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:
----------------------------------------
Xxxxx X. X. Xxxxxx, President
PREMIER CONCEPTS, INC.
By:
----------------------------------------
Xxxxxx X. Xxxxxxxxx, President and CEO
