and effect as of the date hereof. Premier is not in default with
respect to its obligations under any insurance policy maintained by it.
5.14 Compliance with Laws. To the best of Premier's knowledge,
Premier has complied with all Applicable Laws and has not received notice of,
nor does Premier have any reason to know of, any claim of default or violation
with respect to any Applicable Law (including, without limitation, laws
respecting (i) licensing or franchising, (ii) employment and employment
practices, such as those relating to Plans, wages, hours, collective
bargaining, unemployment insurance, workers compensation, OSHA, equal
opportunity, age and handicapped discrimination, immigration control, and the
payment and withholding of social security and other taxes, (iii) public
company registration and reporting requirements and other securities matters,
(iv) the environment and hazardous substances and (v) matters affecting
Premier's business generally).
5.15 Disclosure. Neither this Agreement nor any of the exhibits,
schedules, attachments, written statements, documents, certificates,
securities filings or reports or other items delivered or made available to
Equisition by or on behalf of Premier in connection with the transactions
contemplated hereby (including, without limitation, all publicly available
securities filings, forms and reports) contains any untrue statement of a
material fact or omits a material fact necessary to make each statement
contained herein or therein not misleading. There is no fact which Premier
has not disclosed to Equisition in writing and of which any officers,
directors or executive employees of Premier is aware and which has had or
could reasonably be anticipated to have a material adverse effect on Premier's
business or prospects. Premier, through its directors, officers and
employees, has exerted best efforts to verify all representations, warranties
or other statements, whether in this Agreement or otherwise made to
Equisition, and, to the knowledge of Premier, through such Persons, the
representations, warranties of Premier under this Agreement are true and
correct in all material aspects.
6. Representations and Warranties of Equisition. As a material
inducement to Premier to enter into this Agreement, to issue and sell the
Stock and to consummate the Closing, Equisition hereby represents and warrants
as follows:
6.1 Organization and Power. Equisition is duly organized, validly
existing and in good standing under the laws of the State of Delaware, and it
has all requisite power and authority and all material Consents necessary to
own and operate its properties, to carry on its businesses as now conducted
and presently proposed to be conducted and to carry out the transactions
contemplated by this Agreement.
6.2 Authorization and Enforceability. The execution, delivery and
performance of this Agreement and the consummation of the transactions
contemplated hereby and thereby have been duly and validly authorized by all
requisite company action, and no other company act or proceedings on its part
is necessary to authorize the execution, delivery or performance of this
Agreement and the consummation of the transactions contemplated hereby. This
Agreement constitutes the valid and binding obligation of Equisition and is
enforceable against it in accordance with its terms.
6.3 No Breach. The execution and delivery by Premier of this
Agreement and all other agreements contemplated hereby to which Equisition is
a party, the purchase hereunder of the Stock, and the fulfillment of and
compliance with the respective terms hereof and thereof by Equisition, do not
and shall not (a) conflict with or result in a breach of the terms, conditions
or provisions of, (b) constitute a default under, (c) result in the creation
of any lien, security interest, charge or encumbrance upon the assets of
Equisition pursuant to, (d) give any third party the right to accelerate any
obligations under, (e) result in a violation of, or (f) require any Consent or
other action by or notice, pursuant to, the Limited Liability Company
Agreement of Equisition or any agreement, instrument or Applicable Law to
which Equisition is subject.
6.4 Investment Representation. Equisition is acquiring the Stock
purchased hereunder for its own account with the present intention of holding
such securities for purposes of investment, and it has no intention of selling
such securities in a public distribution in violation of the Securities Act or
any applicable state securities laws; provided that nothing contained in this
Section 6.4 shall prevent Equisition and subsequent holders of the Stock or
any other securities issued by Premier from transferring such securities in
any manner in compliance with, or pursuant to the requirements of an exemption
from registration contained in, the Securities Act of 1933, as amended,
applicable state securities laws and/or the regulations adopted pursuant
thereto (including, without limitation, a distribution of the Stock to the
members of Equisition, which is hereby approved in advance by Premier).
7. Indemnification.
7.1 Losses of Equisition. In addition to all rights and remedies
available to Equisition at law or in equity, Premier shall indemnify
Equisition and its members, managers, officers, partners, agents, employees,
representatives and counsel and their respective successors, assigns, heirs or
legal representatives, and save and hold each of them harmless against and pay
on behalf of or reimburse such party as and when incurred for any loss
(including, without limitation, diminutions in value and consequential
damages), liability, demand, claim, action, cause of action, cost, damage,
deficiency, penalty, fine or expense, whether or not arising out of third
party claims (including, without limitation, interest, penalties, reasonable
attorneys' and other professionals' fees and expenses and all amounts paid in
the investigation, defense or settlement of any of the foregoing)
(collectively, "Losses"), which any such party may suffer, sustain or become
subject to as a result of, in connection with or arising out of:
(i) any misrepresentation or breach of warranty by Premier or
omission of a material fact from any representation or warranty by Premier in
this Agreement (including all Exhibits to this Agreement, and all
certificates, instruments and documents presented to Equisition by Premier
pursuant to the terms of this Agreement (including, without limitation, all
publicly available securities filings, forms and reports)) or any other
agreement, instrument or document executed or delivered in connection with
this Agreement;
(ii) any nonfulfillment of a condition or breach of any
covenant or agreement on the part of Premier under this Agreement or any
agreement, instrument or document executed or delivered in connection
herewith;
(iii) any action, suit, demand, proceeding, order,
investigation, inquiry or claim by any third party (including, without
limitation, governmental agencies) against or affecting Equisition or Premier
which, if successful, would give rise to or evidence the existence of or
relate to a breach of any of the representations, warranties or covenants of
Premier under this Agreement or any agreement, instrument or document executed
or delivered in connection herewith; and
(iv) any third party claim (whenever made) not disclosed on any
Exhibit hereto relating in any way to Premier, and any other third party claim
(whenever made) relating in any way to Premier, whether or not disclosed on
any Exhibit hereto, arising out of, relating to, resulting from or caused by
any transaction, status, event, condition, occurrence or situation occurring
or existing on or prior to the date of Closing or otherwise related to this
Agreement, the purchase or ownership of the Stock by Equisition and/or any use
made by Premier of all or any portion of the proceeds thereof.
7.2 Losses of Premier. In addition to all rights and remedies
available to Premier at law or in equity, Equisition shall indemnify Premier
and its directors, officers, partners, agents, employees, representatives and
counsel and their respective successors, assigns, heirs or legal
representatives, and save and hold each of them harmless against and pay on
behalf of or reimburse such party as and when incurred for any Loss which any
such party may suffer, sustain or become subject to as a result of, in
connection with or arising out of:
(i) any misrepresentation or breach of warranty by Equisition
or omission of a material fact from any representation or warranty by
Equisition in this Agreement (including all Exhibits to this Agreement, and
all certificates, instruments and documents presented to Equisition by
Premier pursuant to the terms of this Agreement (including, without
limitation, all publicly available securities filings, forms and reports)) or
any other agreement, instrument or document executed or delivered in
connection with this Agreement;
(ii) any nonfulfillment of a condition or breach of any
covenant or agreement on the part of Equisition under this Agreement or any
agreement, instrument or document executed or delivered in connection
herewith; and
(iii) any action, suit, demand, proceeding, order,
investigation, inquiry or claim by any third party (including, without
limitation, governmental agencies) against or affecting Premier which, if
successful, would give rise to or evidence the existence of or relate to a
breach of any of the representations, warranties or covenants of Equisition
under this Agreement or any agreement, instrument or document executed or
delivered in connection herewith.
7.3 Survival. All representations, warranties, covenants and other
agreements in this Agreement and in all other agreements, instruments and
documents executed or delivered in connection with this Agreement, and all
rights and remedies provided under or otherwise available in connection with
any of the foregoing (including, without limitation, the indemnification
rights provided in this Section 7), at law or in equity, shall survive the
execution and delivery of this Agreement and the other agreements, instruments
and documents executed or delivered in connection herewith and the
consummation of the transactions contemplated hereby and thereby, regardless
of any investigation, inquiry or examination made for or on behalf of, or any
knowledge of either party or any of their respective directors, officer,
partners, agents, employees, representatives or counsel thereof or the
acceptance by a party of any certification or opinion.
7.4 Defense of Claims. Any Person making a claim for
indemnification under this Section 7 (an "Indemnitee") shall notify the party
obligated to provide such indemnification (the "Indemnifier") of the claim in
writing promptly after receiving written notice of any action, lawsuit,
proceeding, investigation or other claim against it (if by a third party) or
discovering the liability, obligation or facts giving rise to such claim for
indemnification, describing the claim, the amount thereof (if known and
quantifiable), and the basis thereof; provided, that the failure to so notify
the Indemnifier shall not relieve the Indemnifier of its obligations hereunder
except to the extent such failure shall be proved to have caused the
Indemnifier to suffer a material loss. The Indemnifier shall be entitled to
participate in the defense of such action, lawsuit, proceeding, investigation
or other claim giving rise to the Indemnitee's claim for indemnification, at
the Indemnifier's expense, and at its option (subject to the limitations set
forth below), the Indemnifier shall be entitled to appoint lead counsel of
such defense, acceptable to the Indemnitee; provided that prior to, and as a
condition to, the Indemnifier's appointing lead counsel of such defense the
Indemnifier shall first (a) verify to the Indemnitee in writing, in form and
substance satisfactory to the Indemnitee, that the Indemnifier shall be fully
and unconditionally responsible (with no reservation of any rights) for all
liabilities and obligations relating to such claim for indemnification and
that it will provide full indemnification as required hereunder, and (b)
provide the Indemnitee with assurance, in form and substance satisfactory to
the Indemnitee in its sole judgment, that the Indemnifier is and will satisfy
any such liability; provided further, that:
(i) The Indemnitee shall be entitled to participate in the
defense of such claim and to employ counsel of its choice, with fees and
expenses of such separate counsel borne by the Indemnitee. Notwithstanding
the foregoing, the reasonable fees and expenses of such separate counsel
incurred prior to the date the Indemnifier effectively assumes control of such
defense shall be borne by the Indemnifier.
(ii) The Indemnifier shall not be entitled to assume or retain
control of such defense if (A) the claim for indemnification relates to or
arises in connection with any criminal proceeding, action, indictment,
allegation or investigation; (B) the Indemnitee reasonably believes an adverse
determination with respect to the action, suit, investigation, proceeding,
inquiry or other claim giving rise to the claim for indemnification could be
detrimental to or injure Indemnitee's reputation, an important relationship or
future business prospects or otherwise result in harm not readily calculable
in monetary terms, (C) the claim seeks an injunction or equitable relief
against the Indemnitee, (D) the Indemnitee reasonably believes that there is
an actual or potential conflict of interest involved in the representation of
the Indemnitee by the counsel selected by the Indemnifier, whether because of
differing interests between the Indemnifier and the Indemnitee or otherwise,
or (E) the Indemnitee reasonably believes that Premier has failed or is
failing to vigorously prosecute or defend such claim.
(iii) If the Indemnifier, with the consent of the Indemnitee,
shall control the defense of any such claim, the Indemnifier shall obtain the
prior written consent of the Indemnitee before entering into any settlement of
a claim or ceasing to defend such claim, if, pursuant to or as a result of
such settlement or cessation, an injunction or other equitable relief is
likely to be imposed against the Indemnitee or if such settlement does not
expressly and unconditionally release the Indemnitee from all liabilities and
obligations with respect to such claim, with prejudice.
8. Obligations at Second Funding. Upon and subject to the consummation
of the transactions contemplated by the Second Stock Purchase Agreement (the
"Second Funding"), Premier shall issue Equisition a warrant, in the form
attached as a exhibit to the Second Stock Purchase Agreement, to purchase that
portion of the aggregate shares under such warrant as shall be allocated to
Equisition by Infusion, Equisition and the investor under the Second Stock
Purchase Agreement.
9. Miscellaneous
9.1 Rights and Remedies. Except as otherwise expressly provided
herein, the rights and remedies of the parties under this Agreement (including
the right to terminate this Agreement and the right to indemnification) shall
be cumulative with and in addition to, not exclusive or in replacement of, any
other rights or remedies that may be available under any other agreement
between the parties, at law or in equity.
9.2 Forum Selection for Disputes. Each of the parties to this
Agreement hereby submits to the exclusive, personal jurisdiction of either the
Federal District Court for the Eastern District of Pennsylvania or the Court
of Common Pleas of Philadelphia County, Pennsylvania for all claims, disputes
or controversies involving the parties hereto and relating to this Agreement;
provided, however, nothing herein shall prevent a party hereto from asserting
a claim for indemnification or any other claim hereunder against the other
party hereto in connection with a third party action in the same jurisdiction
where a third party action has been brought. Each party hereby knowingly,
intelligently and voluntarily waives its right to contest the jurisdiction or
venue of either such court, whether on the grounds of inconvenience or
otherwise, and each party hereto knowingly, intelligently and voluntarily
waives its right to initiate a suit or action against the other party in any
other court or forum, except as expressly provided in Section 7.
9.3 Waiver of Jury Trial. IRREVOCABLY AND UNCONDITIONALLY, EACH OF
THE PARTIES HERETO HEREBY KNOWINGLY, INTELLIGENTLY AND VOLUNTARILY WAIVES ITS
RIGHTS TO DEMAND TRIAL BY JURY IN ANY LITIGATION, SUIT OR OTHER ACTION BROUGHT
UNDER OR IN CONNECTION WITH THIS AGREEMENT OR UNDER ANY OTHER AGREEMENT,
INSTRUMENT OR DOCUMENT EXECUTED PURSUANT TO, OR IN CONNECTION WITH, THIS
AGREEMENT OR ANY PROVISION OF ANY OF THE FOREGOING OR ANY OTHER MATTERS
INVOLVING BOTH OF THE PARTIES HERETO.
9.4 Notices and Other Communications. Any notice, consent, demand
or other communication required or permitted under this Agreement shall be
made in writing and shall be deemed to have been duly given if (a) sent by
personal delivery or facsimile, telecopier or similar transmission (and shall
be deemed given upon confirmation of receipt), (b) mailed by first class
registered or certified mail, return receipt requested, postage prepaid (and
shall be deemed delivered three (3) days after the date received for delivery
by the United States Postal Service, whether or not accepted by the addressee)
or (c) sent by nationally recognized next-day delivery courier that guaranties
delivery within twenty-four (24) hours, charges prepaid (and shall be deemed
delivered one business day after delivery to said courier), addressed to the
parties hereto at their respective addresses set forth under their names on
the signature pages hereto, marked in each case to the attention of the Chief
Executive Officer of the recipient; however, each party may change the person
to be notified on its behalf or the address of such person from time to time
by giving notice of such change at least ten (10) days in advance.
9.5 Entire Agreement. This Agreement embodies the entire agreement
and understanding between the parties hereto pertaining to the subject matter
hereof and supersedes all prior agreements and understandings of the parties,
oral or written, express or implied, in connection therewith.
9.6 Amendments and Waivers. Any provision of this Agreement may be
amended or modified, in whole or in part, and the compliance with any
provision of this Agreement may be waived only with the written consent of (a)
both parties hereto, in the case of an amendment or modification and (b) the
party waiving compliance with a provision, in the case of a waiver.
9.7 No Waiver. No waiver by any party hereto of any condition, or
the breach of any term or covenant contained in this Agreement, whether by
conduct or otherwise, in any one or more instances, shall be deemed or
construed as a further or continuing waiver of any such condition or breach or
waiver of any other condition.
9.8 Severability. If any provision (or any part of any provision)
of this Agreement shall for any reason be determined by a court of competent
jurisdiction to be invalid, illegal or unenforceable in any respect, such
determination shall not invalidate, impair or affect the remainder of this
Agreement, which shall continue in full force and effect. If such invalid,
illegal or unenforceable provision would be valid, legal and enforceable if
modified in scope, duration or otherwise, such provision shall be deemed
modified to the minimum extent necessary to render the same valid, legal and
enforceable.
9.9 Governing Law. This Agreement, its interpretation, performance
and enforcement, and the rights and remedies of the parties hereto, shall be
governed and construed by and in accordance with the laws of the Commonwealth
of Pennsylvania, without regard to principles of conflict of laws.
9.10 Binding Effect. Except as otherwise expressly provided, all
covenants and agreements contained in this Agreement or any other agreement,
instrument or document executed or delivered in connection herewith by or on
behalf of any of the parties hereto shall bind and inure to the benefit of
their respective successors, assigns, heirs and legal representatives, whether
so expressed or not. In addition, and whether or not any express assignment
has been made, the provisions of this Agreement which are for the benefit of
Equisition as a purchaser or holder of the Stock are also for the benefit of,
and enforceable by, any subsequent holder of such Stock.
9.11 Assignment. Neither party may assign any of its rights or
obligations under this Agreement without the prior written consent of the
other party, in such other party's sole discretion.
9.12 No Third Party Rights. This Agreement is not intended to, and
it shall not, provide any rights whatsoever to any third party, and no third
party shall have any right to assert a claim under or enforce this Agreement
against any party hereto.
9.13 Construction. The masculine form, wherever used herein, shall
be construed to include the feminine and the neuter, and vice versa, where
appropriate. The singular form, wherever used herein, shall be construed to
include the plural, and vice versa, where appropriate. The term "include"
(and correlative terms, such as "includes" and "including") shall not be
construed as a term of limitation in any context but shall be construed as if
followed by the words "without limitation." All references in this Agreement
to a "Section" shall be to the applicable section of this Agreement, unless
otherwise specially provided. The captions of Sections are for the
convenience of the parties only; they form no part of this Agreement and shall
not affect its interpretation.
9.14 Determining Days. In computing the number of days for purposes
hereof, all days shall be counted, including Saturdays, Sundays and legal
holidays in the Commonwealth of Pennsylvania (unless only business days are
specified); provided, however, that if the final day of any time period falls
on a Saturday, Sunday or legal holiday, the final day shall be deemed to be
the following day which is not a Saturday, Sunday or holiday. A "business
day" shall mean any day which is not a Saturday, Sunday or legal holiday in
the Commonwealth of Pennsylvania.
9.15 Counterparts. This Agreement may be executed in counterparts,
each of which when so executed shall be deemed to be an original and all
counterparts together shall constitute one and the same instrument. The
transmission of a signature by telecopier will be treated as delivery of an
executed original.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on
the date first written above.
PREMIER CONCEPTS, INC.
By: /s/ Sissel B. Greenberg
--------------------------------------
Sissel B. Greenberg, President and CEO
Address for Notices:
3033 S. Parker Road, Suite 120
Aurora, CO 80014
Facsimile: (303) 338-5780
EQUISITION CAPITAL, LLC
By: /s/ David M. M. Taffet
-------------------------------------
David M. M. Taffet, President
Address for Notices:
1601 Market Street, Suite 2450
Philadelphia, PA 19103
Facsimile: 215-599-1099
<PAGE>
<PAGE>
Exhibit A
Other Agreements
1. Registration and Anti-Dilution Agreements between Premier and each
of Equisition and Infusion (the "Registration Agreements").
2. E-Commerce Services Agreement between Premier and MeridianTelesis
(the "Meridian Services Agreement").
3. Management Services Agreement between Premier and Infusion (the
"Management Services Agreement").
4. Second Stock Purchase Agreement between Premier and Infusion (the
"Second Stock Purchase Agreement").
5. Employment Agreements between Premier and its CEO, CFO and COO (the
"Executive Employment Agreements").
<PAGE>
<PAGE>
Exhibit B
Board Election, Reporting Provisions and Other Rights
1. Board Election. Premier's Board of Directors shall be constituted
of four (4) Directors and shall be classified such that Equisition, voting
separately, shall be entitled to appoint or elect a number of Directors in
proportion to its stake in Premier (rounded down for partial members, but not
less than one). Premier will cause the first election of such person(s) to be
effective on the Closing Date and will compensate such Board members as it
compensates its other Board members. Equisition shall be entitled to remove
and replace such Director(s), with or without cause, at any time.
2. Reporting Requirements. Premier shall deliver to Equisition as long
as it holds at least ten percent (10%) of Premier's voting securities:
2.1 as soon as available but in any event within forty-five (45)
days (subject to a 5 day extension under Rule 12b-25) after the end of each
quarterly accounting period in each fiscal year, unaudited consolidating and
consolidated statements of operations and cash flows of Premier and its
subsidiaries for such quarterly period and for the period from the beginning
of the fiscal year to the end of such quarter, and consolidating and
consolidated balance sheets of Premier and its subsidiaries as of the end of
such quarterly period, setting forth in each case comparisons to the annual
budget and to the corresponding period in the preceding fiscal year, and all
such statements shall be prepared in accordance with generally accepted
accounting principles, consistently applied, subject to the exclusion of
footnote disclosure and normal year-end audit adjustments;
2.2 within ninety (90) days after the end of each fiscal year
(subject to a 15 day extension under Rule 12b-25), consolidating and
consolidated statements of operations and cash flows of Premier and its
subsidiaries for such fiscal year, and consolidating and consolidated balance
sheets of Premier and its subsidiaries as of the end of such fiscal year,
setting forth in each case comparisons to the annual budget and to the
preceding fiscal year, all prepared in accordance with generally accepted
accounting principles, consistently applied, and accompanied by (A) with
respect to the consolidated portions of such statements, an unqualified
opinion of an independent accounting firm of recognized standing and (B) a
copy of such firm's annual management letter to the Board; and
2.3 with reasonable promptness, such other information and
financial and operating data concerning Premier as may be regularly prepared
by Premier or as Equisition may reasonably request.
Each of the financial statements referred to in the foregoing paragraphs
shall be consistent with the books and records of Premier and shall be
prepared, and fairly present the financial condition of Premier,
in accordance with GAAP, consistently applied, subject in the case of
unaudited financial statements to lack of footnote disclosure and changes
resulting from normal year-end audit adjustments.
3. Inspection. Premier shall permit any representatives designated by
Equisition, upon reasonable notice and during normal business hours, to (i)
visit and inspect any of the properties of Premier, (ii) examine the
corporate, financial and other business records of Premier and make copies
thereof or extracts therefrom and (iii) discuss the affairs, finances and
accounts of any such corporations with the Directors, officers, employees,
independent accountants and counsel of Premier. Premier shall exert
reasonable best efforts to require persons not employed by Premier or
otherwise under Premier's control to cooperate fully with such
representatives.
4. Equitable Relief. Equisition shall be entitled to obtain any
equitable relief appropriate to enforce compliance with this Exhibit B and to
recover expenses, including attorneys' fees and disbursements incurred in
connection with such enforcement. The remedy provided in this Section 4 shall
be in addition to, not exclusive of, any other right or remedy available at
law or in equity, whether by statute, pursuant to an agreement with Premier or
otherwise.
5. Liability Limitation. In addition to any other provisions regarding
limitations of liability in Premier's Certificate of Incorporation, Bylaws or
otherwise applicable, to the maximum extent permitted by law, Premier does
hereby exonerate Equisition and its designee(s) serving on the Board of
Directors and all committees thereof from time to time, or any person or
entity being represented by or acting on behalf of any of the foregoing,
directly and indirectly, and their respective successors and assigns
(collectively, "Indemnitees"), and waives and releases any suit, claim, demand
or cause of action of any kind arising, from any action taken or failure to
take any action by an Indemnitee, unless such action or failure to take action
constitutes willful misconduct, and to the maximum extent permitted by law, no
Indemnitee shall be personally liable for monetary damages as such for any
action or failure to take action.
6. Indemnification. Each Indemnitee shall be indemnified and held
harmless by Premier for all actions taken by him or her and for all failure to
take action (regardless of the date of any such action or failure to take
action) to the fullest extent permitted by law and against all expense,
liability and loss (including without limitation attorneys' fees, judgment,
fines, taxes, penalties, and amounts paid or to be paid in settlement)
reasonably incurred or suffered by the Indemnitee in connection with any
action, suit, claim or proceeding ("Proceeding"), except to the extent that
the act or failure to act giving rise to the claim for indemnification is
determined by a court of competent jurisdiction to have constituted willful
misconduct. The right to indemnification provided in this Section 6 shall
include the right to have the expenses incurred by the Indemnitee in defending
any Proceeding paid by Premier in advance of the final disposition of the
Proceeding to the fullest extent permitted by law; provided that, if law so
requires, the payment of such expenses incurred by the Indemnitee in advance
of the final disposition of a Proceeding shall be made upon delivery to
Premier of an undertaking, by or on behalf of the Indemnitee, to repay all
amounts so advanced without interest if it shall ultimately be determined that
the Indemnitee is not entitled to be indemnified under this Section 6 or
otherwise. The undertaking required by the preceding sentence need not be
secured and shall be accepted without reference to financial ability to make
repayment. Indemnification pursuant to this Section 6 shall continue as to an
Indemnitee who has ceased to be a holder of Stock, a Director or an officer or
ceased to have any relationship with Premier and shall inure to the benefit of
the Indemnitee's heirs, executors and administrators. The rights to
indemnification and to the advancement of expenses provided in this Section 6
shall not be exclusive of any other rights that any person or entity may have
or hereafter acquire under any statute, provision of the Certificate of
Incorporation or Bylaws, agreement, vote of stockholders or Directors or
otherwise.
7. Miscellaneous
7.1 The provisions of this Exhibit B relating to the limitation of
Indemnitees' liability, to indemnification and to the advancement of expenses
shall constitute a contract between Premier and each of the Indemnitees which
may be modified as to any Indemnitee only with that person's or entity's
consent or as specifically provided herein. Notwithstanding any provision in
the Certificate of Incorporation relating to amendment of the Certificate of
Incorporation generally, no repeal or amendment of this Exhibit B can be
effective without the prior written consent of Equisition, and any such
amendment or repeal which is adverse to any Indemnitee shall apply to such
Indemnitee only on a prospective basis and shall not reduce any limitation on
the personal liability of an Indemnitee or limit the rights of an Indemnitee
to indemnification or to the advancement of expenses with respect to any
action or failure to act occurring prior to the time of such repeal or
amendment.
7.2 In the case of any change in law which expands the liability of
an Indemnitee or limits the indemnification rights or the rights to
advancement of expenses which Premier may provide, the right to exoneration,
limited liability, indemnification and the advancement of expenses provided in
this Exhibit B shall continue as theretofore to the extent permitted by law.
Conversely, if change in law permits Premier to limit further the liability of
an Indemnitee or to provide broader indemnification rights or rights to the
advancement of expenses than Premier was permitted to provide prior to such
change, then liability thereupon shall be so limited and the rights to
indemnification and the advancement of expenses shall be so broadened to the
extent permitted by law.
7.3 If any right, power or privilege provided to Equisition does
not become valid and enforceable merely by this Exhibit B, (a) Premier and the
Board of Directors shall exert their best efforts to obtain such consents and
satisfy such other conditions as may be necessary for such right, power or
privilege to be valid and enforceable as provided herein (including, without
limitation, by filing any Certificate of Designation or making any amendment
to the Certificate of Incorporation or Bylaws), (b) such right, power or
privilege shall be provided to the fullest extent permitted by law, (c)
Premier and the Board of Directors shall take such actions as may be necessary
to provide Equisition with such other rights, powers and privileges as may
have the same substantive effect and accomplish the same purposes as the
invalid or unenforceable right, power or privilege and (d) any such invalidity
or unenforceability shall not invalidate or otherwise affect any other right,
power or privilege granted hereby.
<PAGE>
<PAGE>
Exhibit C
Additional Closing Documents
1. An Officer's Certificate (defined below), dated the date of the
Closing, stating that the obligations of Premier under Section 1 and the
conditions specified in this Section 3 have been fully satisfied. "Officer's
Certificate" means a certificate signed by Premier's president, chief
executive officer or chief financial officer, stating that (a) the officer
signing such certificate has made or has caused to be made such investigations
as are necessary in order to permit such officer to verify the accuracy of the
information set forth in such certificate and (b) to the best of such
officer's knowledge, such certificate does not misstate any material fact and
does not omit to state any fact necessary to make any information in the
certificate not misleading.
2. Certified copies of the resolutions duly adopted by Premier's Board
of Directors authorizing the execution, delivery and performance of
this Agreement and each of the other agreements contemplated hereby to which
Premier is a party, the issuance and sale of the Stock to Equisition
and the consummation of all other transactions contemplated by this Agreement
to be performed by Premier.
3. A copy of the Certificate of Incorporation of Premier, certified by
the Secretary of State of Colorado, and a copy of the Bylaws of Premier, each
as in effect at the Closing.
4. A good standing certificate for Premier issued by the Secretary of
State of Colorado and of each state in which Premier is qualified to do
business.
5. A certificate of incumbency signed by the Secretary of Premier,
certifying the names, titles and signatures of the Persons executing this
Agreement and the other agreements contemplated hereby.
6. Copies of all third party (including governmental) Consents required
to be obtained or filed on or before the date of Closing in connection with
the consummation of the transactions hereunder (including, without limitation,
all securities laws filings).
7. The Use of Proceeds Budget.
<PAGE>
<PAGE>
Exhibit D
Financial Statements
See attached pages.
--------
<PAGE>
SECOND STOCK PURCHASE AGREEMENT
This Agreement is made this day of March, 1999, by and between
Premier Concepts, Inc., a Colorado corporation ("Premier"), and Infusion
Capital Partners, LLC, a Delaware limited liability company ("Infusion").
In consideration of the mutual covenants and agreements set forth in
this Agreement, the parties, intending to be legally bound, agree as
follows:
1. Request for Second Funding and Assignment to Investor.
-----------------------------------------------------
At any time within the six (6) month period after the date of this
Agreement, Premier may provide Infusion with a written request for Infusion
to arrange for one or more Persons (defined below) determined by Infusion
(an "Investor") to consummate the transactions contemplated hereby. As
soon as is reasonably practicable (but in no event more than thirty (30)
days) after its receipt of such request, Infusion shall assign this
Agreement, and its rights and obligations hereunder, without the consent of
Premier, to the Investor(s). Such assignment shall be made on terms and
conditions mutually satisfactory to Infusion and Investor, and a copy of
the agreements regarding the assignment shall be provided to Premier.
Notwithstanding such assignment, Infusion shall continue to be obligated to
arrange for one or more Persons to consummate the transactions contemplated
hereby in the event the initial Investor(s) fail to do so.
2. Authorization of Second Funding.
-------------------------------
Premier shall solicit and use its best efforts to obtain stockholder
approval for the transactions contemplated by this Agreement (and any
related transactions) on the terms of this Agreement (and on such other
terms as may be reasonably requested by Investor) prior to Premier's filing
of its report on Form 10-K for its fiscal year ended January 31, 1999.
Premier shall obtain Investor's advance approval, which shall not be
unreasonably withheld, of any materials to be distributed or filed, and of
any action to be taken, with respect to such approval. Without limiting
the foregoing, the stockholder approval shall include a separate approval
of the sale and issuance of the warrants to Infusion and Equisition Capital
Partners, LLC, a Delaware limited liability company ("Equisition") referred
to in agreements between Premier and such Persons.
3. Transactions at Closing
-----------------------
3.1 Purchase and Sale of Stock and Warrant.
--------------------------------------
Subject to the terms and conditions set forth herein, at Closing,
Investor hereby agrees to purchase from Premier, and Premier hereby agrees
to issue and sell to Investor, (i) 446,770 shares of Premier's Series A
Convertible Preferred Stock, par value $.10 per share (the "Stock"), having
the rights and preferences set forth in Exhibit A hereto, each share of
Stock being convertible into one share of Premier's common stock, par value
$.002 per share, and (ii) a Warrant in the form of Exhibit B hereto to
purchase that portion of the aggregate 160,000 shares under such Warrant as
shall be allocated to Investor by Infusion, Investor and Equisition (the
"Investor Warrant"), for the purchase price of $279,231.25 (giving the
Stock a stated value of $5/8 ($.625) per share).
3.2 The Closing.
-----------
The closing of such purchase and sale (the "Closing") shall take
place promptly (but no more than 15 days) after Infusion's assignment of
this Agreement as set forth in Section 1, on a date mutually agreed upon by
Premier and Investor.
4. Use of Proceeds.
---------------
Premier shall use at least $175,000 of the proceeds of this
transaction, together with the proceeds of the transactions contemplated by
the First Stock Purchase Agreement (defined on Exhibit C), to engage
MeridianTelesis, LLC, a Delaware limited liability company
("MeridianTelesis"), to establish and expand Premier's e-commerce
capabilities (such funds to be expended in accordance with a schedule
determined by MeridianTelesis based on discussions with Premier regarding
the strategic rollout of Premier's e-commerce platform). Premier shall use
the remaining proceeds of such transactions for expenses of the
transactions (including expenses associated with necessary filings and to
secure stockholder approval for the consummation of this Agreement), to pay
Infusion pursuant to the Management Services Agreement (defined on Exhibit
C), to reduce the outstanding principal of Premier's bank debt, to acquire
new stores and renovate existing stores and for working capital (all in
accordance with a budget to be adopted by Premier satisfactory to Investor
and Infusion (the "Proceeds Budget").
5. Conditions to Investor's Obligations.
------------------------------------
The obligations of Investor to purchase and pay for the Stock and to
consummate the Closing are subject to the satisfaction or waiver as of the
Closing of the following conditions:
5.1 Request for Second Funding.
--------------------------
Premier shall have made the request set forth in Section 1 above
or Infusion shall have exercised its right to require Premier to consummate
the transactions contemplated hereby as provided in Section 6.8 of the
Management Services Agreement.
5.2 Other Agreements.
----------------
Premier shall have entered into mutually satisfactory agreements
set forth on Exhibit C hereto with the parties identified thereon, and each
of such agreements shall be in full force and effect as of the Closing.
5.3 Other Rights.
------------
Premier shall have taken all necessary actions so that the terms
and provisions set forth on Exhibit D (which are incorporated into and made
a part of this Agreement by this reference) shall be valid, binding and
enforceable against Premier.
5.4 Representations, Warranties and Covenants.
-----------------------------------------
Premier's representations and warranties shall be true and
correct at and as of the Closing, and Premier shall have performed and
complied with all agreements, covenants and conditions contained herein
(including, without limitation, those on Exhibit D) and in the other
agreements, instruments and documents to be executed or delivered by
Premier in connection herewith which are required to be performed or
complied with at or before the Closing.
5.5 No Defaults.
-----------
There shall have occurred no breach, violation, default,
noncompliance, misrepresentation or untrue statement by Premier under or in
any of the agreements set forth on Exhibit C or the Agreement Regarding
Basic Terms dated February 26, 1999 between Premier and Infusion.
5.6 Adverse Proceedings.
-------------------
No action, suit, demand, proceeding, appeal, order,
investigation, inquiry or claim before any judicial, arbitral, regulatory
or governmental body shall be pending or threatened which, in the judgment
of Investor, makes it inadvisable or undesirable to consummate the
transactions contemplated by this Agreement.
5.7 Legal Prohibitions.
------------------
None of the transactions contemplated by this Agreement shall be
prohibited by any Applicable Law (defined below), and the consummation of
such transactions shall not subject Investor to any penalty, liability or
onerous condition under or pursuant to any Applicable Law. "Applicable
Law" means, with respect to any Person, all provisions of constitutions,
statutes, rules, regulations, rulings, ordinances, codes, requirements and
orders of governmental bodies or regulatory agencies applicable to or
affecting such Person, and all orders, decisions, judgments and decrees of
all courts and arbitrators in proceedings or actions to which the Person is
a party or by which it (or any of its property) is bound.
5.8 Proceedings and Consents.
------------------------
Premier shall have taken all actions and proceedings required in
connection with the transactions contemplated hereby to be consummated at
or prior to the Closing (which shall be satisfactory in form and substance
to Investor), and all necessary Consents (defined below), filings and
notices with respect to the transactions contemplated by this Agreement
shall have been obtained, made or given by Premier. Without limiting the
foregoing, (i) Premier shall have obtained the stockholder approval set
forth in Section 2 and such approval shall be in full force and effect and
shall not have been amended or modified and (ii) Premier shall have duly
adopted, executed and filed properly a Certificate of Designation
establishing the terms and the relative rights and preferences of the Stock
set forth on Exhibit A and such Certificate of Designation shall be in full
force and effect and shall not have been amended or modified. "Consent"
means any consent, authorization, approval, order, decree, permit,
certification, license, registration or third party action of any kind.
5.9 Receipt of Stock and Warrant.
----------------------------
Investor shall have received certificates evidencing the Stock
and shall have received the Investor Warrant, each duly issued by Premier
to Investor. Infusion shall have received the warrant referred to in
Section 4.1(ii) of the Management Services Agreement, duly issued by
Premier to Infusion (the "Infusion Warrant"). Equisition shall have
received a Warrant in the form of Exhibit B hereto to purchase that portion
of the aggregate 140,000 shares under such Warrant as shall be allocated to
Equisition by Infusion, Investor and Equisition (the "Equisition Warrant").
There shall have occurred no event or action which could result in a
dilution in the percentage ownership in Premier to be acquired by Investor,
Equisition or Infusion.
5.10 Closing Documents
-----------------
Premier shall have delivered to Investor the documents set forth
on Exhibit D and such other documents, agreements, Consents and other
instruments relating to the transactions contemplated by this Agreement as
Investor or its counsel may reasonably request.
Any condition specified in this Section 5 may be waived if expressly
consented to by Investor, provided that no such waiver shall be effective
against Investor, even if Closing occurs, unless it is set forth in a
writing executed by Investor.
6. Conditions to Premier's Obligations.
-----------------------------------
The obligations of Premier to issue and sell the Stock and Investor
Warrant to Investor and to consummate the Closing are subject to the
satisfaction or waiver as of the Closing of the following conditions:
6.1 Representations and Warranties.
------------------------------
Investor's representations and warranties shall be true and
correct at and as of the Closing.
6.2 Proceedings and Consents.
------------------------
All actions and proceedings taken or required to be taken in
connection with the transactions contemplated hereby to be consummated at
or prior to the Closing shall be satisfactory in form and substance to
Premier, and all necessary Consents, filings and notices to have been
obtained, made or given by Investor with respect to the transactions
contemplated by this Agreement shall have been obtained, made or given by
Investor.
6.3 Receipt of Purchase Price.
-------------------------
Premier shall have received payment for the Stock by wire
transfer of immediately available funds in accordance with written wire
instructions provided by Premier.
6.4 Closing Documents.
-----------------
Investor shall have delivered to Premier an Officer's Certificate
(defined on Exhibit E), dated the date of the Closing, stating that the
obligations of Investor under Section 3 and the conditions specified in
this Section 6 have been fully satisfied.
7. Representations and Warranties of Premier.
-----------------------------------------
As a material inducement to Investor to enter into this Agreement, to
purchase the Stock, and to consummate the Closing, Premier hereby
represents and warrants as follows:
7.1 Organization and Power.
----------------------
Premier is a corporation duly organized, validly existing and in
good standing under the laws of the State of Colorado and is qualified to
do business in every jurisdiction in which its ownership of property or
conduct of business requires it to qualify. Premier has all requisite
power and authority necessary to own and operate its properties, to carry
on its businesses as now conducted and presently proposed to be conducted
and to carry out the transactions contemplated by this Agreement and the
other agreements, instruments and documents to be executed or delivered by
Premier in connection with this Agreement.
7.2 Authorization.
-------------
Premier has full power and authority (corporate or otherwise) to
enter into and carry out the terms of this Agreement and all other
agreements, instruments and documents contemplated hereby and to consummate
all transactions contemplated hereby and thereby. The execution, delivery
and performance of this Agreement and all other agreements, instruments and
documents contemplated hereby to which Premier is a party and the
consummation of all transactions contemplated hereby and thereby have been
duly authorized by Premier. This Agreement and all other agreements,
instruments and documents contemplated hereby to which Premier is a party
constitute the valid and binding obligations of Premier and are enforceable
in accordance with their respective terms.
7.3 No Breach.
---------
The execution and delivery by Premier of this Agreement and all
other agreements, instruments and documents contemplated hereby to which
Premier is a party, the offer, sale and issuance of the Stock hereunder and
the other securities contemplated hereby and the fulfillment of and
compliance with the respective terms hereof and thereof by Premier, do not
and shall not (a) conflict with or result in a breach of the terms,
conditions or provisions of, (b) constitute a default under, (c) result in
the creation of any lien, security interest, charge or encumbrance upon
Premier's capital stock or assets pursuant to, (d) give any third party the
right to accelerate any obligation under, (e) result in a violation of, or
(f) require any Consent, filing, exemption or other action pursuant to the
Certificate of Incorporation or Bylaws of Premier or any agreement,
instrument or Applicable Law to which Premier is subject or by which it is
bound.
7.4 Subsidiaries.
------------
Premier does not own, directly or indirectly, any shares of stock
or other equity interests or security in any corporation, partnership,
limited liability company, association or other entity or business
enterprise (including individuals) (a "Person"), and Premier has no
obligation to make an investment or acquisition in any such Person.
7.5 Capital Stock and Related Matters
---------------------------------
(i) As of the Closing and immediately thereafter, the
authorized capital stock of Premier shall consist of (i) twenty million
(20,000,000) shares of preferred stock, par value $.10 per share, of which
no shares other than the Stock shall be issued and outstanding and (ii)
eight hundred fifty million (850,000,000) shares of common stock, par value
$.0004 per share (referred to herein as Premier's common stock), of which
one million seven hundred seventy-five thousand twenty-five (1,775,025)
shares plus the shares issued to Equisition pursuant to the First Stock
Purchase Agreement shall be issued and outstanding. Upon the Closing, all
of the outstanding shares of the Company's capital stock (including the
Stock) shall be validly issued, fully paid and nonassessable.
(ii) Except for Premier's Class A Warrants, Incentive Stock
Options, Non-Plan Options (referred to in (iii) below) and agreements to
issue no more than twenty-five thousand (25,000) shares of common stock
(and except for the Investor Warrant, the Infusion Warrant and the
Equisition Warrant and the rights under the Registration Agreements
(defined on Exhibit C)), as of the Closing, (a) Premier shall not have
outstanding any stock, debt instrument or securities convertible or
exchangeable for any shares of its capital stock or containing any profit
participation features, (b) Premier shall not have outstanding any rights
or options to subscribe for or to purchase its capital stock or any stock
or securities convertible into or exchangeable for its capital stock, (c)
there shall be no anti-dilution or registration rights to which any holder
of securities of Premier is entitled and (d) Premier shall not be subject
to any obligation (contingent or otherwise) to repurchase or otherwise
acquire or retire any shares of its capital stock or any warrants, options
or other rights to acquire its capital stock.
(iii) As of the Closing and immediately thereafter
(including after giving effect to the Incentive Stock Options under the
Executive Employment Agreements (defined on Exhibit C), the number of
shares of common stock underlying the Class A Warrants shall be 1,858,334,
under the Incentive Stock Options shall be 350,000 and under the Non-Plan
Options shall be 37,000, and the average exercise price of the outstanding
Incentive Stock Options and the Non-Plan Options shall not exceed $2.05.
(iv) There are no statutory or contractual shareholders
preemptive rights or rights of refusal or similar rights with respect to
Premier's issuance and sale of the Stock hereunder or the issuance of
common stock upon exercise or conversion of the warrants and Stock to be
issued pursuant to this Agreement, the Management Services Agreement and
the First Stock Purchase Agreement.
(v) Premier has not violated, and has fully complied with,
any applicable federal or state securities laws in connection with the
offer, sale or issuance of any of its capital stock (including, without
limitation, the Stock, the Investor Warrant, the Infusion Warrant and the
Equisition Warrant). To the best of Premier's knowledge, there are no
agreements between its shareholders with respect to the voting or transfer
of Premier's capital stock or with respect to any other aspect of its
affairs.
(vi) Premier has not granted any appreciation rights,
phantom rights or other rights or interests having profit participation or
other equity features or providing economic incentives or benefits based
upon the income or other measure of performance of Premier or any
distribution on, transaction involving or valuation of any capital stock of
Premier
7.6 Financial Statements.
--------------------
The books and records of Premier are in all material respects
complete and correct, have been prepared and maintained in accordance with
generally accepted accounting principles ("GAAP"), consistently applied,
and in accordance with sound business practices, and they accurately
reflect the basis for all disclosures made by Premier. The financial
statements attached hereto as Exhibit F ("Financial Statements") include an
audited balance sheet, statement of income and statement of changes in
financial position, all of which have been prepared in accordance with
GAAP, consistently applied, and fairly and accurately present the financial
condition and results of operations of Premier, as of the dates and for the
periods of time indicated.
7.7 Projections.
-----------
All projections provided or made available to Investor by or on
behalf of Premier have been prepared in good faith by Premier (or by a
third party acting on behalf of Premier and reasonably believed by Premier
to be competent as to the tasks performed) and are based upon assumptions
that were reasonable in light of the circumstances under which they are
made.
7.8 Material Adverse Changes.
------------------------
Since the date of the most recent balance sheet included in the
Financial Statements, (a) there has occurred no material adverse change in
(i) the existing or prospective business, operations, assets or condition
(financial or otherwise) of Premier or (ii) relations with any employees or
other personnel, joint venturer, customer, supplier or party to a material
contract of Premier (including, without limitation, its store leases), (b)
the business and affairs of Premier have been conducted and carried on only
in the ordinary course of business consistent with past practices (and
Premier has not engaged in any transaction outside such ordinary course)
and (c) the physical properties, inventory and facilities owned or leased
by Premier have suffered individually or in the aggregate any material
depletion, destruction or damage, regardless of whether or not any loss
suffered was insured. To Premier's knowledge, none of the foregoing could
reasonably be expected to occur, excluding changes in the economy
generally.
7.9 Undisclosed Matters.
-------------------
Except as set forth on the Financial Statements:
(i) Premier has no obligation or liability (whether
accrued, absolute, contingent, unliquidated or otherwise, known or unknown,
whether due or to become due and regardless of when asserted) arising out
of any transaction, act, omission or state of fact existing at or prior to
the Closing, other than liabilities and obligations which arise on or after
the date of the Closing in the ordinary course of business (none of which
is a liability resulting from breach of contract, breach of warranty, tort,
infringement or any claim, asserted or unasserted), which either alone or
in the aggregate would have a material adverse effect on Premier.
(ii) The properties (real and otherwise) and assets
(tangible or intangible) owned or used by Premier or located on its
premises are free and clear of all liens, security interests, mortgages,
pledges, assignments, charges, assessments, adverse claims, easements,
restrictions, title defects, covenants, burdens and legal or equitable
encumbrances of any kind.
(iii) There are no actions, suits, demands, proceedings,
orders, investigations, inquiries or claims pending or threatened against
or affecting Premier (or against or affecting any officer, director,
employee agents or other Person acting on behalf of Premier), at law or in
equity, or before or by any governmental department, commission, board,
bureau, agency or instrumentality (including, without limitation, any
actions, suits, proceedings or investigations with respect to the
transactions contemplated by this Agreement or any other agreement,
instrument or document contemplated hereby), and there is no judgment,
order, decree or other ruling of any court, arbitrator or governmental
agency affecting Premier, which either alone or in the aggregate would have
a material adverse effect on Premier.
(iv) Premier has duly filed in proper form (or timely and
properly obtained an extension with respect to) all required federal,
state, local or foreign income, franchise, sales, use, property, excise,
payroll and other tax returns and has paid all taxes, fees, interest,
penalties and assessments of whatever nature due on or before the date of
this Agreement, and no audits of Premier's tax returns by any governmental
authority are pending or, to the knowledge of Premier, threatened.
(v) There are no pending, threatened or potential
unasserted claims (other than routine claims for benefits) by, on behalf of
or against any of the bonus, deferred compensation, stock option, severance
and other medical, life, insurance, profit-sharing, pension, retirement or
other employee benefit or welfare plans of or relating to Premier
("Plans"), and none of the Plans provide benefits, including death or
medical benefits (whether or not insured), beyond retirement or other
termination of service.
(vi) All obligations of Premier to pay salary, wages,
benefits, withholding, social security, unemployment insurance, business
privilege or payroll taxes have been paid or satisfied in full and there
are outstanding no such obligations, except for obligations which either
alone or in the aggregate would not have a material adverse effect on
Premier or subject any director, officer or employee of Premier to any
liability.
(vii) There has been no loan, payment, transfer, assignment
or other disposition of assets or rights of any kind by Premier to, on
account of, or for the benefit of any Person affiliated with or otherwise
related to Premier, directly or indirectly, whether in the form of
compensation, dividends or other distributions in respect of shares of
stock or otherwise, and there is no outstanding offer or commitment to
make, or any reasonable expectation on the part of others that there will
be, such a payment, transfer, assignment or other disposition.
7.10 Premises.
--------
Premier has good and valid right, title or interest in or to the
real property, whether owned or leased, used for its existing store
locations. All such real property, buildings, equipment and other tangible
assets owned, leased or used by Premier (a) are in good operating condition
and are fit for use in the ordinary course of business, (b) do not violate
any present or proposed Applicable Laws, (c) are not subject to any pending
or threatened condemnation or eminent domain proceedings and (d) have all
Consents and all utilities and access rights necessary for full use in the
conduct of business as presently and proposed to be conducted.
7.11 Contracts and Leases.
--------------------
Premier is not a party or otherwise bound by or subject to any
written or oral material contract, agreement, lease (including real
property leases), license or commitment outside the ordinary course of
business. Premier has no reason to believe that any contract, agreement,
lease, license or commitment to which it is a party or otherwise bound is
likely to be terminated, canceled, adversely modified (including by
significant rent increase) or breached or that Premier's right, title and
interest therein may be challenged.
7.12 Proprietary Rights.
------------------
Premier owns all right, title and interest in and to, or has the
right to use pursuant to a valid and binding license, all Proprietary
Rights (defined below) necessary for the operation of its business as
presently conducted and as presently proposed to be conducted.
"Proprietary Rights" means (in whatever form or medium) all patents and
patent applications, trademarks, service marks, trade dress, trade names
and corporate names and registrations and applications for registration
thereof (including, without limitation, "Imposters" and "Elegant
Pretenders"), copyrights and registrations and applications for
registration thereof, computer software, data and documentation, trade
secrets and other confidential information and other intellectual property
rights and licenses. Premier has not granted a license or other right to
any third party with respect to any Proprietary Rights. No loss or
expiration of any Proprietary Right or related group of Proprietary Rights
is pending or, to Premier's knowledge, threatened or is reasonably
foreseeable, and Premier has made reasonable and prudent efforts to
maintain and protect the Proprietary Rights which it owns and uses. To
Premier's knowledge, no owners of any Proprietary Rights licensed to
Premier have failed to make reasonable and prudent efforts to maintain and
protect the Proprietary Rights which are subject to such licenses. Except
for those which arise in the ordinary course of Premier's business and
which either alone or in the aggregate would not have a material adverse
effect on Premier, there have been no claims made against Premier asserting
the invalidity, misuse or unenforceability of any of the Proprietary Rights
owned or used by Premier, and there are no reasonable grounds for any such
claim. Except for those which arise in the ordinary course of Premier's
business and which either alone or in the aggregate would not have a
material adverse effect on Premier, Premier has not received a notice of
conflict with the asserted rights of others, and the conduct of Premier's
business (including, without limitation, any particular product or product
line) has not infringed or misappropriated and does not infringe or
misappropriate any rights of other Persons, nor would any future conduct or
product as presently contemplated infringe any rights of other Persons and,
to Premier's knowledge, the Proprietary Rights owned or used by Premier
have not been infringed or misappropriated by other Persons.
7.13 Insurance.
---------
Premier maintains insurance policies with respect to its assets
and businesses against risks and liabilities to the extent and in respect
of amounts, types and risks insured, as are customary in Premier's
industries. All such policies are adequate to protect the assets and
business of Premier, and each policy is enforceable in accordance with its
terms and in full force and effect as of the date hereof. Premier is not
in default with respect to its obligations under any insurance policy
maintained by it.
7.14 Compliance with Laws.
--------------------
To the best of Premier's knowledge, Premier has complied with all
Applicable Laws and has not received notice of, nor does Premier have any
reason to know of, any claim of default or violation with respect to any
Applicable Law (including, without limitation, laws respecting (i)
licensing or franchising, (ii) employment and employment practices, such as
those relating to Plans, wages, hours, collective bargaining, unemployment
insurance, workers compensation, OSHA, equal opportunity, age and
handicapped discrimination, immigration control, and the payment and
withholding of social security and other taxes, (iii) public company
registration and reporting requirements and other securities matters, (iv)
the environment and hazardous substances and (v) matters affecting
Premier's business generally).
7.15 Disclosure.
----------
Neither this Agreement nor any of the exhibits, schedules,
attachments, written statements, documents, certificates, securities
filings or reports or other items delivered or made available to Investor
by or on behalf of Premier in connection with the transactions contemplated
hereby (including, without limitation, all publicly available securities
filings, forms and reports) contains any untrue statement of a material
fact or omits a material fact necessary to make each statement contained
herein or therein not misleading. There is no fact which Premier has not
disclosed to Investor in writing and of which any officers, directors or
executive employees of Premier is aware and which has had or could
reasonably be anticipated to have a material adverse effect on Premier's
business or prospects. Premier, through its directors, officers and
employees, has exerted best efforts to verify all representations,
warranties or other statements, whether in this Agreement or otherwise made
to Investor, and, to the knowledge of Premier, through such Persons, the
representations, warranties of Premier under this Agreement are true and
correct in all material aspects.
8. Representations and Warranties of Investor.
------------------------------------------
As a material inducement to Premier to enter into this Agreement, to
issue and sell the Stock and to consummate the Closing, Investor hereby
represents and warrants as follows:
8.1 Organization and Power.
----------------------
Investor is duly organized, validly existing and in good standing
under the laws of the State of Delaware, and it has all requisite power and
authority and all material Consents necessary to own and operate its
properties, to carry on its businesses as now conducted and presently
proposed to be conducted and to carry out the transactions contemplated by
this Agreement.
8.2 Authorization and Enforceability.
--------------------------------
The execution, delivery and performance of this Agreement and the
consummation of the transactions contemplated hereby and thereby have been
duly and validly authorized by all requisite company action, and no other
company act or proceedings on its part is necessary to authorize the
execution, delivery or performance of this Agreement and the consummation
of the transactions contemplated hereby. This Agreement constitutes the
valid and binding obligation of Investor and is enforceable against it in
accordance with its terms.
8.3 No Breach.
---------
The execution and delivery by Premier of this Agreement and all
other agreements contemplated hereby to which Investor is a party, the
purchase hereunder of the Stock, and the fulfillment of and compliance with
the respective terms hereof and thereof by Investor, do not and shall not
(a) conflict with or result in a breach of the terms, conditions or
provisions of, (b) constitute a default under, (c) result in the creation
of any lien, security interest, charge or encumbrance upon the assets of
Investor pursuant to, (d) give any third party the right to accelerate any
obligations under, (e) result in a violation of, or (f) require any Consent
or other action by or notice, pursuant to, the Limited Liability Company
Agreement of Investor or any agreement, instrument or Applicable Law to
which Investor is subject.
8.4 Investment Representation.
-------------------------
Investor is acquiring the Stock purchased hereunder for its own
account with the present intention of holding such securities for purposes
of investment, and it has no intention of selling such securities in a
public distribution in violation of the Securities Act or any applicable
state securities laws; provided that nothing contained in this Section 8.4
shall prevent Investor and subsequent holders of the Stock or any other
securities issued by Premier from transferring such securities in any
manner in compliance with, or pursuant to the requirements of an exemption
from registration contained in, the Securities Act of 1933, as amended,
applicable state securities laws and/or the regulations adopted pursuant
thereto (including, without limitation, a distribution of the Stock to the
members of Investor, which is hereby approved in advance by Premier).
9. Indemnification.
---------------
9.1 Losses of Investor.
------------------
In addition to all rights and remedies available to Investor at
law or in equity, Premier shall indemnify Investor and its members,
managers, officers, partners, agents, employees, representatives and
counsel and their respective successors, assigns, heirs or legal
representatives, and save and hold each of them harmless against and pay on
behalf of or reimburse such party as and when incurred for any loss
(including, without limitation, diminutions in value and consequential
damages), liability, demand, claim, action, cause of action, cost, damage,
deficiency, penalty, fine or expense, whether or not arising out of third
party claims (including, without limitation, interest, penalties,
reasonable attorneys' and other professionals' fees and expenses and all
amounts paid in the investigation, defense or settlement of any of the
foregoing) (collectively, "Losses"), which any such party may suffer,
sustain or become subject to as a result of, in connection with or arising
out of:
(i) any misrepresentation or breach of warranty by Premier
or omission of a material fact from any representation or warranty by
Premier in this Agreement (including all Exhibits to this Agreement, and
all certificates, instruments and documents presented to Investor by
Premier pursuant to the terms of this Agreement (including, without
limitation, all publicly available securities filings, forms and reports))
or any other agreement, instrument or document executed or delivered in
connection with this Agreement;
(ii) any nonfulfillment of a condition or breach of any
covenant or agreement on the part of Premier under this Agreement or any
agreement, instrument or document executed or delivered in connection
herewith;
(iii) any action, suit, demand, proceeding, order,
investigation, inquiry or claim by any third party (including, without
limitation, governmental agencies) against or affecting Investor or Premier
which, if successful, would give rise to or evidence the existence of or
relate to a breach of any of the representations, warranties or covenants
of Premier under this Agreement or any agreement, instrument or document
executed or delivered in connection herewith; and
(iv) any third party claim (whenever made) not disclosed on
any Exhibit hereto relating in any way to Premier, and any other third
party claim (whenever made) relating in any way to Premier, whether or not
disclosed on any Exhibit hereto, arising out of, relating to, resulting
from or caused by any transaction, status, event, condition, occurrence or
situation occurring or existing on or prior to the date of Closing or
otherwise related to this Agreement, the purchase or ownership of the Stock
or the Conditional Warrant by Investor and/or any use made by Premier of
all or any portion of the proceeds thereof.
9.2 Losses of Premier.
-----------------
In addition to all rights and remedies available to Premier at
law or in equity, Investor shall indemnify Premier and its directors,
officers, partners, agents, employees, representatives and counsel and
their respective successors, assigns, heirs or legal representatives, and
save and hold each of them harmless against and pay on behalf of or
reimburse such party as and when incurred for any Loss which any such party
may suffer, sustain or become subject to as a result of, in connection with
or arising out of:
(i) any misrepresentation or breach of warranty by Investor
or omission of a material fact from any representation or warranty by
Investor in this Agreement (including all Exhibits to this Agreement, and
all certificates, instruments and documents presented to Investor by
Premier pursuant to the terms of this Agreement (including, without
limitation, all publicly available securities filings, forms and reports))
or any other agreement, instrument or document executed or delivered in
connection with this Agreement;
(ii) any nonfulfillment of a condition or breach of any
covenant or agreement on the part of Investor under this Agreement or any
agreement, instrument or document executed or delivered in connection
herewith; and
(iii) any action, suit, demand, proceeding, order,
investigation, inquiry or claim by any third party (including, without
limitation, governmental agencies) against or affecting Premier which, if
successful, would give rise to or evidence the existence of or relate to a
breach of any of the representations, warranties or covenants of Investor
under this Agreement or any agreement, instrument or document executed or
delivered in connection herewith.
9.3 Survival.
--------
All representations, warranties, covenants and other agreements
in this Agreement and in all other agreements, instruments and documents
executed or delivered in connection with this Agreement, and all rights and
remedies provided under or otherwise available in connection with any of
the foregoing (including, without limitation, the indemnification rights
provided in this Section 9), at law or in equity, shall survive the
execution and delivery of this Agreement and the other agreements,
instruments and documents executed or delivered in connection herewith and
the consummation of the transactions contemplated hereby and thereby,
regardless of any investigation, inquiry or examination made for or on
behalf of, or any knowledge of either party or any of their respective
directors, officer, partners, agents, employees, representatives or counsel
thereof or the acceptance by a party of any certification or opinion.
9.4 Defense of Claims.
-----------------
Any Person making a claim for indemnification under this Section
9 (an "Indemnitee") shall notify the party obligated to provide such
indemnification (the "Indemnifier") of the claim in writing promptly after
receiving written notice of any action, lawsuit, proceeding, investigation
or other claim against it (if by a third party) or discovering the
liability, obligation or facts giving rise to such claim for
indemnification, describing the claim, the amount thereof (if known and
quantifiable), and the basis thereof; provided, that the failure to so
notify the Indemnifier shall not relieve the Indemnifier of its obligations
hereunder except to the extent such failure shall be proved to have caused
the Indemnifier to suffer a material loss. The Indemnifier shall be
entitled to participate in the defense of such action, lawsuit, proceeding,
investigation or other claim giving rise to the Indemnitee's claim for
indemnification, at the Indemnifier's expense, and at its option (subject
to the limitations set forth below), the Indemnifier shall be entitled to
appoint lead counsel of such defense, acceptable to the Indemnitee;
provided that prior to, and as a condition to, the Indemnifier's appointing
lead counsel of such defense the Indemnifier shall first (a) verify to the
Indemnitee in writing, in form and substance satisfactory to the
Indemnitee, that the Indemnifier shall be fully and unconditionally
responsible (with no reservation of any rights) for all liabilities and
obligations relating to such claim for indemnification and that it will
provide full indemnification as required hereunder, and (b) provide the
Indemnitee with assurance, in form and substance satisfactory to the
Indemnitee in its sole judgment, that the Indemnifier is and will satisfy
any such liability; provided further, that:
(i) The Indemnitee shall be entitled to participate in the
defense of such claim and to employ counsel of its choice, with fees and
expenses of such separate counsel borne by the Indemnitee. Notwithstanding
the foregoing, the reasonable fees and expenses of such separate counsel
incurred prior to the date the Indemnifier effectively assumes control of
such defense shall be borne by the Indemnifier.
(ii) The Indemnifier shall not be entitled to assume or
retain control of such defense if (A) the claim for indemnification relates
to or arises in connection with any criminal proceeding, action,
indictment, allegation or investigation; (B) the Indemnitee reasonably
believes an adverse determination with respect to the action, suit,
investigation, proceeding, inquiry or other claim giving rise to the claim
for indemnification could be detrimental to or injure Indemnitee's
reputation, an important relationship or future business prospects or
otherwise result in harm not readily calculable in monetary terms, (C) the
claim seeks an injunction or equitable relief against the Indemnitee, (D)
the Indemnitee reasonably believes that there is an actual or potential
conflict of interest involved in the representation of the Indemnitee by
the counsel selected by the Indemnifier, whether because of differing
interests between the Indemnifier and the Indemnitee or otherwise, or (E)
the Indemnitee reasonably believes that Premier has failed or is failing to
vigorously prosecute or defend such claim.
(iii) If the Indemnifier, with the consent of the
Indemnitee, shall control the defense of any such claim, the Indemnifier
shall obtain the prior written consent of the Indemnitee before entering
into any settlement of a claim or ceasing to defend such claim, if,
pursuant to or as a result of such settlement or cessation, an injunction
or other equitable relief is likely to be imposed against the Indemnitee or
if such settlement does not expressly and unconditionally release the
Indemnitee from all liabilities and obligations with respect to such claim,
with prejudice.
10. Miscellaneous
-------------
10.1 Rights and Remedies.
-------------------
Except as otherwise expressly provided herein, the rights and
remedies of the parties under this Agreement (including the right to
terminate this Agreement and the right to indemnification) shall be
cumulative with and in addition to, not exclusive or in replacement of, any
other rights or remedies that may be available under any other agreement
between the parties, at law or in equity.
10.2 Forum Selection for Disputes.
----------------------------
Each of the parties to this Agreement hereby submits to the
exclusive, personal jurisdiction of either the Federal District Court for
the Eastern District of Pennsylvania or the Court of Common Pleas of
Philadelphia County, Pennsylvania for all claims, disputes or controversies
involving the parties hereto and relating to this Agreement; provided,
however, nothing herein shall prevent a party hereto from asserting a claim
for indemnification or any other claim hereunder against the other party
hereto in connection with a third party action in the same jurisdiction
where a third party action has been brought. Each party hereby knowingly,
intelligently and voluntarily waives its right to contest the jurisdiction
or venue of either such court, whether on the grounds of inconvenience or
otherwise, and each party hereto knowingly, intelligently and voluntarily
waives its right to initiate a suit or action against the other party in
any other court or forum, except as expressly provided in Section 9.
10.3 Waiver of Jury Trial.
--------------------
IRREVOCABLY AND UNCONDITIONALLY, EACH OF THE PARTIES HERETO
HEREBY KNOWINGLY, INTELLIGENTLY AND VOLUNTARILY WAIVES ITS RIGHTS TO DEMAND
TRIAL BY JURY IN ANY LITIGATION, SUIT OR OTHER ACTION BROUGHT UNDER OR IN
CONNECTION WITH THIS AGREEMENT OR UNDER ANY OTHER AGREEMENT, INSTRUMENT OR
DOCUMENT EXECUTED PURSUANT TO, OR IN CONNECTION WITH, THIS AGREEMENT OR ANY
PROVISION OF ANY OF THE FOREGOING OR ANY OTHER MATTERS INVOLVING BOTH OF
THE PARTIES HERETO.
10.4 Notices and Other Communications.
--------------------------------
Any notice, consent, demand or other communication required or
permitted under this Agreement shall be made in writing and shall be deemed
to have been duly given if (a) sent by personal delivery or facsimile,
telecopier or similar transmission (and shall be deemed given upon
confirmation of receipt), (b) mailed by first class registered or certified
mail, return receipt requested, postage prepaid (and shall be deemed
delivered three (3) days after the date received for delivery by the United
States Postal Service, whether or not accepted by the addressee) or (c)
sent by nationally recognized next-day delivery courier that guaranties
delivery within twenty-four (24) hours, charges prepaid (and shall be
deemed delivered one business day after delivery to said courier),
addressed to the parties hereto at their respective addresses set forth
under their names on the signature pages hereto, marked in each case to the
attention of the Chief Executive Officer of the recipient; however, each
party may change the person to be notified on its behalf or the address of
such person from time to time by giving notice of such change at least ten
(10) days in advance.
10.5 Entire Agreement.
----------------
This Agreement embodies the entire agreement and understanding
between the parties hereto pertaining to the subject matter hereof and
supersedes all prior agreements and understandings of the parties, oral or
written, express or implied, in connection therewith.
10.6 Amendments and Waivers.
----------------------
Any provision of this Agreement may be amended or modified, in
whole or in part, and the compliance with any provision of this Agreement
may be waived only with the written consent of (a) both parties hereto, in
the case of an amendment or modification and (b) the party waiving
compliance with a provision, in the case of a waiver.
10.7 No Waiver.
---------
No waiver by any party hereto of any condition, or the breach of
any term or covenant contained in this Agreement, whether by conduct or
otherwise, in any one or more instances, shall be deemed or construed as a
further or continuing waiver of any such condition or breach or waiver of
any other condition.
10.8 Severability.
------------
If any provision (or any part of any provision) of this Agreement
shall for any reason be determined by a court of competent jurisdiction to
be invalid, illegal or unenforceable in any respect, such determination
shall not invalidate, impair or affect the remainder of this Agreement,
which shall continue in full force and effect. If such invalid, illegal or
unenforceable provision would be valid, legal and enforceable if modified
in scope, duration or otherwise, such provision shall be deemed modified to
the minimum extent necessary to render the same valid, legal and
enforceable.
10.9 Governing Law.
-------------
This Agreement, its interpretation, performance and enforcement,
and the rights and remedies of the parties hereto, shall be governed and
construed by and in accordance with the laws of the Commonwealth of
Pennsylvania, without regard to principles of conflict of laws.
10.10 Binding Effect.
--------------
Except as otherwise expressly provided, all covenants and
agreements contained in this Agreement or any other agreement, instrument
or document executed or delivered in connection herewith by or on behalf of
any of the parties hereto shall bind and inure to the benefit of their
respective successors, assigns, heirs and legal representatives, whether so
expressed or not. In addition, and whether or not any express assignment
has been made, the provisions of this Agreement which are for the benefit
of Investor as a purchaser or holder of the Stock are also for the benefit
of, and enforceable by, any subsequent holder of such Stock.
10.11 Assignment.
----------
Except as contemplated by Section 1, neither party may assign any
of its rights or obligations under this Agreement without the prior written
consent of the other party, in such other party's sole discretion.
10.12 No Third Party Rights.
---------------------
This Agreement is not intended to, and it shall not, provide any
rights whatsoever to any third party, and no third party shall have any
right to assert a claim under or enforce this Agreement against any party
hereto.
10.13 Construction.
------------
The masculine form, wherever used herein, shall be construed to
include the feminine and the neuter, and vice versa, where appropriate.
The singular form, wherever used herein, shall be construed to include the
plural, and vice versa, where appropriate. The term "include" (and
correlative terms, such as "includes" and "including") shall not be
construed as a term of limitation in any context but shall be construed as
if followed by the words "without limitation." All references in this
Agreement to a "Section" shall be to the applicable section of this
Agreement, unless otherwise specially provided. The captions of Sections
are for the convenience of the parties only; they form no part of this
Agreement and shall not affect its interpretation.
10.14 Determining Days.
----------------
In computing the number of days for purposes hereof, all days
shall be counted, including Saturdays, Sundays and legal holidays in the
Commonwealth of Pennsylvania (unless only business days are specified);
provided, however, that if the final day of any time period falls on a
Saturday, Sunday or legal holiday, the final day shall be deemed to be the
following day which is not a Saturday, Sunday or holiday. A "business day"
shall mean any day which is not a Saturday, Sunday or legal holiday in the
Commonwealth of Pennsylvania.
[intentionally left blank]
10.15 Counterparts.
------------
This Agreement may be executed in counterparts, each of which
when so executed shall be deemed to be an original and all counterparts
together shall constitute one and the same instrument. The transmission of
a signature by telecopier will be treated as delivery of an executed
original.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on
the date first written above.
PREMIER CONCEPTS, INC.
By: /s/ Sissel B. Greenberg
----------------------------------
Sissel B. Greenberg, President and CEO
Address for Notices:
3033 S. Parker Road, Suite 120
Aurora, CO 80014
Facsimile: (303) 338-5780
INFUSION CAPITAL PARTNERS, LLC
By: /s/ David M. M. Taffet
------------------------------------
David M. M. Taffet, President
Address for Notices:
1601 Market Street, Suite 2450
Philadelphia, PA 19103
Facsimile: 215-988-9055
<PAGE>
<PAGE>
Exhibit A
CERTIFICATE OF DESIGNATION OF
RIGHTS AND PREFERENCES OF SERIES A
CONVERTIBLE PREFERRED STOCK
OF PREMIER CONCEPTS, INC.
Pursuant to Section 7-106-102 of the
Colorado Business Corporation Act
PREMIER CONCEPTS, INC., a corporation organized and existing under the
laws of the State of Colorado (the "Company"), DOES HEREBY CERTIFY that
pursuant to the authority contained in its Articles of Incorporation, as
amended, and in accordance with the provisions of the Colorado Business
Corporation Act, the Company's Board of Directors has duly adopted the
following resolution creating a series of the class of its authorized
Preferred Stock, designated as Series A Convertible Preferred Stock:
RESOLVED THAT:
Whereas, by virtue of the authority contained in its Articles of
Incorporation, as amended, the Company has the authority to issue
Twenty Million (20,000,000) shares of $.10 par value Preferred Stock,
the designation and amount thereof and series, together with the
powers, preferences, rights, qualifications, limitations or
restrictions thereof, to be determined by the Board of Directors
pursuant to the applicable law of the State of Colorado;
Now therefore, the Company's Board of Directors hereby
establishes a series of the class of Preferred Stock authorized to be
issued by the Company as above stated, with the designations and
amounts thereof, together with the voting powers, preferences and
relative, participating, optional and other special rights of the
shares of each such series, and the qualifications, limitations or
restrictions thereof, to be as follows:
1. Designations and Amounts. Five Hundred Thousand (500,000) shares
of the Company's authorized Preferred Stock are designated as Series A
Convertible Preferred Stock, having a Stated Value of $.625 per share.
2. Definitions. For the purposes of this Resolution the following
definitions shall apply:
(a) "Board" shall mean the Board of Directors of the Company.
(b) "Company" shall mean Premier Concepts, Inc., a Colorado
corporation.
(c) "Original Issue Date" for a series of Preferred Stock shall
mean the date on which the first share of such series of
Preferred Stock was originally issued.
(d) "Preferred Stock" shall refer to Series A Convertible
Preferred Stock.
(e) "Common Stock" shall refer to the Company's $.002 par value
common stock.
(f) "Stated Value" shall be $.625 per share.
(g) "Subsidiary" shall mean any corporation at least 50% of
whose outstanding voting stock shall at the time be owned
directly or indirectly by the Company or by one or more
Subsidiaries.
(h) "Securities Act" shall mean the Securities Act of 1933, as
amended.
(i) "Exchange Act" shall mean the Securities Exchange Act of
1934, as amended.
3. Dividends.
---------
(a) The holders of outstanding Preferred Stock shall be entitled
to receive dividends at the annual rate of 10% per annum based on
the Stated Value Per Share computed on the basis of a 360-day
year and twelve 30-day months. Dividends shall be calculated
from the date of issue and shall be payable only upon the
conversion of the Preferred Stock into shares of Common Stock as
provided for in Paragraph 7 hereof (the "Dividend Payment Date").
Dividends shall be payable only to the record holders of the
shares of Preferred Stock on the date of conversion; and prior
record holders of the shares of Preferred Stock shall have no
right, title or interest or divisible share in such dividend.
(b) The dividends payable on the Preferred Stock provided for in
Paragraph 3(a) above shall be paid exclusively by the issuance by
the Company to the record holder entitled to such dividend of
shares of the Company's Common Stock valued at Fair Market Value
on the Dividend Payment Date. For the purposes of the dividend,
Fair Market Value shall be 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.
(c) In addition to the Common Stock dividend, the holders of
outstanding Preferred Stock shall be entitled to participate, pro
rata, in dividends paid on outstanding shares of Common Stock,
if, when and as the Board of Directors shall in their sole
discretion deem advisable, and only from the net profits or
surplus of the Company as such shall be fixed and determined by
the Board of Directors. The determination of the Board of
Directors at any time of the amount of net profits or surplus
available for dividend shall be binding and conclusive on the
holders of all the stock of the Company at the time outstanding.
4. Liquidation Rights.
------------------
(a) In the event of any liquidation, dissolution, or winding up
of the Company, whether voluntary or involuntary, the holders of
each share of Preferred Stock then outstanding shall be entitled
to be paid out of the assets of the Company available for
distribution to its shareholders before any payment or
declaration and setting apart for payment of any amount shall be
made in respect to any outstanding preferred stock ranking junior
to the Preferred Stock or the Common Stock, an amount equal to
$.625 per share. If upon any liquidation, dissolution, or
winding up of the Company, whether voluntary or involuntary, the
assets to be distributed to the holders of the Preferred Stock
shall be insufficient to permit the payment to such shareholders
of the full preferential amount aforesaid, then all of the assets
of the Company available to be distributed shall be distributed
ratably to the holders of the Preferred Stock.
(b) After the payment or distribution to the holders of the
Preferred Stock of the full preferential amounts aforesaid, the
holders of any preferred stock rank junior to the Preferred Stock
and the Common Stock then outstanding shall be entitled to
receive all of the remaining assets of the Company.
(c) Neither a consolidation, merger or reorganization of the
Company, a sale or other transfer of all or substantially all of
its assets, nor a sale of fifty percent (50%) or more of the
Company's capital stock then issued and outstanding nor the
purchase or redemption by the Company of stock of any class, nor
the payment of a dividend or distribution from net profits or
surplus of the Company shall be treated as or deemed to be a
liquidation hereunder.
5. Redemption. The Company shall have neither 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.
6. Voting Rights. Upon issuance, and subject to increase and
additional rights as provided below, holders of shares of this series
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. The number of votes per
share of this series of Preferred Stock which can be cast shall be
adjusted at such time or times as the conversion price is adjusted so
that the number of votes per share of this series of Preferred Stock
which may be cast shall always be equal to the full number of shares
of Common Stock into which each share of this series of Preferred
Stock may be converted when voting with the holders of Common Stock as
a single class.
7. Conversion. The Preferred Stock shall have the following
conversion rights (the "Conversion Rights"):
(a) Holder's Optional Conversion. Holders of outstanding shares
of Preferred Stock shall have an option at any time after
issuance to convert each share of Preferred Stock into one share
of the Company's Common Stock (the "Initial Conversion Value").
(b) Company's Optional Conversion. 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
Company's Common Stock issuable upon such conversion (the
"Conversion Stock"), and the closing bid price of the Company's
Common Stock on the over-the-counter market has been equal to or
greater than $.9375 per share for twenty (20) or more consecutive
trading days.
(c) Mechanics of Conversion. The Company shall, within ten (10)
days of its decision to exercise its rights under Paragraph 7(b)
above, provide written notice, first class postage pre-paid, to
each holder of record of the Preferred Stock to be converted, at
his post office address last shown on the records of the Company,
of the conversion (the "Conversion Notice"). The Conversion
Notice shall state:
(i) That all of the holder's outstanding shares of
Preferred Stock were converted;
(ii) The number of shares of Preferred Stock held by the
holder that were converted;
(iii) The effective date of the Conversion (the
"Conversion Date") and the number of shares of Common Stock
which the holder will receive; and
(iv) That the holder is to surrender to the Company, in the
manner and at the place designated, his certificate or
certificates representing the shares of Preferred Stock
converted.
Thereafter, each holder of Preferred Stock to be converted shall
surrender the certificate or certificates representing such
shares to the Company, in the manner and at the place designated
in the Conversion Notice, and thereupon the requisite number of
shares of Common Stock shall be issued in the name of the person
whose name appears on the surrendered certificate or certificates
as the owner thereof, and each surrendered certificate shall be
canceled and retired. Notwithstanding that the certificates
evidencing any of the shares of Preferred Stock shall not have
been surrendered, all rights with respect to such shares shall
forthwith after the Conversion Date, terminate, except only the
right of the holders to receive the appropriate number of shares
of Common Stock upon surrender of their certificate or
certificates therefor.
(d) Adjustment for Stock Splits, Stock Dividends and
Combinations. If the Company shall at any time or from time to
time after the Original Issue Date for a series of the Preferred
Stock effect a subdivision of the outstanding Common Stock or
declares a stock dividend on outstanding shares of Common Stock,
the Conversion Value then in effect immediately before that
subdivision shall be proportionately decreased, and conversely,
if the Company shall at any time or from time to time after the
Original Issue Date for a series of the Preferred Stock combine
the outstanding shares of Common Stock, the Conversion Value then
in effect immediately before the combination shall be
proportionately increased. Any adjustment under this
Paragraph 7(d) shall become effective at the close of business on
the date the subdivision, stock dividend or combination becomes
effective.
(e) Adjustment for Reclassification, Exchange, or Substitution.
If the Common Stock issuable upon the conversion of the Preferred
Stock shall be changed into the same or a different number of
shares of any class or classes of stock, whether by capital
reorganization, reclassification, or otherwise (other than a
subdivision or combination of shares or stock dividend provided
for above, or a reorganization, merger, consolidation, or sale of
assets provided for elsewhere in this Paragraph 7), then and in
each such event the holder of each share of Preferred Stock shall
have the right thereafter to convert such share into the kind and
amount of shares of stock and other securities and property
receivable upon such reorganization, reclassification, or other
change, by holders of the number of shares of Common Stock into
which such shares of Preferred Stock might have been converted
immediately prior to such reorganization, reclassification, or
change, all subject to further adjustments as provided herein.
(f) Reorganization, Mergers, Consolidations, or Sales of Assets.
If at any time or from time to time there shall be a capital
reorganization of the Common Stock (other than a subdivision,
combination, reclassification, or exchange of shares provided for
elsewhere in this Paragraph 7) or a merger or consolidation of
the Company with or into another corporation, or the sale of all
or substantially all of the company's assets to any other person,
then, as a part of such reorganization, merger, consolidation, or
sale, provision shall be made so that the holders of the
Preferred Stock shall thereafter be entitled to receive upon
conversion of the Preferred Stock, the number of shares of stock
or other securities or property of the Company, or of the
successor corporation resulting form such merger or consolidation
or sale, to which a holder of Common Stock deliverable upon
conversion would have been entitled on such capital
reorganization, merger, consolidation, or sale. In any such
case, appropriate adjustment shall be made in the application of
the provisions of this Paragraph 7 with respect to the rights of
the holders of the Preferred Stock after the reorganization,
merger, consolidation, or sale to the end that the provisions of
this Paragraph 7 (including adjustment of the Conversion Value
then in effect and the number of shares purchasable upon
conversion of the Preferred Stock) shall be applicable after that
event as nearly equivalent as may be practicable.
(g) Definition. The term "Additional Shares of Common Stock" as
used herein shall mean all shares of Common Stock issued or
deemed issued (including a right or option to purchase Common
Stock, or shares of stock or an obligation convertible into
Common Stock) by the Company after the Original Issue Date for a
series of Preferred Stock, whether or not subsequently reacquired
or retired by the Company, other than (1) shares of Common Stock,
and (2) shares or other securities issued to employees, officers,
directors, consultants or other persons performing services for
the Company pursuant to any stock offering, option, plan, or
arrangement approved by the Board of Directors of the Company.
(h) Notices of Record Date. In the event of (i) any taking by
the Company of a record of the holders of any class or series of
securities for the purpose of determining the holders thereof who
are entitled to receive any dividend or other distribution or
(ii) any reclassification or recapitalization of the capital
stock of the Company, any merger or consolidation of the Company,
or any transfer of all or substantially all of the assets of the
Company to any other corporation, entity, or person, or any
voluntary or involuntary dissolution, liquidation, or winding up
of the Company, the Company shall mail to each holder of
Preferred Stock at least 30 days prior to the record date
specified therein, a notice specifying (A) the date on which any
such record is to be taken for the purpose of such dividend or
distribution and a description of such dividend or distribution,
(B) the date on which any such reorganization, reclassification,
transfer, consolidation, merger, dissolution, liquidation, or
winding up is expected to become effective, and (C) the time, if
any is to be fixed, as to when the holders of record of Common
Stock (or other securities) shall be entitled to exchange their
shares of Common Stock (or other securities) for securities or
other property deliverable upon such reorganization,
reclassification, transfer, consolidation, merger, dissolution,
liquidation, or winding up.
(i) Fractional Shares. No fractional shares of Common Stock
shall be issued upon conversion of Preferred Stock. In lieu of
any fractional shares to which the holder would otherwise be
entitled, the Company shall pay cash equal to the product of such
fraction multiplied by the fair market value of one share of the
Company's Common Stock on the date of conversion, as determined
in good faith by the Board.
(j) Notices. Any notice required by the provisions of this
Paragraph 7 to be given to the holder of shares of the Preferred
Stock shall be deemed given when personally delivered to such
holder or five (5) business days after the same has been
deposited in the United States mail, certified or registered
mail, return receipt requested, postage prepaid, and addressed to
each holder of record at his address appearing on the books of
the Company.
(k) Payment of Taxes. The Company will pay all taxes and other
governmental charges that may be imposed in respect of the issue
or delivery of shares of Common Stock upon conversion of shares
of Preferred Stock.
(l) No Dilution or Impairment. The Company shall not amend its
Articles of Incorporation or participate in any reorganization,
transfer of assets, consolidation, merger, dissolution, issue, or
sale of securities or any other voluntary action, for the purpose
of avoiding or seeking to avoid the observance or performance of
any of the terms to be observed or performed hereunder by the
Company, but will at all times in good faith assist in carrying
out all such action as may be reasonably necessary or appropriate
in order to protect the conversion rights of the holders of the
Preferred Stock against dilution or other impairment.
(m) Reservation of Common Stock. The Company agrees that the
number of shares of Common Stock sufficient to provide for the
conversion of the Preferred Stock upon the basis herein set forth
will at all times that the shares of Preferred Stock are issued
and outstanding be reserved for the conversion thereof.
8. No Preemptive Rights. No holder of the Series A Preferred Stock
of the Corporation shall be entitled, as of right, to purchase or
subscribe for any part of the unissued stock of the Corporation or of
any stock of the Corporation to be issued by reason of any increase of
the authorized capital stock of the Corporation, or to purchase or
subscribe for any bonds, certificates of indebtedness, debentures or
other securities convertible into or carrying options or warrants to
purchase stock or other securities of the Corporation or to purchase
or subscribe for any stock of the Corporation purchased by the
Corporation or by its nominee or nominees, or to have any other
preemptive rights now or hereafter defined by the laws of the State of
Colorado.
9. No Reissuance of Preferred Stock. No share or shares of
Preferred Stock acquired by the Company by reason of purchase,
conversion, or otherwise shall be reissued, and all such shares shall
be canceled, retired, and eliminated from the shares which the Company
shall be authorized to issue.
IN WITNESS WHEREOF, said PREMIER CONCEPTS, INC, has caused this
Certificate of Designations, Preferences and Rights of Series A Convertible
Preferred Stock to be duly executed by its President and attested by its
Secretary and has caused its corporate seal to be affixed hereto, this
day of , 1999.
PREMIER CONCEPTS, INC.
Attest:
/s/ Todd Huss By:/s/ Sissel Greenberg
- -------------------------- ------------------------------------
Secretary Sissel Greenberg, President
[Corporate Seal]
<PAGE>
<PAGE>
Exhibit B
The Securities represented by this instrument have not been registered
under the Securities Act of 1933 (the "Securities Act") or qualified under
the securities laws of any state, in reliance upon exemptions from such
registration and qualification requirements.
WARRANT CERTIFICATE
For the Purchase of Common Shares,
$.002 Par Value per Share
of
PREMIER CONCEPTS, INC.
(a Colorado corporation)
Warrant No. Warrants
WA -002 160,000
THIS WARRANT CERTIFIES THAT, for value received, Equisition Capital, LLC,
or registered assigns ("Warrantholder") is the registered owner of the
above indicated number of Warrants entitling the Warrantholder, commencing
upon the Exercise Date, as defined in paragraph 1 of this Certificate, but
before the Expiration Date as defined in Paragraph 1 of this Certificate,
but not thereafter, to subscribe for, purchase and receive one (1) fully
paid and non-assessable share of Common Stock, $.002 par value (the "Common
Stock") of Premier Concepts, Inc., a Colorado corporation (the "Company"),
at a purchase price of $2.05 per share of Common Stock ("Exercise Price")
upon presentation and surrender of this Warrant and upon payment of the
Exercise Price for such of the shares of Common Stock of the Company, at
any time after the Exercise Date, but only subject to the conditions set
forth herein. The Exercise Price, the number of shares purchasable upon
exercise of each Warrant, and the Expiration Date are subject to
adjustments described herein. The Warrantholders may exercise all or any
number of the Warrants represented hereby. Upon exercise of this Warrant,
the form of election hereinafter provided for must be duly executed and the
instructions for registration of the Common Stock acquired by such exercise
must be completed. If the rights represented hereby shall not be exercised
at or before the Expiration Date, this Warrant shall become and be void
without further force or effect, and all rights represented hereby shall
cease and expire.
1. TERM OF WARRANT. The Warrants evidenced by this Warrant Certificate
may be exercised in whole or in part at any time commencing upon and
subject to the consummation by the Company of the Second Stock Purchase
Agreement (the "Second Stock Purchase Agreement" or the "Agreement")
between the Holder, on the one hand, and the Company, on the other (the
"Exercise Date") and ending at 5:00 p.m. Mountain Time on the third
anniversary of the Exercise Date (the "Expiration Date").
2. NOTICE OF EXTENDED EXPIRATION DATE. The Company may extend the
Expiration Date for the exercise of this Warrant at any time by giving
thirty (30) days' written notice thereof to the Warrantholder. If this
Warrant is not exercised on or before the extended Expiration Date, it
shall become wholly void.
3. ADJUSTMENTS OF EXERCISE PRICE AND SHARES. In the event the Common
Stock issuable upon exercise of this Warrant shall be changed into the same
or different number of shares of any class or classes of stock, whether by
capital reorganization, reclassification or otherwise, or in the event the
Company shall at any time issue Common Stock by way of dividend or other
distribution on any stock of the Company, or subdivide or combine the
outstanding shares of Common Stock, then in each such event the Holder of
this Warrant shall have the right thereafter to exercise such Warrant and
receive the kind and amount of shares of stock and other securities and
property receivable upon such reorganization, reclassification or other
change by holders of the number of shares of Common Stock into which such
Warrant might have been exercised immediately prior to such reorganization,
reclassification or change. In the case of any such reorganization,
reclassification or change, the Exercise Price shall also be appropriately
adjusted so as to maintain the aggregate Exercise Price. Further, in case
of any consolidation or merger of the Company with or into another
corporation in which consolidation or merger the Company is not the
continuing corporation, or in case of any sale or conveyance to another
corporation of the property of the Company as an entirety, or substantially
as an entirety, the Company shall cause effective provision to be made so
that the Warrantholder shall have the right thereafter, by exercising this
Warrant, to purchase the kind and amount of shares of stock and other
securities and property receivable upon such consolidation, merger, sale or
conveyance by holders of the number of shares of Common Stock into which
such Warrant might have been exercised immediately prior to such
consolidation, merger, sale or conveyance, which provision shall provide
for adjustments which shall be as nearly equivalent as may be practicable
to the adjustments provided for in this Warrant. The foregoing provisions
shall similarly apply to successive reclassifications, capital
reorganizations and changes of shares of Common Stock and to successive
consolidations, mergers, sales or conveyances. Notwithstanding the
foregoing, except for issuances of Common Stock or options, warrants or
other securities exercisable to purchase or convertible into shares of
Common Stock at a price less than the Exercise Price as then in effect on
the date of such issuance, no adjustment of the Exercise Price shall be
made as a result of or in connection with (1) the issuance of Common Stock
of the Company pursuant to options, warrants and share purchase agreements
now in effect or hereafter outstanding or created, (2) the establishment of
option plans of the Company, the modification, renewal or extension of any
plan now in effect or hereafter created, or the issuance of Common Stock
upon exercise of any options pursuant to such plans, (3) the issuance of
Common Stock in connection with an acquisition, consolidation or merger of
any type in which the Company is the continuing corporation, or (4) the
issuance of Common Stock in consideration of such cash, property or service
as may be approved by the Board of Directors of the Company and permitted
by applicable law. In the event of the issuance by the Company of Common
Stock or options, warrants or other securities convertible into or
exercisable to purchase shares of the Company's Common Stock for a price
less than the Exercise Price, the Exercise Price of this Warrant and the
number of shares issuable upon such exercise shall be adjusted,
proportionately, such that the Exercise Price shall be reduced to equal the
Purchase Price, Exercise Price or Conversion Value of such security.
4. ADJUSTMENT TO PURCHASE PRICE. The Company may, in its sole
discretion, lower the purchase price at any time, or from time-to-time.
When any adjustment is made in the purchase price, the Company shall cause
a copy of such statement to be mailed to the Warrantholder, as of a date
within ten (10) days after the date when the purchase price has been
adjusted.
5. MANNER OF EXERCISE. The Warrantholder of the Warrants evidenced
by this Warrant Certificate may exercise all or any whole number of such
Warrants during the Exercise Period in the manner stated herein. This
Warrant Certificate, together with the purchase form provided herein duly
executed by the Warrantholder or by the Warrantholder's duly authorized
attorney, plus payment of the exercise price in the manner set forth in
paragraph 6 below, shall be surrendered to the Company. If upon exercise
of any Warrants evidenced by this Warrant Certificate the number of
Warrants exercised shall be less than the total number of Warrants so
evidenced, there shall be issued to the Warrantholder a new Warrant
Certificate evidencing the number of Warrants not so exercised.
6. MANNER OF PAYMENT. The exercise price of each Warrant shall be
paid, to the extent permitted by applicable statutes and regulations,
either (I) in cash at the time the Warrant is exercised, (ii) by delivery
to the Company of other Common Stock of the Company valued at its then
established fair market value, (iii) by delivery to the Company of either
options or warrants of the Company, including, without limitation, this
Warrant, valued at the difference between their exercise price and the then
established fair market value of the Company's Common Stock, (iv) according
to a deferred payment or other arrangement (which may include, without
limiting the generality of the foregoing, the use of other Common Stock of
the Company) with the holder hereof, or (v) any other form of legal
consideration that may be acceptable to the Board of Directors, in their
discretion. For the purposes of this paragraph 6, the fair market value of
the Company's Common Stock shall be (I) the closing sale price for the
Common Stock on the primary exchange upon which the shares are listed and
traded on the date the Warrant is exercised, or (ii) if the shares are not
traded on any national exchange, the closing sale price for the Common
Stock on the NASDAQ National Market on the date the Warrant is exercised,
or (iii) if the shares or neither traded on a national exchange nor listed
on the NASDAQ National Market, then the average of the bid and ask prices
for the Common Stock in the Over-The-Counter Market as quoted on the NASDAQ
Small-Cap Market or (iv) if the shares of Common Stock are neither traded
on a national exchange or the NASDAQ National Market nor quoted on the
NASDAQ Small-Cap Market, the average of the bid and ask prices for the
Common Stock as quoted by any recognized securities quotation service such
as the National Quotation Bureau, Inc. or the OTC Electronic Bulletin Board
on the date the Warrant is exercised. In the case of any deferred payment
arrangement, any interest shall be payable at least annually and shall be
charged at the minimum rate of interest necessary to avoid the treatment as
interest, under any applicable provisions of the Internal Revenue Code, of
any amounts other than amounts stated to be interest under the deferred
payment arrangement.
7. RESERVATION OF COMMON STOCK. The Company agrees that the number
of shares of Common Stock sufficient to provide for the exercise of the
Warrant upon the basis herein set forth will at all times during the term
of this Warrant be reserved for the exercise thereof.
8. ISSUANCE OF COMMON STOCK UPON EXERCISE. The Company, at its
expense, shall cause to be issued, within ten (10) days after exercise of
this Warrant, a certificate or certificates in the name requested by the
Warrantholder of the number of shares of Common Stock to which the
Warrantholder is entitled upon such exercise. All shares of Common Stock
or other securities delivered upon the exercise of the Warrants shall be
validly issued, fully paid and non-assessable.
9. NO RIGHT AS STOCKHOLDER. The Warrantholder is not, by virtue of
ownership of the Warrant, entitled to any rights whatsoever of a
stockholder of the Company.
10. ASSIGNMENT. This Warrant may be assigned in whole or in part
without the written consent of the Company. Upon any assignment, the
Company will issue within ten (10) days in the name of the assignee, and
any balance remaining in the name of Warrantholder, a certificate or
certificates for the Warrants issuable to such assignee and Warrantholder.
Dated: , 1999 PREMIER CONCEPTS, INC.
-----------------
By:/s/ Sissel Greenberg
-----------------------------
Sissel Greenberg, President
By:/s/ Todd Huss
-----------------------------
Todd Huss, Secretary
countersigned
CORPORATE STOCK TRANSFER, INC.
By:
----------------------------------------------
Transfer Agent and Registrar Authorized Officer
<PAGE>
<PAGE>
PREMIER CONCEPTS, INC.
ELECTION OF PURCHASE
Transfer Fee: $15.00 per certificate issued.
The undersigned hereby irrevocably elects to exercise Warrants
represented by this Warrant Certificate, and to purchase the common shares
issuable upon the exercise of such Warrants, and requests that the
certificates for such shares shall be issued in the name of:
- ---------------------------------------------------------------------------
- ---------------------------------------------------------------------------
Address
---------------------------------------------------------------------------
Social Security or other identifying number
and be delivered to
---------------------------------------------------------------------------
Name
at
---------------------------------------------------------------------------
Address
and, if said number of Warrants shall not be all the Warrants evidenced by
this Warrant certificate, that a new Warrant certificate for the balance of
such Warrants be registered in the name of, AND delivered to, the
undersigned at the address stated below.
Dated:
------------------
Name of Warrantholder:
---------------------------------------------------
Address:
------------------------------------------------------------------
- -------------------------------------------------------------------------
Signature:
--------------------------------------------------------------
ASSIGNMENT
For value received
------------------------------------------------------
hereby sell, assign, and transfer unto
-------------------------------------
- ---------------------------------------------------------------------------
Warrants represented by this Warrant certificate, together with all right,
title, and interest therein, and do hereby irrevocably constitute and
appoint
-------------------------------------------------------------------
attorney, to transfer this Warrant certificate on the books of the Company,
with full power of substitution.
Dated: X
------------------- -------------------------------------
X
-------------------------------------
SIGNATURE GUARANTEED:
NOTICE: The signature to this assignment must correspond with the name as
written upon the face of the certificate, in every particular, without
alteration or enlargement, or any change whatever.
IMPORTANT: SIGNATURE MUST BE GUARANTEED BY A COMMERCIAL BANK OR MEMBER
FIRM OF ONE OF THE FOLLOWING STOCK EXCHANGES: NEW YORK STOCK EXCHANGE,
PACIFIC COAST STOCK EXCHANGE, AMERICAN STOCK EXCHANGE, MIDWEST STOCK
EXCHANGE.
<PAGE>
<PAGE>
Exhibit D
Board Election, Reporting Provisions and Other Rights
-----------------------------------------------------
1. Board Election. Premier's Board of Directors shall be
constituted of five (5) Directors and shall be classified such that
Investor, voting separately, shall be entitled to appoint or elect a number
of Directors in proportion to its stake in Premier (rounded down for
partial members, but not less than one). Premier will cause the first
election of such person(s) to be effective on the Closing Date and will
compensate such Board members as it compensates its other Board members.
Investor shall be entitled to remove and replace such Director(s), with or
without cause, at any time.
2. Reporting Requirements. Premier shall deliver to Investor as
long as it holds at least ten percent (10%) of Premier's voting securities:
2.1 as soon as available but in any event within forty-five (45)
days (subject to a 5 day extension under Rule 12b- ) after the end of
each quarterly accounting period in each fiscal year, unaudited
consolidating and consolidated statements of operations and cash flows of
Premier and its subsidiaries for such quarterly period and for the period
from the beginning of the fiscal year to the end of such quarter, and
consolidating and consolidated balance sheets of Premier and its
subsidiaries as of the end of such quarterly period, setting forth in each
case comparisons to the annual budget and to the corresponding period in
the preceding fiscal year, and all such statements shall be prepared in
accordance with generally accepted accounting principles, consistently
applied, subject to the exclusion of footnote disclosure and normal year-
end audit adjustments;
2.2 within ninety (90) days after the end of each fiscal year
(subject to a 5 day extension under Rule 12b- ), consolidating and
consolidated statements of operations and cash flows of Premier and its
subsidiaries for such fiscal year, and consolidating and consolidated
balance sheets of Premier and its subsidiaries as of the end of such fiscal
year, setting forth in each case comparisons to the annual budget and to
the preceding fiscal year, all prepared in accordance with generally
accepted accounting principles, consistently applied, and accompanied by
(A) with respect to the consolidated portions of such statements, an
unqualified opinion of an independent accounting firm of recognized
standing and (B) a copy of such firm's annual management letter to the
Board; and
2.3 with reasonable promptness, such other information and
financial and operating data concerning Premier as may be regularly
prepared by Premier or as Investor may reasonably request.
Each of the financial statements referred to in the foregoing
paragraphs shall be consistent with the books and records of Premier and
shall be prepared, and fairly present the financial condition of Premier,
in accordance with GAAP, consistently applied, subject in the case of
unaudited financial statements to lack of footnote disclosure and changes
resulting from normal year-end audit adjustments.
3. Inspection. Premier shall permit any representatives designated
by Investor, upon reasonable notice and during normal business hours, to
(i) visit and inspect any of the properties of Premier, (ii) examine the
corporate, financial and other business records of Premier and make copies
thereof or extracts therefrom and (iii) discuss the affairs, finances and
accounts of any such corporations with the Directors, officers, employees,
independent accountants and counsel of Premier. Premier shall exert
reasonable best efforts to require persons not employed by Premier or
otherwise under Premier's control to cooperate fully with such
representatives.
4. Equitable Relief. Investor shall be entitled to obtain any
equitable relief appropriate to enforce compliance with this Exhibit D and
to recover expenses, including attorneys' fees and disbursements incurred
in connection with such enforcement. The remedy provided in this Section 4
shall be in addition to, not exclusive of, any other right or remedy
available at law or in equity, whether by statute, pursuant to an agreement
with Premier or otherwise.
5. Liability Limitation. In addition to any other provisions
regarding limitations of liability in Premier's Certificate of
Incorporation, Bylaws or otherwise applicable, to the maximum extent
permitted by law, Premier does hereby exonerate Investor and its
designee(s) serving on the Board of Directors and all committees thereof
from time to time, or any person or entity being represented by or acting
on behalf of any of the foregoing, directly and indirectly, and their
respective successors and assigns (collectively, "Indemnitees"), and waives
and releases any suit, claim, demand or cause of action of any kind
arising, from any action taken or failure to take any action by an
Indemnitee, unless such action or failure to take action constitutes
willful misconduct, and to the maximum extent permitted by law, no
Indemnitee shall be personally liable for monetary damages as such for any
action or failure to take action.
6. Indemnification. Each Indemnitee shall be indemnified and held
harmless by Premier for all actions taken by him or her and for all failure
to take action (regardless of the date of any such action or failure to
take action) to the fullest extent permitted by law and against all
expense, liability and loss (including without limitation attorneys' fees,
judgment, fines, taxes, penalties, and amounts paid or to be paid in
settlement) reasonably incurred or suffered by the Indemnitee in connection
with any action, suit, claim or proceeding ("Proceeding"), except to the
extent that the act or failure to act giving rise to the claim for
indemnification is determined by a court of competent jurisdiction to have
constituted willful misconduct. The right to indemnification provided in
this Section 6 shall include the right to have the expenses incurred by the
Indemnitee in defending any Proceeding paid by Premier in advance of the
final disposition of the Proceeding to the fullest extent permitted by law;
provided that, if law so requires, the payment of such expenses incurred by
the Indemnitee in advance of the final disposition of a Proceeding shall be
made upon delivery to Premier of an undertaking, by or on behalf of the
Indemnitee, to repay all amounts so advanced without interest if it shall
ultimately be determined that the Indemnitee is not entitled to be
indemnified under this Section 6 or otherwise. The undertaking required by
the preceding sentence need not be secured and shall be accepted without
reference to financial ability to make repayment. Indemnification pursuant
to this Section 6 shall continue as to an Indemnitee who has ceased to be a
holder of Stock, a Director or an officer or ceased to have any
relationship with Premier and shall inure to the benefit of the
Indemnitee's heirs, executors and administrators. The rights to
indemnification and to the advancement of expenses provided in this Section
6 shall not be exclusive of any other rights that any person or entity may
have or hereafter acquire under any statute, provision of the Certificate
of Incorporation or Bylaws, agreement, vote of stockholders or Directors or
otherwise.
7. Miscellaneous
7.1 The provisions of this Exhibit D relating to the limitation
of Indemnitees' liability, to indemnification and to the advancement of
expenses shall constitute a contract between Premier and each of the
Indemnitees which may be modified as to any Indemnitee only with that
person's or entity's consent or as specifically provided herein.
Notwithstanding any provision in the Certificate of Incorporation relating
to amendment of the Certificate of Incorporation generally, no repeal or
amendment of this Exhibit D can be effective without the prior written
consent of Investor, and any such amendment or repeal which is adverse to
any Indemnitee shall apply to such Indemnitee only on a prospective basis
and shall not reduce any limitation on the personal liability of an
Indemnitee or limit the rights of an Indemnitee to indemnification or to
the advancement of expenses with respect to any action or failure to act
occurring prior to the time of such repeal or amendment.
7.2 In the case of any change in law which expands the liability
of an Indemnitee or limits the indemnification rights or the rights to
advancement of expenses which Premier may provide, the right to
exoneration, limited liability, indemnification and the advancement of
expenses provided in this Exhibit D shall continue as theretofore to the
extent permitted by law. Conversely, if change in law permits Premier to
limit further the liability of an Indemnitee or to provide broader
indemnification rights or rights to the advancement of expenses than
Premier was permitted to provide prior to such change, then liability
thereupon shall be so limited and the rights to indemnification and the
advancement of expenses shall be so broadened to the extent permitted by
law.
7.3 If any right, power or privilege provided to Investor does
not become valid and enforceable merely by this Exhibit D, (a) Premier and
the Board of Directors shall exert their best efforts to obtain such
consents and satisfy such other conditions as may be necessary for such
right, power or privilege to be valid and enforceable as provided herein
(including, without limitation, by filing any Certificate of Designation or
making any amendment to the Certificate of Incorporation or Bylaws), (b)
such right, power or privilege shall be provided to the fullest extent
permitted by law, (c) Premier and the Board of Directors shall take such
actions as may be necessary to provide Investor with such other rights,
powers and privileges as may have the same substantive effect and
accomplish the same purposes as the invalid or unenforceable right, power
or privilege and (d) any such invalidity or unenforceability shall not
invalidate or otherwise affect any other right, power or privilege granted
hereby.
<PAGE>
MANAGEMENT SERVICES AGREEMENT
This Management Services Agreement (this "Agreement"), dated March ,
1999, is entered into by and between Infusion Capital Partners, L.L.C., a
Delaware limited liability company ("Infusion"), and Premier Concepts,
Inc., a Colorado corporation ("Premier").
In consideration of the mutual covenants of the parties set forth in
this Agreement, the parties, intending to be legally bound, agree as
follows:
1. Purpose; Exclusivity. Premier hereby engages Infusion, as an
independent contractor of Premier, to provide the services required
pursuant to Section 3 throughout the Term (defined below), on the terms and
subject to the conditions set forth herein. Premier shall not engage or
employ any third party to provide during the Term, or compensate in any
form any third party for providing during the Term, any services to be
provided by Infusion hereunder.
2. Term. The period during which Infusion shall provide services to
Premier hereunder shall commence on the date hereof and continue until
December 31, 1999 (the "Term"); provided, however, prior to the expiration
of the Term, (a) Infusion may terminate this Agreement in accordance with
Sections 9 or 12 and (b) Premier may terminate this Agreement in accordance
with Section 13. The Term of this Agreement shall renew from year to year
commencing January 1, 2000, with Infusion's compensation to be agreed upon
by the parties, and in the event the Second Funding (defined below) does
not occur the Term of this Agreement shall renew on terms and conditions to
be determined by the parties.
3. Services of Infusion
--------------------
3.1 Throughout the Term, Infusion shall:
(i) Identify and arrange for an entity determined by
Infusion (the "First Investor") to invest $220,768.75 to purchase 353,230
shares of Premier's common stock, which shall constitute 19.9% of the
issued and outstanding shares of Premier's common stock (immediately prior
to such investment) at the price of $5/8 ($.625) per share (the "First
Funding"), as more particularly described in and subject to the terms and
conditions of a Stock Purchase Agreement mutually satisfactory to Premier
and the First Investor executed contemporaneously with this Agreement (the
"First Stock Purchase Agreement");
(ii) If requested by Premier at any time within the six (6)
month period after the First Funding, identify and arrange, as soon as is
reasonably practicable (but in no event more than thirty (30) days) after
such request, for an entity or individuals determined by Infusion (which
entity may be the First Investor or any assignee(s) of Infusion, the
"Second Investor") to invest the difference between $500,000 and the amount
of the First Funding to purchase shares of a new series of convertible
preferred stock (the "Second Funding"), as more particularly described in
and subject to the terms and conditions of a Stock Purchase Agreement
mutually satisfactory to Premier and the Second Investor executed
contemporaneously with this Agreement (the "Second Stock Purchase
Agreement");
(iii) Supervise the financing and use of proceeds
contemplated by the First Stock Purchase Agreement and the Second Stock
Purchase Agreement;
(iv) Coordinate the drafting of an analytical document for
distribution by Premier to broker-dealers and supervise public relations
relating to the distribution of such analytical document; and
(v) Provide strategic, operational and investment banking
advice, including, without limitation, presenting other financing (debt and
equity) opportunities to Premier and assisting Premier in structuring and
negotiating the terms of other financing opportunities Premier desires to
pursue, whether the opportunity was presented to Premier by Infusion or by
a third party (with Infusion's compensation to be determined by the parties
in connection with any such other financing).
3.2 Except for arranging the First Funding and the Second
Funding (which shall be performed in accordance with certain terms
regarding dates of closing), Infusion shall provide the services and render
advice pertaining to the matters set forth above at Infusion's initiative,
if and when determined by Infusion, or upon reasonable request by Premier.
With reasonable advance notice from Premier, an employee or representative
of Infusion shall use reasonable efforts to participate (whether in person
or by teleconference) in strategic planning sessions of Premier's
management and Board of Directors. It is understood and acknowledged by
the parties, however, that the value of Infusion's services and advice is
not readily quantifiable and not necessarily in proportion to the amount of
time devoted to performing services, and Infusion shall not be obligated to
spend any specific amount of time to the rendering of any services
hereunder.
3.3 Nothing in this Agreement shall require Premier to request
that Infusion perform any particular service at any particular time or
require Infusion to undertake any duties beyond the scope of the services
required by this Section 3. Premier specifically acknowledges that
Infusion shall not be providing legal, tax or accounting services.
3.4 Infusion makes no representation or warranty and gives no
guaranty or assurance as to the number of financing opportunities it may
present to Premier, the desirability of any opportunities presented
(including, without limitation, the First Funding and the Second Funding),
the success of Premier in negotiating or agreeing on the terms of any
financing, the financial or other performance of any financing or the tax
or accounting treatment of any financing or terms thereof. All decisions
relating to financings by Premier (including whether to pursue an, what
offer to make or accept, what agreement to enter into and the like), even
if based on the advice of Infusion, shall be the sole responsibility of
Premier.
4. Compensation
------------
4.1 In consideration for services rendered by Infusion pursuant
to this Agreement, Premier shall:
(i) Pay Infusion the sum of $50,000, $25,000 of which
Infusion shall be entitled to upon signing this Agreement ($10,000 of which
will be paid upon such signing and the balance of which will be paid in 3
consecutive monthly installments of $5,000 each, with such payments to be
made on the 15th day of the month) and the remaining $25,000 of which
Infusion shall be entitled to upon and subject to the Second Funding
($10,000 of which will be paid upon the Second Funding and the balance of
which will be paid in 3 consecutive monthly installments of $5,000 each,
with such payments to be made on the 15th day of the month); and
(ii) Upon and subject to the Second Funding, issue Infusion
as an additional financing fee a warrant in the form of Exhibit A hereto to
purchase 50,000 shares of Premier's common stock at the price per share
equal to$5/8 ($.625), which warrant shall be exercisable on a cashless
basis for a period of 3 years from issuance and may be assigned by Infusion
in whole or in part.
4.2 In the event the Second Funding does not occur, Infusion's
cash compensation and the number of shares under Infusion's warrant will be
reduced in proportion to the amount by which the First Funding is less than
$500,000, and Premier shall issue such warrant promptly following the
expiration of the six (6) month period during the which the Second Funding
may be requested by Premier and upon Infusion's failure to require the
Second Funding thereafter as provided in Section 6.8.
4.3 Each payment to Infusion under this Agreement shall be
delivered to 1601 Market Street, Suite 2450, Philadelphia, Pennsylvania
19103, or such other address as Infusion may designate from time to time,
in the form of a check made payable to the order of "Infusion Capital
Partners, L.L.C."
5. Expenses. In addition to other payments due to Infusion pursuant
to this Agreement, Premier shall reimburse Infusion for all reasonable,
out-of-pocket expenses incurred by Infusion relating to its services
rendered pursuant to this Agreement (including, but not limited to, legal
fees and costs, travel and lodging, on-line research, printing and postage
for bulk mailings). Premier shall be entitled to receive a copy of
invoices, receipts and other documentation evidencing the incurrence of
such an expense by Infusion. Such payment shall be made in accordance with
Section 4.3 within 30 days of invoice.
6. Representations, Warranties and Covenants of Premier. Premier
makes the following representations, warranties and covenants to Infusion:
6.1 Premier has the corporate power and authority to execute and
deliver this Agreement and to perform all of Premier's obligations as set
forth in this Agreement, and Premier has obtained any and all necessary
approvals relating to such execution, delivery or performance (except for
the stockholder approval referred to in Section 6.7).
6.2 This Agreement has been duly executed and delivered by
Premier and constitutes a valid and binding obligation, enforceable against
Premier in accordance with its terms. The execution, delivery and
performance of this Agreement by Premier do not violate, breach or
contravene the provisions of (i) any charter document, agreement or
document, by which Premier or any of its assets is bound, (ii) any
judgment, decree, order, ruling of any judicial or arbitral body or any
regulatory or other governmental commission, agency or body having
jurisdiction over Premier or any of its assets or (iii) any applicable law.
6.3 All information provided or made available to Infusion by or
on behalf of Premier will not contain any untrue statement of a material
fact or omit to state a material fact necessary in order to make the
statements therein not misleading in light of the circumstances under which
such statements are made. If during or after the Term Premier becomes
aware of any fact or circumstance which gives Premier a reasonable basis
for believing that information previously provided or made available to
Premier contained an untrue statement of a material fact or omitted to
state a material fact necessary in order to make the statements therein not
misleading in light of the circumstances under which such statements were
made, Premier shall make prompt written disclosure to Infusion of such fact
or circumstance.
6.4 All projections provided or made available to Infusion by or
on behalf of Premier will have been prepared in good faith by Premier (or
by a third party acting on behalf of Premier and reasonably believed by
Premier to be competent as to the tasks performed) and will be based upon
assumptions that were reasonable in light of the circumstances under which
they are made.
6.5 In rendering its services hereunder, Infusion will, with
Premier's authorization, be using and relying on information provided or
made available by Premier (and additional information available from public
or other sources) without independent verification (such as an independent
appraisal of assets of Premier). Infusion will not be responsible or
liable for, and Premier will indemnify and hold harmless Infusion from any
claim or action challenging or questioning, the accuracy or completeness of
any information provided or made available by Premier.
6.6 Premier's representations and warranties made in this
Agreement are true and correct as of the execution of this Agreement and
shall remain true and correct in all material respects throughout the Term.
6.7 Premier shall solicit and use its best efforts to obtain
stockholder approval for the Second Funding (and any related transactions)
on the terms of the Second Stock Purchase Agreement (and on such other
terms as may be reasonably requested by Infusion or the Second Investor)
prior to Premier's filing of its report on Form 10-K for its fiscal year
ended January 31, 1999. Premier shall obtain Infusion's advance approval,
which shall not be unreasonably withheld, of any materials to be
distributed or filed, and of any action to be taken, with respect to such
approval.
6.8 Premier grants Infusion the option to require, and Infusion
may require, if Premier does not request Infusion to arrange the Second
Funding within the six (6) month period after the First Funding, Premier to
obtain the stockholder approval described in Section 6.7 and accept the
Second Funding within thirty (30) days thereafter (subject to satisfaction
of the conditions contained in the Second Stock Purchase Agreement).
7. Certain Conditions Precedent. The infusion's obligations
hereunder, including, without limitation, its obligation to arrange the
First Funding and the Second Funding, are subject to the satisfaction or
waiver, as of the applicable date(s) of performance by Infusion, of the
following conditions:
7.1 Premier shall have taken all actions and proceedings
required in connection with the transactions contemplated hereby to be
consummated at or prior to such date(s), and all necessary consents,
authorizations, approvals, filings and notices with respect to the
transactions contemplated by this Agreement (including, without limitation,
those required to grant Infusion the preemptive rights herein) shall have
been obtained, made or given by Premier.
7.2 The applicable parties shall have entered into the First
Stock Purchase Agreement, the Second Stock Purchase Agreement, the E-
Commerce Services Agreement (between Premier and MeridianTelesis, LLC), the
Registration and Anti-Dilution Agreements (between Premier and each of
Infusion and the First Investor) and all other agreements contemplated
hereby or thereby.
7.3 Premier shall have reimbursed Infusion for all expenses for
which Infusion shall be reimbursed pursuant to Section 5.
7.4 The representations and warranties of Premier herein shall
be true and correct at and as of such date(s), and Premier shall have
performed and complied with all covenants and conditions contained herein
which are required to be performed or complied with at or before such
date(s).
7.5 All conditions set forth in the First Stock Purchase
Agreement and the Second Stock Purchase Agreement shall have been satisfied
or waived as of such date(s).
8. Confidentiality
---------------
8.1 Infusion acknowledges that it has and throughout the Term
will continue to have a relationship of trust and confidence with Premier.
Based on such relationship, Infusion has and throughout the Term will
continue to be given access to Confidential Information (as hereinafter
defined). Infusion may disclose Confidential Information only to its
managers, officers, employees and counsel to the extent they need to know
such information for the purpose of providing the services required by this
Agreement. Infusion and its managers, officers, employees and counsel
shall maintain in strict confidence, protect and safeguard the Confidential
Information, and, except as expressly provided in the preceding sentence,
shall not, directly or indirectly, (a) disclose, reveal or make available
to any third party any Confidential Information, (b) assist or enable any
third party to access or use any Confidential Information or (c) use or
exploit any Confidential Information for any purpose whatsoever.
Notwithstanding anything in this Section 8, Infusion or any of its
managers, officers, employees or counsel may disclose Confidential
Information to the extent (and only to the extent) required by applicable
law (including by request for information or documents through legal
proceedings, subpoena, governmental investigation or any similar process)
without liability hereunder, but only if prior to making such disclosure
Premier has been given written notice of such required disclosure and a
reasonable opportunity to seek a protective order or other appropriate
assurance that confidential treatment will be accorded and Infusion has
given all reasonable cooperation with Premier's efforts to preserve the
confidentiality of the Confidential Information, provided that any out-of-
pocket expenses that Infusion would incur in complying with this Section 8
shall be paid by Premier.
8.2 "Confidential Information" means any information, data or
facts concerning the business, operations, finances, assets, affairs or
prospects of Premier or any of its portfolio companies, including all
information relating to: (a) performance of its business, whether
historic, current or prospective (including information contained in
financial statements, tax returns, financial projections, budgets, business
plans and other financial, managerial, tax and accounting plans, statements
or reports); (b) customers, prospective customers, suppliers or vendors
(in each case, including names, addresses, persons to contact, type and
quantity of products bought or sold, specifications and preferences, credit
information, financial arrangements and other dealings); (c) employees,
consultants, contractors or other personnel or service providers, whether
employed or independent (in each case, including names, addresses,
compensation, benefits, other financial arrangements, extent of services,
nature of relationship, policies, practices and dealings); (d) investors,
prospective investors, lenders, guarantors, sureties, lessors, lessees,
licensors, licensees and business contacts; (d) proprietary technology,
formulae, methods of production, processes, procedures, techniques, know-
how, research and development efforts or results (whether abandoned, in
progress or completed); (e) products, services, packaging, pricing,
marketing or business practices or policies; (f) type, quantity, condition
or value of assets, tangible or intangible (including computer software,
systems and intellectual property); (g) prospective investments,
acquisitions, financings and other transactions outside the ordinary course
of Premier's business; or (h) trade secrets or any other information which
Premier wishes to keep confidential; provided, however, "Confidential
Information" will cease to include information after it (i) becomes
available to the public (other than as a result of a breach hereof or other
wrongful conduct by Infusion), (ii) becomes available to Infusion on a
nonconfidential basis from a third party that is not in breach of a duty
(contractual, fiduciary or otherwise) to maintain the confidentiality of
such information or (iii) is independently developed by Infusion without
any use whatsoever of Confidential Information.
9. Other Engagements. Nothing in this Agreement shall restrict or
limit Infusion's acceptance of other engagements or performance of services
for any third parties, including competitors of Premier, subject at all
times to Infusion's obligations under Section 8. If Infusion believes that
any task it is required to perform for a third party is in conflict with
the best interests of Premier, Infusion shall disclose such conflict to
Premier and, if requested by Premier, shall terminate Infusion's engagement
with either Premier or the third party, as Infusion may choose. Premier
acknowledges that Infusion serves as investment advisor and consultant to
Equisition Capital, LLC ("Equisition"), a private equity fund which will be
the First Investor, and to other parties affiliated with Infusion, which
(including Equisition) may be the Second Investor. Premier also
acknowledges that the sole member of Infusion owns membership interest in
Equisition and has voting control of Equisition. Premier knowingly and
intelligently waives all conflicts of interest arising out of such
relationships.
10. Independent Contractor Status. The relationship of Infusion to
Premier is and shall remain solely that of an independent contractor.
Infusion shall not be considered for any purpose, and shall not represent
itself as being, a member, manager, officer, employee, partner, joint
venturer, agent or representative of Premier. Infusion's authority to act
for Premier shall be limited strictly to such authority as may be granted
to Infusion in writing from time to time by the Board of Directors and/or
senior management of Premier, and Infusion shall have no authority, and
shall not represent itself as having authority, to enter into contracts for
or otherwise bind Premier or to take any other action beyond what is
expressly permitted pursuant to this Agreement.
11. Public Announcements. Following the closing of any financing or
other transaction involving Premier, Infusion shall have the right to place
advertisements or make other public announcements in financial and other
newspapers, journals and periodicals, at Infusion's own expense, describing
Infusion's services to Premier hereunder, provided that Infusion has
provided a copy of any such advertisement or announcement to Premier prior
to publication thereof and Premier has consented to such advertisement or
announcement, with such consent not to be unreasonably withheld, delayed or
conditioned. Infusion specifically acknowledges that Premier may withhold
its consent to any publication that would constitute or result in the
breach of a confidentiality, non-disclosure or other agreement between
Premier and an unrelated third party.
12. Termination by Infusion. Infusion may terminate this Agreement
at any time, by giving written notice setting forth the effective date of
termination (which may be immediate), after any of the following: (i)
Premier's failure to pay completely and timely the compensation due to
Infusion pursuant to Section 4 or expenses due pursuant to Section 5, which
failure either remains uncured for thirty (30) days after written notice or
is the third such failure to pay completely and timely; (ii) a material
misrepresentation by Premier in Section 6; (iii) a material breach of a
warranty or covenant made by Premier in or pursuant to this Agreement; (iv)
the indictment of Premier or any of its Directors or officers for a crime
involving moral turpitude; or (v) the failure to satisfy any of the
conditions set forth in the First Stock Purchase Agreement or the Second
Stock Purchase Agreement in accordance with their terms.
13. Termination by Premier. Premier may terminate the Term at any
time, by giving written notice setting forth the effective date of
termination (which may be immediate), after: (i) a material
misrepresentation by Infusion in or pursuant to this Agreement; (ii) a
material breach of a warranty or covenant made by Infusion in or pursuant
to this Agreement; (iii) conduct on the part of Infusion intended to, or
reasonably expected to, cause material damage to the business, assets,
operations, condition, affairs or prospects of Premier; (iv) the indictment
of Infusion or any of its managers or officers for a crime involving moral
turpitude, whether relating to Infusion's engagement hereunder or
otherwise; or (v) Infusion's repeated failure to render advice requested by
Premier within the scope of Infusion's duties as set forth in Section 3,
which failure persists after written notice to Infusion.
14. Effect of Termination. Upon termination of the Term for any
reason, Premier shall pay Infusion the compensation owed pursuant to
Section 4 and expense reimbursements owed pursuant to Section 5 through the
effective date of termination. Sections 6, 8, 15 - 30 and this Section 14
shall survive the termination of the Term for any reason whatsoever and
remain in full force and effect indefinitely.
15. Indemnification of Premier
--------------------------
15.1 Infusion agrees to indemnify, defend and hold harmless
Premier and its members, managers, officers and employees from and against
any and all Losses arising in connection with (i) a material breach by
Infusion of this Agreement or (ii) any other act or omission of Infusion
and its members, managers, officers and employees which has a material
adverse effect on Premier, subject to Section 15.2. "Losses" means all
losses, claims, suits, actions, liabilities, obligations, expenses
(including court costs, amounts paid in settlement, judgments, and counsel
fees and other expenses incurred in connection with investigating,
preparing, pursuing or defending any claim giving rise to a right of
indemnification under this Agreement) and damages of any kind. In all
cases, Losses shall be calculated on a net after-tax basis, accounting for
the tax effects of the Losses incurred and the indemnification payments to
be received, and shall take into account any insurance proceeds receivable
in connection with the Losses.
15.2 Notwithstanding anything in this Agreement to the contrary,
the aggregate liability of Infusion to Premier or any of its members,
managers, officers or employees for acts and omissions, whether in breach
of this Agreement or otherwise relating to Infusion's performance of
services for Premier pursuant to this Agreement, shall not exceed the
aggregate amount of compensation actually received by Infusion pursuant to
Section 4; provided, however, such limitation shall not apply to Losses
directly resulting from Infusion's intentionally wrongful conduct.
16. Indemnification of Infusion. Premier agrees to indemnify, defend
and hold harmless Infusion and its members, managers, officers and
employees from and against any and all Losses arising in connection with
any misrepresentation, breach of warranty or breach of covenant by Premier
in this Agreement.
17. Third Party Claims. Promptly (and in any event within five
business days) after receipt of actual notice that a third party is
commencing a lawsuit, arbitration or other action (a "Third Party Action")
against a party hereto (the "Indemnified Party") based on allegations
which, if proven, would entitle the Indemnified Party to indemnification
pursuant to Section 15 or 16 of this Agreement, the Indemnified Party shall
give written notice of the pending or threatened Third Party Action to the
party that would be obligated to provide such indemnification (the
"Indemnifying Party"). Delay in notifying the Indemnifying Party shall
relieve the Indemnifying Party from liability only to the extent the
Indemnifying Party shall have been materially prejudiced by such delay. As
a condition to its right to indemnification hereunder, the Indemnified
Party shall give the Indemnifying Party the right (without prejudice to the
right of the Indemnifying Party to contest its obligation to indemnify the
Indemnified Party with respect to any claims made in the Third Party
Action) to assume control of the defense of the Third Party Action,
including through the selection and engagement of counsel reasonably
satisfactory to the Indemnified Party. The party hereto not in control of
the defense of a Third Party Action shall have the right to participate in
the Third Party Action through its own separate counsel at such party's own
expense; except, however, even if the Indemnifying Party assumes the
defense of a Third Party Action, the Indemnifying Party shall be liable for
the fees and expenses of the Indemnified Party's separate counsel if the
Indemnified Party shall have been advised by counsel that there may be one
or more legal defenses available to the Indemnified Party which may
conflict with or be inconsistent with those available to the Indemnifying
Party. No party shall be liable for or bound by any settlement of an
action effected without such party's written consent, which shall not be
unreasonably withheld, delayed or conditioned. In addition, neither party
will settle, compromise or consent to the entry of a judgment in or
otherwise seek to terminate any pending or threatened action in respect of
which indemnification or contribution may be sought hereunder (whether or
not the Indemnified Party is a party thereto) unless such settlement,
compromise, consent or termination includes an unconditional release of the
Indemnified Party from all claims arising out of such action.
18. Rights and Remedies. Except as otherwise expressly provided
herein, the rights and remedies of the parties under this Agreement
(including the right to terminate this Agreement and the right to
indemnification) shall be cumulative with and in addition to, not exclusive
or in replacement of, any other rights or remedies that may be available
under any other agreement between the parties, at law or in equity.
19. Forum Selection for Disputes. Each of the parties to this
Agreement hereby submits to the exclusive, personal jurisdiction of either
the Federal District Court for the Eastern District of Pennsylvania or the
Court of Common Pleas of Philadelphia County, Pennsylvania for all claims,
disputes or controversies involving the parties hereto and relating to this
Agreement; provided, however, nothing herein shall prevent a party hereto
from asserting a claim for indemnification or any other claim hereunder
against the other party hereto in connection with a Third Party Action in
the same jurisdiction where a Third Party Action has been brought. Each
party hereby knowingly, intelligently and voluntarily waives its right to
contest the jurisdiction or venue of either such court, whether on the
grounds of inconvenience or otherwise, and each party hereto knowingly,
intelligently and voluntarily waives its right to initiate a suit or action
against the other party in any other court or forum, except as expressly
provided in Section 17.
20. Waiver of Jury Trial. IRREVOCABLY AND UNCONDITIONALLY, EACH OF
THE PARTIES HERETO HEREBY KNOWINGLY, INTELLIGENTLY AND VOLUNTARILY WAIVES
ITS RIGHTS TO DEMAND TRIAL BY JURY IN ANY LITIGATION, SUIT OR OTHER ACTION
BROUGHT UNDER OR IN CONNECTION WITH THIS AGREEMENT OR UNDER ANY OTHER
AGREEMENT, INSTRUMENT OR DOCUMENT EXECUTED PURSUANT TO, OR IN CONNECTION
WITH, THIS AGREEMENT OR ANY PROVISION OF ANY OF THE FOREGOING OR ANY OTHER
MATTERS INVOLVING BOTH OF THE PARTIES HERETO.
21. Notices and Other Communications. Any notice, consent, demand or
other communication required or permitted under this Agreement shall be
made in writing and shall be deemed to have been duly given if (a) sent by
personal delivery or facsimile, telecopier or similar transmission (and
shall be deemed given upon confirmation of receipt), (b) mailed by first
class registered or certified mail, return receipt requested, postage
prepaid (and shall be deemed delivered three (3) days after the date
received for delivery by the United States Postal Service, whether or not
accepted by the addressee) or (c) sent by nationally recognized next-day
delivery courier that guaranties delivery within twenty-four (24) hours,
charges prepaid (and shall be deemed delivered one business day after
delivery to said courier), addressed to the parties hereto at their
respective addresses set forth under their names on the signature pages
hereto, marked in each case to the attention of the President of the
recipient; however, each party may change the person to be notified on its
behalf or the address of such person from time to time by giving notice of
such change at least ten (10) days in advance.
22. Entire Agreement. This Agreement embodies the entire agreement
and understanding between the parties hereto pertaining to the subject
matter hereof and supersedes all prior agreements and understandings of the
parties, oral or written, express or implied, in connection therewith.
23. Amendments and Waivers. Any provision of this Agreement may be
amended or modified, in whole or in part, and the compliance with any
provision of this Agreement may be waived only with the written consent of
(a) both parties hereto, in the case of an amendment or modification and
(b) the party waiving compliance with a provision, in the case of a waiver.
24. No Waiver. No waiver by any party hereto of any condition, or
the breach of any term or covenant contained in this Agreement, whether by
conduct or otherwise, in any one or more instances, shall be deemed or
construed as a further or continuing waiver of any such condition or breach
or waiver of any other condition.
25. Severability. If any provision (or any part of any provision) of
this Agreement shall for any reason be determined by a court of competent
jurisdiction to be invalid, illegal or unenforceable in any respect, such
determination shall not invalidate, impair or affect the remainder of this
Agreement, which shall continue in full force and effect. If such invalid,
illegal or unenforceable provision would be valid, legal and enforceable if
modified in scope, duration or otherwise, such provision shall be deemed
modified to the minimum extent necessary to render the same valid, legal
and enforceable.
26. Governing Law. This Agreement, its interpretation, performance
and enforcement, and the rights and remedies of the parties hereto, shall
be governed and construed by and in accordance with the laws of the
Commonwealth of Pennsylvania, without regard to principles of conflict of
laws.
27. Binding Effect. This Agreement shall be binding upon and inure
to the benefit of the parties hereto and their respective representatives,
successors and permitted assigns. Either party may assign its rights and
obligations under this Agreement (a) as part of a merger, consolidation or
other transaction effecting an assignment by operation of law or (b) as
part of a sale or transfer of substantially all of its assets, including
its business and goodwill, in which case the successor entity shall confirm
in writing at the time of such sale or transfer that such successor remains
bound by this Agreement. Except as provided in the preceding sentence,
neither party may assign any of its rights or obligations under this
Agreement without the prior written consent of the other party, in such
other party's sole discretion.
28. No Third Party Rights. This Agreement is not intended to, and it
shall not, provide any rights whatsoever to any third party, and no third
party shall have any right to assert a claim under or enforce this
Agreement against any party hereto. The services rendered by Infusion to
Premier are intended for the sole benefit of Premier. Accordingly, unless
otherwise expressly agreed in writing by Infusion, no one other than
Premier is authorized to rely upon any statement, opinion or advice of
Infusion, and no statement, opinion or advice of Infusion shall be
reproduced, disseminated, quoted or referred to at any time in any manner
or otherwise used for any purpose, other than as contemplated by this
Agreement.
29. Construction. The masculine form, wherever used herein, shall be
construed to include the feminine and the neuter, and vice versa, where
appropriate. The singular form, wherever used herein, shall be construed
to include the plural, and vice versa, where appropriate. The term
"include" (and correlative terms, such as "includes" and "including") shall
not be construed as a term of limitation in any context but shall be
construed as if followed by the words "without limitation." All references
in this Agreement to a "Section" shall be to the applicable section of this
Agreement, unless otherwise specially provided. The captions of Sections
are for the convenience of the parties only; they form no part of this
Agreement and shall not affect its interpretation.
30. Determining Days. In computing the number of days for purposes
hereof, all days shall be counted, including Saturdays, Sundays and legal
holidays in the Commonwealth of Pennsylvania (unless only business days are
specified); provided, however, that if the final day of any time period
falls on a Saturday, Sunday or legal holiday, the final day shall be deemed
to be the following day which is not a Saturday, Sunday or holiday. A
"business day" shall mean any day which is not a Saturday, Sunday or legal
holiday in the Commonwealth of Pennsylvania.
31. Counterparts. This Agreement may be executed in counterparts,
each of which when so executed shall be deemed to be an original and all
counterparts together shall constitute one and the same instrument. The
transmission of a signature by telecopier will be treated as delivery of an
executed original.
32. Preemptive Rights. Premier hereby grants to Infusion the right
to purchase all New Securities (defined below) which Premier may propose,
during the Term and any renewal of this Agreement, to sell or issue,
subject to and in accordance with the following provisions:
32.1 In the event that Premier proposes to undertake an issuance
of New Securities, Premier shall give Infusion an Offer Notice (defined
below), which shall constitute an offer by Premier to Infusion to purchase
the New Securities as provided in this Section 32. Infusion shall have the
right, exercisable by giving an Acceptance (defined below) to Premier
within fifteen (15) days following the date of receipt of such Offer
Notice, to purchase the New Securities at the price and upon the terms
specified in the Offer Notice. Infusion shall be obligated to purchase the
quantity of New Securities stated in its Acceptance and to close such
purchase within 90 days from the date of such Acceptance.
32.2 In the event that the quantity of New Securities proposed to
be sold by Premier exceeds the aggregate quantity of New Securities for
which Infusion has given Acceptance, within 90 days thereafter Premier may
sell (or enter into an agreement pursuant to which the sale of the New
Securities covered thereby shall be closed, if at all, within 90 days from
the date of said agreement (a "Sale Agreement")) those New Securities for
which Infusion's preemptive rights were not exercised in accordance with
Section 32.1, at a price and upon terms no more favorable in any respect to
a purchaser thereof than specified in the Offer Notice. In the event that
Premier has not sold (or entered into a Sale Agreement covering) all of the
New Securities within said 90-day period (or sold and issued the New
Securities to be sold pursuant to the Sale Agreement within 90 days from
the date thereof), Premier shall not issue or sell any New Securities
without first offering such securities to Infusion in the manner required
hereby.
32.3 Infusion may assign its preemptive rights to any one or more
persons or entities or arrange for the exercise or purchase of New
Securities through the exercise of these preemptive rights by any one or
more other persons or entities.
32.4 For purposes hereof:
(i) "Acceptance" means a written notice by Infusion to
Premier stating that Infusion is exercising its preemptive rights hereunder
and specifying the quantity of New Securities which Infusion desires to
purchase.
(ii) "New Securities" means any Common Stock or Preferred
Stock of Premier, whether now or hereafter authorized, and rights, options
or warrants to purchase Common Stock or Preferred Stock, and securities of
any type whatsoever which are, or may become, convertible into Common Stock
or Preferred Stock; provided, however, that "New Securities" does not
include (i) the securities issuable with respect to or upon conversion of
the Convertible Preferred Stock or upon exercise of warrants to be issued
pursuant to this Agreement, the First Stock Purchase Agreement or the
Second Stock Purchase Agreement or upon exercise of options and warrants
issued and outstanding as of the date of this Agreement; (2) securities
issuable upon conversion or exercise of New Securities which were offered
to Infusion in accordance with this Agreement; or (3) shares issued in
connection with any stock split, stock dividend or recapitalization of
Premier.
[intentionally left blank]
(iii) "Offer Notice" means a written notice given by Premier
stating its intention to sell New Securities, describing the type of
securities, the price, the proposed recipients (to the extent known), and
the terms of sale and providing all other information which Infusion would
reasonably consider material to its decision whether or not to exercise its
preemptive rights.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date and year first written above.
PREMIER CONCEPTS, INC.
By:
--------------------------------------
Sissel B. Greenberg, President and CEO
Address for Notices:
3033 S. Parker Road, Suite 120
Aurora, CO 80014
Facsimile: (303) 338-5780
INFUSION CAPITAL PARTNERS, L.L.C.
By:
-------------------------------------
David M. M. Taffet, President
Address for Notices:
1601 Market Street, Suite 2450
Philadelphia, PA 19103
Facsimile: 215-988-9055
<PAGE>
<PAGE>
Exhibit A
----------
Form of Infusion Warrant
------------------------
See attached pages.
-------
[ARTICLE] 5
[LEGEND]
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS FOUND ON PAGES F-1 THROUGH F-21 OF THE COMPANY'S FORM
10-KSB FOR THE YEAR ENDED JANUARY 31, 1999 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.[/LEGEND]
[RESTATED]
<TABLE>
<S> <C>
[PERIOD-TYPE] YEAR
[FISCAL-YEAR-END] JAN-31-1999
[PERIOD-END] JAN-31-1999
[CASH] 221,273
[SECURITIES] 0
[RECEIVABLES] 98,265
[ALLOWANCES] 35,698
[INVENTORY] 1,975,595
[CURRENT-ASSETS] 2,294,163
[PP&E] 4,175,000
[DEPRECIATION] 1,475,624
[TOTAL-ASSETS] 5,136,704
[CURRENT-LIABILITIES] 2,232,760
[BONDS] 0
[PREFERRED-MANDATORY] 0
[PREFERRED] 0
[COMMON] 1,775
[OTHER-SE] 2,651,893
[TOTAL-LIABILITY-AND-EQUITY] 5,136,704
[SALES] 12,705,602
[TOTAL-REVENUES] 12,705,602
[CGS] 4,158,271
[TOTAL-COSTS] 9,598,904
[OTHER-EXPENSES] 8,115
[LOSS-PROVISION] 0
[INTEREST-EXPENSE] 44,427
[INCOME-PRETAX] (1,059,688)
[INCOME-TAX] 0
[INCOME-CONTINUING] (1,059,688)
[DISCONTINUED] 0
[EXTRAORDINARY] 0
[CHANGES] 0
[NET-INCOME] (1,059,688)
[EPS-PRIMARY] (1.19)
[EPS-DILUTED] (1.19)
</TABLE>
