FORM 10-KSB
UNITED STATES
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 APRIL 30, 1998.
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934 FOR THE TRANSITION PERIOD FROM ______________ TO ____________.
PALM DESERT ART, INC. (formerly DATABASE TECHNOLOGIES, INC.)
(Exact name of registrant as specified in its charter)
Delaware 0-17623 02-0429620
(State of Jurisdiction) (Commission File Number) (IRS Employer ID No.)
39-725 Garand Lane, Suite J, Palm Desert, California 92211
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code 760-360-5911
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Name of each exchange on
Title of each class which registered
------------------- ----------------
Common Stock $.001 par value NASD OTC Electronic Bulletin Board
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was required
to file such reports), and (2) has been subject to filing requirements for the
past 90 days. Yes _XX_ No ____.
Indicate by check mark if the disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of the registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10- K or any
amendments to this form 10-K. [ ].
Based on the closing sales price of $.0625 on June 9, 1998, the aggregate market
value of the voting stock held by non-affiliates of the registrant was $225,152.
The number of shares outstanding of the registrant's common stock, $.001 par
value was 25,000,000 on April 30, 1998.
DOCUMENTS INCORPORATED BY REFERENCE
Location in Form 10-K Incorporated Document
Part IV
Items 14(C) - Reports on Form 8-K Form 8-K filed on May 7, 1998
Form 8-K/A filed on July 7, 1998
<PAGE>
PALM DESERT ART, INC.
(formerly DATABASE TECHNOLOGIES, INC.)
TABLE OF CONTENTS
Part I Page
- ------ ----
Item 1 Business........................................................... 1
A. Historical Background
B. Certain Transactions During the
Reporting Period and Recent Developments
C. Current Business Operations
D. Risk Factors
Item 2 Properties ......................................................... 6
Item 3 Legal Proceedings .................................................. 7
Item 4 Submission of Matters to a Vote of Security Holders ................ 7
Part II
Item 5 Market for Registrant's Common Equity and
Related Stockholders Matters ....................................... 8
Item 6 Management's Discussion and Analysis of
Financial Condition and Results of Operations ...................... 9
Item 7 Financial Statements ...............................................11
Item 8 Changes in and Disagreements with Accountants
on Accounting and Financial Disclosure..............................12
Part III
Item 9 Directors and Executive Officers of the
Registrant..........................................................12
Item 10 Executive Compensation..............................................13
Item 11 Security Ownership of Certain Beneficial Owners
and Management......................................................13
a. Section 16(a) Beneficial Ownership
Reporting Compliance
Item 12 Certain Relationships and Related Transactions .....................15
Part IV
Item 13 Exhibits and Reports on Form 8-K....................................15
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PALM DESERT ART, INC.
(formerly Database Technologies, Inc.)
Part I
Item 1 Business
Historical Background
The Registrant was incorporated under the laws of the State of Delaware on
November 4, 1988, under the name of Database Technologies, Inc. to engage in,
among other lawful activities, the business of owning and operating a database
which was transferred to it by Pathfinder Data Group Inc. ("Pathfinder"), a
Colorado corporation. The database provided information assisting insurance
property adjusters in replacing insured's losses by identifying discontinued
products and the current like kind and quality replacement models and
replacement values.
Although several small insurance companies used the Registrant's system, one of
its larger customers representing 50% of its revenues cancelled its contract in
October 1989 and a second customer representing 30% of its revenues elected not
to renew its contract in 1994. The Registrant continued to suffer a downtrend in
sales in the last few quarters of its operations.
The Registrant's operating cash flow became insufficient to finance its
operations causing the Company to borrow cash from its principal
stockholder/officer to enable it to meet its operating cash flow requirements.
Larger and better capitalized competitors than the Registrant entered the market
with products that offered many of the same features that Registrant had been
offering thus increasing the pressure for increased revenues. Eventually, the
Registrant began exploring possible asset sales and/or merger transactions in an
effort to diversify its business with another business which would be able to
generate positive cash flow.
Certain Transactions and Other Events During the Reporting Period
and Recent Developments
In April 1998, after several months of negotiations, the Registrant concluded a
transaction with Palm Desert Art Publishers, Ltd., LLC, whereby the Registrant
acquired substantially all of the assets of Palm Desert Art Publishers in
exchange for approximately 80.34% of Registrant's authorized stock. On April 22,
1998, in consideration of 32,763,661 of its $.001 par value common stock, the
Registrant purchased all of the assets of Palm Desert Art Publishers, Ltd. LLC
("Palm Desert") pursuant to an Asset Purchase and Subscription Agreement dated
February 5, 1998.
Of the total consideration, 20,083,918 shares of the Registrant's common stock
was delivered to Palm Desert at the closing. The remaining 12,679,743 shares
were to be delivered to Palm Desert upon the Registrant's holding of a
shareholders' meeting to, among other things, authorize a reverse split of
Registrant's stock. At the close of the transaction, Palm Desert owned
approximately 80.34% of the 25,000,000 shares of common stock which had been
authorized and issued by Registrant.
<PAGE>
In connection with this transaction, Palm Desert, as majority shareholder,
accepted the resignations of Robert A. Boyd and Betty L. Wolfe as officers and
directors of the Registrant and appointed Hugh G. Pike and Jurg Mullhaupt to
serve as directors. Mr. Allan S. Wolfe remained as a director of the Registrant.
Mr. Pike was elected President and Treasurer of Registrant and Ms. Sandra
Mitchell serves as Secretary and Vice President of Marketing. (On June 12, 1998
Ms. Mitchell resigned as Secretary and Mr. John Anderholt was elected to fill
the vacancy.)
Also on April 22, 1998, the Registrant, Palm Desert and Allan S. Wolfe (a
shareholder, officer, director and creditor of Registrant) concluded an Asset
Purchase Agreement dated February 5, 1998, pursuant to which Registrant agreed
to transfer to Wolfe certain software assets of Registrant together with a
promissory note from Registrant in favor of Wolfe in the amount of $90,000 in
exchange for Wolfe's agreement to discharge Registrant's debt to Wolfe in the
amount of $184,000. To induce Wolfe to accept Registrant's promissory note, Palm
Desert agreed to guaranty payment of the note and to pledge to Wolfe all shares
of the capital stock of Registrant which Palm Desert acquired under the Asset
Purchase and Subscription Agreement as security for the guaranty.
Immediately prior to closing the aforementioned transactions, it was discovered
that Registrant's Certificate of Incorporation had lapsed by proclamation of the
State of Delaware. Registrant was able to renew and revive its Certificate of
Incorporation, however, it was required to do so using a new corporate name
inasmuch as another company had since registered in Delaware under the name
"Database Technologies." Accordingly (and in contemplation of the aforementioned
transactions), Registrant renewed and revived its Certificate of Incorporation
using the name "Palm Desert Art, Inc." and is presently in good standing in the
State of Delaware.
On April 24, 1998, the Registrant agreed to sell 2,450,000 shares of its
outstanding $.001 par value common stock (the "Shares") to Sencorp Ltd., a
private company located at National Westminster Bank Building, Gibraltar. The
shares were sold pursuant to Regulation S for $245,000 on April 24, 1998, the
date both parties executed the Offshore Subscription and Investment
Representation Agreement. The proceeds were to be used for Registrant's working
capital needs over the following months.
On July 14, 1998, a shareholders meeting was held at the corporate offices of
the Registrant in Palm Desert, California. At that meeting the shareholders
approved a 10-for-1 reverse stock split and authorized the board of directors to
take any and all action necessary to effect a 10-for-1 reverse stock split of
the Company's $.001 par value Common Stock from 25,000,000 issued and
outstanding shares to 2,500,000. On July 17, 1998 the Registrant filed an
Amended Certificate of Incorporation with the Secretary of State of Delaware to
reflect the reverse stock split.
On July 31, 1998, the 10-for-1 reverse stock split became effective on the
NASDAQ OTC Bulletin Board and Registrant announced that effective as of that
date, the new trading symbol for the Registrant is "PDAP" and the new cusip
number for the shares of common stock is 69661M-106.
On August 5, 1998, the Registrant acquired six gallery and art framing retail
outlets located throughout Upstate New York. The acquisition was
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accomplished through a merger of R M & M Framemakers, Inc. into R. M. & M.
Acquisition, Inc., a wholly-owned subsidiary of the Registrant.
Current Business Operations
Having acquired substantially all of the assets of Palm Desert Art Publishers,
Ltd., Registrant is now an integrated publisher and retailer of limited-edition
serigraphs, lithographs and other works of fine art created by internationally
recognized and innovative, contemporary artists and owns and operates several
art framing shops and galleries. The Registrant has formally changed its
corporate name from Database Technologies, Inc. to Palm Desert Art, Inc. and has
relocated its principal place of business from Bedford, New Hampshire to Palm
Desert, California.
Agreements with Artists
The Registrant has secured the exclusive rights to publish the artworks of
several contemporary artists who are well-recognized in the art community such
as:
Patricia Nix, a contemporary master, whose work has been acquired by the
Smithsonian Institution's National Museum of American Art in Washington
D.C. and has received international award.
Elyse Cohen, an American Watercolorist whose work has recently become part
of the collection at City Hall in New York City and has been acquired by
numerous collectors around the world.
Sandra Bierman, an American figurative painter, has earned international
recognition as one of today's leading contemporary artists.
Barbara Cleary, whose impressionistic work has earned her a position in
"Who's Who in American Art".
Weilaing Zhao, a Chinese artist, whose artistic styles range from
photo-realistic portraiture to highly sophisticated, abstract canvases.
Ali Golkar, a contemporary painter who combines the influences of 20th
Century Expressionism, Cubism and Abstraction with his own unique form of
artistic impression.
Publishing Techniques
The Registrant uses various publishing techniques ranging from the classic,
hand-pulled serigraphy to innovative new printing techniques which incorporate
hand-painted details.
Operations
The Registrant maintains art galleries in Palm Desert and Tarzana, California
and has recently acquired six art framing shops and galleries in Upstate New
York. In addition, the Company has entered two letters of intent and is
currently negotiating with three other companies to acquire approximately 29
more privately-owned art framing shops located in the U.S. Southeast and
Midwest. With each acquisition, the space which once had been dedicated to
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art framing services will be converted into gallery space and art framing sales
offices with all art framing operations to be performed in regional framing
centers to be located throughout the country. The Registrant intends to continue
to obtain the exclusive rights to publish contemporary artists while growing its
gallery and publishing business and reputation through the acquisition of art
framing shops and galleries nationwide. The company's business plan is to
develop a national chain of galleries to sell fine artwork and provide
high-quality art framing services while taking advantage of the economies of
scale through regional framing centers.
Working Capital
The Company anticipates that in the fiscal year ending April 30, 1999,
(commencing May 1, 1998) its annual working capital requirements will be in the
range of $1 million. To meet its initial capital equirements, the Company has
raised approximately $478,000 primarily through the private placement of its
common stock with four non-affiliated investors. The company may seek to raise
additional capital through the sale of a convertible debenture or common stock
or bank financing during the fiscal year ending April 30, 1999. However, there
can be no assurances that financing can be obtained or, if obtained, that it
will be of a sufficient quantity to meet the company's immediate needs or that
it will be on reasonable terms.
Competition
The primary markets that the company plans to enter into in 1998 and 1999 are
the U.S. West Coast, the Northeast, the Midwest and the Mid-Atlantic.
The Registrant's plans to convert art framing retail outlets into fine art
gallery space and art framing sales offices with all art framing operations to
be performed in regional framing centers to be located throughout the country.
By moving all framing operations to regional framing centers, the Registrant
believes it will realize substantial economies of scale while providing its
customers with consistent high-quality framing services. The Registrant further
believes that by combining the art framing business with the fine art gallery
business, the Registrant will increase the exposure of its individual artists
while providing its customers with exceptional artwork and consistent
high-quality framing services at reasonable prices. The Registrant is not aware
of any other companies which are engaged in the art publishing, framing and art
gallery business.
Employees
As of the filing of this Form 10-KSB, the Registrant has 8 full-time employees.
Two of them are employed at the executive offices in Palm Desert, two at the
gallery in Palm Desert and four are at the gallery in Tarzana, California.
Another 30 persons are employed at the 6 art framing shops and galleries
recently acquired by R. M. & M. Acquisition, Inc., a wholly-owned subsidiary of
the Registrant.
Operating Results
On April 22, 1998, the Registrant acquired substantially all of the assets of
Palm Desert Art Publishers, Ltd., LLC in exchange for approximately 80.34% of
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Registrant's stock. Since then, the company has completely changed its line of
business and has undergone a substantial change in management. Therefore, for
reporting purposes, the revenues indicated in the Financial Statements of
Registrant herein (Item 7) represents the revenues resulting from the
operations of Palm Desert Art Publishers Ltd., LLC for the year ended April 30,
1998. On that basis, the Registrant's revenues for its first year of operations
ended April 30, 1998 were $864,504.
The Registrant's selling, general and administrative expenses for the year ended
April 30, 1998 were $489,148 most of which related to the start-up of the
company's operations in the art publishing and exhibiting business. Management
is of the opinion that administrative expenses will continue to rise as a result
of its plans to acquire and consolidate art galleries and art-framing
operations.
Risk Factors
Limited Operating History. The Registrant has had limited operating history
in its current art publishing business. On April 22, 1998, the Registrant
purchased all of the assets of Palm Desert Art Publishers, Ltd. LLC, (PDAP) in
exchange for approximately 80.34% of the Company's authorized common stock. PDAP
was a privately-held limited liability company which published on an exclusive
basis the artwork of various artists. At the time of the acquisition, PDAP had
been in the art publishing business for one year. Accordingly, the Company's
operations are subject to the risks inherent in the development of a new
business enterprise; specifically, the complications, delays and resulting
expenses often encountered in marketing artwork and related services, the
uncertainties of developing and marketing such artwork and services and the
difficulties in recruiting and retaining qualified personnel.
Limited Profitability. For reporting purposes, the Company's acquisition of
PDAP's assets in exchange for 80.34% of the Company's common stock were
accounted for as a reverse acquisition of PDAP by the Company under the purchase
method of accounting. Consequently, the financial statements for the year ended
April 30, 1998 consist of the operations formerly known as Palm Desert Art
Publishers Ltd., LLC, which recorded net income for its first year of operation
from May 1, 1997 through April 30, 1998 of $35,910. There can be no assurance
that the company will be able to generate revenues or profits sufficient to pay
its obligations in the ordinary course of business or to acquire the operations
of other galleries and art framing shops, and the Company may incur losses if
the Company increases expenditures for marketing, advertising and acquisitions.
Uncertain Market Acceptance. Since the acquisition of PDAP's assets in
April, 1998, the Company has focused its efforts on obtaining the exclusive
rights to publish contemporary artists while growing its gallery and publishing
business and reputation through the acquisition of art framing shops and
galleries nationwide. It is the Company's business plan to convert the
newly-acquired art framing shops into galleries and to provide off-site framing
services through regional centers to take advantage of economies of scale.
Although there is an existing market for such artwork, artwork is subject to the
individual tastes of the consumer which cannot be predicted with any degree of
accuracy and there is a risk that the Company's potential
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customers may not appreciate the quality of the Company's publications. Market
acceptance of the Company's products will depend, in large part, upon the
ability of the Company to demonstrate to the art community that it can produce
high-quality artwork and framing services at affordable prices. Although
management believes that the artwork published and exhibited by the Company
represents the significant talents of various contemporary artists, there can be
no assurance that the Company's artwork will achieve market acceptance.
Limited Marketing Organization. Commercialization of the Company's artwork
and framing services will be substantially dependent on the Company's ability to
develop or acquire the network of galleries and framing shops throughout the
country as well as a marketing and sales organization. There can be no assurance
that the Company can develop or acquire this network of galleries or the
marketing organization.
Need for Additional Capital. The Company will require an immediate
investment of approximately $600,000 (USD) to complete the first two of several
acquisitions which the Company is contemplating, to hire additional personnel
and for working capital. Funds for these purposes may be obtained from a number
of sources, including, sales of equity and debt instruments, and bank financing.
However, the Company currently has no arrangements for such financing, and there
can be no assurance that any additional financing can be obtained or, if
obtained, that it will be of a sufficient quantity to meet the Company's
immediate needs or on reasonable terms.
Need for Qualified Personnel. In order to meet its business objectives, the
Company will need to hire additional marketing and managerial personnel. The
Company may be required to compete for such personnel with companies having
greater financial and other resources than the Company. Since the future success
of the Company will be dependent, in part, upon its ability to attract and
retain qualified personnel, its ability to do so could have a material adverse
effect upon the business of the Company.
Absence of Dividends. The Company has not paid any cash dividends and does
not anticipate paying any dividends in the foreseeable future. Earnings, if any,
will be retained to fund development and expansion. There is no assurance that
the Company will at any time pay cash dividends.
Item 2 Properties
The Registrant owns no real estate. Following its acquisition of the assets of
Palm Desert Art Publishers, Ltd., LLC, the Registrant relocated its principle
executive offices to 39-725 Garand Lane, Suite J, in Palm Desert California. At
that location the Registrant occupies one suite of 3300 square feet of office
and warehouse space. In addition, the Registrant leases 3300 square feet of
gallery space at 73920 El Paseo Street, in Palm Desert, California.
As of the filing of this Form 10-KSB, the Registrant also occupies approximately
3800 square feet of gallery space at 18727 Ventura Blvd., in Tarzana,
California. In addition, the Registrant's wholly-owned subsidiary, R. M. & M.
Acquisition, Inc., leases the following properties:
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a. Five Star Frame and Art Shop, 1789 Western Avenue, Albany, New York;
b. Five Star Frame and Art Shop, Polar Plaza, Amsterdam, New York;
c. Five Star Frame and Art Shop, 715 Columbia Turnpike, East Greenbush,
New York;
d. Five Star Frame and Art Shop, 126 Clinton Street, Schenectady, New
York;
e. Artifax Gallery, 124 Cayuga Street, Ithaca, New York;
f. Framecrafters Moulding & Supply, 60 Railroad Avenue, Albany, New York;
g. Commercial Frame and Art, 60 Railroad Avenue, Albany, New York;
h. Heart of America Portfolio, 60 Railroad Avenue, Albany, New York;
and
i. Frame Products Outlet, 60 Railroad Avenue, Albany, New York.
Item 3 Legal Proceedings
The Registrant is not a party to any legal proceedings.
Item 4 Submission of Matters to a Vote of Security Holders
No matters were submitted to a vote of security holders during the fourth
quarter of the fiscal year covered by this report.
As of the filing of this Form 10-KSB, an annual meeting of the Registrant's
shareholders was held on July 14, 1998 to elect new directors and to authorize
an amendment to the company's certificate of incorporation to provide for a
10-for-1 reverse stock split of the company's issued and outstanding $.001 par
value common stock from 25,000,000 shares to 2,500,000 shares. Messrs. Pike,
Mullhaupt and Wolfe were re-elected as directors and the reverse stock split was
approved.
7
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Part II
Item 5 Market for Registrant's Common Equity and Related Stockholders Matters
Market Information
Effective July 31, 1998, the Registrant's common stock, $.001 par value, is
traded on the Over-the Counter Bulletin Board (OTC) operated by the National
Association of Securities Dealers under the ticker symbol "PDAP". The cusip
number of the company's $.001 par value common stock has also been changed to
69661M-106. Prior to that date, the ticker symbol had been "DBTC". The table
presents its high and low market prices for each of the four quarters in the
fiscal years ending April 30, 1997, and April 30, 1998. The prices were
determined from information obtained from NASDAQ Trading & Market Services. The
quotations reflect interdealer prices without retail mark-up, mark-down or
commissions and may not necessary represent actual transactions. The Company's
common stock began trading at the beginning of June 1989. The Company has paid
no cash dividends in the year ended April 30, 1998 and does not expect to
changes its dividend policy in the foreseeable future.
Month Low Bid High Bid
- ----- ------- --------
July 31, 1996 .0125 .0125
October 31, 1996 .03125 .0625
January 31, 1997 .0625 .0625
April 30, 1997 .0625 .0625
July 31, 1997 .0625 .0625
October 31, 1997 .0625 .0625
January 31, 1998 .0625 .0625
April 30, 1998 .0625 .0625
The number of shares of common stock issued and outstanding as of April 30, 1998
was 25,000,000.
On April 22, 1998, the Registrant issued to Palm Desert Art Publishers, Ltd.,
LLC, ("PDAP") 20,083,918 shares of its common stock in exchange for all of
PDAP's assets. In addition, on April 24, 1998, the Registrant entered into a
subscription agreement to sell 2,450,000 shares of its outstanding $.001 par
value common stock to Sencorp Ltd., a private company located and domiciled in
Gibraltar. The shares were subscribed pursuant to Regulation S for $245,000.
The approximate number of holders of record of the Common Stock of the
Registrant as of June 9, 1998 was 807.
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Item 6 Management's Discussion and Analysis of Financial Condition and Results
of Operations
Revenues
On April 22, 1998, the Registrant acquired substantially all of the assets of
Palm Desert Art Publishers, Ltd., LLC in exchange for approximately 80.34% of
Registrant's stock. Therefore, for reporting purposes, the revenues indicated in
the attached Financial Statements of Registrant represents the revenues
resulting from the operations of Palm Desert Art Publishers Ltd., LLC for the
year ended April 30, 1998.(1) On that basis, the Registrant's revenues for its
first year of operations ended April 30, 1998 were $864,504.
The year ended April 30, 1998 would have been the Registrant's ninth full year
of operations in providing data to the insurance industry. Had the Registrant
not acquired the assets of Palm Desert Art Publishers, Ltd. LLC, Registrant's
revenues for the year ended April 30, 1998 on a pro forma basis would have been
$258,013, which when compared to revenues of the prior year ended April 30, 1997
represents increased revenues of $159,701 or 162%.
Operational Expenses
The Registrant's selling, general and administrative expenses for the year ended
April 30, 1998 were $489,148 most of which related to the start-up of the
company's operations in the art publishing and exhibiting business. Management
is of the opinion that administrative expenses will continue to rise as a result
of its plans to acquire and consolidate art galleries and art-framing
operations.
Income Taxes
The Registrant anticipates that it will pay income taxes the next fiscal year.
Liquidity and Capital Resources
Liquidity had been a constant problem for the Registrant for several years
because revenues from operations did not generate sufficient cash flow and
deficiencies totalling $184,000 had been funded by borrowing from Mr. Allan S.
Wolfe, who had been the principal stockholder/officer of the Registrant. After
the Registrant exchanged approximately 80.34% of its stock for the assets of
Palm Desert Art Publishers, Ltd. LLC, the Registrant transferred approximately
$94,000 of its software assets used in its previous business of providing data
to the insurance industry to Mr. Wolfe and executed a promissory note for
$90,000 in exchange for which Mr. Wolfe discharged the earlier debt.
- -------- (1) Although it did not become a registered limited liability company
until April 18, 1997, Palm Desert Art Publishers, Ltd. LLC, began its operations
in March 1997. Accordingly, the financial information presented in Item 7
includes the first two months of operations which were minimal and have an
immaterial impact on the financial information for the 12-month period ended
April 30, 1998.
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After the Registrant purchased the assets of Palm Desert Art Publishers, Ltd.
LLC, the company's art publishing operations were sufficient to meet its
immediate cash flow requirements. In addition, on April 24, 1998, the Company
entered into a subscription agreement to sell 2,450,000 shares of its common
stock to an offshore entity for the purpose of raising $245,000 of additional
capital to be used to pay off the company's debt to Mr. Wolfe and for working
capital. Although the Company has received confirmation that the proceeds have
been deposited with an escrow agent, as of April 30, 1998, the stock certificate
had not been issued because new share certificates were not available bearing
the new corporate name.
The Company's new management does anticipate it will sell inventory in the
current fiscal year through its galleries which sales are expected to generate
positive cash flow. In addition, the Company may seek to raise additional
capital through the issuance of convertible debt and common stock to provide
additional working capital.
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Item 7 Financial Statements
Index to Consolidated Financial Statements
Page
----
Report of Independent Certified Public Accountants F-1
Financial Statements:
Balance Sheet, April 30, 1998 F-2
Statement of Income Year Ended
April 30, 1998 F-4
Statement of Changes in Stockholders' Equity
Year Ended April 30, 1998 F-5
Statement of Cash Flows, Year Ended
April 30, 1998 F-6
Notes to Consolidated Financial Statements F-7
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PALM DESERT ART, INC.
FINANCIAL STATEMENTS
April 30, 1998
With Independent Auditors' Report
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors
Palm Desert Art, Inc.
We have audited the accompanying balance sheet of Palm Desert Art, Inc. as of
April 30, 1998, and the related statements of income, changes in stockholders'
equity and cash flows for the year then ended. These financial statements are
the responsibility of the Company. Our responsibility is to express an opinion
on these financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides 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 Palm Desert Art, Inc. as of
April 30, 1998, and the results of its operations and its cash flows for the
year then ended, in conformity with generally accepted accounting principles.
Manchester, New Hampshire
June 17, 1998
F-1
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PALM DESERT ART, INC.
Balance Sheet
April 30, 1998
ASSETS
Current assets
Accounts receivable $ 83,319
Inventory 273,043
Prepaid expense 3,600
Direct response advertising 158,462
--------
Total current assets 518,424
--------
Property and equipment
Leasehold improvements 38,661
Furniture and fixtures 6,500
Vehicles 4,552
Equipment 6,957
--------
56,670
Less accumulated depreciation 3,642
--------
Net property and equipment 53,028
--------
Other assets
Deposits 31,836
Direct response advertising 39,615
--------
Total other assets 71,451
--------
Total assets $642,903
========
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The accompanying notes are an integral part of these financial statements.
F-2
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PALM DESERT ART, INC.
Balance Sheet
April 30, 1998
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Cash overdraft $ 13,270
Loan payable 90,000
Accrued liabilities 9,893
--------
Total current liabilities 113,163
--------
Commitments and contingencies (Notes 5 and 6)
Stockholders' equity
Common stock - $.01 par value, authorized 25,000,000 shares,
22,575,000 shares outstanding 225,750
Common stock subscribed 245,000
Common stock subscription receivable (245,000)
Additional paid-in capital 268,080
Retained earnings 35,910
--------
Total stockholders' equity 529,740
--------
Total liabilities and stockholders' equity $642,903
========
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The accompanying notes are an integral part of these financial statements.
F-3
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PALM DESERT ART, INC.
Statement of Income
Year Ended April 30, 1998
Sales $ 864,504
Costs of sales 328,426
---------
Gross profit 536,078
---------
Selling, general, and administrative expenses 489,148
---------
Operating income
Interest expense (11,020)
---------
Net income $ 35,910
=========
- --------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
F-4
<PAGE>
PALM DESERT ART, INC.
Statement of Changes in Stockholders' Equity
Year Ended April 30, 1998
<TABLE>
<CAPTION>
Common Common Stock Additional Retained Earnings
Common Stock Subscription Paid-In (Accumulated
Stock Subscribed Receivable Capital Deficit) Total
--------- ---------- ------------ ---------- ----------------- ---------
<S> <C> <C> <C> <C> <C> <C>
Balance, beginning of year $ 2,466 $ -- $ -- $ 12,179 $(208,944) $(194,299)
Net income -- -- -- -- 35,910 35,910
Effect of reverse acquisition
Elimination of Database Technologies,
Inc.'s accumulated deficit -- -- -- -- 208,944 208,944
Common stock issued 223,284 -- -- 255,901 -- 479,185
Common stock subscribed -- 245,000 (245,000) -- -- --
--------- --------- --------- --------- --------- ---------
Balance, end of year $ 225,750 $ 245,000 $(245,000) $ 268,080 $ 35,910 $ 529,740
========= ========= ========= ========= ========= =========
</TABLE>
- --------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
F-5
<PAGE>
PALM DESERT ART, INC.
Statement of Cash Flows
Year Ended April 30, 1998
Cash flows from operating activities
Net income $ 35,910
Adjustments to reconcile net income to net cash used
by operating activities
Depreciation 3,642
(Increase) in
Accounts receivable (83,319)
Inventory (68,593)
Prepaid expense (3,600)
Deposits (31,836)
Direct response advertising (198,077)
Increase in
Accrued liabilities 9,893
---------
Net cash used by operating activities (335,980)
---------
Cash flows from investing activities
Additions to property and equipment (51,670)
---------
Cash flows from financing activities
Net short-term borrowings - cash overdraft 13,270
Stockholders' contributions 374,380
---------
Net cash provided by financing activities 387,650
---------
Net increase in cash and cash equivalents --
Cash and cash equivalents, beginning of year --
---------
Cash and cash equivalents, end of year $ --
=========
Supplemental disclosures of cash flow information
Cash paid for interest $ 11,020
Supplemental schedule of noncash investing and financing activities
Contributed artwork $ 204,450
Contributed equipment 5,000
Loan payable 90,000
- --------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
F-6
<PAGE>
PALM DESERT ART, INC.
Notes to Financial Statements
April 30, 1998
Nature of Business, Organization, and Basis of Presentation
On March 19, 1998, the Company changed its name from Database Technologies, Inc.
to Palm Desert Art, Inc. (the Company). On April 22, 1998, the Company executed
two transactions which changed the operations of the Company.
One transaction involved a sale of all of the assets and liabilities of its
database business to the Company's then-majority stockholder in exchange for
reducing its stockholder obligations to $90,000. Consequently, the Company is no
longer in the database business.
The other transaction resulted in the acquisition of substantially all of the
outstanding assets of Palm Desert Art Publishers, Ltd., L.L.C. ("PDAP, Ltd.,
LLC") in exchange for common stock of the Company. This reorganization was
accounted for as a reverse acquisition of PDAP, Ltd., LLC by the Company under
the purchase method of accounting, as the shareholders of PDAP, Ltd., LLC
controlled the entity immediately following the reorganization. Consequently,
the reporting entity consists of the operations formerly known as PDAP, Ltd.,
LLC.
The Company is now in the business of publishing artwork and distributing its
artwork to independent art galleries throughout the country. In addition to the
publishing business, the Company owns an art gallery in Palm Desert, California,
which sells the Company's published artwork and other pieces of art.
For reporting purposes, PDAP, Ltd., LLC's first year of operations commenced May
1, 1997. Consequently, these financial statements are single-year statements,
since the reporting entity was not in existence prior to May 1, 1997.
1. Summary of Significant Accounting Policies
Revenue Recognition Policy
The Company records revenue on sales after the approval period, if any, has
expired. Approval periods do not typically extend beyond 30 days.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
- --------------------------------------------------------------------------------
F-7
<PAGE>
1. Summary of Significant Accounting Policies (Continued)
Cash and Cash Equivalents
For purposes of reporting the statement of cash flows, the Company
considers all cash accounts, which are not subject to withdrawal
restrictions or penalties, and all highly liquid investments with a
maturity of three months or less to be cash equivalents.
Allowance for Doubtful Accounts
The Company's policy for allowance for doubtful accounts is evolving as it
establishes relationships with its gallery customers. As of April 30, 1998,
management deems the accounts receivable as fully collectible. Management
has also obtained from PDAP, Ltd., LLC a written guarantee as to the
collectibility of any outstanding receivable as of April 30, 1998.
Inventory
Inventory includes cost of publishing and reproducing giclee and serigraph
reproductions of original works of art of artists under agreement with the
Company. All inventory items are stated at the lower of cost (specific
identification by print) or market value. All inventory costs are expensed
as cost of sales when the inventory item is sold.
Advertising
The Company expenses the costs of advertising the first time the
advertising takes place, except for direct-response advertising, which is
capitalized and amortized over its expected period of future benefits.
Direct-response advertising consists primarily of magazine advertisements
that include response coupons for the Company products. The capitalized
costs of the advertising are amortized as sales are recognized over a
period, not to exceed three years.
At April 30, 1998, approximately $198,000 of advertising was reported as
assets, of which $39,615 was non-current and $158,462 was current.
Advertising expense was approximately $89,000 in 1998.
- --------------------------------------------------------------------------------
F-8
<PAGE>
1. Summary of Significant Accounting Policies (Concluded)
Property and Equipment
Furniture and fixtures, equipment, vehicles and leasehold improvements
purchased are depreciated and amortized by the straight-line method over
the estimated useful lives of the respective assets.
Income Taxes
Deferred income taxes are provided for the expected tax effects of
differences between the financial statement and tax basis of assets and
liabilities.
Due to the change in control and the change in continuity of business,
there are no net operating loss carryforwards.
For the period May 1, 1997 to April 22, 1998, the Company was taxed under
sections of the federal income tax law, which provide that, in lieu of
corporation federal income taxes, the owners separately account for their
prorata shares of the Company's items of income, deduction, losses, and
credits. Therefore, these statements do not include any provision for
corporation federal and state income taxes for the period May 1, 1997 to
April 22, 1998. During the period from April 23, 1998 to April 30, 1998,
the Company was subject to corporate income taxes. However, the corporate
income tax effect for this period is immaterial to the financial statements
and no provision for income taxes is deemed necessary.
Comprehensive Income
The Company has no components of comprehensive income. Consequently, a
statement of comprehensive income is not required.
2. Cash Overdraft
The Company experienced a cash overdraft as of April 30, 1998. The
overdraft was funded by the Company's bank in accordance with a verbal
agreement between management and the bank to fund overdrafts. Management
has chosen this cash management technique, because it has pledged its stock
to collateralize the debt described in Note 3.
- --------------------------------------------------------------------------------
F-9
<PAGE>
3. Loan Payable - Stockholder
Loan payable to a minority stockholder, interest at 9%, due July 1998. This
$90,000 note is guaranteed by the majority stockholder, and the guarantee
is collateralized by all of the shares the majority stockholder owns of the
Company's stock. The pledged stock is in the hands of the noteholder.
4. Stockholders' Equity
The Company has entered into a stock subscription agreement for the
issuance of 2,450,000 shares of common stock for $245,000. The Company has
received confirmation that the proceeds have been deposited with an escrow
agent. As of April 30, 1998, however, the stock certificate had not been
issued, because no new share certificates were available bearing the new
corporate name.
5. Commitments and Contingencies
Substantially all of the Company's inventory is located at locations that
are not owned by the Company. The Company does not have insurance coverage
on the inventory at these locations. The Company has obtained
representation from the management of these locations that insurance
coverage is being maintained on its inventory.
The Company has not made an assessment of the Year 2000 issue that may
affect the computer applications of its operations and those of its vendors
and customers. The Company plans to make an assessment of the impact of the
Year 2000 issue in fiscal year 1998. The operations of the Company are not
expected to be materially affected by this issue.
As part of the acquisition described in the Nature of Business,
Organization, and Basis of Presentation footnote, the Company is required
to issue approximately 12,700,000 additional shares to PDAP, Ltd., LLC. It
is expected that those shares will be issued by April 30, 1999.
Management intends to have the Company's stockholders approve a 10-1
reverse stock split at its annual meeting in July 1998.
- --------------------------------------------------------------------------------
F-10
<PAGE>
6. Operating Leases
The Company leases certain retail and storage facilities under operating
leases that expire from 1999 through 2002. Future minimum lease payments
under noncancelable operating leases are:
1999 $ 124,408
2000 124,408
2001 124,408
2002 15,125
---------
$ 388,349
=========
Total rental expense for operating leases approximated $51,000 in 1998.
7. Income (Loss) Per Share
As of April 30, 1998, the earnings per share and the fully diluted earnings
per share are $.01 and $.00, respectively.
8. Disclosure About Fair Value of Financial Instruments
The Company's financial instruments consist of cash, short-term trade
receivables and payables, and short-term debt. The carrying value of all
instruments approximates their fair value.
9. Subsequent Events
In June 1998, the Company opened a second art gallery in Los Angeles,
California which will operate substantially in the same manner as the
gallery in Palm Desert.
The Company has letters of intent to acquire art galleries in various
regions of the United States.
- --------------------------------------------------------------------------------
F-11
<PAGE>
Item 8 Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
None.
Part III
Item 9 Directors and Executive Officers of the Registrant
The following provides certain information concerning the directors and
executive officers of the Company as of the filing of this Form 10-KSB.
Age Position
--- --------
Hugh G. Pike 60 Chairman of the Board
President and Treasurer
Allan S. Wolfe 66 Director
Jurg Mullhaupt 50 Director
John Anderholt 55 Secretary(2)
HUGH G. PIKE, age 60, is the President, Treasurer, and Chairman of the Board of
Directors. He has served in these capacities since April 22, 1998, the date upon
which the Company purchased the assets of Palm Desert Art Publishers, Ltd., LLC,
which owned and operated an art gallery and owned the exclusive right to publish
the artwork of several contemporary artists and which is now the Company's
majority shareholder. Mr. Pike had been the President of Palm Desert Art
Publishers, Ltd. LLC since April 1997. For approximately ten years prior to that
time, Mr. Pike provided consulting services to the real estate industry. Mr.
Pike is the father-in-law to Mr. Mullhaupt who is also a Director of the
Company.
ALLAN S. WOLFE, age 66, is the President of Dataware Technologies, LLC, a New
Hampshire limited liability company which provides software data to the
insurance industry. From November 1988 to April 22, 1998, Mr. Wolfe served as
President, Treasurer and Chairman of the Board and was a majority shareholder of
the Company. Prior to that time, Mr. Wolfe had been Chief Executive Officer of
Pathfinder Data Group, Inc., a company which provided insurance replacement and
software data. From 1980 to 1984, Mr. Wolfe was Vice President of Audio of New
England, Inc., a corporation engaged in the same business as Pathfinder, as well
as the retailing of hi-fi equipment to the public.
JURG MULLHAUPT, age 50, has been a Director of the Company since April 22,
- --------
(2) From April 22, 1998 to June 12, 1998, Sandra Mitchell had been serving
as Secretary of the company. On June 12, 1998 Ms. Mitchell resigned as Secretary
and Mr. Anderholt was appointed to fill the vacancy.
12
<PAGE>
1998. Mr. Mullhaupt is President and Chief Executive Officer of First National
Environmental Technologies Inc., a privately-held company which provides
equipment and consulting services to municipalities in connection with their
underground infrastructure for the delivery of water. Mr. Mullhaupt is the
son-in-law of Mr. Pike, the Company's President and Chairman of the Board.
JOHN ANDERHOLT, age 55, has been Secretary of the Company since June 12, 1998.
Mr. Anderholt is an attorney in private practice with the firm Anderholt &
Bonnheim in Indian Wells, California. Mr. Anderhold has been a general civil
attorney for 30 years practicing primarily in the areas of corporate and real
estate law. He is admitted to practice before the United States Supreme Court,
and the California Bar, and he is a member of the Los Angeles County, Riverside
County, and Desert Bar Associations.
Item 10 Executive Compensation
The following table shows all remuneration in excess of $100,000 paid by the
Company during the fiscal year ending April 30, 1998, to all directors and
officers as a group:
<TABLE>
<CAPTION>
Cash and Cash
Equivalent Forms
of Remuneration
---------------
Securities or
Property
Name of Insurance
Individual Salaries, Fees Benefits or Aggregate
or Number Capacities Directors Fees Reimbursement Contingent
of Persons in which Commissions & Personal Form of
in Group Served Bonuses Benefits Remuneration
- -------- ------ ------- -------- ------------
<S> <C> <C> <C> <C>
All Directors
and Officers
as a Group
(pre-4/22/98) NONE NONE NONE
All Directors
and Officers
as a Group
(post-4/22/98) NONE NONE NONE
</TABLE>
Item 11 Security Ownership of Certain Beneficial Owners and Management
The following table sets forth information with respect to each person known to
the management of the Company who are the beneficial owners of more than five
percent of the common stock of the Company, that which is owned by each director
and officer of the Company and that which is owned by all directors and officers
of the Company as a group, 4 persons, as of June 9, 1998.
13
<PAGE>
Name and Address Amount and Nature Percent
of Beneficial Owner of Beneficial Ownership of Class
- ------------------- ----------------------- --------
Non-Management
Beneficial Owners:
Palm Desert Art 20,083,918 80.34%
Publishers, Ltd.(1)
39-725 Garand Lane,
Suite J
Palm Desert, CA
Sencorp Ltd.(2) 2,450,000 9.80
National Westminster
Bank Building
57/63 Line Wall Road
P. O. Box 199
Gibraltar
Directors/Officers:
Hugh G. Pike 0 0.00%
Allan S. Wolfe(3) 1,313,658 5.25%
Jurg Mullhaupt 0 0.00%
Sandy Mitchell 0 0.00%
Directors/Officers
as a Group: 1,313,658 5.25%
(1) As reported in Schedule 13-D relating to events as of April 22, 1998, filed
with the Securities and Exchange Commission, 20,083,918 shares of the
company are held by Palm Desert Art Publishers, Ltd., LLC, ("PDAP") of
which Elaine Mullhaupt is a member. Ms. Mullhaupt is the daughter of Hugh
G. Pike and is the wife of Jurg Mullhaupt. Mr. Pike is the President and
Director of the Company and is President of PDAP. Mr. Mullhaupt is a
director of the Company. PDAP has sole voting and dispositive power with
respect to all shares held by PDAP.
(2) As reported in Schedule 13-D relating to events as of April 24, 1998 filed
with the Securities and Exchange Commission, 2,450,000 shares of the
Company's Common Stock is held by Sencorp Ltd., a privately-held trading
company which has sole voting and dispositive power over all shares held.
(3) Allan S. Wolfe holds 1,312,658 shares of the Company's Common Stock. His
wife, Betty L. Wolfe, a former director and officer of the company, holds
1,000 shares. In the aggregate, they have voting and dispositive power over
1,313,658 shares held by them, respectively.
14
<PAGE>
Item 12 Certain Relationships and Related Transactions
On April 22, 1998, the Company sold to Allan S. Wolfe (a shareholder, director,
former officer and creditor of the Company) certain software assets of the
Company together with a promissory note from the Company in favor of Mr. Wolfe
in the amount of $90,000 in exchange for which Mr. Wolfe agreed to discharge the
Company's debt to him in the amount of $184,000. To induce Mr. Wolfe to accept
the Company's promissory note, the Company's majority shareholder, Palm Desert
Art Publishers, Ltd., LLC, agreed to guaranty payment of the note and pledged to
Mr. Wolfe as security for the guaranty all shares of the capital stock of the
Company which Palm Desert Art Publishers, Ltd., LLC had acquired under the Asset
Purchase and Subscription Agreement between itself and the Company.
Part IV
Item 13 Exhibits and Reports on Form 8-K
(a) (1) The following financial statements and supplementary data are included
in Part II, Item 7: Page
----
Report of Independent Certified Public Accountants F-1
Financial Statements:
Balance Sheet, April 30, 1998 F-2
Statement of Income Year Ended
April 30, 1998 F-4
Statement of Changes in Stockholders' Equity
Year Ended April 30, 1998 F-5
Statement of Cash Flows, Year Ended
April 30, 1998 F-6
Notes to Consolidated Financial Statements F-7
(2) Schedules included herein:
None. All other schedules are omitted because they are not
applicable or the required information is shown in the financial
statements or notes thereto.
(3) Exhibits included herein:
15
<PAGE>
3.1 Certificate of Incorporation as filed with the Secretary of State
of Delaware on November 4, 1988, filed with the Registrant's
Registration Statement Form 10 on April 17, 1989, (File No. 0-
17623) and by this reference incorporated herein and made a part
hereof.
3.2 Certificate for Renewal and Revival of Charter as filed with the
Secretary of State of Delaware on March 19, 1998.
3.3 Amendment to Certificate of Incorporation as filed with the Secretary
of State of Delaware on March 19, 1998.
3.4 Amendment to Certificate of Incorporation as filed with the Secretary
of State of Delaware on July 17, 1998.
3.5 By-Laws of the Registrant as filed with the Registrant's
Registration Statement Form 10 on April 17, 1989, (File No. 0-
17623) and by this reference incorporated herein and made a part
hereof.
21. Subsidiaries of Registrant
22. Notice of and Proxy Materials relating to Annual Meeting of
Shareholders held July 14, 1998, filed with Form 14A on
June 24, 1998 (File No. 0-172623) and by this reference
incorporated herein and made a part hereof.
27. Financial Data Schedule
99. Additional Exhibits
99.1 Asset Purchase and Subscription Agreement dated February 5, 1998
99.2 Asset Purchase Agreement dated February 5, 1998
99.3 Promissory Note dated April 22, 1998
99.4 Guaranty dated April 22, 1998
99.5 Stock Pledge Agreement dated April 22, 1998
99.6 Offshore Subscription Agreement
(b) Reports on Form 8-K:
The following reports on Form 8-K were filed by the Registrant during
the year covered by this report:
May 7, 1998 Acquisition of Assets of Palm Desert Art Publishers,
Ltd., LLC and Sale of Software to Allan Wolfe
July 7, 1998 Amendment to above Form 8-K to include financial
information of Palm Desert Art Publishers, Ltd., LLC
(c) Copies of Exhibits 3.2 - 3.4, 21, 27 and 99.1 - 99.6 are attached hereto.
Exhibits 3.1 and 3.5 are incorporated by reference as described in Item
14(a)(3).
(d) Not applicable.
16
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, Palm Desert Art, Inc. has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
PALM DESERT ART, INC.
By: /s/ Hugh G. Pike
-----------------------------
Hugh G. Pike
President
(Duly Authorized Officer)
(Principal Financial Officer)
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:
By: /s/ Hugh G. Pike
------------------------------------------
Hugh G. Pike, President, Treasurer
and Director
By: /s/ Jurg Mullhaupt
------------------------------------------
Jurg Mullhaupt, Director
By: /s/ Allan S. Wolfe
------------------------------------------
Allan S. Wolfe, Director
Dated: August 13, 1998
17
STATE OF DELAWARE
CERTIFICATE FOR RENEWAL
AND REVIVAL OF CHARTER
PALM DESERT ART, INC., formerly known as DATABASE TECHNOLOGIES INC., a
corporation organized under the laws of Delaware, the charter of which was
voided for nonpayment of taxes, now desires to procure a restoration, renewal
and revival of its charter, and hereby certificates as follows:
1. The name of this corporation is PALM DESERT ART, INC., formerly known
as DATABASE TECHNOLOGIES INC.
2. Its registered office in the State of Delaware is located at 1209
Orange Street, City of Wilmington, Zip Code 19801, County of New
Castle, the name and address of its registered agent is The
Corporation Trust Company.
3. The date of filing of the original Certificate of Incorporation in
Delaware was November 4, 1988.
4. The date when restoration, renewal, and revival of the charter of this
company is to commence is the 29th day of February, 1992, same being
prior to the date of the expiration of the charter. This renewal of
the charter of this corporation is to be perpetual.
5. This corporation was duly organized and carried on the business
authorized by its charter until the 1st day of March, A.D. 1992, at
which time its charter became inoperative and void for non-payment of
taxes and this certificate for renewal and revival is filed by
authority of the duly elected directors of the corporation in
accordance with the laws of the State of Delaware.
IN TESTIMONY WHEREOF, and in compliance with the provisions of Section 312
of the General Corporation Law of the State of Delaware, as amended, providing
for the renewal, extension and restoration of charters, Allan S. Wolfe,
President, the last and acting authorized officer hereunto set his/her hand to
this certificate this 19th day of March, 1998.
By: ss: Allan S. Wolfe
--------------------------
Authorized Officer
Name: Allan S. Wolfe
Title: President
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
OF
PALM DESERT ART, INC.
* * * * *
PALM DESERT ART, INC., a corporation organized and existing under and by virtue
of the General Corporation Law of the State of Delaware ( the "Corporation"),
DOES HEREBY CERTIFY:
FIRST: The Board of Directors of the Corporation, by the unanimous written
consent of its members, filed with the minutes of the board, duly adopted
resolutions setting forth a proposed amendment to the Certificate of
Incorporation of the Corporation, declaring said amendment to be advisable and
calling a meeting of the stockholders of said corporation for consideration
thereof. The resolution setting forth the proposed amendment is as follows:
RESOLVED, the Certificate of Incorporation of this corporation be
amended by changing the fourth Article thereof so that, as amended, said
Article shall be and read as follows:
"4. The total number of shares of all classes of stock which the
corporation shall have the authority to issue is twenty-five million
(25,000,000), and the par value of each of such shares is One Mil
($.001) amounting in the aggregate to Twenty-five Thousand Dollars
($25,000.00)."
SECOND: That thereafter, pursuant to resolution of its Board of Directors,
the annual meeting of the stockholders of said corporation was duly called and
held, at which meeting the necessary number of shares as required by statute
were voted in favor of the amendment.
THIRD: That said amendment was duly adopted in accordance with the
provisions of Section 242 of the General Corporation Law of the State of
Delaware.
<PAGE>
IN WITNESS WHEREOF, the Corporation has caused this Certificate to be
signed by ALLAN S. WOLFE, its President, and attested by Betty L. Wolfe, its
Secretary, this 19 day of March, 1998
PALM DESERT ART, INC.
By: ss: Allan S. Wolfe
-----------------------------
Allan S. Wolfe, President
ATTEST:
By: ss: Betty L. Wolfe
-----------------------------
Betty L. Wolfe, Secretary
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
OF
PALM DESERT ART, INC.
* * * * *
PALM DESERT ART, INC., a corporation organized and existing under and by
virtue of the General Corporation Law of the State of Delaware (the
"Corporation", DOES HEREBY CERTIFY:
FIRST: The Board of Directors of the Corporation, by the unanimous written
consent of its members, filed with the minutes of the board, duly adopted
resolutions proposing an amendment to the Certificate of Incorporation of the
Corporation, declaring said resolution to be advisable and calling a meeting of
the stockholders of said corporation for consideration thereof.
The resolution to be considered by the stockholders is as follows:
RESOLVED, the Board of Directors is hereby authorized to
take any and all action necessary to effect a 10-for-1
reverse stock split of the Company's $.001 par value Common
Stock from 25,000,000 issued and outstanding shares to
2,500,000.
SECOND: That thereafter, pursuant to resolution of its Board of Directors,
the annual meeting of stockholders of said corporation was duly called and held,
at which meeting the necessary number of shares as required by statute were
voted in favor of the resolution.
<PAGE>
THIRD: That said resolution was duly adopted in accordance with the
provisions of Section 242 of the General Corporation Law of the State of
Delaware.
FOURTH: That the exact text of Article FOURTH of the Certificate of
Incorporation of the Corporation is now as follows:
"4. The total number of shares of all classes of stock which
the corporation shall have the authority to issue is twenty-five
million (25,000,000), and the par value of each of such shares is
One Mil ($.001) amount in the aggregate to Twenty-Five Thousand
Dollars ($25,000.00). The Board of Directors is hereby authorized
to take any and all action necessary to effect a 10-for-1 reverse
stock split of the Company's $.001 par value Common Stock from
25,000,000 issued and outstanding shares to 2,500,000."
FIFTH: That this amendment was adopted as of July 14, 1998.
I, the UNDERSIGNED, being the president of the Corporation herein, do make
this Certificate, hereby declaring and certifying that this is the act and deed
of the Corporation and the facts herein stated are true, and accordingly have
hereunto set my hand this 15th day of July, 1998.
PALM DESERT ART, INC.
By: /s/ Hugh G. Pike
--------------------------------
Hugh G. Pike, President
Sworn to and subscribed before
me this 15th day of July, 1998.
/s/ David D. Welty
- -------------------------------------
Notary Public
Exhibit 21
SUBSIDIARIES OF REGISTRANT
The following is a list of the subsidiaries of Registrant and their status as of
the filing of this report:
R. M. & M. Acquisitions, Inc., a Delaware corporation was formed in July
1998. The subsidiary was formed for the purpose of merging with R M & M
Framemakers, Inc., a New York corporation, and is the surviving corporation of
that merger.
ASSET PURCHASE AND SUBSCRIPTION AGREEMENT
THIS ASSET PURCHASE AND SUBSCRIPTION AGREEMENT dated the 5th day of
February 1998, by and between Database Technologies, Inc., a Delaware
corporation, ("Database") and Palm Desert Art Publishers, Ltd., a California
corporation, ("Palm Desert"),
WITNESSETH:
WHEREAS, Palm Desert is a privately-held corporation engaged in the
business of owning contracts with artists who grant it the right to reproduce
and sell their artwork,
WHEREAS, Palm Desert is committed to acquiring privately owned and operated
art framing businesses;
WHEREAS, Palm Desert believes that the development of a public market for
its securities may further the growth and expansion of its business;
WHEREAS, the securities of Database are publicly held and traded through
the facilities of the NASD's OTC Bulletin Board; and
WHEREAS, Palm Desert desires to cause its assets to be acquired by Database
in exchange for a controlling interest in the securities of Database.
NOW, THEREFORE, in consideration of their respective promises and
undertakings herein contained, the parties hereto, each intending to be legally
bound hereby, do hereby covenant and agree as follows:
ARTICLE I
AGREEMENTS TO TRANSFER AND ACQUIRE;
CONSIDERATION; CLOSING
ss.1.1. Agreement to Transfer. On the Closing Date (as defined in ss.1.4)
Palm Desert shall sell, convey, transfer, assign, and deliver to Database, and
Database shall acquire and accept, substantially all of the assets of Palm
Desert, both real and personal, including, without limitation, Palm Desert's
furniture, fixtures, business machines, inventories, supplies, semi-finished
products, products under development, trademarks, licenses, copyrights, trade
names, leasehold interests, options to purchase real or personal property,
rights under contracts, notes receivable, securities, franchises, claims, choses
in action, permits or licenses to conduct the business of Palm Desert as now
carried on, such business as a going concern and its good will, subject to no
mortgages, pledges, liens, encumbrances, title retention or other security
agreements or arrangements or charges of any kind whatsoever, but excepting:
<PAGE>
(a) Palm Desert's minute book, stock transfer ledger and other
organizational or corporate records and any document or record which Palm
Desert is required by law to retain in its possession;
(b) all cash on hand or in banks in excess of the sum of $90,000 (all
of the foregoing being referred to herein as the "Assets to be Acquired");
and
(c) any property or asset of Palm Desert whose sale or assignment or
attempted sale or assignment hereunder without the consent of another
person would constitute a breach of any agreement or commitment to which
Palm Desert is a party or by which it may be bound, if the consent of such
person shall not have been obtained prior to the Closing Date; provided,
however, that in such event, such property or asset or the proceeds thereof
shall be held and/or received by Palm Desert for the benefit of Database
and that Database may act as Palm Desert's agent in order to obtain for
Database the benefits flowing from ownership of such property or asset.
ss.1.2. Agreement to Acquire; Consideration. On the Closing Date, Database
shall acquire the Assets to be Acquired in consideration of 32,763,661 shares
(the "Shares") of the common stock, par value $.001 per share, of Database (the
"Common Stock"). On the Closing Date, Database shall deliver 20,083,918 of the
Shares to Palm Desert, and shall deliver the remaining 12,679,743 Shares within
90 days of the Closing Date. The Shares, when delivered, shall have been duly
and validly issued and shall be fully-paid and non-assessable.
ss.1.3. No Liabilities Assumed. Database shall assume none of the
liabilities of Palm Desert, whether absolute, accrued, contingent or otherwise.
ss.1.4. The Closing. The consummation of the sale, conveyance, transfer,
assignment and delivery to Database of the Assets to be Acquired shall
constitute the Closing. The Closing shall take place at the offices of Database
on February 8, 1998 (the "Closing Date") or at such other time or place as shall
be mutually agreed upon by Database and Palm Desert.
ss.1.5. Action to be Taken at and After Closing.
(a) At the Closing, Palm Desert shall deliver to Database:
(1) such bills of sale with covenants of general warranty and
such other good and sufficient instruments of assignment, transfer or
conveyance as shall be necessary or appropriate to vest in or confirm
to Database good and marketable title to all properties and assets
included in the Assets to be Acquired, subject to
<PAGE>
no mortgage, pledge, lien, encumbrance, conditional sale agreement,
title retention or other security agreement or arrangement or charge
of any kind whatsoever;
(2) actual possession and operating control of the Assets to be
Acquired;
(3) originals or, if unavailable, copies of all Palm Desert's
books, records, documents and files, together with all other data
relating to the Assets to be Acquired (with the same to remain in the
custody of Database for not less than two years and thereafter in
accordance with its usual business practice, subject to access thereto
by Palm Desert at any reasonable time upon reasonable notice);
(4) executed copies of the consents referred to in ss.ss.2.7 and
4.3 hereof;
(5) all such other deeds, endorsements, assignments and other
instruments as are, in the opinion of Database's counsel, reasonably
necessary to vest in Database good and marketable title to the Assets
to be Acquired and
(6) the certificates and opinions of counsel contemplated by
ss.ss.8.6 and 8.7.
(b) From time to time at the request of Database, whether at or after
the Closing and without further consideration, Palm Desert at its expense
shall execute and deliver to Database such further instruments of sale,
conveyance, transfer, assignment and confirmation and take such other
action as Database may reasonably request in order more effectively to
sell, convey, transfer, vest and confirm in Database any of the Assets to
be Acquired.
(c) At the Closing, Database shall deliver to Palm Desert:
(1) Duly authorized and executed certificates evidencing the
Shares or irrevocable instructions to the Company's transfer agent
directing that such certificates be issued;
(2) the written resignations of all officers and directors of
Database other than Allan Wolfe and written instruments terminating
the employment of all Database employees;
(3) executed copies of the consents referred to in ss.ss. 3.8 and
5.4 hereof, and
<PAGE>
(4) the certificates and opinions of counsel contemplated by
ss.ss. 7.6 and 7.7.
(d) Immediately following the Closing, Allan Wolfe, as the sole
remaining director of Database, shall elect such persons as Palm Desert
shall designate as officers and directors of Database.
ss.1.6. Termination and Abandonment. The transactions contemplated herein
may be terminated or abandoned at any time prior to, but not after, the Closing
by mutual consent of Database and Palm Desert.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF PALM DESERT
Palm Desert represents and warrants to Database as follows:
ss.2.1. Incorporation; Corporate Power. Palm Desert is a corporation duly
organized, validly existing and in good standing under the laws of the State of
California. Palm Desert has full power and authority (corporate and other) to
own and lease its properties and assets and to conduct its business as and where
such properties and assets are now owned or leased and such business is now
conducted. The character of the properties and assets now owned and leased by
Palm Desert and the nature of the business now conducted by it do not make it
necessary for Palm Desert to be licensed or qualified to do business as a
foreign corporation in any jurisdiction.
ss.2.2. Due Authorization of Agreement; No Conflict With Other Instruments.
Palm Desert has full power and authority and has taken all necessary and proper
action to authorize the execution and delivery of this Agreement, the
consummation of the transactions contemplated hereby and the performance of all
terms and conditions hereof to be performed by Palm Desert. This Agreement
constitutes the valid and legally binding obligation of Palm Desert and is
enforceable against it in accordance with its terms. The execution and delivery
of this Agreement, the consummation of the transactions contemplated hereby, and
the fulfillment of, and compliance with, the terms and provisions hereof do not
and will not (i) violate any provision of law or administrative regulation or
any judicial or administrative order, award, judgment or decree applicable to
Palm Desert; (ii) conflict with, result in a breach of or constitute a default
under any of the terms, conditions or provisions of Palm Desert's Articles of
Incorporation or By-laws; (iii) conflict with, result in a breach of or
constitute a default under or accelerate or permit the acceleration of the
performance required by, any agreement or instrument to which Palm Desert is a
party or by which it is bound; (iv) result in the creation of any lien, charge,
or encumbrance upon any of the Assets to be Acquired under any such agreement or
<PAGE>
instrument; or (v) terminate or give any party thereto the right to terminate
any such agreement or instrument, except such breaches, defaults, liens,
charges, encumbrances, or rights of acceleration or termination as have been
consented to or waived by the other party or parties to such agreement or
instrument or by Database.
ss.2.3. Compliance with Law. To the best of Palm Desert's knowledge and
except as otherwise disclosed by Palm Desert in writing to Database, the
operations of Palm Desert have been conducted in substantial compliance with all
applicable laws, regulations and other requirements of all federal, state and
local governmental authorities, and of all states, municipalities and other
political subdivisions and agencies thereof, having jurisdiction over Palm
Desert, including, without limitation, all such laws, regulations and
requirements relating to consumer protection, equal opportunity, health,
occupational safety, pension and securities matters.
ss.2.4. Books and Records. The books of account, minute book, stock record
book, and other records of Palm Desert, all of which have been made available to
Database, are complete and correct and have been maintained in accordance with
sound business practices and the requirements of Section 13(b)(2) of the
Securities Exchange Act of 1934, as amended. The minute book of Palm Desert
contains accurate and complete records of all meetings held of, and corporate
action taken by, the stockholders and the Board of Directors of Palm Desert, and
no meeting of either of them has been held for which minutes have not been
prepared and are not contained in such minute book.
ss.2.5. Taxes. Palm Desert has duly filed all tax reports and returns
required to be filed by it and all such returns are true, correct and complete.
Palm Desert has duly paid all taxes and other charges due or claimed to be due
from it by federal, state, local or foreign taxing authorities (including,
without limitation, those due in respect of Palm Desert's properties, income,
franchises, licenses, sales or payrolls), except such taxes, if any, as are
being contested in good faith and as to which it has set aside adequate
reserves. There are no tax liens upon any of the Assets to be Acquired, except
liens for current taxes not yet due. Palm Desert has not given or been requested
to give any waiver or extension of any statute of limitations relating to the
payment of taxes. All taxes that Palm Desert is or was required by law to
withhold or collect have been duly withheld or collected and, to the extent
required, have been paid to the proper governmental authorities.
ss.2.6. Patents, Trademarks, Trademarks, Etc. No proceeding charging Palm
Desert with infringement of any patent, trademark or copyright has been filed or
is threatened to be filed. Palm Desert owns, or is licensed or otherwise has all
necessary rights to use, convey and transfer, free and clear of the claims of
others, all patents, trademarks, licenses, trade names, technology, trade
<PAGE>
secrets, copyrights, know-how, patterns, manufacturing processes, formulae and
customer lists constituting a part of the Assets to be Acquired and used in or
useful to the conduct of the business of Palm Desert as heretofore conducted.
2.7. Consents. Except as otherwise disclosed by Palm Desert in writing to
Database, no consent of any person is necessary to the consummation of the
transactions contemplated hereby, including, without limitation, consents from
parties to loans, contracts, licenses, leases or other agreements and consents
from governmental agencies, whether federal, state or local. Prior to the
Closing Date, Palm Desert will have obtained all such consents, and executed
counterpart copies of all consents other than those contemplated by ss.1.1(d)
above shall be delivered to Database at the Closing.
ss.2.8. Litigation. There is no action, suit, inquiry, proceeding or
investigation by or before any court or governmental or other regulatory or
administrative agency or commission pending or, to the best knowledge of Palm
Desert, threatened against or involving the business or operations of Palm
Desert, and Palm Desert does not know, or have any reason to know, of any valid
basis for any such action, inquiry, proceeding or investigation.
ss.2.9. Brokers and Finders. Excepting only Palm Desert's understandings
and agreements with Dowe & Dowe and A. Joseph Lussier, neither Palm Desert nor
any of its officers or directors has employed any broker or finder or incurred
any liability for any brokerage fees, commissions or finders' fees in connection
with the transactions contemplated by this Agreement.
ss.2.10. Palm Desert's Investment Representations and Warranties.
(a) Palm Desert acknowledges that Database is offering the Shares in
reliance upon the representations, warranties and other information set forth
herein by Palm Desert.
(b) Palm Desert represents that it has such knowledge and experience in
financial and business matters that it is capable of evaluating the merits and
risks of acquisition of the Shares and of making an informed investment decision
with respect thereto.
(c) Palm Desert represents that its financial condition is such that it is
able to bear all risks of (i) holding the Shares and (ii) losing its entire
investment in the Shares. Palm Desert represents and warrants that it is
acquiring the Shares for its own account, for investment and not with a view
towards any resale or other distribution thereof
(d) Palm Desert acknowledges its understanding (i) that the Shares have not
been registered under the Securities Act of 1933, as amended (the "Securities
Act") or any state securities act in reliance on an exemption for private
offerings, (ii) that there are
<PAGE>
substantial restrictions on the transfer of Shares under the Securities Act,
(iii) that it may not transfer the Shares unless it supplies Database with a
written opinion of counsel reasonably satisfactory to Database to the effect
that, or in the opinion of counsel for Database, such transfer complies with all
applicable federal and state securities laws, (iv) that a restrictive legend to
the foregoing effect shall be imprinted on each certificate evidencing the
Shares, (v) that Database has no obligation, nor does it intend, to cause the
Shares to be registered under the Securities Act or to take any action to comply
or assist Palm Desert to comply with any exemption under the Securities Act,
including but not limited to Rule 144 promulgated under the Securities Act and
(vi) that no securities commission or regulatory authority has approved, passed
upon, or endorsed the merits of the offer and sale of the Shares, nor shall any
such agency will do so.
ss.2.11. Full Disclosure. All the representations and warranties made by
Palm Desert herein or in any Schedule hereto, and all of the statements,
documents or other information pertaining to the transaction contemplated herein
made or given by Palm Desert, its agents or representatives are true and
complete, and do not omit any information required to make the statements and
information provided, in light of the transactions contemplated herein, true,
complete and non-misleading.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF DATABASE
Database represents and warrants to Palm Desert as follows:
ss.3.1. Incorporation; Corporate Power. Database is a corporation duly
organized, validly existing, and in good standing under the laws of the State of
Delaware. Database has full power and authority (corporate and other) to own and
lease its properties and assets and to conduct its business as and where such
properties and assets are now owned or leased and such business is now
conducted. The character of the properties and assets now owned and leased by
Database and the nature of the business now conducted by it do not make it
necessary for Database to be licensed or qualified to do business as a foreign
corporation in any jurisdiction.
ss.3.2. Due Authorization of Agreement; No Conflict With Other Instruments.
Database has full power and authority and has taken all necessary and proper
action to authorize the execution and delivery of this Agreement, the
consummation of the transactions contemplated hereby and the performance of all
terms and conditions hereof to be performed by Database. This Agreement
constitutes the valid and legally binding obligation of Database and is
enforceable against them in accordance with its terms. The execution and
delivery of this Agreement, the consummation of the transactions contemplated
hereby, and the fulfillment of, and compliance with, the terms and provisions
hereof do not and will not (i) violate any provision of law or administrative
regulation
<PAGE>
or any judicial or administrative order, award, judgment or decree applicable to
Database; (ii) conflict with, result in a breach of or constitute a default
under any of the terms, conditions or provisions of Database's Articles of
Incorporation or By-laws; (iii) conflict with, result in a breach of or
constitute a default under or accelerate or permit the acceleration of the
performance required by any agreement or instrument to which Database is a party
or by which it is bound; (iv) result in the creation of any lien, charge, or
encumbrance upon any of Database's assets under any such agreement or
instrument; or (v) terminate or give any party thereto the right to terminate
any such agreement or instrument, except a breach, default, lien, charge,
encumbrance, or right of acceleration or termination which has been consented to
or waived by the other party or parties to such agreement or instrument or by
Palm Desert.
ss.3.3. Compliance with Law. To the best of Database's knowledge and except
as otherwise disclosed by Database in writing to Palm Desert, the operations of
Database have been conducted in substantial compliance with all applicable laws,
regulations and other requirements of all federal, state and local governmental
authorities, and of all states, municipalities and other political subdivisions
and agencies thereof, having jurisdiction over Database, including, without
limitation, all such laws, regulations and requirements relating to consumer
protection, equal opportunity, health, occupational safety, pension and
securities matters.
ss.3.4. Capitalization. The authorized capitalization of Database consists
of 25,000,000 shares of Common Stock, of which 2,466,082 shares are now, and
immediately prior to closing shall be, issued and outstanding. All outstanding
shares of Common Stock have been authorized and validly issued and are fully
paid and nonassessable. Database is not a party to any agreement relating to the
issuance, sale or transfer of any shares of Common Stock. None of the
outstanding shares of Common Stock was issued in violation of the Securities Act
or any state securities law. Database has now, and will continue to have through
the Closing Date, not less than 350 registered holders of the shares of its
Common Stock.
ss.3.5. Financial Statements. Database has delivered to Palm Desert: (a)
audited its consolidated balance sheet as at April 30, 1997 (the "Balance
Sheet") and as at April 30, 1996 and 1995, and the related consolidated
statements of income, changes in stockholders' equity and cash flow for each of
the fiscal years then ended, together with the report thereon of its independent
certified public accountants, and (b) its unaudited consolidated balance sheet
at October 30, 1997 (the "Interim Balance Sheet") and the related unaudited
consolidated statements of income, changes in stockholders' equity, and cash
flow for the nine months then ended, including in each case the notes thereto.
Such financial statements and notes fairly present the financial condition and
the results of operations, changes in stockholders' equity, and cash
<PAGE>
flow of Database as at the respective dates of and for the periods referred to
in such financial statements, all in accordance with generally accepted
accounting principles consistently applied, subject, in the case of interim
financial statements, to normal recurring year-end adjustments and the absence
of notes.
ss.3.6. Books and Records. The books of account, minutebook, stock record
book, and other records of Database, all of which have been made available to
Palm Desert, are complete and correct and have been maintained in accordance
with sound business practices and the requirements of Section 13(b)(2) of the
Securities Exchange Act of 1934, as amended. The minute book of Database
contains accurate and complete records of all meetings held of, and corporate
action taken by, the stockholders and the Board of Directors of Database, and no
meeting of either of them has been held for which minutes have not been prepared
and are not contained in such minute book.
ss.3.7. Taxes. Database has duly filed all tax reports and returns required
to be filed by it and all such returns are true, correct and complete. Database
has duly paid all taxes and other charges due or claimed to be due from it by
federal, state, local or foreign taxing authorities (including, without
limitation, those due in respect of Database's properties, income, franchises,
licenses, sales or payrolls), except such taxes, if any, as are being contested
in good faith and as to which it has set aside adequate reserves. There are no
tax liens upon any of its assets, except liens for current taxes not yet due.
Database has not given or been requested to give any waiver or extension of any
statute of limitations relating to the payment of taxes. All taxes that Database
is or was required by law to withhold or collect have been duly withheld or
collected and, to the extent required, have been paid to the proper governmental
authorities.
ss.3.8. Consents. Except as otherwise disclosed by Database in writing to
Palm Desert, no consent of any person is necessary to the consummation of the
transactions contemplated hereby, including, without limitation, consents from
parties to loans, contracts, licenses, leases or other agreements and consents
from governmental agencies, whether federal, state or local. Prior to the
Closing Date, Database will have obtained all such consents, and executed
counterpart copies of all such consents shall be delivered to Palm Desert at the
Closing.
ss.3.9. Litigation. There is no action, suit, inquiry, proceeding or
investigation by or before any court or governmental or other regulatory or
administrative agency or commission pending or, to the best knowledge of
Database, threatened against or involving the business or operations of
Database, and Database does not know, or have any reason to know, of any valid
basis for any such action, inquiry, proceeding or investigation.
ss.3.10. OTC Bulletin Board Service. The Common Stock meets all eligibility
requirements for quotation through the OTC Bulletin
<PAGE>
Board Service of the National Association of Securities Dealers, Inc. Trading in
the shares has not been halted.
ss.3.11. SEC Filings. Database is required by Section 15(d) of the
Securities Exchange Act of 1934, as amended, to file annual and periodic reports
with the Securities and Exchange Commission pursuant to Section 13 of said Act.
Database has filed all reports required of it.
ss.3.12. Brokers and Finders. Excepting only Database's understandings and
agreements with Arcadia Ventures, neither Database nor any of its officers or
directors has employed any broker or finder or incurred any liability for any
brokerage fees, commissions or finders' fees in connection with the transactions
contemplated by this Agreement.
ss.3.13. Full Disclosure. All the representations and warranties made by
Database herein or in any Schedule hereto, and all of the statements, documents
or other information pertaining to the transaction contemplated herein made or
given by Database, its agents or representatives are true and complete, and do
not omit any information required to make the statements and information
provided, in light of the transactions contemplated herein, true, complete and
non-misleading.
ss.3.14. No Material Adverse Change. Since the date of the Interim Balance
Sheet, there has not been any material adverse change in the business,
operations, properties, prospects, assets, or condition of Database, and no
event has occurred or circumstance exists that may result in such a material
adverse change.
ARTICLE IV
COVENANTS OF PALM DESERT
Palm Desert hereby covenants and agrees with Database:
ss.4.1. Access and Investigation. Between the date of this Agreement and
the Closing Date, Palm Desert will (i) afford Database full and free access to
Palm Desert's personnel, properties, contracts, books and records, and other
documents and data, and (ii) furnish Database with copies of all such contracts,
books and records, and other existing documents and data as Database may
reasonably request.
ss.4.2. Conduct of Palm Desert's Business Pending Closing. Between the date
of this Agreement and the Closing Date, Palm Desert will: (i) conduct its
business only in the ordinary course; (ii) use its best efforts to preserve
intact its current business organization; (iii) maintain its corporate
existence, and (iv) refrain from taking or permitting to be taken any action not
contemplated by this Agreement that is inconsistent with the representations and
warranties given by Palm Desert herein.
<PAGE>
ss.4.3. Consents. Subject to the provisions of ss. 1.1(d), Palm Desert
shall use its best efforts to obtain at the earliest practicable date and prior
to the Closing all consents necessary to the consummation of the transactions
contemplated hereby and shall deliver each such consent to Database promptly
after it is obtained.
ss.4.4. Covenant to Satisfy Conditions. Palm Desert will use its best
efforts to insure that the conditions set forth in Article VIII hereof are
satisfied, insofar as such matters are within its control.
ARTICLE V
COVENANTS OF DATABASE
Database hereby covenants and agrees with Palm Desert:
ss.5.1. Access and Investigation. Between the date of this Agreement and
the Closing Date, Database will (i) afford Palm Desert full and free access to
Database's personnel, properties, contracts, books and records, and other
documents and data, and (ii) furnish Palm Desert with copies of all such
contracts, books and records, and other existing documents and data as Palm
Desert may reasonably request.
ss.5.2. Conduct of Database's Business Pending Closing. Between the date of
this Agreement and the Closing Date, Database will: (i) conduct its business
only in the ordinary course; (ii) use its best efforts to preserve intact its
current business organization; (iii) maintain its corporate existence, and (iv)
refrain from taking or permitting to be taken any action not contemplated by
this Agreement that is inconsistent with the representations and warranties
given by Database herein.
ss.5.3. Employees. Database agrees to offer employment to all existing
employees of Palm Desert. Database further agrees to apply all payments for
accrued wages, salaries and employee benefits which it may receive from Palm
Desert at the Closing to the payment of the obligations represented by such
payments.
ss.5.4. Consents. Database shall use its best efforts to obtain at the
earliest practicable date and prior to the Closing all consents necessary to the
consummation of the transactions contemplated hereby and shall deliver each such
consent to Palm Desert promptly after it is obtained.
ss.5.5. Covenant to Satisfy Conditions. Database will use its best efforts
to insure that the conditions set forth in Article VII hereof are satisfied,
insofar as such matters are within its control.
<PAGE>
ARTICLE VI
COVENANTS OF ALLAN WOLFE
Wolfe hereby covenants and agrees with Palm Desert and Database as follows:
ss.6.1. Proxy. Wolfe agrees to vote, at a special meeting of the
shareholders of Database to be held as soon as practicable following the
consummation of the transactions contemplated hereby, all shares of Database
common stock that he beneficially owns and has the right to vote in favor of
each of the following proposals:
(a) The change of the Database's corporate name to the name "Palm
Desert Art Publishers" or such other name as may be proposed by Database's
board of directors (post-closing);
(b) To approve a reverse split of the Common Stock;
(c) To elect any nominees of Palm Desert to Database's board of
directors; and
(d) To ratify the replacement of the Database's independent auditor if
any
ARTICLE VII
CONDITIONS TO OBLIGATIONS OF PALM DESERT
Each and every obligation of Palm Desert under this Agreement to be
performed on or before the Closing shall be subject to the satisfaction, on or
before the Closing, of each of the following conditions, unless waived in
writing by Palm Desert:
ss.7.1. Related Agreement. Database and Allan Wolfe shall have entered into
a certain Asset Purchase Agreement of even date herewith, by which agreement
Wolfe shall have agreed to purchase the so-called software assets of Database
ss.7.2. Representations and Warranties True. The representations and
warranties of Allan Wolfe and the representations and warranties contained in
Article III and each other document delivered or to be delivered by Database to
Palm Desert pursuant hereto or in connection with the transactions contemplated
hereby shall be true, complete and accurate in all material respects as of the
date when made and at and as of the Closing as though such representations and
warranties were made at and as of such date, except for changes expressly
permitted or contemplated by the terms of this Agreement.
ss.7.3. Performance. Database shall have performed and complied with all
agreements, obligations and conditions required by this Agreement to be
performed or complied with by it on or prior to the Closing.
<PAGE>
ss.7.4. Consents. All consents from third parties and government agencies
required to consummate the transactions contemplated hereby shall have been
obtained. In the event that Database, after having used its best efforts to do
so, is unable to obtain prior to the Closing Date all required consents,
Database shall, if acceptable to Palm Desert, continue to use its best efforts
to obtain such consents and shall indemnify Palm Desert for the loss of any
economic benefit which Palm Desert may suffer as a result of Database's failure
to obtain any required consent.
ss.7.5. No Government Proceeding or Litigation. No suit, action,
investigation, inquiry or other proceeding by any governmental body or other
person or legal or administrative proceeding shall have been instituted or
threatened which questions the validity or legality of the transactions
contemplated hereby.
ss.7.6. Certificates. Palm Desert shall have received such certificates of
public officials and of the officers of Database evidencing the accuracy of
Database's representations and warranties, its compliance with the covenants set
forth in this Article VII and such other matters as Palm Desert may reasonably
request.
ss.7.7. Opinion of Counsel. Palm Desert shall have received the opinion of
McLane, Graf, Raulerson & Middleton, Professional Association, special counsel
to Database with respect to the matters addressed in, and in substantially the
form of, paragraphs 1 - 7 of Exhibit A hereto, but subject to such
qualifications and limitations as are reasonably acceptable to Palm Desert.
ARTICLE VIII
CONDITIONS TO OBLIGATIONS OF DATABASE
Each and every obligation of Database under this Agreement to be performed
on or before the Closing shall be subject to the satisfaction, on or before the
Closing, of each of the following conditions, unless waived in writing by
Database:
ss.8.1. Related Agreement. Palm Desert shall have entered into a certain
Asset Purchase Agreement of even date herewith, by which agreement Allan Wolfe
shall have agreed to purchase the so- called software assets of Database
ss.8.2. Representations and Warranties True. The representations and
warranties contained in Article II and each other document delivered or to be
delivered by Palm Desert to Database pursuant hereto or in connection with the
transactions contemplated hereby shall be true, complete and accurate in all
material respects as of the date when made and at and as of the Closing as
though such representations and warranties were made at and as of such date,
except for changes expressly permitted or contemplated by the terms of this
Agreement.
<PAGE>
ss.8.3. Performance. Palm Desert shall have performed and complied with all
agreements, obligations and conditions required by this Agreement to be
performed or complied with by it on or prior to the Closing.
ss.8.4. Consents. All consents from third parties and government agencies
required to consummate the transactions contemplated hereby shall have been
obtained. In the event that Palm Desert, after having used its best efforts to
do so, is unable to obtain prior to the Closing Date all required consents, Palm
Desert shall, if acceptable to Database, continue to use its best efforts to
obtain such consents and shall indemnify Database for the loss of any economic
benefit which Database may suffer as a result of Palm Desert's failure to obtain
any required consent.
ss.8.5. No Government Proceeding or Litigation. No suit, action,
investigation, inquiry or other proceeding by any governmental body or other
person or legal or administrative proceeding shall have been instituted or
threatened which questions the validity or legality of the transactions
contemplated hereby.
ss.8.6. Certificates. Database shall have received such certificates of
public officials and the officers of Palm Desert evidencing the accuracy of Palm
Desert's representations and warranties, its compliance with the covenants set
forth in this Article VIII and such other matters as Database may reasonably
request.
ss.8.7. Opinion of Counsel. Database shall have received the opinion of
Dowe and Dowe, special counsel to Palm Desert with respect to the matters
addressed in, and in substantially the form of, paragraphs 1 - 4 and 7 of
Exhibit A hereto, but subject to such qualifications and limitations as are
reasonably acceptable to Database.
ARTICLE IX
MISCELLANEOUS PROVISIONS
ss.9.1. Entire Agreement. This Agreement constitutes the entire Agreement
between the parties hereto pertaining to the subject matter hereof and
supersedes all prior and contemporaneous agreements, understandings,
negotiations, and discussions, whether oral or written, of the parties, and
there are no warranties, representations, or other agreements between the
parties in connection with the subject matter hereof except as specifically set
forth herein. No supplement, modification, waiver, or termination of this
Agreement shall be binding unless executed in writing by the party to be bound
thereby. No waiver of any of the provisions of this Agreement shall be deemed or
shall constitute a waiver of any other provisions hereof (whether or not
similar), nor shall such waiver constitute a continuing waiver unless otherwise
expressly provided.
<PAGE>
ss.9.2. Survival of Warranties. The respective representations and
warranties of Palm Desert and Database contained herein or in any certificate or
other document delivered pursuant hereto shall survive the execution and
delivery of this Agreement and the consummation of the transactions contemplated
hereby.
ss.9.3. Waiver of Compliance. Any failure of Palm Desert, on the one hand,
or Database, on the other, to comply with any obligation, covenant, agreement or
condition herein may be expressly waived in writing by Database or Palm Desert,
respectively, but such waiver or failure to insist upon strict compliance with
such obligation, covenant, agreement or condition shall not operate as a waiver
of, or estoppel with respect to, any subsequent or other failure.
ss.9.4. Assignment. This Agreement and all of the provisions hereof shall
be binding upon and inure to the benefit of the parties hereto and their
respective successors and permitted assigns, but neither this Agreement nor any
of the rights, interests or obligations hereunder shall be assigned by any of
the parties hereto without the prior written consent of the other parties.
ss.9.5. Governing Law. This Agreement and the legal relations among the
parties hereto shall be governed by and construed in accordance with the laws of
the State of Delaware, without regard to its conflicts of law doctrine.
ss.9.6. Counterparts. This Agreement may be executed simultaneously in two
or more counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument.
ss.9.7. Headings. The headings of the sections and articles of this
Agreement are inserted for convenience only and shall not constitute a part
hereof or affect in any way the meaning or interpretation of this Agreement.
ss.9.8. Third Parties. Except as specifically set forth or referred to
herein, nothing herein expressed or implied is intended or shall be construed to
confer upon or give to any person other than the parties hereto and their
successors or assigns, any rights or remedies under or by reason of this
Agreement.
<PAGE>
IN WITNESS WHEREOF, the parties hereto, by their duly authorized officers,
have caused this Agreement to be duly executed and delivered on the day and year
first above written.
DATABASE TECHNOLOGIES, INC.
By: ss/Allan S. Wolfe
------------------------------------
Name: Alan Wolfe
Title: President
PALM DESERT ART PUBLISHERS, LTD.
By: ss/Hugh G. Pike
------------------------------------
Name: Hugh G. Pike
Title: President
ALLAN S. WOLFE
(With respect to obligations set
forth in Article VI only)
ss/Allan S. Wolfe
----------------------------------------
<PAGE>
Exhibit A
PROPOSED OPINION OF COUNSEL
1. The Company is a corporation duly incorporated, validly existing and in
good standing under the laws of the State of ____________________ , and has all
power and authority (corporate and other) necessary to own and lease its
properties and assets and carry on its business as presently conducted.
2. The Company has all necessary power and authority to enter into and to
perform its obligations under the Agreement. All corporate action required to be
taken by the Company in order to authorize the transactions contemplated by the
Agreement has been duly and validly taken. The Agreement has been duly and
validly executed and delivered by the Company and constitutes a valid and
legally binding agreement enforceable in accordance with its terms, subject to
the General Qualifications set forth in the American Bar Association Legal
Opinion Accord (1991) (the "Enforceability Qualification").
3. No authorization, approval, exemption or by any governmental or public
body or authority is required in connection with the authorization, execution,
delivery or performance of the terms of the Agreement by the Company, except
such authorizations, approvals, exemptions or consents as have been duly and
validly obtained or which, if not obtained, will not have a material adverse
effect on the financial condition or business of the Company or impair its
ability to perform its obligations under the Agreement.
4. Neither the execution and delivery of the the consummation of the
transactions contemplated therein nor compliance with the terms and provisions
thereof will conflict with or result in a breach of (i) any of the terms,
conditions or provisions of the Certificate of Incorporation or by-laws of the
Company as presently in effect, or (ii), to the best of our knowledge after only
such limited investigation [as is described above], any law, regulation, order,
writ, injunction or decree of any court or governmental instrumentality or
agency or of any agreement or instrument to which the Company is a party or by
which it is bound or to which it is subject, or constitute a default thereunder,
or result in the creation or imposition of any lien, charge or encumbrance upon
any of the property or assets of the Company.
5. The shares of Common Stock issuable pursuant to the Agreement, when and
as issued, sold against payment therefor and delivered in accordance with the
terms of the Agreement, will be duly authorized, validly issued, fully paid and
non-assessable.
6. In reliance upon the representations of [the Purchaser]
<PAGE>
contained in the Agreement [and in its investor questionnaire], and except as
otherwise disclosed in Exhibit _____________, the offer and sale to [the
Purchaser] of the shares of Common Stock in accordance with the Agreement are
(i) exempt from the registration requirements of Section 5 of the Securities Act
of 1933, as amended, (the "1933 Act") pursuant to the exemption contained in
Section _______ of the 1933 Act and [Regulation D promulgated thereunder,
assuming the timely filing of Form D with the Securities and Exchange Commission
and (ii) exempt from the registration requirements of Section _______ of the
[State] Securities Act.
7. To the best of our knowledge after only such limited investigation as is
described [above] and except as disclosed Exhibit _______ to the Agreement,
there is no action at law, suit in equity or other proceeding or investigation
in any court or by or before any other governmental or public authority or
agency or any arbitrator against or affecting, or threatened against, the
Company, which, if determined adversely, either individually or in the
aggregate, would have a material adverse effect on the financial condition or
business of the Company or impair the Company's ability to perform its
obligations under the Agreement.
ASSET PURCHASE AGREEMENT
THIS AGREEMENT is made this 5th day of February 1998, by and among DATABASE
TECHNOLOGIES, INC., a Delaware corporation ("Database"), PALM DESERT ART
PUBLISHERS, LTD., a California corporation ("Palm Desert") and ALLAN WOLFE of
Bedford, New Hampshire ("Wolfe") and,
WHEREAS, Database is presently controlled by Wolfe and engaged in the
business of developing and marketing computer software and Palm Desert is
engaged in the business of selling art work;
WHEREAS, to avail itself of the existing public market for Database's
securities, Palm Desert has agreed to sell all of its assets to Database in
exchange for a controlling interest in the securities of Database
WHEREAS, Database is indebted to Wolfe in the approximate amount of
$184,000 in respect of those debts, claims and liabilities identified on
Schedule A hereto (the "Indebtedness");
WHEREAS, Database desires to discharge its indebtedness to Wolfe by (i)
issuing to Wolfe its promissory note in the amount of $90,000 (the "Note") and
(ii) transferring to Wolfe, or his nominee, all tangible and intangible assets
associated with Database's software business, including, without limitation, all
those assets listed on Schedule B hereto (the "Software Assets"), subject to
certain of Database's liabilities;
WHEREAS, to induce Wolfe to accept Database's promissory note, Palm Desert
has agreed to execute and deliver to Wolfe its guaranty (the "Guaranty") of the
Note and to pledge to Wolfe all shares of the capital stock of Database that it
shall acquire (the "Shares") as security for the Guaranty;
NOW, THEREFORE, the parties hereto, in consideration of the premises set
forth herein and each intending to be legally bound hereby, do covenant and
agree as follows:
1. Agreement to Transfer. On the Closing Date (as defined below) Database
shall:
(i) sell, convey, transfer, assign, and deliver the Software Assets to
Wolfe, subject to no mortgages, pledges, liens, encumbrances, title
retention or other security agreements or arrangements or charges of any
kind whatsoever; and
(ii) deliver the Note to Wolfe.
2. Agreement to Acquire. On the Closing Date, Wolfe shall accept the Assets
and the Note and execute and deliver to Database such instrument evidencing the
discharge of the Indebtedness as Database shall reasonably request.
<PAGE>
3. Assumption of Liabilities. On the Closing Date, by an appropriate
written instrument or instruments satisfactory in form and substance to Database
and Palm Desert, Wolfe shall assume and agree to pay, perform and discharge
those certain debts, obligations and liabilities of Database set forth on the
Schedule of Assumed Liabilities attached hereto as Exhibit C (the "Assumed
Liabilities"). The Assumed Liabilities shall include all liabilities of Database
existing on the Closing Date other than the obligations of Database arising
under this Agreement and that certain Asset Purchase and Subscription Agreement
of even date herewith and the transactions contemplated by such agreements.
Wolfe shall not assume, pay or discharge any liability or obligation that is not
an Assumed Liability. Database's obligations to its transfer agent shall be
apportioned as of the Closing Date
4. The Closing. The consummation of the transactions contemplated hereby
shall constitute the Closing. The Closing shall take place on February 8, 1998
at the offices of Database immediately following the closing of Database's
purchase of Palm Desert's assets and the issuance to Palm Dessert of the Shares
or at such other time or place as shall be mutually agreed upon by the parties.
5. Documents to be Delivered at the Closing. At the Closing the following
documents or instruments shall be delivered, together with such other documents
as shall be necessary to consummate the transactions contemplated by this
Agreement.
(a) Database shall deliver, or cause to be delivered, to Wolfe:
(i) such bills of sale with covenants of general warranty and such
other good and sufficient instruments of assignment, transfer or conveyance
as shall be necessary or appropriate to vest in or confirm to Wolfe good
and marketable title to all properties and assets included in the Software
Assets;
(ii) actual possession and operating control of the Software Assets;
(iii) originals or, if unavailable, copies of all Database's books,
records, documents and files, together with all other data, relating to the
Software Assets and the business conducted in regard thereto (with the same
to remain in the custody of Wolfe for not less than two years and
thereafter in accordance with his usual business practice, subject to
access thereto by Database at any reasonable time upon reasonable notice);
(iv) the Note;
<PAGE>
(v) the Guaranty and Stock Pledge Agreement of Palm Desert, each of
which shall be acceptable in form and substance to Wolfe and his counsel;
(vi) such other deeds, endorsements, assignments and other instruments
as are, in the opinion of Wolfe's counsel, reasonably necessary to give
effect to this Agreement.
(b) Wolfe shall deliver to Database all such instruments as are, in the
opinion of Palm Desert's counsel reasonably necessary to evidence the discharge
of the Indebtedness, and otherwise give effect to the purposes and intent of
this Agreement.
6. Conditions Precedent to Buyer's Obligations. The obligations of the
parties under this Agreement are contingent upon the consummation of the sale of
Palm Desert's assets to Database.
7. Further Assurances. From time to time at the request of Wolfe, whether
at or after the Closing and without further consideration, Database, at its
expense, shall execute and deliver to Wolfe such other and further instruments
of sale, conveyance, transfer, assignment and confirmation and take such other
action as Wolfe may reasonably request in order more effectively to sell,
convey, transfer, vest and confirm in Wolfe any of the Software Assets.
After the Closing Wolfe and his administrator, executor, or other personal
representative shall have reasonable access to Database's books and records to
assist him or them in preparing or filing of any tax return, and for any other
business purpose.
8. Affirmative Covenants. Palm Desert and Database, jointly and severally,
covenant that, until payment in full of the Note and unless otherwise consented
to in writing by Wolfe, they will:
(a) Corporate Existence, etc. Maintain Database's corporate existence
and its qualification to do business and its good standing in each
jurisdiction in which such qualification is necessary for the proper
conduct of its business, and maintain in full force and effect all
licenses, permits and other authorizations necessary for the ownership and
operation by Database of the properties and business acquired from Palm
Desert.
(b) Insurance. Keep all insurable property owned by Database insured
at all times against fire and extended coverage risks and other hazards of
the kinds customarily insured against, and in amounts customarily carried,
by corporations engaged in comparable businesses and comparably situated;
keep Database adequately insured at all times against liability on account
of injury to persons or property
<PAGE>
and comply with the insurance provisions of all applicable workmen's
compensation laws;
(c) Taxes. Pay or cause to be paid all taxes, fees, assessments and
governmental charges or levies upon any of the property or assets of
Database or upon Database or its income or profits before the same shall
become delinquent, and all lawful claims of whatsoever nature which, if
unpaid, might become a lien or charge upon any such property, assets,
income or profits; provided, however, that Database shall not be required
to pay and discharge any such tax, fee, assessment, charge, levy or claim
so long as the validity thereof shall be contested in good faith by
appropriate proceedings diligently conducted (unless and until foreclosure,
distraint, sale or other similar process shall have been commenced).
(d) Additional Information. Furnish promptly to Wolfe such financial
and other information regarding Database and its business and affairs as
Wolfe may from time to time reasonably request.
9. Negative Covenants. Palm Desert and Database covenant that until payment
in full of the Note, Database will not, without the prior written consent of
Wolfe:
(a) Wolfe. Take, or suffer to be taken, any action to remove Wolfe as
a director of Database.
(b) Liens. Create, incur, issue, assume or suffer to exist any
mortgage, pledge, lien or other encumbrance on or security interest in any
of its assets, whether now owned or hereafter acquired, except:
(i) mortgages, pledges, liens, encumbrances or security interests
in favor of Wolfe;
(ii) liens for taxes or other governmental charges which are not
due or remain payable without penalty or which are being contested in
good faith and by appropriate proceedings diligently conducted;
(iii) deposits or pledges to secure workmen's compensation,
unemployment insurance, old age benefits or other social security
obligations or in connection with or to secure the performance of
bids, tenders, trade contracts or leases or to secure statutory
obligations or surety or appeal bonds or other pledges or deposits of
like nature and all in the ordinary course of business; and
(iv) mechanics', carriers', workmen's, repairmen's or other like
liens arising in the ordinary course of business in respect of
obligations not yet due or which are being contested in good faith and
by appropriate
<PAGE>
proceedings diligently conducted.
(c) Indebtedness. Database shall not at any time create, incur, assume
or suffer to exist any Indebtedness, except:
(i) Indebtedness existing under Note; or
(ii) Current accounts payable arising out of transactions (other
than borrowings) in the ordinary course of business, without Wolfe's
prior written approval, which approval will not be unreasonably
withheld or delayed so long as any such new Indebtedness is expressly
subordinate to the Note.
(d) Contingent Liabilities. Assume, guarantee, endorse or otherwise
become or remain directly or indirectly liable for the obligations of any
person, firm or corporation, except:
(i) guarantees in favor of Wolfe; and
(ii) the endorsement of negotiable or other instruments for
deposit or collection or similar transactions in the ordinary course
of its business.
(e) Loans and Advances. Make or have outstanding any loans or advances
or extend credit to any person, firm or corporation, except:
(i) loans or advances in the ordinary course of business to
suppliers; and
(ii) trade credit extended under usual and customary terms in the
ordinary course of business;
(f) Disposition of Assets. Sell, lease, abandon or otherwise dispose
of all or any substantial portion of Database's properties or assets.
(g) Issuance of Securities. Issue any shares of the capital stock of
Database or any right instrument convertible into the capital stock of
Database.
(h) Dividends. Declare, make, pay, become or remain liable to make or
pay, any dividend or other distribution of any nature (whether in cash,
property, securities or otherwise) on account of or in respect of any
shares of the capital stock of Database or on account of the purchase,
redemption, retirement or acquisition of any shares of the capital stock of
Database.
10. Wolfe's Covenants. Upon Database's full payment of the Note, Wolfe
shall tender to Database his written resignation as a
<PAGE>
director Database and provide Database with a written discharge of Database's
obligations under the Note.
11. Merger Clause and Restrictions on Assignment. This Agreement and the
related Promissory Note, Guaranty and Stock Pledge Agreement and a certain Asset
Purchase and Subscription Agreement of even date herewith constitute the
complete agreement and understanding of the parties thereto as to the matters
provided for therein and all prior agreements, representations and
understandings of the parties are merged herein and therein. This Agreement may
only be amended or changed by a writing signed by all the parties to be charged.
The rights of any party under this Agreement may not be assigned without
the express written consent of all other parties, which consent shall be granted
or withheld in the sole discretion of any party.
12. Miscellaneous. This Agreement shall be enforced and interpreted in
accordance with the law of the State of Delaware. The captions and headings in
this Agreement have been included to purposes of convenience and shall not be
considered part of the Agreement. Notwithstanding the Closing, any part of this
Agreement which expressly, or by implication, requires performance by any party
after the Closing, shall survive the Closing, and where appropriate, may be
specifically enforced.
IN WITNESS WHEREOF, the parties hereto, by their duly authorized officers,
have caused this Agreement to be duly executed and delivered as of the day and
year first above written.
DATABASE TECHNOLOGIES, INC.
By: ss/Allan S. Wolfe
-----------------------------------
Name: Allan S. Wolfe
Title: President
PALM DESERT ART PUBLISHERS, LTD.
By: ss/Hugh G. Pike
-----------------------------------
Name:
Title:
ALLAN WOLFE
ss/Allan S. Wolfe
---------------------------------------
PROMISSORY NOTE
$90,000.00 MANCHESTER, NEW HAMPSHIRE
APRIL 22, 1998
FOR VALUE RECEIVED, the undersigned, PALM DESERT ART, INC. (f/k/a Database
Technologies, Inc.), a Delaware corporation, (the "Maker") hereby promises to
pay to the order of ALLAN WOLFE, or to any holder hereof, (the "Holder") on or
before [90 days] July 21, 1998 (the "Maturity Date") the principal sum of Ninety
Thousand Dollars ($90,000.00), together with interest at the rate of 9% per
annum from the date hereof through the date upon which the principal balance
shall have been paid in full.
All payments by the Maker hereunder shall be applied first to accrued
interest, then to principal currently due in accordance with the terms hereof,
the balance (if any) to prepayment of principal. Interest will be calculated on
the basis of the actual number of days elapsed over a year of 365 days. The
Maker shall have the right to prepay principal at any time or from time to time
without any prepayment fee or penalty whatsoever.
This Note is the promissory note referred to in, has been issued pursuant
to and is entitled to the benefits of a certain Asset Purchase Agreement between
the Maker and Holder (the "Agreement"), a Guaranty issued by Palm Desert Art
Publishers, Ltd., a California corporation and an affiliate of the Maker, (the
"Guarantor") and a Stock Pledge Agreement of the Guarantor, all being of even
date herewith.
Events of Default.
(a) If one or more of the following described Events of Default shall occur
and be continuing, that is to say:
(i) The Maker shall default in the payment of principal of or interest
on this Note when due, and such default shall have continued for a period
of ten days;
(ii) The Maker shall default in any payment of principal of or
interest on any other obligation for borrowed money beyond any period of
grace provided with respect thereto if the effect of such default is to
cause such obligation to become due prior to its stated maturity;
(iii) Any representation or warranty made by the Maker or the
Guarantor in the Agreement or in any document or instrument delivered in
connection therewith shall prove to have been false or misleading in any
material respect as of the time made or furnished; or
(iv) The Maker or the Guarantor shall default in the observance or
performance of any other covenant, condition or provision of the
<PAGE>
Agreement or of any document or instrument delivered in connection
therewith, and such default shall not have been remedied within 30 days
after notice thereof shall have been given to them by the Lender.then, and
in any such event, the holder of this Note shall be entitled by written,
telephonic or telegraphic notice to the Maker to declare this Note and
interest accrued hereunder and all other liabilities of the Maker hereunder
to be forthwith due and payable and the same shall thereupon become and be
due and payable without presentment, demand, protest or further notice of
any kind, all of which are hereby expressly waived.
(b) If one or more of the following described Events of Default shall occur
and be continuing, that is to say:
(i) A proceeding shall have been instituted in respect of the Maker
(1) seeking the entry of an order for relief against the Maker,
or seeking a declaration that it is insolvent, or resulting in a
finding that it is insolvent, or seeking the dissolution, arrangement,
adjustment, composition or other similar relief with respect to the
Maker, its assets or its debts under any law now or hereafter in
effect relating to bankruptcy, insolvency, relief of debtors or
protection of creditors, or
(2) seeking the appointment of a receiver, trustee, custodian,
liquidator, assignee, sequestrator or other similar official for the
Maker or for all or any substantial part of its property,
and such proceeding results in the entry, making or grant of any such
order, finding or appointment, or such proceeding shall remain undismissed
and unstayed for a period of 30 consecutive days, or, if such proceeding is
brought under the federal bankruptcy code, the Maker fails to file a proper
answer (including a request that the petitioner post adequate bond under
Section 303(e) of said code) thereto within 10 days of receipt of notice of
said proceeding; or
(ii) the Maker shall become insolvent, shall become generally unable
to pay its debts as they become due, shall voluntarily suspend transaction
of its business, shall make a general assignment for the benefit of
creditors, shall institute a proceeding described in the foregoing
paragraph (b)(i) hereof or shall by any act indicate its consent to or
acquiescence in any proceeding or action described in said paragraph (b)(i)
hereof (whether or not such proceeding is actually instituted or diligently
prosecuted), or shall dissolve, wind-up or liquidate itself, or shall take
any action in furtherance of any of the foregoing,
2
<PAGE>
then, and in any such event, this Note and interest accrued hereunder and all
other liabilities of the Maker hereunder shall thereupon become and be forthwith
due and payable without presentment, demand, protest or notice of any kind, all
of which are hereby expressly waived.
General Provisions.
In the event this Note shall have been declared or shall have become due
and payable, the Holder shall have the right, in addition to all other rights
and remedies available to it, without notice to the Maker, to set off against
and to appropriate and apply to the then unpaid balance of this Note any debt
owing to, and any other funds held in any manner for the account of, the Maker
by the Holder. Such right shall exist whether or not the Holder shall have made
any demand hereunder, whether or not any such debt owing to or funds held for
the account of the Maker is or are matured or unmatured, and regardless of the
existence or adequacy of any collateral, guaranty or any other security, right
or remedy available to the Holder.
In the event the Holder is at any time required to turn over, disgorge or
repay (whether to the Maker, a trustee in Bankruptcy, or to third parties) any
payment previously received by the Holder with respect to this Note (whether
received from the Maker or third parties), then the amount of the liabilities of
the Maker hereunder shall be increased by the amount so turned over or disgorged
by the Holder, plus reasonable expenses incurred by the Holder in the process,
to the same extent as if the amount and expenses in question had been advanced
by the Holder at the inception of this Note and had remained unpaid since that
date, all of which shall be payable immediately, without further demand.
No delay or omission on the part of the Holder in exercising any right
hereunder shall operate as a waiver of such right, or of any other right, nor
shall any delay, omission or waiver on any one occasion be deemed a bar to or
waiver of the same or any other right on any future occasion. No single or
partial exercise of any right, power or privilege hereunder shall preclude other
exercises thereof, or the exercise of any other power hereunder.
The Maker hereby unconditionally waives presentment, demand, notice,
protest and all other demands and notices in connection with the delivery,
acceptance, performance, default or enforcement of this Note.
In case a suit or action is instituted to collect this Note or any portion
hereof, the Maker shall pay, in addition to costs and disbursements allowed by
law, such sum as the court may judge reasonable as attorneys' fees in such suit
or action.
3
<PAGE>
This Note is intended to take effect as a sealed instrument. The rights,
obligations and duties of the parties hereunder shall be construed in accordance
with and be governed by the laws of the State of New Hampshire. The Maker hereby
agrees that any action hereon or relating hereto may be maintained in a court of
competent subject-matter jurisdiction located in the State of New Hampshire, and
consents to the jurisdiction of any such court for all purposes connected
herewith.
This Note is fully negotiable, and upon negotiation may be enforced by the
Holder in accordance with its terms. The rights, obligations and duties of the
Maker hereunder shall not be assigned or delegated.
IN WITNESS WHEREOF, the Maker has executed and delivered this Note on the
day and year first written above.
PALM DESERT ART, INC.
By: ss/ Hugh G. Pike
-----------------------------------
Name: Hugh G. Pike
Title: President
4
<PAGE>
STATE OF CALIFORNIA
COUNTY OF RIVERSIDE
On April 24, 1998 before me, Marianne M. Parsons "Notary Public" personally
appeared Hugh Gene Pike personally known to me
to be the person whose name is
subscribed to the within instrument and
acknowledged to me that he executed the
same in his authorized capacity and that
by his signature on the instrument the
person or the entity upon behalf of
which the person acted, executed the
instrument.
WITNESS my hand and official seal.
ss/Marianne M. Parsons
----------------------------------------
Marianne M. Parons
[SEAL] Comm. #1152975
Notary Public-California
Riverside County
My Comm. Exp.Aug. 24, 2001
5
GUARANTY
FOR GOOD AND VALUABLE CONSIDERATION, the receipt and sufficiency of which
are hereby acknowledged, PALM DESERT ART PUBLISHERS, LTD. (the "Guarantor"), a
California corporation and the principal shareholder of PALM DESERT ART, INC.
(f/k/a Database Technologies, Inc.), a Delaware corporation (the "Company"),
unconditionally guaranties, in accordance with the terms hereof and without any
prior written notice, the payment and performance of the Liabilities (as defined
herein) of the Company to ALLAN WOLFE of Bedford, New Hampshire ("Wolfe").
As used herein, the term "Liabilities" includes, without limitation, any
and all liabilities, debts, and obligations of the Company to Wolfe, of each and
every kind, nature and description. "Liabilities" also include, without
limitation, each obligation to repay all loans, advances, indebtedness, notes,
obligations and amounts now or at any time hereafter owing by the Company to
Wolfe (including all future advances or the like, whether or not given pursuant
to a commitment by Wolfe), whether or not such are liquidated, unliquidated,
secured, unsecured, direct, indirect, absolute, contingent, or of any other
type, nature or description, or by reason of any cause of action which Wolfe now
or hereafter may hold against the Company. "Liabilities" also include, without
limitation, all notes and other obligations of the Company now or hereafter
assigned to or held by Wolfe, of each and every kind, nature and description.
"Liabilities" also include, without limitation, all interest, penalties and
costs and other amounts which may be charged to the Company or which may be due
from the Company to Wolfe from time to time and all costs and expenses incurred
or paid by Wolfe to enforce any agreement between the Company and Wolfe or
pursuant to any instrument furnished by the Company to Wolfe (including, without
limitation, costs of collection, reasonable attorneys' fees, court and
litigation costs and expenses). "Liabilities" also include, without limitation,
any and all obligations of the Company to act or to refrain from acting in
accordance with the terms, provisions and covenants of any agreement between the
Company and Wolfe or pursuant to any instrument furnished by the Company to
Wolfe. As used herein, the term "indirect" includes, without limitation, all
obligations and liabilities which Wolfe may incur or become liable for on
account of or as a result of any transactions between Wolfe and the Company.
"Costs of Collection" include, without limitation, all reasonable
attorneys' fees and out-of-pocket expenses incurred by Wolfe's attorneys and all
costs incurred by Wolfe including, without limitation, costs and expenses
associated with travel on behalf of Wolfe, which costs and expenses are directly
or indirectly related to or incurred in respect of Wolfe's efforts to collect or
enforce any of the Liabilities, or to enforce any of Wolfe's rights, remedies or
powers against or in respect of the Company or any other guarantor or person
liable in respect of the Liabilities (whether or not suit is instituted in
connection with
<PAGE>
such efforts). The Costs of Collection shall be added to the Liabilities of the
Company to Wolfe, as if such had been lent, advanced and credited by Wolfe to,
or for the benefit of, the Company.
For said good and valuable consideration, the Guarantor shall also
indemnify, defend, and hold Wolfe harmless of and from any liability, claim or
demand suffered by or asserted against Wolfe with respect to Wolfe's
relationship with the Company, the Guarantor or any other guarantor or endorser
of the Liabilities (each of which may be defended, compromised, settled or
pursued by Wolfe with counsel of Wolfe's selection, but at the expense of the
Guarantor).
The obligations of the Guarantor hereunder shall not be affected by any
fraudulent, illegal or improper act by the Company, nor by any release,
discharge or invalidation, by operation of law or otherwise, of the Liabilities.
Interest and Costs of Collection shall continue to accrue and shall continue to
be deemed Liabilities guarantied hereunder, notwithstanding any stay of the
enforcement thereof against the Company or the disallowance of any claim
therefor against the Company.
This instrument incorporates all discussions and negotiations between the
Guarantor and Wolfe concerning the guaranty and indemnification provided by the
Guarantor hereunder. No such discussions or negotiations shall limit, modify or
otherwise affect the provisions hereof. No provision hereof may be altered,
amended, waived, canceled or modified, except by Wolfe.
The Guarantor waives presentment, demand, notice and protest with respect
to the Liabilities, and further waives any delay on the part of Wolfe, and
further waives any right to require Wolfe to pursue or to proceed against the
Company or any collateral which Wolfe might have been granted to secure the
Liabilities or to secure the obligations of the Guarantor hereunder, and further
waives notice of acceptance of this Guaranty.
Wolfe's books and records showing the account between Wolfe and the Company
shall be admissible in any action or proceeding and constitute prima facie
evidence and proof of the items contained therein.
The obligations of the Guarantor hereunder are primary, with no recourse
necessary by Wolfe against the Company or any collateral given to secure the
Liabilities or against any other person liable for or on the Liabilities prior
to proceeding against the Guarantor hereunder. The Guarantor assents to any
indulgence or waiver which Wolfe may grant or give the Company or any other
person liable or obligated to Wolfe for or on account of the Liabilities. The
Guarantor authorizes Wolfe to alter, amend, cancel, waive or modify any term or
condition of the Liabilities
2
<PAGE>
and obligations of any other person liable or obligated to Wolfe for or on
account of the Liabilities without notice to, or consent from, the Guarantor. No
compromise, settlement or release by Wolfe of the Liabilities or obligations of
any other such person (whether or not jointly liable with the Guarantor) and no
release of any collateral securing the Liabilities or obligations of any other
such person shall affect the obligations of the Guarantor hereunder. No action
by Wolfe which has been assented to herein shall affect the obligations of the
Guarantor to Wolfe hereunder.
The Guarantor shall not exercise any right of subrogation, reimbursement,
indemnity, contribution or the like (including any right to proceed upon any
collateral granted by the Company to the Guarantor) against the Company or any
other person liable or obligated for or on account of the Liabilities unless and
until all of the Liabilities have been satisfied in full.
The Guarantor will pay on demand all reasonable attorneys' fees and
out-of-pocket expenses incurred by Wolfe's attorneys and all costs incurred by
Wolfe which are directly or indirectly related to Wolfe's efforts to collect or
to enforce any of the obligations of the Guarantor hereunder or to enforce any
of Wolfe's rights, remedies or powers against or in respect of the Guarantor
(whether or not suit is instituted by or against Wolfe).
This instrument shall inure to the benefit of Wolfe, and his heirs,
successors and assigns, shall be binding upon the heirs, successors and assigns
of the Guarantor, and shall apply to all liabilities of the Company and any
successor to the Company, including any successor by operation of law.
The rights, remedies, powers, privileges and discretions of Wolfe hereunder
(hereinafter, the "Wolfe's Rights and Remedies") shall be cumulative and not
exclusive of any rights or remedies which he would otherwise have. No delay or
omission by Wolfe in exercising or enforcing any of Wolfe's Rights and Remedies
shall operate as, or constitute, a waiver thereof. No waiver by Wolfe of any of
Wolfe's Rights and Remedies, of any default, of any remedies under any other
agreement with the Guarantor, or of any default under any agreement with the
Company or any other person liable or obligated for or on account of the
Liabilities shall operate as a waiver of any other of Wolfe's Rights and
Remedies or of any default or remedy hereunder or thereunder. No exercise of any
of Wolfe's Rights and Remedies, and no other agreement or transaction of
whatever nature entered into between Wolfe and the Guarantor, Wolfe and the
Company or Wolfe and any other person at any time, shall preclude any other
exercise of Wolfe's Rights and Remedies. No waiver by Wolfe of any of Wolfe's
Rights and Remedies on any one occasion shall be deemed a waiver on any
subsequent occasion, nor shall it be deemed a continuing waiver. All of Wolfe's
Rights and Remedies and all of Wolfe's rights, remedies, powers, privileges and
discretion under any other agreement or
3
<PAGE>
transaction with the Guarantor, the Company or any other such person shall be
cumulative and not alternative or exclusive, and may be exercised by Wolfe at
such time or times and in such order of preference as Wolfe in its sole
discretion may determine.
This instrument shall take effect as a sealed instrument and shall be
governed, construed and interpreted in accordance with the laws of the State of
New Hampshire. The Guarantor submits to the jurisdiction of the courts of the
State of New Hampshire for all matters in connection herewith as well as for all
purposes in connection with any other relationship between the Guarantor and
Wolfe. It is the intention of the Guarantor that the provisions of the within
guaranty and indemnification be liberally construed to the end that Wolfe may be
put in as good a position as if the Company had promptly, punctually and
faithfully performed all Liabilities and the Guarantor had promptly, punctually
and faithfully performed hereunder.
Any determination that any provision hereof is invalid, illegal or
unenforceable in any respect in any instance shall not affect the validity,
legality or enforceability of such provision in any other instance and shall not
affect the validity, legality or enforceability of any other provision contained
herein.
This instrument shall remain in full force and effect until the earlier of
(a) the satisfaction and performance by the Company of all of its obligations
under a certain Promissory Note of even date herewith, as the same may be
amended from time to time, or (b) the delivery of written notice of termination
of this Guaranty dated and signed by Wolfe. No termination hereof shall affect
any Liability in existence or outstanding ten (10) days following the date of
such actual receipt or delivery (including, without limitation, those which are
contingent or not then due and those which arise out of any check, draft, item
or paper which was made, executed or drawn prior to the expiration of such ten
(10) day period, even if received by Wolfe thereafter) nor any obligation of the
Guarantor hereunder which by its terms includes any Liability or obligation of a
contingent nature (including, without limitation, the indemnification provided
for herein).
IN WITNESS WHEREOF, the Guarantor has executed this Guaranty made to be
effective as of the 22nd day of April, 1998.
PALM DESERT ART PUBLISHERS, LTD.
By: ss/Hugh G. Pike
-----------------------------------
Name:
Title: President
4
<PAGE>
STATE OF CALIFORNIA
COUNTY OF RIVERSIDE
On this the _____ day of ___________________________ 1998, before me, a
Notary Public or Justice of the Peace in and for the State of
________________________ personally appeared ______________________ who
acknowledged that he/she is the __________________________ of Palm Desert Art
Publishers, Ltd. and acting in that capacity and being authorized to do so,
executed the foregoing instrument for and on behalf of Palm Desert Art
Publishers, Ltd. for the purposes therein contained.
See attached
-------------------------------------
Notary Public/Justice of the Peace
My Commission Expires:
5
<PAGE>
STATE OF CALIFORNIA
COUNTY OF RIVERSIDE
On April 24, 1998 before me, Marianne M. Parsons "Notary Public" personally
appeared Hugh Gene Pike personally known to me
to be the person whose name is
subscribed to the within instrument and
acknowledged to me that he executed the
same in his authorized capacity and that
by his signature on the instrument the
person or the entity upon behalf of
which the person acted, executed the
instrument.
WITNESS my hand and official seal.
ss/Marianne M. Parsons
----------------------------------------
Marianne M. Parons
[SEAL] Comm. #1152975
Notary Public-California
Riverside County
My Comm. Exp.Aug. 24, 2001
6
STOCK PLEDGE AGREEMENT
This STOCK PLEDGE AGREEMENT (the "Agreement"), dated as of this 9th day of
February, by and between ALLAN WOLFE of Bedford, New Hampshire ("Pledgee") and
PALM DESERT ART PUBLISHERS, LTD., a California corporation ("Pledgor"),
WITNESSETH THAT:
WHEREAS, the Pledgor is the controlling shareholder of Palm Desert Art,
Inc. (f/k/a Database Technologies, Inc.) ("DBI")
WHEREAS, DBI is indebted to Pledgee and desires Pledgee to accept its
promissory note (the "Note");
WHEREAS, to induce Pledgee to accept the Note, Pledgor has executed and
delivered to the Pledgee its guaranty of the Note ("the "Guaranty") and has
agreed to pledge to Pledgee all shares of the capital stock of DBI that it now
owns or may hereafter acquire and all securities convertible into such capital
stock (the "Shares") as security for the Guaranty, subject, nevertheless, to the
terms and conditions hereof.
NOW, THEREFORE, the parties hereto, in consideration of the premises set
forth herein and each intending to be legally bound hereby, do covenant and
agree as follows:
1. Pledged Stock. The term "Pledged Stock" shall mean the Shares, together
with all certificates, options, rights or other distributions issued as an
addition to, in substitution or in exchange for, or on account of any of such
Shares, and all proceeds of all of the foregoing, now or hereafter owned or
acquired by the Pledgor.
2. Delivery. Upon the execution and delivery hereof, the Pledgor shall
deliver to the Pledgee all certificates for the Pledged Stock, endorsed in blank
and with undated stock powers duly executed in blank attached.
3. Security Interest.
(a) As security for the full and timely performance of all of its
obligations (the "Obligations") under the Guaranty, the Pledgor hereby
grants to the Pledgee a lien upon and a security interest in the Pledged
Stock. In addition to the rights granted hereby, the Pledgee shall have all
the rights and remedies of a secured party under the Uniform Commercial
Code.
(b) At any time the Pledgee, at its option, may have any part or all
of the Pledged Stock registered in its name or that of its nominee, and the
Pledgor hereby covenants that, upon the Pledgee's request, the Pledgor will
cause the issuer, transfer agent or registrar of the Pledged Stock to
effect
<PAGE>
such registration.
(i) If that shall be done prior to the occurrence of an event of
default under the Note (an "Event of Default"), the Pledgor shall
nevertheless retain all voting rights with respect to the Pledged
Stock, and, for that purpose, the Pledgee shall execute and deliver to
the Pledgor a conditional revocable proxy or proxies, substantially in
the form of Exhibit I hereto, with respect to all of the shares of
Pledged Stock (which proxies shall expire automatically upon the
occurrence of an Event of Default). Unless and until an Event of
Default has occurred, Pledgee shall not cause the Pledged Stock to be
registered in its name without first giving 48 hours' written notice
to Pledgee.
(ii) Immediately and without further notice, upon the occurrence
of an Event of Default and so long as the same shall continue, whether
or not the Pledged Stock shall have been registered in the name of the
Pledgee or its nominee, the Pledgee or its nominee shall have the
right to exercise all voting rights as to all shares and with respect
to all of the Pledged Stock, all other corporate rights and all
conversion, exchange, subscription or other rights, privileges or
options pertaining thereto as if it were the absolute owner thereof
including, without limitation, the right to exchange any or all of the
Pledged Stock upon the merger, consolidation, reorganization,
recapitalization or other readjustment of the issuer thereof, or upon
the exercise by such issuer of any right, privilege or option
pertaining to any of the Pledged Stock, and, in connection therewith,
to deliver any of the Pledged Stock to any committee, depository,
transfer agent, registrar or other designated agency upon such terms
and conditions as it may determine, all without liability except to
account for property actually received by it; but (1) the Pledgee
shall have no duty to exercise any of the aforesaid rights, privileges
or options and shall not be responsible for any failure to do so or
delay in so doing; and (2) Pledgee may by written notice to Pledgor
relinquish, either partially or completely in accordance with any
terms or conditions Pledgee may set forth in such notice, any or all
voting rights Pledgee may acquire pursuant to this Section 3(b)(ii).
(c) Unless an Event of Default shall have occurred and be continuing
and notwithstanding the security interest created in the Pledged Stock
hereunder, the Pledgor shall be entitled to receive for its own use all
dividends declared and paid on the Pledged Stock, and, if the Pledgee has
elected to cause the Pledged Stock to be registered in its name or the
2
<PAGE>
name of its nominee, it shall receive all dividends paid upon the Pledged
Stock as the trustee of the Pledgor and promptly pay over all such
dividends to the Pledgor in the form in which they were received. Upon the
occurrence of an Event of Default, the Pledgee may require any such cash
dividends to be delivered to the Pledgee as additional security hereunder
or applied toward the satisfaction of the Obligations.
(d) Upon the occurrence of an Event of Default, the Pledgee may,
without demand of performance or other demand, advertisement or notice
(except the notice specified below of the time and place of public or
private sale) of any kind to or upon the Pledgor or any other person (all
of which are, to the extent permitted by law, hereby expressly waived),
forthwith realize upon the Pledged Stock or any part thereof, and may
forthwith sell or otherwise dispose of and deliver the Pledged Stock or any
part thereof or interest therein, or agree to do so, in one or more parcels
at public or private sale or sales, at any exchange, broker's board or at
any of the Pledgee's offices or elsewhere, at such prices and on such terms
(including, without limitation, a requirement that any purchaser of all or
any part of the Pledged Stock purchase the shares constituting the Pledged
Stock for investment and without any intention to make distribution thereof
as it may deem best, for cash or on credit, or for future delivery without
assumption of any credit risk, with the right to the Pledgee or any
purchaser to purchase upon any such sale the whole or any part of the
Pledged Stock free of any right or equity of redemption in the Pledgor,
which right or equity is hereby expressly waived and released.
(e) The proceeds of any such disposition other action by the Pledgee
shall be applied as follows:
(i) First, to the costs and expenses incurred in connection
therewith or incidental thereto or to the care or safekeeping of any
of the Pledged Stock or in any way relating to the rights of the
Pledgee hereunder, including reasonable attorneys' fees and legal
expenses;
(ii) Second, to the satisfaction of the Obligations;
(iii) Third, to the Pledgor to the extent of any surplus.
(f) Except as may otherwise be expressly required by applicable law,
the Pledgee need not give more than five (5) days' notice of the time and
place of any public sale or of the time after which a private sale may take
place, which notice the Pledgor hereby deems reasonable; provided, however,
3
<PAGE>
that the Pledgee at any time, without any notice to the Pledgor, may sell
any shares of Pledged Stock for which a market exists at the market price
for such shares.
4. Representations and Warranties of the Pledgor. The Pledgor represents
and warrants that:
(a) It has all requisite power and authority to enter into this
Agreement, to pledge the Pledged Stock, and to carry out the transactions
contemplated hereby.
(b) It is the legal and beneficial owner of all of the Pledged Stock.
(c) All of the shares of Pledged Stock have been duly and validly
issued, are fully-paid and nonassessable, and are owned by the Pledgor free
of any pledge, mortgage, hypothecation, lien, charge, encumbrance or
security interest therein or in the proceeds thereof, except such as are
granted hereunder.
(d) There are no restrictions upon the transfer of the Pledged Stock;
the Pledgor has the right to transfer the Pledged Stock free of any
encumbrances, without obtaining the consents of other stockholders or third
parties.
(e) The execution and delivery of this Agreement and the performance
of its terms will not result in any violation of any provision of the
Pledgor's charter or bylaws, or violate or constitute a default under the
terms of any agreement, indenture or other instrument, license, judgment,
decree, order, law, statute, ordinance or other governmental rule or
regulation applicable to the Pledgor or any of its property.
(f) Upon delivery of the Pledged Stock to the Pledgee or its nominee,
this Agreement shall create a valid first lien upon and perfected security
interest in, the Pledged Stock and the proceeds thereof, subject to no
prior security interest, lien, charge, encumbrance or agreement purporting
to grant to any third party a security interest in the property or assets
of the Pledgor which would include the Pledged Stock.
5. Covenants of Pledgor. Pledgor covenants as follows:
(a) The Pledgor hereby covenants that until all of the Obligations
have been satisfied in full it will not sell, convey or otherwise dispose
of any of the Pledged Stock or any interest therein or create, incur or
permit to exist any pledge, mortgage, lien, charge, encumbrance or other
security interest in any of the Pledged Stock or the proceeds thereof,
other than that created hereby.
4
<PAGE>
(b) The Pledgor hereby covenants that until all of the Obligations
have been satisfied in full it will not consent to or approve of the
issuance of any additional shares of any class of capital stock of any
issuer of the Pledged Stock, or any securities convertible into or
exchangeable for any such shares, or any warrants, options, rights or other
commitments entitling any person to purchase or otherwise acquire any such
shares.
(c) If, during the term of this Agreement, any stock dividend,
reclassification, adjustment or other changes are made or declared in the
capital structure of DBI, all new, substituted and additional shares or
other securities issued by reason of any such change shall be held by the
Pledgor under the terms of this Agreement and delivered to the Pledgee and
become subject to this Agreement in the same manner as the shares of
Pledged Stock originally pledged hereunder.
(d) If, during the term of this Agreement, subscription warrants or
other rights or options shall be issued in respect of shares of Pledged
Stock, such warrants, rights and options shall immediately be assigned by
the Pledgor to the Pledgee and (if exercised by the Pledgor) all new stock
or other securities issued pursuant thereto shall likewise be immediately
assigned to the Pledgee to be held under the terms of this Agreement in the
same manner as the shares of Pledged Stock originally pledged hereunder.
(e) The Pledgor, at its own expense, shall defend the Pledgee's right,
title and interest in and to the Pledged Stock against the claims of all
third persons.
6. Pledgee's Rights Remedies and Duties.
(a) The rights granted to the Pledgee hereunder are the rights of a
secured party. Accordingly, except as otherwise expressly provided herein,
Pledgee shall have no right to exercise any right of ownership of the
Shares or sell, pledge, encumber, assign or transfer the Shares, except
upon the lawful exercise of its rights as a secured party.
(b) Beyond the exercise of reasonable care to assure the safe custody
of the Pledged Stock while held hereunder, the Pledgee shall have no duty
or liability to preserve rights pertaining thereto and shall be relieved of
all responsibility for the Pledged Stock upon surrendering it to the
Pledgor.
(c) No course of dealing between the Pledgor and the Pledgee, nor any
failure to exercise, nor any delay in exercising, any right, power or
privilege of the Pledgee hereunder or under the Guaranty shall operate as a
waiver thereof, nor shall any single or partial exercise of any
5
<PAGE>
right, power or privilege hereunder or thereunder preclude any other or
further exercise thereof or the exercise of any other right, power or
privilege.
(d) The rights and remedies provided herein and in the Guaranty and in
all other agreements, instruments and documents delivered pursuant to or in
connection with the Guaranty are cumulative and are in addition to, and not
exclusive of, any rights or remedies provided by law, including, but
without limitation, the rights and remedies of a secured party under the
Uniform Commercial Code.
7. Termination of Security Interest. Upon payment and performance in full
of the Obligations, this Agreement and the security interest created hereunder
shall terminate and be without further force and effect, whereupon the Pledgee
shall re-deliver the shares of Pledged Stock (or such of them as have not been
sold or otherwise disposed of hereunder) to the Pledgor, endorsed in blank and
with blank stock powers attached, together with a written cancellation of any
proxies then outstanding.
8. Further Assurances. The Pledgor shall at any time, and from time to
time, execute and deliver upon the written request of the Pledgee such further
documents and do such further acts and things as the Pledgee may reasonably
request to effect the purposes of this Agreement, including, without limitation,
delivering to the Pledgee upon the occurrence of an Event of Default irrevocable
proxies with respect to the Pledged Stock in form satisfactory to the Pledgee.
Until receipt thereof, this Agreement shall constitute the Pledgor's proxy to
the Pledgee or its nominee to vote all shares of Pledged Stock then registered
in the Pledgor's name at any and all such times as Pledgee has the right to vote
such shares pursuant to the terms of this Agreement. The power of attorney
granted hereby is coupled with an interest and is irrevocable.
9. Notices.
(a) The Pledgor will promptly deliver to the Pledgee all written
notices and will promptly give the Pledgee written notice of any other
notices received by it with respect to Pledged Stock, and the Pledgee will
promptly give like notice to the Pledgor of any such notices received by it
or its nominee.
(b) All notices, statements, requests and demands given to or made
upon either party hereto in accordance with the provisions of this
Agreement shall be deemed to have been given or made when deposited in the
mail, postage prepaid, addressed, if to the Pledgee, to:
6
<PAGE>
Allan Wolfe
20 Commerce Park North
Bedford, New Hampshire 03110
with a copy to:
Edward L. Hahn, Esq.
McLane, Graf, Raulerson & Middleton, P.A.
900 Elm Street
P.O. Box 326
Manchester, New Hampshire 03105-0326
and if to the Pledgor, to:
Palm Desert Art Publishers, Ltd.
39-725 Garand Lane, Suite J
Palm Desert, California 92211
with a copy to:
Daniel W. Dowe, Esq.
Dowe & Dowe
67 Wall Street, Suite 2411
P.O. Box 326
New York, New York 10005
or in accordance with any unrevoked written direction from either party to
the other party hereto.
10. Modification. This Agreement contains the entire agreement between the
parties hereto with respect to the transactions contemplated herein and shall
not be modified or amended except by an instrument in writing signed by or on
behalf of the parties hereto.
11. Choice of Law. This Agreement shall be deemed to be a contract under
the laws of the State of Delaware for all purposes shall be governed by and
construed and enforced in accordance with the laws of said State. Any action or
other judicial proceeding for the enforcement of this contract or any of its
provisions may be instituted in any court of competent jurisdiction.
12. Successors and Assigns. This Agreement shall be binding upon and shall
inure to the benefit of the Pledgor and the Pledgee and their respective
successors and assigns.
13. Severability. The provisions of this Agreement are intended to be
severable. If any provision of this Agreement shall be held invalid or
unenforceable in whole or in part, such provision shall be ineffective to the
extent of such invalidity or unenforceability without in any manner affecting
the validity or enforceability of the remaining provisions hereof.
7
<PAGE>
14. Prior Understandings. This Agreement supersedes all prior
understandings and agreements, whether written or oral, among the parties hereto
relating to the transactions provided for herein.
WITNESS the due execution hereof as of the day and year first above
written.
ALLAN WOLFE
PALM DESERT ART PUBLISHERS, LTD.
By: ss/Hugh G. Pike
-----------------------------------
Name:
Title:
8
<PAGE>
EXHIBIT I
CONDITIONAL REVOCABLE PROXY
ALLAN WOLFE does hereby constitute and appoint PALM DESERT ART PUBLISHERS,
LTD. with full power of substitution and resubstitution, as its true and lawful
attorney-in-fact and proxy to vote all the shares of Database Technologies, Inc.
which it has the power to vote at any annual or special meeting of the
shareholders of said coproration and at any adjournment thereof to be held while
this proxy shall remain outstanding.
This proxy is issued pursuant to the terms of a certain Stock Pledge
Agreement by and between the parties hereto and is subject to the terms and
conditions thereof. This proxy is coupled with an interest on the part of Palm
Desert Art Publishers, Ltd. in the shares of said corporation and shall be
irrevocable so long as it shall remain outstanding; provided, however, that it
shall be revoked without any action on the part of any party hereto in the event
that an Event of Default (as defined in the Stock Pledge Agreement) shall occur
and be continuing.
WITNESS the due execution hereof as of this ___ day of _______, 1998.
ALLAN WOLFE
ss/Allan S. Wolfe
---------------------------------------
EXHIBIT
PALM DESERT ART, INC.
(formerly Database Technologies Inc.)
OFFSHORE SUBSCRIPTION AND
INVESTMENT REPRESENTATION AGREEMENT
THESE SECURITIES HAVE NOT BEEN REGISTERED WITH THE UNITED STATES SECURITIES AND
EXCHANGE COMMISSION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "1933
ACT") OR THE SECURITIES COMMISSION OF ANY STATE UNDER ANY STATE SECURITIES LAWS.
THEY ARE BEING OFFERED PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER
REGULATION S PROMULGATED UNDER THE SECURITIES ACT OF 1933 ("REGULATION S"). THE
SECURITIES MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED IN THE UNITED
STATES OR TO U.S. PERSONS (AS SUCH TERM IS DEFINED IN THE REGULATIONS) UNLESS
THE SECURITIES ARE REGISTERED UNDER THE ACT AND APPLICABLE STATE SECURITIES
LAWS, OR SUCH OFFERS, SALES AND TRANSFERS ARE MADE PURSUANT TO AVAILABLE
EXEMPTIONS FROM REGISTRATION REQUIREMENTS OF THE ACT AND THOSE LAWS.
THIS SUBSCRIPTION AGREEMENT DOES NOT CONSTITUTE AN OFFER TO SELL NOR A
SOLICITATION OF AN OFFER TO BUY ANY OF THE SECURITIES OFFERED HEREBY BY OR TO
ANY PERSON IN ANY JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION WOULD BE
UNLAWFUL. INVESTMENTS IN THESE SECURITIES INVOLVES A HIGH DEGREE OF RISK. IN
MAKING AN INVESTMENT DECISION, INVESTORS RELY ON THEIR OWN EXAMINATION OF THE
COMPANY AND TERMS OF THE OFFERING, INCLUDING THE MERITS AND RISKS INVOLVED.
THESE SECURITIES HAVE NOT BEEN RECOMMENDED BY ANY FEDERAL OR STATE SECURITIES
COMMISSION OR REGULATORY AUTHORITY. FURTHERMORE, THE FOREGOING AUTHORITIES HAVE
NOT CONFIRMED OR DETERMINED THE ACCURACY OR ADEQUACY OF THIS DOCUMENT AND ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. THE SECURITIES ARE
"RESTRICTED" AND MAY NOT BE RESOLD OR TRANSFERRED EXCEPT AS PERMITTED UNDER THE
1933 ACT PURSUANT TO REGISTRATION OR EXEMPTION THEREFROM.
THIS OFFSHORE SUBSCRIPTION AND INVESTMENT REPRESENTATION AGREEMENT
("Subscription Agreement") is executed in reliance upon the transaction
exemption afforded by Regulation S as promulgated by the Securities and Exchange
Commission ("SEC"), under the 1933 Acsst, and;
This Subscription Agreement has been executed by the undersigned in connection
with Palm Desert Art, Inc. (formerly Database Technologies Inc.) ("the Company")
offer for sale two million four hundred fifty thousand (2,450,000) shares
("Shares") of its $.001 par value common stock ("Common Stock") at a purchase
price of U.S. $.10 per share, or two hundred forty-five thousand dollars (U.S.
$245,000) (the "Purchase Price"). The Company's principal executive office is
located at 39-725 Grand Lane, Suite J, Palm Desert, California 92211, and is a
corporation organized under the laws of the State of Delaware, USA. The
Company's common stock is
<PAGE>
publicly traded on the OTC Bulletin Board under the ticker symbol (DTBS). The
terms governing the sale of the Shares are set forth in detail in this
Subscription Agreement. The offer for sale of the Shares and the sale of such
Shares pursuant to this Subscription Agreement, if accepted by the Company, are
being made in reliance upon the provisions of Regulation S under the 1933 Act.
The undersigned subscriber, Sencorp Ltd. is private company located at National
Westminster Bank Building, Gibraltar, and has no residence or domicile in the
United States (hereinafter referred to as "Subscriber") and hereby represents
and warrants to, and agrees with the Company, as follows:
WHEREAS, the Subscriber is willing to purchase and the Company is willing
to issue two million four hundred fifty thousand shares (2,450,000) of the
Company's Common Stock pursuant to an exemption from registration under
Regulation S of the 1933 Act; and
NOW THEREFORE, in consideration of their respective promises and
undertakings herein contained, all of which are deemed by the parties hereto to
be good and valuable consideration, the parties, hereto each intending to be
legally bound hereby, do hereby covenant and agree as follows:
W I T N E S S E T H
1. Agreement to Subscribe; Consideration.
Upon the execution of this Agreement and payment of the Purchase Price by
the Subscriber to the Escrow Agent (as defined below), the Company shall cause
to be issued to the Subscriber duly authorized and executed certificate(s)
evidencing ownership of the Shares and which will bear a restrictive legend to
restrict the transfer of the Shares pursuant to Regulation S.
2. Representations and Warranties of the Subscriber. Subscriber acknowledges,
represents, warrants and agrees as follows:
(a) Offshore Transaction. The Subscriber represents and warrants to the
Company that the Subscriber is not a U.S. Person as that term is defined in Rule
902(o) of Regulation S (and as set forth in Footnote 1 below). Subscriber has
all requisite power and authority to own the Shares. The decision to invest and
the execution and delivery of this Subscription Agreement by the Subscriber, the
performance by the Subscriber of its obligations hereunder and the consummation
by the Subscriber of the transactions contemplated hereby have been duly
authorized and requires no other proceedings on the part of the Subscriber. This
Subscription Agreement has been duly executed and delivered by the Subscriber
and, assuming the execution and delivery hereof and acceptance thereof by the
Company, will constitute the legal, valid
2
<PAGE>
and binding obligations of the Subscriber, enforceable against the Subscriber in
accordance with its terms.
(b) Independent Investigation. The Subscriber, in offering to subscribe for
the Shares hereunder, has relied upon an independent investigation made by it
and has, prior to the date hereof, been given access to and the opportunity to
examine all books and records of the Company. In making the investment decision
to purchase the Shares, the Subscriber is not relying on any oral or written
representations or assurances from the Company or any other person or any
representation of the Company or any person other than as is set forth in this
Agreement, public filings of the Company or in a document executed by a duly
authorized representative of the Company making reference to this Agreement. The
Subscriber has not been furnished with any offering materials or literature
relating to the offer and sale of the securities.
(c) Evaluation of Risks. Subscriber has such knowledge and experience in
financial and business matters as to be capable of evaluating the merits and
risks of, and bearing the economic risks entailed by, an investment in the
Company and of protecting its interests in connection with this transaction. It
recognizes that its investment in the Company involves a high degree of risk.
The Subscriber, has relied upon an independent investigation made by it and has,
prior to the date hereof, been given access to and the opportunity to examine
all books and records of the Company.
(d) Due Diligence. Subscriber and/or the Subscriber's advisor(s) has
reviewed a copy of the Company's most recently filed Annual Report on Form 10-K,
and all Quarterly Reports and other reports filed thereafter or therebefore,
pursuant to the Securities Exchange Act of 1934, as amended (the "SEC Filings"),
has carefully reviewed such documents, has had the opportunity to obtain any
additional information necessary to verify the accuracy of the information
contained in such documents and has been given the opportunity to meet with
representatives of the Company and to have them answer any questions and provide
any additional information regarding the terms and conditions of this particular
investment deemed relevant by the Subscriber, and all such questions have been
answered and requested information provided to the Subscriber's full
satisfaction. In making its decision to purchase the Shares, the Subscriber has
relied solely upon its review of the documents referred to above and this
Subscription Agreement and independent investigations made by it or its
representatives. No other offering documents have been delivered to Subscriber.
(e) Independent Counsel. Subscriber acknowledges that it has been advised
to consult with its own attorney regarding legal matters concerning the Company
and to consult with its tax advisor regarding the tax consequences of acquiring
the Shares.
3
<PAGE>
(f) No Registration. Subscriber understands that the Shares have not been
registered under the 1933 Act or any other securities laws but are being offered
and sold to it in reliance upon specific exemptions from the registration
requirements of Federal and State securities laws and that the Company is
relying upon the truth and accuracy of the representations, warranties,
agreements, acknowledgments and understandings of Subscriber set forth herein in
order to determine the applicability of such exemptions and the suitability of
Subscriber to acquire the Shares.
(g) Offering Outside the United States. The Subscriber is not a "U.S.
Person" as defined in Regulation S (as the same may be amended from time to
time) promulgated under the Act.1 At the time the buy order for this transaction
was originated and as of the date of this Agreement, the Subscriber was outside
the United States and no offer to purchase the Securities was made in the United
States. Subscriber agrees, that it will not reoffer or sell the Securities, or
cause any transferee permitted hereunder to reoffer or sell the Securities,
within the United States, or for the account or benefit of a U.S. Person: (i) as
part of the distribution of the Securities at any time, or (ii) otherwise, until
at least forty (40) days after the Shares are issued, and, in either case, only
in a transaction meeting the requirements of Regulation S, including without
limitation, where the offer (i) is not made to a person in the United States and
either (A) at the time the buy order is originated, the Buyer is outside the
United States or the Company and any person acting on its behalf reasonably
believe that the buyer is outside the United States, or (B) the transaction is
executed in, on or through the facilities
- ----------
1 Pursuant to Regulation S, a "U.S. Person" means: (i) any natural person
resident in the United States, (ii) any partnership or corporation organized or
incorporated under the laws of the United States, (iii) any estate of which any
executor or administrator is a U.S. Person, (iv) any trust of which any trustee
is a U.S. Person, (v) any agency or branch of a foreign entity located in the
United States, (vi) any non-discretionary account or similar account (other than
an estate or trust) held by a dealer or other fiduciary organized, incorporated
or (if any individual resident in the United States), (vii) any discretionary
account or similar account (other than an estate or trust) held by a dealer or
other fiduciary organized, incorporated or (if an individual resident in the
United States), or (viii) any partnership or corporation if organized under the
laws of any foreign jurisdiction and formed by any U.S. Person principally for
the purpose of investing in securities not registered under the Act, unless it
is organized or incorporated and owned by accredited investors (as defined in
Rule 501(a) under the Act) who are not natural persons, estates or trusts.
4
<PAGE>
of a designated offshore securities market and neither the seller nor any person
acting on its behalf knows that the transaction has been prearranged with a
buyer in the United States; and (ii) no directed selling efforts shall be made
in the United States by the buyer, an affiliate or any person acting on their
behalf, or in a transaction registered under the Act or pursuant to an exemption
from such registration.
(h) Investment Intent. Subscriber is acquiring the Shares for its own
account and not with a view to the distribution thereof to or for the benefit or
account of any U.S. Person, in whole or in part. Subscriber understands and
agrees that it may bear the economic risk of its investment in the Shares for an
indefinite period of time. Subscriber does not now have any short position or
hedge position in the Company's Common Stock nor will the Subscriber make any
promissory notes and/or pledges to that effect on the Company's Common Stock.
(i) Transfer Restrictions.
(1) The transaction restriction in connection with this offshore offer
and sale restricts Subscriber from offering and selling to U.S. Persons, or
for the account or benefit of a U.S. Person, for a period of time as
follows and defined herein as the "Restricted Period," which shall be at
least after forty (40) days after the Company's acceptance of this
Subscription Agreement. Rule 903(c)(2) governs a forty (40) day transaction
restriction.
(2) Stop transfer instructions have been or will be placed on any
certificates or other documents evidencing the Shares so as to restrict the
resale, pledge, hypothecation or other transfer thereof in accordance with
the provisions hereof and the provisions of Regulation S and the Restricted
Period. All certificates shall bear the following legend, or one of similar
effect, and assuming there are no changes in the material facts set forth
in Section 2 of this Subscription Agreement or applicable law from the date
hereof until the date the Shares are sold, and subject to the Company's
Transfer Agent's receipt of a legal opinion from legal counsel that is
reasonably acceptable to the Company, all certificates representing the
Shares after the Restricted Period shall not bear a legend.
"The Common Shares of Palm Desert Art, Inc. (the "Issuer") represented
by this certificate have been issued pursuant to Regulation S,
promulgated under the Securities Act of 1933, as amended (the "Act"),
and have not been registered under the Act or any applicable state
securities laws. These Shares may not be offered or sold within the
United States or to or for the account of a "U.S. Person" (as that
term is defined in Regulation S) during the period commencing
5
<PAGE>
on the sale of these securities and ending on the fortieth (40) day
following completion of the Regulation S offering of the Issuer
pursuant to which these Shares have been issued, which day is
__________ 1998 (the "Restricted Period")."
(j) Transfer Restrictions Regarding Shares. If the Subscriber of the Shares
makes the certification pursuant to the Notice of Sale attached hereto, as
Exhibit A, that such Subscriber has complied with all of the requirements of
Regulation S and such other requirements as set forth herein, and assuming there
are no changes in the material facts set forth in Section 2 of this Subscription
Agreement or applicable law from the date hereof, the Company shall authorize
its Transfer Agent to deliver to Subscriber stock certificates evidencing
ownership of the Shares without a restrictive legend or stop transfer
instructions to the Subscriber upon the Transfer Agent's receipt of the original
certificate(s) bearing restrictive legends. Otherwise, the Shares shall be
considered restricted securities and certificates representing such Shares shall
contain restrictive legends and stop transfer restrictions will be placed with
the Company's Transfer Agent regarding such Shares.
The Subscriber understands that the Company is the issuer of the Shares
which are the subject of this Subscription Agreement and that, for purposes of
Regulation S, a "distributor" is any underwriter, dealer or other person who
participates, pursuant to a contractual arrangement, in the distribution of
securities offered or sold in reliance on Regulation S and that an "affiliate"
is any partner, officer, director or any person directly or indirectly
controlling, controlled by or under common control with the person in question.
In this regard, the Subscriber shall not, during the 40-day restricted period
set forth under Rule 903(c)(2), act as a distributor, either directly or through
any affiliate, and shall not sell, transfer, hypothecate or otherwise convey the
Shares or interest therein, other than outside the United States to a non-U.S.
person.
(k) Registration. If, following the Restricted Period, the Company fails to
issue certificates for the Shares bearing no restrictive legend for any reason,
other than a breach of contract by the Subscriber concerning the representations
and warranties made by the Subscriber in this Subscription Agreement or the
Notice of Sale were untrue when made, then the Company shall be required, at the
request of the Subscriber and at the Company's expense, to effect the
registration of the Shares under the 1933 Act, and relevant Blue Sky laws as
promptly as is practicable. The Company and the Subscriber shall cooperate in
good faith in connection with the furnishing of information required for such
registration and the taking of such other actions as may be legally or
commercially necessary in order to effect such registration. The Company shall
commence to prepare and file a registration statement within 30
6
<PAGE>
days of the Subscriber's written demand therefor and shall use its best efforts
to cause such registration statement to become effective as soon as practicable
thereafter. Such best efforts shall include, but not be limited to, promptly
responding to all comments received from the staff of the Securities and
Exchange Commission with respect to such registration statement and promptly
preparing and filing amendments to such registration statement which are
responsive to the comments received from the staff of the Securities and
Exchange Commission. Once declared effective by the Securities and Exchange
Commission, the Company shall cause such registration statement to remain
effective until the earlier of: (i) the sale by the Subscriber of all Shares
registered, or (ii) 120 days after the effective date of such registration
statement.
(l) No Advertisements. The Subscriber is not subscribing for Shares as a
result of, or subsequent to, any advertisement, article, notice or other
communication published in any newspaper, magazine, or similar media or
broadcast over television or radio, or presented at any seminar or meeting.
Neither the Subscriber nor any affiliate nor any person acting on its behalf,
has made any "directed selling efforts" (as defined in Rule 902 of Regulation S)
in the United States. Such activity includes, without limitation, the mailing of
printed material to investors residing in the United States, the holding of
promotional seminars in the United States, the placement of advertisements with
radio or television stations broadcasting in the United States or in
publications with a general circulation in the United States which discuss the
offering of Shares.
(m) Not an Affiliate. Subscriber is not an officer, director or affiliate
(as that term is defined in Rule 405 of the 1933 Act) of the Company.
(n) No Inquiry. Subscriber has not been the subject of a regulatory inquiry
by the Commission.
3. Representations and Warranties of the Company. For so long as any Shares held
by the Subscriber remains outstanding, the Company acknowledges, represents,
warrants and agrees as follows:
(a) Organization and Authorization. The Company is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware and has all requisite corporate power and authority to own and operate
its properties and assets and to carry on its business as currently conducted.
The Company is not in default or violation of any material term or provision of
its Certificate of Incorporation, as amended, or Bylaws nor will the
consummation of the transactions contemplated by this Subscription Agreement
cause any such default or violation. The Company has all requisite corporate
power and authority to enter into this Subscription Agreement, to sell the
Shares hereunder and to carry out and perform its obligations under the
7
<PAGE>
terms of this Subscription Agreement. This Agreement is a valid and binding
obligation of the Company, enforceable in accordance with its terms, except as
the same may be limited by applicable bankruptcy, insolvency, reorganization,
moratorium or other similar laws effecting the rights of creditors generally and
available equitable remedies.
(b) Securities Law Authorization. The Company is a "Reporting Issuer" as
defined in Rule 902 of Regulation S. The Company is in full compliance, to the
extent applicable, with all reporting obligations under either Section 12(b),
12(g) or 15(d) of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), and shall maintain such status on a timely basis. The Company has
registered its Common Stock pursuant to Section 12 of the Exchange Act and its
Common Stock trades on the OTC Bulletin Board under the ticker symbol (DTBS).
(c) Issuer Compliance. For so long as any Shares held by the Subscriber
remain outstanding, the Company acknowledges, represents, warrants and agrees as
follows:
(1) It will reserve from its authorized but unissued shares of Common
Stock a sufficient number of shares of Common Stock to permit the sale and
ownership of the Shares.
(2) It will use its best efforts to maintain the listing of its Common
Stock on the OTC Bulletin Board.
(3) It will permit the Subscriber to exercise its rights under this
Subscription Agreement by telecopying an executed and completed Notice of
Sale to the Company and delivering the original Notice of Sale and the
certificate(s) representing the Shares bearing a restrictive legend to the
Company by express courier. Each business date on which a Notice of Sale is
telecopied to and received by the Company in accordance with the provisions
hereof shall be deemed the Notice of Sale.
(d) Full Disclosure. There is no fact known to the Company (other than
general economic conditions known to the public generally) that has not been
disclosed in writing to the Subscriber that: (i) could reasonably be expected to
have a material adverse effect on the condition (financial or otherwise) or on
the earnings, business affairs, business prospects, properties or assets of the
Company, or (ii) could reasonably be expected to materially and adversely affect
the ability of the Company to perform its obligations pursuant to this
Subscription Agreement.
4. Representations and Warranties of the Company and Subscriber.
Each of Subscriber and the Company represent to the other the following
with respect to itself:
8
<PAGE>
(a) Subscription Agreement. This Subscription Agreement has been duly
authorized, validly executed and delivered on behalf of the Company and
Subscriber and is a valid and binding agreement in accordance with its terms,
subject to general principles of equity and to bankruptcy or other laws
affecting the enforcement of creditors' rights generally.
(b) Non-Contravention. The execution and delivery of this Subscription
Agreement and the consummation of the issuance of the Shares and the transaction
contemplated by the Subscription Agreement do not and will not conflict with or
result in a breach by the Company or Subscriber of any of the terms or
provisions of, or constitute a default under, the articles of incorporation or
by-laws of the Company or Subscriber, or any indenture, mortgage, deed of trust
of other material agreement or instrument to which the Company or Subscriber is
a party or by which it or any of its properties or assets are bound, or any
existing applicable law, rule or regulation or any applicable decree, judgment
or order of any court, Federal or State regulatory body, administrative agency
or other governmental body having jurisdiction over the Company or Subscriber or
any of its properties or assets.
(c) Approvals. Neither the Company nor Subscriber is aware of any
authorization, approval or consent of any governmental body which is legally
required for the issuance and sale of the Shares.
(d) Indemnification. Each of the Company and the Subscriber agrees to
indemnify the other and to hold the other harmless from and against any and all
losses, damages, liabilities, costs and expenses (including reasonable
attorneys' fees) which the other may sustain or incur in connection with the
breach by the indemnifying party of any representation, warranty or covenant
made by it in this Subscription Agreement.
6. Exemption; Reliance on Representations. Subscriber understands that the offer
and sale of the Shares are not being registered under the 1933 Act. The Company
is relying on the rules governing offers and sales made outside the United
States pursuant to Regulation S. Each of the Company and Subscriber agree to
comply in all material respects with the provisions of Regulation S in
connection with the transactions contemplated hereby, and to ensure that all
applicable Offering Restrictions (as defined in Regulation S) are thoroughly
complied with and satisfied and to refrain from engaging, and to ensure that
none of its affiliates will engage, in any Directed Selling Efforts.
7. Closing Date. The closing date shall be the date on which the this Agreement
shall become full executed by all parties hereto (the "Closing Date").
9
<PAGE>
8. Conditions to the Company's Obligation to Execute this Agreement. Subscriber
understands that the Company's obligation to execute this Agreement are
conditioned upon:
(a) The receipt and acceptance by the Company of this Subscription
Agreement for the Shares as evidenced by execution of this Subscription
Agreement by the President or any Vice President of the Company; and
(b) All representations and warranties of the Subscriber shall remain true
and correct as of the Closing Date; and
(c) Payment of the Purchase Price by Subscriber to Dowe & Dowe (the "Escrow
Agent"). All checks should be made payable to "Dowe & Dowe, as Escrow Agent for
Palm Desert Art, Inc." All funds deposited by wire transfer should be sent as
follows:
Account: Dowe & Dowe Client Trust Funds
Bank: Chase Manhattan Bank
1 Chase Manhattan Plaza
New York, New York 10081
ABA: 021 0000 21
Acct No: 910-191-4647
Ref: Palm Desert
9. Conditions to Subscriber's Obligation to Execute this Agreement.
The Company understands that Subscriber's obligation to execute this
Agreement are conditioned upon:
(a) Acceptance by Subscriber of a satisfactory Subscription Agreement for
the Shares; and
(b) Delivery of the certificate(s) evidencing ownership of the Shares
pursuant to Regulations; and
(c) All representations and warranties of the Company shall remain true and
correct as of the Closing Date.
10. Miscellaneous.
(a) This Subscription Agreement will be construed and enforced in
accordance with and governed by the laws of the State of Delaware, except for
matters arising under the Act, without reference to principles of conflicts of
law. Each of the parties consents to the jurisdiction of the federal courts
whose districts encompass any part of the State of Delaware or the state courts
of the State of Delaware in connection with any dispute arising under this
Subscription Agreement and hereby waives, to the maximum extent permitted by
law, any objection, including any objection based on forum non conveniens, to
the bringing of any such proceeding in such jurisdictions. Each party hereby
agrees that
10
<PAGE>
if another party to this Subscription Agreement obtains a judgment against it in
such a proceeding, the party which obtained such judgment may enforce same by
summary judgment in the courts of any country having jurisdiction over the party
against whom such judgment was obtained, and each party hereby waives any
defenses available to it under local law and agrees to the enforcement of such a
judgment. Each party to this Subscription Agreement irrevocably consents to the
service of process in any such proceeding by the mailing of copies thereof by
registered or certified mail, postage prepaid, to such party at its address set
forth herein. Nothing herein shall affect the right of any party to serve
process in any other manner permitted by law.
(b) If for any reason the transactions contemplated by this Subscription
Agreement are not consummated, each of the parties hereto shall keep
confidential any information obtained from any other party (except information
publicly available or in such party's domain prior to the date hereof, and
except as required by court order) and shall promptly return to the other
parties all schedules, documents, instruments, work papers or other written
information, without retaining copies thereof, previously furnished by it as a
result of this Subscription Agreement or in connection herewith.
(c) In lieu of the original, a facsimile transmission or copy of the
original shall be as effective and enforceable as the original. This
Subscription Agreement may be executed in counterparts which shall be considered
an original document and which together shall be considered a complete document.
(d) This Subscription Agreement and Exhibits annexed hereto constitute the
entire Subscription Agreement between the Subscriber and the Company with
respect to the subject matter hereof. The Subscription Agreement may be amended
only by a writing executed by both of them.
(e) The Subscriber represents to the Company that the representations and
warranties of the Subscriber contained herein are complete and accurate and may
be relied upon by the Company in determining the availability of an exemption
from registration under federal and state securities laws in connection with a
private offering of securities.
(f) In the event that any provision of this Subscription Agreement becomes
or is declared by a court of competent jurisdiction to be illegal, unenforceable
or void, this Subscription Agreement shall continue in full force and effect
without said provision; provided that no such severability shall be effective if
it materially changes the economic benefit of this Subscription Agreement to any
party.
11
<PAGE>
(g) Each of the Company and the Subscriber agrees to keep confidential and
not to disclose to or use for the benefit of any third party the terms of this
Subscription Agreement or any other information which at any time is
communicated by the other party as being confidential without the prior written
approval of the other party; provided, however, that this provision shall not
apply to information which, at the time of disclosure, is already part of the
public domain (except by breach of this Subscription Agreement) and information
which is required to be disclosed by law.
(h) Each of the parties shall pay its own fees and expenses (including the
fees of any attorneys, accountants, appraisers or others engaged by such party)
in connection with this Subscription Agreement and the transactions contemplated
hereby.
IN WITNESS WHEREOF, this Subscription Agreement was duly executed on the
24th day of April, 1998.
SENCORP LTD.
By: ss/ Lesley Anne Muttall
--------------------------------
Cheam Directors Limited
-------------------------------------
Title: Directors to Sencorp Ltd.
Lesley Anne Muttall
-------------------------------------
(Print Name above)
Agreed to and Accepted on
this 24th day of April, 1998.
PALM DESERT ART, INC.
By: ss/ Hugh G. Pike
-------------------------
Hugh G. Pike, President
President
-------------------------
Title
Hugh G. Pike
-------------------------
(Print Name above)
12
<PAGE>
EXHIBIT A
NOTICE OF SALE
__________, 199__
Palm Desert Art, Inc.
39-725 Grand Lane, Suite J,
Palm Desert, California 92211
Dear Sir or Madam:
The undersigned, Sencorp Ltd. (the "Holder"), does hereby give notice that it
wishes to sell _______ shares of Common Stock of PALM DESERT ART, INC. (formerly
Database Technologies, Inc.) (the "Company") purchased from the Company pursuant
to Regulation S on April __, 1998 and the attached Subscription Agreement and
tenders herewith certificate(s) evidencing ownership of such Shares and bearing
a restrictive legend together with payment for all applicable transfer taxes, if
any. Please issue a certificate or certificates representing said Shares of
Common Stock in the name of the undersigned or in such other name specified
below, without restrictive legends.
Name: ______________________________________
Address: ______________________________________
______________________________________
The Holder represents and warrants that:
(i) the Holder is not a U.S. Person (as defined under Regulation S under
the Securities Act of 1933, as amended);
(ii) the Shares to be sol are not being sold on behalf of a U.S. Person;
(iii) all of the representations and warranties of the Holder contained in
the attached Subscription Agreement are true and correct in all respects on and
as of the date hereof as though made on and as of the date hereof;
(iv) all of the requirements of Regulation S applicable to the Holder have
been complied with by the Holder.
SENCORP LTD.
By: ______________________________
______________________________
Title
______________________________
(Print Name above)
<PAGE>
FULL NAME AND ADDRESS OF SUBSCRIBER FOR REGISTRATION PURPOSES:
NAME: Sencorp Ltd.
ADDRESS: National Westminster Bank Building, 57/63 Line Wall Road
Gibraltar, P.O. Box 199
TEL NO: 011-350-79000
FAX NO: 011-350-40249
CONTACT
NAME:
DELIVERY INSTRUCTIONS (IF DIFFERENT FROM REGISTRATION NAME):
NAME:
ADDRESS:
TEL NO:
FAX NO:
CONTACT
NAME:
SPECIAL
INSTRUCTIONS:
2
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<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> APR-30-1998
<PERIOD-END> APR-30-1998
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 83,319
<ALLOWANCES> 0
<INVENTORY> 273,043
<CURRENT-ASSETS> 518,424
<PP&E> 56,670
<DEPRECIATION> 3,642
<TOTAL-ASSETS> 642,903
<CURRENT-LIABILITIES> 113,163
<BONDS> 0
0
0
<COMMON> 225,750
<OTHER-SE> 303,990
<TOTAL-LIABILITY-AND-EQUITY> 642,903
<SALES> 864,504
<TOTAL-REVENUES> 864,504
<CGS> 328,426
<TOTAL-COSTS> 328,426
<OTHER-EXPENSES> 489,148
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 11,020
<INCOME-PRETAX> 35,910
<INCOME-TAX> 0
<INCOME-CONTINUING> 35,910
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