SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
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FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported):
March 4, 1998
CORNICHE GROUP INCORPORATED
(Exact name of registrant as specified in its charter)
Delaware
(State or other jurisdiction of incorporation)
0-10909 22-2343568
Commission File Number IRS Employer
Identification No.
272 Rte 206, Bldg # B1.1, Flanders, New Jersey 07836
(Address of principal executive offices) (Zip Code)
973-927-7155
Registrant's Telephone Number
ITEM 5. OTHER EVENTS
On March 4, 1998, the Corporation entered into a Stock Purchase Agreement
("Agreement"), conditioned upon the approval of the Corporation's shareholders,
with Mr. Joel San Antonio and certain other individuals (the "Initial
Purchasers") whereby the Initial Purchasers will acquire an aggregate of 765,000
shares of a newly created Series B Convertible Preferred Stock, par value $.01
per share. Thereafter, the Initial Purchasers will endeavor to establish for the
Corporation new business operations in the insurance sector, more specifically
the property and casualty specialty insurance markets. Mr. San Antonio, who has
many years experience in these sectors, is in the process of exploring a number
of specialty insurance opportunities for the development of new business
operations.
The Agreement provides for Mr. San Antonio to subscribe for 710,000 shares
of preferred stock at $0.10 per share, a total consideration of $71,000, and
Messrs. Glime, Hutchins and Aber to subscribe for 25,000, 15,000 and 15,000
shares, respectively, of Series B Preferred Stock at the same price per share.
Pursuant to the Agreement, the Corporation will pay certain expenses of the
Initial Purchasers in connection with the Transaction, which expenses are
currently estimated to be $50,000. In addition, the Corporation would issue
50,000 shares of Series B Preferred Stock to Alan Zuckerman as compensation for
his assisting the Corporation in the identification and review of business
opportunities and this transaction and for his assistance in bringing the
transaction to fruition. Additionally, the Corporation would issue 10,000 shares
of Series B Preferred Stock to James Fyfe for his work in bringing this
transaction to fruition.
Mr. San Antonio's initial goal will be to complete the development of a
comprehensive strategic and operational business plan for the Corporation and to
secure the services of a quality management team. In connection with this
process, Mr. San Antonio has agreed to act as Chairman of the Corporation and
Robert Hutchins has agreed to act as President of the Corporation. The following
description represents Mr. San Antonio's current plans for the Corporation which
are subject to change as business necessities require during the course of
implementation. No assurances can be given that Mr. San Antonio will be
successful in implementing his business plan as currently envisioned.
Mr. San Antonio's plans for the Corporation involve having the Corporation
enter into insurance and/or insurance-related businesses. The thrust of the
Corporation will be to optimize spread to risk and seek "niche" business
opportunities that do not fit what is often referred to in the industry as
"mainstream" business. The Corporation may also explore opportunities for
"fronting" insurance for service contract business and other property and
casualty insurance business whereby all or a portion of the risk of such
policies written by the Corporation would be ceded to a reinsurer. As part of
any such strategy the Corporation anticipates that it will reinsure heavily on a
"quote share" or "pro-rata" basis with other operators with whom proposed new
management has achieved successful business relationships in the past. In "quote
share" or pro-rata" reinsurance, one or more reinsurers bears an agreed upon
proportion of the specified risk, rather than a fixed dollar amount of risk or
the excess above a fixed dollar amount of risk.
In connection with the implementation of these strategies, it may become
necessary for the Corporation to become licensed in one or more states in order
to enable it to conduct operations. No assurances can be given that the
Corporation will be able to obtain such licenses.
The Corporation does not presently anticipate dealing with insurance
products in the worker's compensation, personal insurance or environmental
insurance product areas. The Corporation presently anticipates that its
marketing efforts in the property and casualty sectors of the insurance market
will focus on operating on a conservative basis using both facultative and
treaty reinsurance support to minimize its exposure. Facultative reinsurance
generally involves a reinsurer agreeing to hear the risk of loss over a
specified dollar amount for a specified risk. Treaty reinsurance generally
involves a reinsurer agreeing to bear a portion of the risk associated with a
specified category or "book" of business, and may be done on a excess or quote
share basis. As part of this strategy, the Corporation may consider direct
selling, brokerage and agency produced business and may evaluate potential
opportunities to participate in the reinsurance sector of commercial property
and casualty insurance on both a "quote share" and "excess" basis.
The Corporation currently anticipates that business development and future
market growth will be concentrated on "short tail" casualty business that does
not provide for payment after the policy expires and package product lines and
focus primarily in the retail/service industry marketplace. If successfully
developed, the customer base generated by a service contract/product warranty
marketing business could become a source to seek out other property and casualty
insurance business opportunities.
As part of its overall business plan, the Corporation may pursue other and
different business activities than those described above, but it has no current
plans to do so.
The following summarizes the terms of the Series B Preferred Stock. The
Series B Preferred Stock would carry a zero coupon and each share of the Series
B Preferred Stock would be convertible into ten shares of the Corporation's
Common Stock. The holder of a share of the Series B Preferred Stock would be
entitled to ten times any dividends paid on the Common Stock. Mr. San Antonio
would assume control of the Corporation as the holder of such 710,000 shares of
Series B Preferred Stock, since the Series B Preferred Stock will have ten votes
per share and vote as one class with the Common Stock. Accordingly, Mr. San
Antonio, with 49% of the voting power, will almost have sufficient voting power
by himself to elect all of the Board of Directors. However, the Initial
Purchasers of the Series B Preferred Stock, including Mr. San Antonio, would be
required to vote in favor of Mr. Fyfe or his designee as a director of the
Corporation through June 30, 2000.
Pursuant to the terms of the Agreement, from March 21, 2000 to June 30,
2000, the Corporation would have the right to repurchase or redeem such shares
of Series B Preferred Stock from the holders for a total consideration of $.10
per share ($76,500 in the aggregate) unless, during the period from the date the
Agreement of stockholder approval through March 31, 2000:
(i) the Corporation's shares of common stock maintain a minimum
closing bid price of not less than $2 per share on a public market during a
period of any 10 consecutive trading days, and either
(ii) the Corporation raises a minimum of $2.5 million of new equity
capital through a placement of the Corporation's shares of common stock, or
(iii) the Corporation has revenues of at least $1 million in any
fiscal quarter through the fiscal quarter ending March 31, 2000 (collectively,
the "Trigger Conditions").
Mr. Fyfe or the director designated by Mr. Fyfe will have the ability to
determine if the Corporation will elect to exercise this redemption right on
behalf of the Corporation.
Each Series B Preferred Share would be convertible into ten shares of
Common Stock. Upon liquidation, the Series B Preferred Stock would be junior to
the Corporation's Series A Preferred Stock and would share ratably with the
Common Stock with respect to liquidating distributions.
There can be absolutely no assurance that any business plan implemented by
Mr. San Antonio would be successful or that the Corporation would be successful
in obtaining necessary licensing. Furthermore, while the Corporation would have
the right to redeem the Series B Preferred Stock if such business plan is into
successful (as measured by the Trigger Conditions), there can be absolutely no
assurance that the Corporation would have sufficient funds to redeem the Series
B Preferred Stock or that the Corporation will not otherwise be damaged or
insolvent if such business plan fails so that the redemption right would not be
available or viable.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
CORNICHE GROUP INCORPORATED
By: /s/ James J . Fyfe
James J. Fyfe
Vice President
Dated: March 4, 1998