As filed with the Securities and Exchange Commission on February __, 1999.
Registration No. 333-
------
- -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------------
FORM S-8 AND FORM S-3
REGISTRATION STATEMENT UNDER
THE SECURITIES ACT OF 1933
Palm Desert Art, Inc.
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(Exact name of issuer as specified in its charter)
Delaware 02- 0429620
------------------------------- -------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
74-350 Alessandro Dr., Suite A-2, Palm Desert, CA 92260
- ------------------------------------------------- ----------
(Address of Principal Executive Offices) (Zip Code)
Palm Desert Art, Inc. 1999 Stock Compensation Plan
Palm Desert Art Inc. 1998 Stock Compensation Grants
---------------------------------------------------
(Full title of the plans)
Hugh G. Pike, President, 74-350 Alessandro Dr.,
Suite A-2, Palm Desert, CA 92260
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(Name and address of agent for service)
(760) 346-1192
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(Telephone number, including area code, of agent for service)
Approximate date of commencement of proposed sale to the public: Upon
grant of shares or exercise of the options granted under the Stock
Compensation Plan, but in no event prior to the effective date of this
Registration Statement.
If the only securities being registered on this Form are being
offered pursuant to dividend or interest reinvestment plans, please check
the following box.
If any of the securities being registered on this Form are to be
offered on a delayed or continuous basis pursuant to Rule 415 under the
Securities Act of 1933, other than securities offered only in connection
with dividend or interest reinvestment plans, check the following box. [x]
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
Proposed Proposed
maximum maximum
Title of securities to Amount to be offering price aggregate Amount of
be registered registered(1) per share offering price Registration Fee(2)
- ---------------------- ------------- -------------- -------------- -------------------
<S> <C> <C> <C> <C>
Common Stock
$.002 par value 616,000 $.625 $385,000 $107.03
- --------------------------------------------------------------------------------------------------
<FN>
<F1> The aggregate amount of securities registered hereunder is 616,000
shares of Common Stock: 166,000 shares have previously been issued by
the Registrant, and 450,000 shares which may be issued by the
Registrant pursuant to the Registrant's 1999 Stock Compensation Plan.
Pursuant to Rule 416 promulgated under the Securities Act of 1933, as
amended, this Registration Statement covers such additional shares of
Common Stock to be offered or issued to prevent dilution as a result
of future stock splits, stock dividends or similar transactions.
<F2> The fee with respect to 616,000 shares has been calculated pursuant
to paragraphs (h) and (c) of Rule 457 upon the basis of $.625 per
share, the average of the bid and asked price per share of the
Registrant's Common Stock on February 16, 1999, a date within five
(5) business days prior to the date of filing of this Registration
Statement, as reported by the Over The Counter Bulletin Board ("OTC
Bulletin Board") of the National Association of Securities Dealers,
Inc. ("NASD").
</FN>
</TABLE>
EXPLANATORY NOTE
This Registration Statement contains two parts. The first part
contains a prospectus pursuant to Form S-3 (in accordance with Section C of
the General Instructions to Form S-8) which covers reoffers and resales by
affiliates and non-affiliates of Palm Desert Art, Inc. the "Registrant") of
shares of Common Stock of the Registrant which have been previously issued
by the Registrant. The second part contains Information Required in the
Registration Statement pursuant to Part II of Form S-8 and certain items
from Information Not Required in the Prospectus pursuant to Part II of Form
S-3. Pursuant to the introductory Note to Part I of Form S-8, the Plan
Information specified by Part I is not being filed with the Commission.
PROSPECTUS
PALM DESERT ART, INC.
74-350 Alessandro Dr., Suite A-2,
Palm Desert, CA 92260
(760) 346-1192
166,000 SHARES OF COMMON STOCK
This prospectus relates to the offer and sale of up to 166,000 shares
of our common stock by certain selling stockholders. These selling
stockholders are consultants to the Company who have acquired these shares
as compensation for consulting services previously rendered. On February
19, 1999, the closing price of the Common Stock was $.50 per share. The
selling stockholders may offer their shares from time to time, in different
types of transactions, including brokerage and negotiated transactions or
otherwise, at market prices prevailing at the time of sale or at negotiated
or other prices.
We will receive no proceeds from any of these sales.
Our Common Stock is traded on the Over-the Counter (OTC) Bulletin
Board operated by the National Association of Securities Dealers. Our
ticker symbol is "PDAP". The bid and asked prices of our Common Stock on
February 16, 1999 was $.50 and $.6875 per share, respectively.
--------------------
THIS INVESTMENT INVOLVES A HIGH DEGREE OF RISK. YOU SHOULD PURCHASE
SHARES ONLY IF YOU CAN AFFORD A COMPLETE LOSS. SEE "RISK FACTORS"
BEGINNING ON PAGE 5.
--------------------
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE
SECURITIES COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR
DETERMINED IF THISPROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO
THE CONTRARY IS A CRIMINAL OFFENSE.
--------------------
THE DATE OF THIS PROSPECTUS IS FEBRUARY 16, 1999.
WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and special reports, proxy statements and
other information with the Securities and Exchange Commission. You may read
and copy any reports, statements or other information filed by us at the
Commission's public reference room at Room 1024, Judiciary Plaza, 450 Fifth
Street, N.W., Washington, D.C. 20549 and the regional offices of the
Commission located at Seven World Trade Center, 13th Floor, New York, New
York 10048, and 500 West Madison Street, Chicago, Illinois 60661. Copies of
such material can be also obtained from the Public Reference Section of the
Commission at 450 Fifth Street, N.W., Washington, D.C. 20549, and its
public reference rooms in New York, New York and Chicago, Illinois, at
prescribed rates. Please call the Commission at 1-800-SEC-0330 for further
information on the public reference rooms. Copies of such information may
also be inspected at the reading room of the library of the National
Association of Securities Dealers, Inc., 1735 K Street, N.W., Washington,
D.C. 20006. Our filings with the Commission are also available to the
public from commercial document retrieval services and at the Commission's
web site at http://www.sec.gov.
We are allowed to "incorporate by reference" the information we file
with the Commission (File No. 0-17623), which means that we can disclose
important information to you by referring you to another document we filed
with the Commission. The information incorporated by reference is an
important part of this Prospectus, and information that we file later with
the Commission will automatically update and supersede this information. We
incorporate by reference the documents listed below
(a) Our Annual Report on Form 10-KSB for the fiscal year ended
April 30, 1998;
(b) Our Quarterly Report on Form 10-QSB for the quarterly period
ended October 31, 1998;
(c) Our Current Report on Form 8-K, filed on August 20, 1999
(d) All documents filed by us in the future pursuant to Sections
13(a), 13(c), 14 or 15(d) of the Exchange Act until all of the
shares are sold by the Selling Shareholders.
You should read the information relating to us in this Prospectus
together with the information in the documents incorporated by reference.
Any statement contained in a document incorporated by reference herein,
unless otherwise indicated therein, speaks as of the date of the document.
Statements contained in this Prospectus may modify or replace statements
contained in the documents incorporated by reference. We will furnish
without charge to you, upon request, a copy of any or all of the documents
described above, except for exhibits to such documents, unless such
exhibits are specifically incorporated by reference into such documents.
Requests should be addressed to:
PALM DESERT ART, INC.
74-350 Alessandro Dr., Suite A-2,
Palm Desert, CA 92260
(760) 346-1192.
This prospectus is part of a registration statement we filed with the
Commission. You should rely only on the information incorporated by
reference or provided in this prospectus or any supplement. We have not
authorized anyone else to provide you with different information. The
selling stockholders will not make an offer of the shares of common stock
in any state where the offer is not permitted. You should not assume that
the information in this prospectus or any supplement is accurate as of any
date other than the date on the front of those documents.
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
This prospectus contains certain "forward-looking statements" as
defined in the Private Securities Litigation Reform Act of 1995 and
information relating to us that are based on the beliefs of our management,
as well as assumptions made by and information currently available to our
management. When used in this prospectus, the words "estimate," "project,"
"believe," "anticipate," "intend," "expect" and similar expressions are
intended to identify forward-looking statements. These forward-looking
statements reflect our current views with respect to future events and are
subject to risks and uncertainties that could cause actual results to
differ materially from those contemplated in these forward-looking
statements, including those risks discussed under "Risk Factors" on Page 5.
You are cautioned not to place undue reliance on these forward-looking
statements, which speak only as of the date on this prospectus. We have no
obligation to publicly release any revisions to these forward-looking
statements to reflect events or circumstances after the date of this
prospectus or to reflect the occurrence of unanticipated events.
PROSPECTUS SUMMARY
THIS SUMMARY HIGHLIGHTS SELECTED INFORMATION FROM THIS PROSPECTUS AND MAY
NOT CONTAIN ALL OF THE INFORMATION THAT IS IMPORTANT TO YOU. TO UNDERSTAND
THETERMS OF OUR SECURITIES, YOU SHOULD CAREFULLY READ THIS DOCUMENT. YOU
SHOULD ALSO READ THE DOCUMENTS WE HAVE REFERRED YOU TO IN THE SECTION
ENTITLED "WHERE YOU CAN FIND MORE INFORMATION" ON PAGE 1 FOR INFORMATION ON
OUR COMPANY AND OUR FINANCIAL STATEMENTS.
OUR BUSINESS
We are an integrated publisher and retailer of limited-edition
serigraphs, lithographs and other works of fine art created by
internationally recognized and innovative, contemporary artists. We have
obtained the exclusive rights to publish the artworks of several
contemporary artists who are well-recognized in the art community. We use
various publishing techniques ranging from the classic, hand-pulled
serigraphy to innovative new printing techniques which incorporate hand-
painted details. We maintain art galleries in Palm Desert and Tarzana,
California, and in August 1998, we acquired six art framing shops and
galleries in Upstate New York.
We intend to continue to obtain the exclusive rights to publish
contemporary artists while growing our gallery and publishing business and
reputation through the acquisition of art framing shops and galleries
nationwide. Our business plan is to develop a national chain of galleries
to sell fine artwork and provide high-quality art framing services. By
consolidating material handling and frame cutting into regional framing
centers, we hope to realize substantial cost savings.
In 1998, we changed the name of the company from Database
Technologies, Inc. to Palm Desert Art, Inc. and we relocated our principal
place of business from Bedford, New Hampshire to Palm Desert, California.
Recent Developments
In August 1998, we acquired R M & M Framemakers, Inc. (RM&M), a New
York corporation engaged in the art framing and gallery business. In
connection with this transaction, we issued 645,000 shares our Common Stock
to the former shareholders of RM&M. We have recently commenced negotiations
with the former shareholders of RM&M to resell RM&M back to said
shareholders, and we anticipate that this transaction, if it occurs at all,
will retroactively take effect prior to the close of the quarter ended
January 31, 1999.
Also in August 1998, we also issued 166,000 shares of our Common
Stock to three consultants as payment for services rendered. In addition,
we issued 800,000 shares of our Common Stock to three private investors for
a price of $.30 per share. The proceeds from this private placement were
used to pay off company debt.
RISK FACTORS
All prospective investors should carefully consider, among other
things, the following factors before purchasing any securities offered
hereby:
Limited Operating History. We have had only a limited operating history in
the art publishing business. In April 1998, we purchased all of the assets
of Palm Desert Art Publishers, Ltd. LLC, (PDAP) in exchange for
approximately 80% of the Company's authorized common stock. At the time of
the acquisition, PDAP had been in the art publishing business for only one
year. Accordingly, we are subject to the risks inherent in the development
of a new business enterprise; including:
- 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. Our financial statements for the fiscal 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 of $35,910. Our financial statements for the six months ended
October 31, 1998, which have not yet been audited, show net income of
$148,483. We may never be able generate revenues or profits sufficient to
pay our expenses and obligations or to acquire the operations of other
galleries and art framing shops. We expect that we will incur losses as we
increase expenditures for marketing, advertising and acquisitions.
Uncertain Market Acceptance. Since the acquisition of PDAP's assets in
April 1998, we have focused our efforts on (1) obtaining the exclusive
rights to publish contemporary artists and (2) growing our gallery and
publishing business and reputation through the acquisition of art framing
shops and galleries nationwide. Although there is an existing market for
artwork generally, artwork is subject to the individual tastes of the
consumer which cannot be predicted with any degree of accuracy.
Accordingly, there is a risk that the art buyers may not appreciate the
quality of the Company's publications. Market acceptance of our products
will depend, in large part, upon our ability to demonstrate to the art
community that we can produce high-quality artwork and framing services at
affordable prices. Although we believe that our artwork represents the
significant talents of various contemporary artists, we cannot guaranty
that our artwork will ever achieve market acceptance.
Limited Marketing Organization. Commercialization of our artwork and
framing services will be substantially dependent on
- our ability to develop or acquire the network of galleries and
framing shops throughout the country; and
- our ability to put together a successful a marketing and sales
team.
We cannot guaranty that we will ever be able to develop or acquire this
network of galleries or put together a successful sales and marketing team.
Need for Additional Capital. We will require substantial additional capital
- to complete the several acquisitions that we are contemplating;
- to hire additional personnel; and
- for general working capital purposes.
We may be able to obtain funds for these purposes from a number of sources,
including, sales of equity and debt instruments, and bank financing.
However, we currently have no arrangements for any such financing, and we
cannot guaranty that we will ever be able to obtain any additional
financing. Even if we can obtain some financing, we cannot guaranty that
that it will be on reasonable or favorable terms, or that it will enough to
meet our immediate and long term needs.
Need for Qualified Personnel. In order to meet our business objectives, we
will need to hire additional marketing and managerial personnel, and we
will be required to compete for such personnel with companies having
greater financial and other resources. Because our future success will be
dependent, in part, upon our ability to attract and retain qualified
personnel, our failure to do so could have a material adverse effect upon
our business.
Absence of Dividends. We have not paid any cash dividends and we do not
anticipate paying any dividends in the foreseeable future. We expect that
all future earnings, if any, will be retained to fund development and
expansion. Accordingly, we cannot guaranty that the Company will ever pay
cash dividends.
Dependence on Limited Management. Our success is substantially dependent
on the efforts and abilities of its President, Hugh G. Pike, who makes or
significantly influences most decisions concerning our business and its
management. If we were to lose Mr. Pike, our business and further
prospects would suffer materially.
Control by Current Management. Management and affiliates of the Company
currently own or control more than 50% of the outstanding Common Stock.
These persons are and will continue to be able to exercise control over the
election of the Company's directors and the appointment of officers.
Dilutive Effect of Stock Options and Stock Grants. We currently have
outstanding options to purchase up to 300,000 shares of Common Stock. In
addition, the Board of Directors has reserved for issuance 450,000 shares
of Common Stock which may be granted from time to time pursuant to the
Company's 1999 Stock Compensation Plan (hereinafter the "Plan"). Issuance
of shares upon exercise of outstanding options or pursuant to the Plan
will reduce the percentage of Common Stock held by the public stockholders.
OTC Bulletin Board; Volatility of Price. Currently, our Common Stock is
quoted on the OTC Bulletin Board. The OTC Bulletin Board offers less
trading liquidity than Nasdaq. Quotes for securities traded on the OTC
Bulletin Board are not as widely available in newspapers as are those for
Nasdaq. Therefore, the lack of readily available price information may
impair the ability of purchasers of the Common Stock to resell the
securities offered hereby at or near their purchase price or at any price.
Furthermore, it is unlikely that a lending institution will accept the
Company's securities as pledged collateral for loans even if a regular
trading market develops. The trading price of the Common Stock could be
subject to wide fluctuations in response to quarterly variations in the
Company's operating results, announcements by the Company or other parties,
developments affecting the Company, and other events or factors. In
addition, the stock market has experienced extreme price and volume
fluctuations in recent years. These fluctuations have had a substantial
effect on the market price for many companies, often unrelated to the
operating performance of such companies and may adversely affect the market
price of the Common Stock.
No Proceeds from the Offering. We will not receive any of the proceeds of
this offering. All of the proceeds of this offering will be received by
the Selling Shareholders.
Possible Future Sales of Shares by the Selling Shareholders. The Selling
Shareholders could sell any or all of the Common Stock they own upon the
effectiveness of the registration statement of which this prospectus forms
a part. The Selling Shareholders may determine to sell shares of Common
Stock from time to time for any reason. Although we cannot predict the
effect, if any, that sales of shares of Common Stock owned by Selling
Shareholders would have on the market price prevailing from time to time,
we expect that sales of substantial amounts of Common Stock, or the
availability of such shares for sale in the public market, could adversely
affect prevailing market prices of our Common Stock.
Shares Eligible for Future Sale. We presently have 5,379,044 shares of
Common Stock issued and outstanding, of which approximately 500,000 shares
are eligible for sale in the public market to the extent they are not held
by "affiliates." In addition, we are registering for pubic resale 166,000
shares held by the Selling Shareholders, presently outstanding as well as
450,000 shares which may be issued from time to time pursuant to the 1999
Stock Compensation Plan. The remaining issued and outstanding shares of
Common Stock are currently "restricted securities" for purposes of the
Securities Act. Approximately 3,276,366 shares will become eligible for
resale in the public market pursuant to Rule 144 in April 1999, and another
1,445,000 will become eligible for resale in the public market pursuant to
Rule 144 in August 1999. Although the Company can make no prediction as to
the effect, if any, that sales of the shares of Common Stock referred to
above would have on the market price prevailing from time to time, we
expect that sales of substantial amounts of Common Stock, or the
availability of such shares for sale in the public market could adversely
affect prevailing prices of the Common Stock.
Potential Effect of Penny Stock Rules on Liquidity of Common Stock. If our
securities are not listed on the Nasdaq SmallCap market or certain other
national securities exchanges and the price falls below $5.00, subsequent
purchases of such securities will be subject to the requirements of the
penny stock rules unless an exemption is available. The Commission has
adopted rules that regulate broker-dealer practices in connection with
transactions in "penny stocks." Penny stocks generally are equity
securities with a price of less than $5.00 (other than securities listed on
certain national securities exchanges or designated for quotation on the
Nasdaq system). The penny stock rules require a broker-dealer to:
(i) deliver a standardized risk disclosure document required by the
SEC;
(ii) provide the customer with (a) current bid and offer
quotations for the penny stock,
(b) the compensation of the broker-
dealer and its salesperson in
the transaction, and
(c) monthly account statements
showing the market value of
each penny stock held in the
customer's account;
(iii) make a special written determination that the penny stock is a
suitable investment for the purchaser; and
(iv) receive the purchaser's written agreement to the transaction.
These disclosure requirements may have the effect of reducing the level of
trading activity in the secondary market for a stock that becomes subject
to the penny stock rules. If our securities become subject to the penny
stock rules, stockholders may find it more difficult to sell their
securities. If our securities become subject to the existing or proposed
regulations on penny stocks, the market liquidity for the Company's
securities would be severely and adversely affected by limits on the
ability of broker-dealers to sell the Company's securities and the ability
of Selling Shareholders in this offering to sell their securities in the
secondary market.
SELLING SHAREHOLDERS
The following table sets forth the name and relationship to the
Company of each Selling Shareholder and the number of shares of Common
Stock which each Selling Shareholder (1) owned of record as of January 31,
1999; (2) is offering hereby for resale pursuant to this Prospectus; and
(3) the amount of Common Stock to be owned by each Selling Shareholder
assuming the sale of all shares which may be sold pursuant to this
Prospectus.
<TABLE>
<CAPTION>
Amount of
Common Percentage of
Owned as of Offered for Resale Stock to be Common Stock
Name and Relationship February 15, Pursuant to this Owned After Owned After
To the Company 1999 Prospectus) Sales Sales
- --------------------- ------------ ------------------ ----------- -------------
<S> <C> <C> <C> <C>
Joseph Lussier
acquisition consultant 75,000 75,000 0 0%
David Dow, Esq.
legal advisor 75,000 75,000 0 0%
Kerry Pope
acquisition consultant 16,000 16,000 0 0%
</TABLE>
PLAN OF DISTRIBUTION
We are registering the shares covered by this prospectus on behalf of
the Selling Stockholders. All costs, expenses and fees in connection with
the registration of these shares will be paid by us. Brokerage
commissions, if any, attributable to the sale of these shares will be paid
by the Selling Stockholders or their donees or pledgees. Sales of these
shares may be effected from time to time in transactions (which may include
block transactions) on the NASD's OTC Bulletin Board (or such other
exchange on which the Securities are listed at the time of sale), in the
over-the-counter market or otherwise, in negotiated transactions, or a
combination of such methods of sale, at fixed prices which may be changed,
at market prices prevailing at the time of sale, or at negotiated or other
prices.
The Selling Stockholders may also sell these shares pursuant to Rule
144 promulgated under the Securities Act of 1933, as amended, or may pledge
shares as collateral for margin accounts and such shares could be resold
pursuant to the terms of such accounts. Pursuant to this prospectus, the
selling stockholders may also donate a certain de minimus number (as
allowed by the Securities and Exchange Commission) of their shares of
Common Stock, and such shares could be resold pursuant to rules set forth
by the Commission. The Selling Stockholders have advised us that they have
not entered into any agreements, understandings or arrangements with any
underwriters or broker-dealers regarding the sale of their securities. The
Selling Stockholders may effect such transactions by selling common stock
directly to purchasers or to or through broker-dealers which may act as
agents or principals. These broker-dealers may receive compensation in the
form of discounts, concessions or commissions from each selling stockholder
and/or the purchasers of the shares for whom the broker-dealers may act as
agents or to whom they sell as principal, or both (which compensation as to
a particular broker-dealer might be in excess of customary commissions).
The Selling Stockholders and any broker-dealers that act in
connection with the sale of the shares might be deemed to be "underwriters"
within the meaning of Section 2(11) of the Securities Act and any
commission received by them and any profit on the resale of the shares of
common stock as principal might be deemed to be underwriting discounts and
commissions under the Securities Act. The selling stockholders may agree to
indemnify any agent, dealer or broker-dealer that participates in
transactions involving sales of the shares against certain liabilities,
including liabilities arising under the Securities Act. Liabilities under
the federal securities laws cannot be waived. Because the Selling
Stockholders may be deemed to be "underwriters" within the meaning of
Section 2(11) of the Securities Act, the Selling Stockholders will be
subject to prospectus delivery requirements under the Securities Act.
Furthermore, in the event of a "distribution" of the shares, the Selling
Stockholder, any selling broker or dealer and any "affiliated purchasers"
may be subject to Regulation M under the Exchange Act. Such regulation
would prohibit, with certain exceptions, any such person from bidding for
or purchasing any security which is the subject of the distribution until
his, her or its participation in that distribution is completed. In
addition, Regulation M prohibits any "stabilizing bid" or "stabilizing
purchase" for the purpose of pegging, fixing or stabilizing the price of
common stock in connection with this offering.
LEGAL MATTERS
Certain legal matters relating to the common stock have been passed upon
for us by Francis D. Parisi, Esq. of Cranston, RI.
EXPERTS
Our audited financial statements incorporated by reference in this
prospectus and elsewhere in the registration statement have been audited by
Berry, Dunn, McNeil & Parker of Manchester, NH, as indicated in their
report with respect thereto, and are included herein in reliance upon the
authority of said firm as experts in accounting and auditing in giving said
reports.
PROSPECTUS
166,000 Shares of Common Stock
NO PERSON (INCLUDING ANY SALESMAN OR BROKER) IS AUTHORIZED TO PROVIDE
ORALOR WRITTEN INFORMATION ABOUT THIS OFFERING NOT CONTAINED IN THIS
PROSPECTUS. YOU SHOULD NOT ASSUME THAT THE INFORMATION CONTAINED IN THIS
PROSPECTUS IS ACCURATE AS OF ANY DATE OTHER THAN THE DATE INDICATED BELOW.
Table of Contents
Where You Can Find More Information 2
Cautionary Statement Regarding Forward-Looking Statements 3
Prospectus Summary 4
Our Business
Recent Developments
Risk Factors 5
Limited Operating History
Limited Profitability
Uncertain Market Acceptance.
Limited Marketing Organization
Need for Additional Capital
Need for Qualified Personnel
Absence of Dividends
Dependence on Limited Management
Control by Current Management
Dilutive Effect of Stock Options and Stock Grants
OTC Bulletin Board; Volatility of Price
No Proceeds from the Offering
Possible Future Sales of Shares by the Selling Shareholders
Shares Eligible for Future Sale
Potential Effect of Penny Stock Rules on Liquidity of Common Stock
Selling Stockholders 9
Plan of Distribution 10
Legal Matters 11
Experts 12
FEBRUARY 16, 1999
PART II
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INFORMATION REQUIRED IN REGISTRATION STATEMENT
ITEM 3: DOCUMENTS INCORPORATED BY REFERENCE
The information in the following documents which we have filed with the
Commission (File No. 0- 17623) pursuant to the Exchange Act is incorporated
by reference in this Registration Statement:
(a) Our Annual Report on Form 10-KSB for the fiscal year ended
April 30, 1998;
(b) Our Quarterly Report on Form 10-QSB for the quarterly period
ended October 31, 1998;
(c) Our Current Reports on Form 8-K, filed on August 20, 1999
All documents and reports subsequently filed by us pursuant to Sections
13(a), 13(c), 14 or 15(d) of the Exchange Act after the date of this
Registration Statement and prior to the termination of this offering is
incorporated by reference into this Registration Statement and will be a
part of this Registration Statement from the date of the filing of those
documents or reports. The information relating to us in this Registration
Statement should be read together with the information in the documents
incorporated by reference. Any statement contained in a document
incorporated by reference herein, unless otherwise indicated therein,
speaks as of the date of the document. Statements contained in this
Registration Statement may modify or replace statements contained in the
documents incorporated by reference.
ITEM 4: DESCRIPTION OF SECURITIES
Not applicable.
ITEM 5: INTERESTS OF NAMED EXPERTS AND COUNSEL
Not applicable.
ITEM 6: INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Company is permitted by Delaware law to indemnify any present or
former director, officer, employee or agent against all expenses and
liabilities reasonably incurred by him in connection with any legal action
in which such person is involved by reason of his position with the Company
unless he is adjudged liable for negligence or misconduct in the
performance of his duties as a director, officer, employee or agent.
In addition to such other rights of indemnification as they may have
as directors or as members of the committee (the "Committee") administering
the Company's 1999 Stock Compensation Plan (the "Plan"), under the terms of
the Plan the members of the Committee shall be indemnified by the Company
against the reasonable expenses, including attorney's fees, actually and
necessarily incurred in connection with the defense of any action, suit or
proceeding, or in connection with any appeal therein, to which they or any
of them may be a party by reason of any action taken or failure to act
under or in connection with the Plan or any option granted thereunder, and
against all amounts paid by them in settlement thereof (provided such
settlement is approved by independent legal counsel selected by the
Company) or paid by them in satisfaction of a judgment in any such action,
suit or proceeding, except in relation to matters as to which it shall be
adjudged in such action, suit or proceeding that such Board member is
liable for negligence or misconduct in the performance of his duties.
Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers or persons
controlling the Company pursuant to the foregoing provisions, the Company
has been informed that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in
the Act and is therefore unenforceable.
ITEM 7: EXEMPTION FROM REGISTRATION CLAIMED
Prior to the effectiveness of the initial filing of this Registration
Statement, an aggregate 166,000 shares of Common Stock were issued by the
Company, to an aggregate 3 individuals in transactions not involving a
public offering, and such offer and sale was therefore exempt pursuant to
the provision of Section 4(2) under the Act.
ITEM 8: EXHIBITS
<TABLE>
<CAPTION>
Number Description
- ------ -----------
<C> <S>
3.1 Registrant's Certificate of Incorporation, as amended*
3.2 Registrant's By-Laws**
4.13 Registrant's 1999 Stock Compensation Plan
5.1 Opinion of Francis D. Parisi, Esq.
23.1 Consent of Berry, Dunn, McNeil & Parker
23.2 Consent of Francis D. Parisi, Esq. (included in Exhibit 5.1)
24.1 Power of Attorney (included on signature page)
<FN>
<F*> Incorporated by reference to the Registrant's Registration Statement
Form 10 filed on April 17, 1989 (File No. 0- 17623), and Form 10-KSB
for the fiscal year ended April 30, 1998 (File No. 0-17623), as filed
with the SEC on August 14, 1998.
<F**> Incorporated by reference to the Registrant's Registration Statement
Form 10 filed on April 17, 1989 (File No. 0- 17623).
</FN>
</TABLE>
ITEM 9: UNDERTAKINGS
(a) The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are
being made, a post-effective amendment to this
registration statement:
(i) To include any prospectus required by Section
10(a)(3) of the Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events
arising after the effective date of the
registration statement (or the most recent post-
effective amendment thereof) which, individually or
in the aggregate, represent a fundamental change in
the information set forth in the registration
statement. Notwithstanding the foregoing, any
increase or decrease in volume of securities
offered (if the total dollar value of securities
offered would not exceed that which was registered)
and any deviation from the low or high end of the
estimated maximum offering range may be reflected
in the form of prospectus filed with the Commission
pursuant to Rule 424(b) if, in the aggregate, the
changes in volume and price represent no more than
20 percent change in the maximum aggregate offering
price set forth in the "Calculation of Registration
Fee" table in the effective registration statement;
(iii) To include any material information with respect to
the plan of distribution not previously disclosed
in the registration statement or any material
change to such information in the registration
statement; PROVIDED, HOWEVER, that paragraphs
(a)(1)(i) and (a)(1)(ii) do not apply if the
information required to be included in a post-
effective amendment by those paragraphs is
contained in periodic reports filed by the
registrant pursuant to Section 13 or Section 15(d)
of the Securities Exchange Act of 1934 that are
incorporated by reference in the registration
statement.
(2) That, for the purpose of determining any liability under
the Securities Act of 1933, each such post-effective
amendment shall be deemed to be a new registration
statement relating to the securities offered therein, and
the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which
remain unsold at the termination of the offering.
(b) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and
controlling persons of the registrant pursuant to the foregoing provisions,
or otherwise, the registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public
policy as expressed in the Act and is, therefore, unenforceable. In the
event that a claim for indemnification against such liabilities (other than
the payment by the registrant of expenses incurred or paid by a director,
officer or controlling person of the registrant in the successful defense
of any action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered, the
registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against
public policy as expressed in the Act and will be governed by the final
adjudication of such issue.
(c) The undersigned Registrant hereby undertakes that, for purposes
of determining any liability under the Securities Act of 1933, each filing
of the Registrant's annual report pursuant to Section 13(a) or Section
15(d) of the Securities Exchange Act of 1934 (and, where applicable, each
filing of an employee benefit plan's annual report pursuant to Section
15(d) of the Securities Exchange Act of 1934) that is incorporated by
reference in the Registration Statement shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial
bona fide offering thereof.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all of
the requirements for filing on Form S-8 and Form S-3. and has duly caused
this registration statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the Town of Palm Desert, State of California,
on February 16, 1999.
PALM DESERT ART, INC.
By: /s/ Hugh G. Pike
-----------------
Hugh G. Pike, President
Know all persons by these presents, that each person whose signature
appears below, constitutes and appoints Hugh G. Pike and, jointly and
severally, his attorneys-in-fact, each with the power of substitution, for
him in any and all capacities, to sign any amendment to this Registration
Statement on Form S-8 and Form S-3 and to file the same with exhibits
thereto and other documents in connection therewith, with the Securities
and Exchange Commission, hereby ratifying and confirming all that each of
said attorneys-in-fact, or his substitute or substitutes, may do or cause
to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons on
behalf of the Registrant and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signatures Title Date
---------- ----- ----
<S> <S> <C>
/s/ Hugh G. Pike Chairman of the Board and President February 16, 1999
- ---------------- (Principal Executive Officer)
Hugh G. Pike
/s/ William Smitherman Treasurer (Principal Financial Officer) February 16, 1999
- ----------------------
William Smitherman
/s/ Jurg Mullhaupt Director February 16, 1999
- ------------------
Jurg Mullhaupt
/s/ Allan S. Wolfe Director February 16, 1999
- ------------------
Allan S. Wolfe
</TABLE>
Exhibit 4.13
PALM DESERT ART, INC.
1999 Stock Compensation Plan
Section 1. Purpose; Definitions.
1.1 Purpose. The purpose of the Palm Desert Art, Inc. (the
"Company") 1999 Stock Compensation Plan (the "Plan") is to enable the
Company to offer to its key employees, officers, directors and consultants
whose past, present and/or potential contributions to the Company and its
Subsidiaries have been, are or will be important to the success of the
Company, an opportunity to acquire a proprietary interest in the Company.
The various types of compensation and long-term incentive awards which may
be provided under the Plan will enable the Company to respond to changes in
compensation practices, tax laws, accounting regulations and the size and
diversity of its businesses.
1.2 Definitions. For purposes of the Plan, the following terms
shall be defined as set forth below:
(a) "Agreement" means the agreement between the Company and
the Holder setting forth the terms and conditions of an award under the
Plan.
(b) "Board" means the Board of Directors of the Company.
(c) "Code" means the Internal Revenue Code of 1986, as amended
from time to time, and any successor thereto and the regulations
promulgated thereunder.
(d) "Committee" means the Compensation Committee of the Board
or any other committee of the Board, which the Board may designate to
administer the Plan or any portion thereof. The Committee shall consist of
disinterested persons appointed by the Board who, during the one year
period prior to commencement of service on the Committee, shall not have
participated in, and while serving and for one year after serving on the
Committee, shall not be eligible for selection as persons to whom awards of
Stock may be allocated, or to whom Stock Options may be granted under the
Plan or any other discretionary plan of the Company, under which
participants are entitled to acquire Stock or Stock Options of the Company.
If no Committee is so designated, then all references in this Plan to
"Committee" shall mean the Board.
(e) "Common Stock" means the Common Stock of the Company, par
value $.001 per share.
(f) "Company" means Palm Desert Art, Inc., a corporation
organized under the laws of the State of Delaware.
(g) "Continuous Status as an Employee" means the absence of
any interruption or termination of service as an Employee. Continuous
Status as an Employee shall not be considered interrupted in the case of
sick leave, military leave, or any other leave of absence approved by the
Board.
(h) "Employee" shall mean any person, including officers and
directors, employed by the Company or any Parent or Subsidiary of the
Company and for whom a withholding obligation exists under Section 3401 of
the Code by the employing corporation, as applicable. The payment of a
director's fee by the Company shall not be sufficient to constitute
"employment" by the Company.
(i) "Deferred Stock" means Stock to be received, under an
award made pursuant to Section 8 below, at the end of a specified deferral
period.
(j) "Disability" means disability as determined under
procedures established by the Committee for purposes of the Plan.
(k) "Effective Date" means the date set forth in Section 11.
(l) "Fair Market Value", unless otherwise required by any
applicable provision of the Code or any regulations issued thereunder,
means, as of any given date: (i) if the Common Stock is listed on a
national securities exchange or quoted on the NASDAQ National Market or
NASDAQ SmallCap Market, the last sale price of the Common Stock in the
principal trading market for the Common Stock on the last trading day
preceding the date of grant of an award hereunder, as reported by the
exchange or NASDAQ, as the case may be; (ii) if the Common Stock is not
listed on a national securities exchange or quoted on the NASDAQ National
Market or NASDAQ SmallCap Market, but is traded in the over-the-counter
market, the closing bid price for the Common Stock on the last trading day
preceding the date of grant of an award hereunder for which such quotations
are reported by the National Quotation Bureau, Incorporated or similar
publisher of such quotations; and (iii) if the fair market value of the
Common Stock cannot be determined pursuant to clause (i) or (ii) above,
such price as the Committee shall determine, in good faith.
(m) "Holder" means a person who has received an award under
the Plan.
(n) "Incentive Stock Option" means any Stock Option intended
to be and designated as an "incentive stock option" within the meaning of
Section 422 of the Code.
(o) "Non-Qualified Stock Option" means any Stock Option that
is not an Incentive Stock Option.
(p) "Normal Retirement" means retirement from active
employment with the Company or any Subsidiary on or after age 65.
(q) "Other Stock-Based Award" means an award under Section 9
below that is valued in whole or in part by reference to, or is otherwise
based upon, Stock.
(r) "Parent" means any present or future parent corporation of
the Company, as such term is defined in Section 424(e) of the Code.
(s) "Plan" means the Palm Desert Art, Inc. 1999 Stock
Compensation, as hereinafter amended from time to time.
(t) "Restricted Stock" means Stock, received under an award
made pursuant to Section 7 below, that is subject to restrictions under
said Section 7.
(u) "SAR Value" [Intentionally omitted.]
(v) "Stock" means the Common Stock of the Company, par value
$.001 per share.
(w) "Stock Appreciation Right" [Intentionally omitted.]
(x) "Stock Option" or "Option" means any option to purchase
shares of Stock which is granted pursuant to the Plan.
(y) "Stock Reload Option" means any option granted under
Section 5.3 as a result of the payment of the exercise price of a Stock
Option and/or the withholding tax related thereto in the form of Stock
owned by the Holder or the withholding of Stock by the Company.
(z) "Subsidiary" means any present or future subsidiary
corporation of the Company, as such term is defined in Section 424(f) of
the Code.
Section 2. Administration.
2.1 Committee Membership. The Plan shall be administered by the
Board or a Committee. Committee members shall serve for such term as the
Board may in each case determine, and shall be subject to removal at any
time by the Board.
2.2 Powers of Committee. The Committee shall have full authority,
subject to Section 4.2 hereof, to award, pursuant to the terms of the Plan:
(i) Stock Options, (ii) Restricted Stock; (iii) Deferred Stock; (iv) Stock
Reload Options; and/or (v) Other Stock-Based Awards. For purposes of
illustration and not of limitation, the Committee shall have the authority
(subject to the express provisions of this Plan):
(a) to select the officers, key employees, directors and
consultants of the Company or any Subsidiary to whom Stock Options,
Restricted Stock, Deferred Stock, Stock Reload Options and/or Other Stock-
Based Awards may from time to time be awarded hereunder.
(b) to determine the terms and conditions, not inconsistent
with the terms of the Plan, of any award granted hereunder (including, but
not limited to, number of shares, share price, any restrictions or
limitations, and any vesting, exchange, surrender, cancellation,
acceleration, termination, exercise or forfeiture provisions, as the
Committee shall determine);
(c) to determine any specified performance goals or such other
factors or criteria which need to be attained for the vesting of an award
granted hereunder;
(d) to determine the terms and conditions under which awards
granted hereunder are to operate on a tandem basis and/or in conjunction
with or apart from other equity awarded under this Plan and cash awards
made by the Company or any Subsidiary outside of this Plan;
(e) to permit a Holder to elect to defer a payment under the
Plan under such rules and procedures as the Committee may establish,
including the crediting of interest on deferred amounts denominated in cash
and of dividend equivalents on deferred amounts denominated in Stock;
(f) to determine the extent and circumstances under which
Stock and other amounts payable with respect to an award hereunder shall be
deferred which may be either automatic or at the election of the Holder;
and
(g) to substitute (i) new Stock Options for previously granted
Stock Options, which previously granted Stock Options have higher option
exercise prices and/or contain other less favorable terms, and (ii) new
awards of any other type for previously granted awards of the same type,
which previously granted awards are upon less favorable terms.
2.3 Interpretation of Plan.
(a) Committee Authority. Subject to Section 10 hereof, the
Committee shall have the authority to adopt, alter and repeal such
administrative rules, guidelines and practices governing the Plan as it
shall, from time to time, deem advisable, to interpret the terms and
provisions of the Plan and any award issued under the Plan (and to
determine the form and substance of all Agreements relating thereto), and
to otherwise supervise the administration of the Plan. Subject to Section
10 hereof, all decisions made by the Committee pursuant to the provisions
of the Plan shall be made in the Committee's sole discretion and shall be
final and binding upon all persons, including the Company, its Subsidiaries
and Holders.
(b) Incentive Stock Options. Anything in the Plan to the
contrary notwithstanding, no term or provision of the Plan relating to
Incentive Stock Options (including but limited to Stock Reload Options
rights granted in conjunction with an Incentive Stock Option) or any
Agreement providing for Incentive Stock Options shall be interpreted,
amended or altered, nor shall any discretion or authority granted under the
Plan be so exercised, so as to disqualify the Plan under Section 422 of the
Code, or, without the consent of the Holder(s) affected, to disqualify any
Incentive Stock Option under such Section 422.
Section 3. Stock Subject to Plan.
3.1 Number of Shares. The total number of shares of Common Stock
reserved and available for distribution under the Plan shall be 450,000
shares. Shares of Stock under the Plan may consist, in whole or in part, of
authorized and unissued shares or treasury shares. If any shares of Stock
that have been optioned cease to be subject to a Stock Option, or of any
shares of Stock that are subject to any Restricted Stock, Deferred Stock
award, Stock Reload Option or Other Stock-Based Award granted hereunder are
forfeited or any such award otherwise terminates without a payment being
made to the Holder in the form of Stock, such shares shall again be
available for distribution in connection with future grants and awards
under the Plan. Only net shares issued upon a stock-for-stock exercise
(including stock used for withholding taxes) shall be counted against the
number of shares available under the Plan.
3.2 Adjustment Upon Changes in Capitalization, Etc. In the event of
any merger, reorganization, consolidation, recapitalization, dividend
(other than a cash dividend), stock split, reverse stock split, or other
change in corporate structure affecting the Stock, such substitution or
adjustment shall be made in the aggregate number of shares reserved for
issuance under the Plan, in the number and exercise price of shares subject
to outstanding Options, in the number of shares and in the number of shares
subject to, and in the related terms of, other outstanding awards
(including but not limited to awards of Restricted Stock, Deferred Stock,
Stock Reload Options and Other Stock-Based Awards) granted under the Plan
as may be determined to be appropriate by the Committee in order to prevent
dilution or enlargement of rights, provided that any fractional shares
resulting from such adjustment shall be eliminated by rounding to the next
lower whole number of shares.
Section 4. Eligibility.
4.1 General. Awards may be made or granted to key employees,
officers, directors and consultants who are deemed to have rendered or to
be able to render significant services to the Company or its Subsidiaries
and who are deemed to have contributed or to have the potential to
contribute to the success of the Company. No Incentive Stock Option shall
be granted to any person who is not an employee of the Company or a
Subsidiary at the time of grant.
4.2 Directors' Awards. [Intentionally Omitted]
Section 5. Stock Options.
5.1 Grant and Exercise. Stock Options granted under the Plan may be
of two types: (i) Incentive Stock Options and (ii) Non-Qualified Stock
Options. Any Stock Option granted under the Plan shall contain such terms,
not inconsistent with this Plan, or with respect to Incentive Stock
Options, the Code, as the Committee may from time to time approve. The
Committee shall have the authority to grant Incentive Stock Options, Non-
Qualified Stock Options, or both types of Stock Options and may be granted
alone or in addition to other awards granted under the Plan. To the extent
that any Stock Option intended to qualify as an Incentive Stock Option does
not so qualify, it shall constitute a separate Non-Qualified Stock Option.
An Incentive Stock Option may only be granted within the ten year period
commencing from the Effective Date and may only be exercised within ten
years of the date of grant (or five years in the case of an Incentive Stock
Option granted to optionee ("10% Stockholder") who, at the time of grant,
owns Stock possessing more than 10% of the total combined voting power of
all classes of stock of the Company or a Parent or Subsidiary.
5.2 Terms and Conditions. Stock Options granted under the Plan
shall be subject to the following terms and conditions:
(a) Exercise Price. The exercise price per share of Stock
purchasable under a Stock Option shall be determined by the Committee at
the time of grant and may be less than 100% of the Fair Market Value of the
Stock as defined above; provided, however, that (i) the exercise price of
an Incentive Stock Option shall not be less than 100% of the Fair Market
Value of the Stock (110%, in the case of 10% Stockholder); and (ii) the
exercise price of a Non-Qualified Stock Option shall not be less than 85%
of the Fair Market Value of the Stock as defined above.
(b) Option Term. Subject to the limitations in Section 5.1,
the term of each Stock Option shall be fixed by the Committee.
(c) Exercisability. Stock Options shall be exercisable at
such time or times and subject to such terms and conditions as shall be
determined by the Committee. If the Committee provides, in its discretion,
that any Stock Option is exercisable only in installments, i.e., that it
vests over time, the Committee may waive such installment exercise
provisions at any time at or after the time of grant in whole or in part,
based upon such factors as the Committee shall determine.
(d) Method of Exercise. Subject to whatever installment,
exercise and waiting period provisions are applicable in a particular case,
Stock Options may be exercised in whole or in part at any time during the
term of the Option, by giving written notice of exercise to the Company
specifying the number of shares of Stock to be purchased. Such notice
shall be accompanied by payment in full of the purchase price, which shall
be in cash or, unless otherwise provided in the Agreement, in shares of
Stock (including Restricted Stock and other contingent awards under this
Plan) or, partly in cash and partly in such Stock, or such other means
which the Committee determines are consistent with the Plan's purpose and
applicable law. Cash payments shall be made by wire transfer, certified or
bank check or personal check, in each case payable to the order of the
Company; provided, however, that the Company shall not be required to
deliver certificates for shares of Stock with respect to which an Option is
exercised until the Company has confirmed the receipt of good and available
funds in payment of the purchase price thereof. Payments in the form of
Stock shall be valued at the Fair Market Value of a share of Stock on the
date prior to the date of exercise. Such payments shall be made by
delivery of stock certificates in negotiable form which are effective to
transfer good and valid title thereto to the Company, free of any liens or
encumbrances. Subject to the terms of the Agreement, the Committee may, in
its sole discretion, at the request of the Holder, deliver upon the
exercise of a Non-Qualified Stock Option a combination of shares of
Deferred Stock and Common Stock; provided that, notwithstanding the
provisions of Section 8 of the Plan, such Deferred Stock shall be fully
vested and not subject to forfeiture. A Holder shall have none of the
rights of a stockholder with respect to the shares subject to the Option
until such shares shall be transferred to the Holder upon the exercise of
the Option.
(e) Transferability. No Stock Option shall be transferable by
the Holder otherwise than by will or by the laws of descent and
distribution, and all Stock Options shall be exercisable, during the
Holder's lifetime, only by the Holder.
(f) Termination by Reason of Death. If a Holder's employment
by the Company or a Subsidiary terminates by reason of death, any Stock
Option held by such Holder, unless otherwise determined by the Committee at
the time of grant and set forth in the Agreement, shall be fully vested and
may thereafter be exercised by the legal representative of the estate or by
the legatee of the Holder under the will of the Holder, for a period of one
year (or such other greater or lesser period as the Committee may specify
at grant) from the date of such death or until the expiration of the stated
term of such Stock Option, whichever period is the shorter.
(g) Termination by Reason of Disability. If a Holder's
employment by the Company or any Subsidiary terminates by reason of
Disability, any Stock Option held by such Holder, unless otherwise
determined by the Committee at the time of grant and set forth in the
Agreement, shall be fully vested and may thereafter be exercised by the
Holder for a period of one year (or such other greater or lesser period as
the Committee may specify at the time of grant) from the date of such
termination of employment or until the expiration of the stated term of
such Stock Option, whichever period is the shorter.
(h) Other Termination. Subject to the provisions of Section
12.3 below and unless otherwise determined by the Committee at the time of
grant and set forth in the Agreement, if a Holder is an employee of the
Company or a Subsidiary at the time of grant and if such Holder's
employment by the Company or any Subsidiary terminates for any reason other
than death or Disability, the Stock Option shall thereupon automatically
terminate, except that if the Holder's employment is terminated by the
Company or a Subsidiary without cause or due to Normal Retirement, then the
portion of such Stock Option which has vested on the date of termination of
employment may be exercised for the lesser of three months after
termination of employment or the balance of such Stock Option's term.
(i) Additional Incentive Stock Option Limitation. In the case
of an Incentive Stock Option, the amount of aggregate Fair Market Value of
Stock (determined at the time of grant of the Option) with respect to which
Incentive Stock Options are exercisable for the first time by a Holder
during any calendar year (under all such plans of the Company and its
Parent and any Subsidiary) shall not exceed $100,000.
(j) Buyout and Settlement Provisions. The Committee may at
any time offer to buy out a Stock Option previously granted, based upon
such terms and conditions as the Committee shall establish and communicate
to the Holder at the time that such offer is made.
(k) Stock Option Agreement. Each grant of a Stock Option
shall be confirmed by, and shall be subject to the terms of, the Agreement
executed by the Company and the Holder.
5.3 Stock Reload Option. The Committee may also grant to the Holder
(concurrently with the grant of an Incentive Stock Option and at or after
the time of grant in the case of a Non-Incentive Stock Option) a Stock
Reload Option up to the amount of shares of Stock held by the Holder for at
least six months and used to pay all or part of the exercise price of an
Option and, if any, withheld by the Company as payment for withholding
taxes. Such Stock Reload Option shall have an exercise price of the Fair
Market Value as of the date of the Stock Reload Option grant. Unless the
Committee determines otherwise, a Stock Reload Option may be exercised
commencing one year after it is granted and shall expire on the date of
expiration of the Option to which the Reload Option is related.
Section 6. Stock Appreciation Rights. [Intentionally omitted.]
Section 7. Restricted Stock.
7.1 Grant. Shares of Restricted Stock may be awarded either alone
or in addition to other awards granted under the Plan. The Committee shall
determine the eligible persons to whom, and the time or times at which,
grants of Restricted Stock will be awarded the number of shares to be
awarded, the price (if any) to be paid by the Holder, the time or times
within which such awards may be subject to forfeiture (the "Restriction
Period"), the vesting schedule and rights to acceleration thereof, and all
other terms and conditions of the awards.
7.2 Terms and Conditions. Each Restricted Stock award shall be
subject to the following terms and conditions:
(a) Certificates. Restricted Stock, when issued, will be
represented by a stock certificate or certificates registered in the name
of the Holder to whom such Restricted Stock shall have been awarded.
During the Restriction Period, certificates representing the Restricted
Stock and any securities constituting Retained Distributions (as defined
below) shall bear a legend to the effect that ownership of the Restricted
Stock (and such Retained Distributions), and the enjoyment of all rights
appurtenant thereto, are subject to the restrictions, terms and conditions
provided in the Plan and the Agreement. Such certificates shall be
deposited by the Holder with the Company, together with stock powers or
other instruments of assignment, each endorsed in blank, which will permit
transfer to the Company of all or any portion of the Restricted Stock and
any securities constituting Retained Distributions that shall be forfeited
or that shall not become vested in accordance with the Plan and the
Agreement.
(b) Rights of Holder. Restricted Stock shall constitute
issued and outstanding shares of Common Stock for all corporate purposes.
The Holder will have the right to vote such Restricted Stock, to receive
and retain all regular cash dividends and other cash equivalent
distributions as the Board may in its sole discretion designate, pay or
distribute on such Restricted Stock and to exercise all other rights,
powers and privileges of a holder of Common Stock with respect to such
Restricted Stock, with the exceptions that (i) the Holder will not be
entitled to delivery of the stock certificate or certificates representing
such Restricted Stock until the Restriction Period shall have expired and
unless all other vesting requirements with respect thereto shall have been
fulfilled; (ii) the Company will retain custody of the stock certificate or
certificates representing the Restricted Stock during the Restriction
Period; (iii) other than regular cash dividends and other cash equivalent
distributions as the Board may in its sole discretion designate, pay or
distribute, the Company will retain custody of all distributions ("Retained
Distributions") made or declared with respect to the Restricted Stock (and
such Retained Distributions will be subject to the same restrictions, terms
and conditions as are applicable to the Restricted Stock) until such time,
if ever, as the Restricted Stock with respect to which such Retained
Distributions shall have been made, paid or declared shall have become
vested and with respect to which the Restriction Period shall have expired;
(iv) a breach of any of the restrictions, terms or conditions contained in
this Plan or the Agreement or otherwise established by the Committee with
respect to any Restricted Stock or Retained Distributions will cause a
forfeiture of such Restricted Stock and any Retained Distributions with
respect thereto.
(c) Vesting; Forfeiture. Upon the expiration of the
Restriction Period with respect to each award of Restricted Stock and the
satisfaction of any other applicable restrictions, terms and conditions (i)
all or part of such Restricted Stock shall become vested in accordance with
the terms of the Agreement, and (ii) any Retained Distributions with
respect to such Restricted Stock shall become vested to the extent that the
Restricted Stock related thereto shall have become vested. Any such
Restricted Stock and Retained Distributions that do not vest shall be
forfeited to the Company and the Holder shall not thereafter have any
rights with respect to such Restricted Stock and Retained Distributions
that shall have been so forfeited.
Section 8. Deferred Stock.
8.1 Grant. Shares of Deferred Stock may be awarded either alone or
in addition to other awards granted under the Plan. The Committee shall
determine the eligible persons to whom and the time or times at which
grants of Deferred Stock shall be awarded, the number of shares of Deferred
Stock to be awarded to any person, the duration of the period (the
"Deferral Period") during which, and the conditions under which receipt of
the shares will be deferred, and all other terms and conditions of the
awards.
8.2 Terms and Conditions. Each Deferred Stock award shall be
subject to the following terms and conditions:
(a) Certificates. At the expiration of the Deferral Period
(or the Additional Deferral Period referred to in Section 8.2(c) below,
where applicable), share certificates shall be delivered to the Holder, or
his legal representative, representing the number equal to the shares
covered by the Deferred Stock award.
(b) Vesting; Forfeiture. Upon the expiration of the Deferral
Period (or the Additional Deferral Period, where applicable) with respect
to each award of Deferred Stock and the satisfaction of any other
applicable limitations, terms or conditions, such Deferred Stock shall
become vested in accordance with the terms of the Agreement. Any Deferred
Stock that does not vest shall be forfeited to the Company and the Holder
shall not thereafter have any rights with respect to such Deferred Stock
that has been so forfeited.
(c) Additional Deferral Period. A Holder may request to, and
the Committee may at any time, defer the receipt of an award (or an
installment of an award) for an additional specified period or until a
specified event (the "Additional Deferral Period"). Subject to any
exceptions adopted by the Committee, such request must generally be made at
least one year prior to expiration of the Deferral Period for such Deferred
Stock award (or such installment).
Section 9. Other Stock-Based Awards.
9.1 Grant and Exercise. Other Stock-Based Awards may be awarded,
subject to limitations under applicable law, that are denominated or
payable in, valued in whole or in part by reference to, or otherwise based
on, or related to, shares of Common Stock, as deemed by the Committee to be
consistent with the purposes of the Plan including, without limitation,
purchase rights, shares of Common Stock awarded which are not subject to
any restrictions or conditions, convertible or exchangeable debentures, or
other rights convertible into shares of Common Stock and awards valued by
reference to the value of securities of or the performance of specified
Subsidiaries. Other Stock-Based Awards may be awarded either alone or in
addition to or in tandem with any other awards under this Plan or any other
plan of the Company.
9.2 Eligibility. The Committee shall determine the eligible persons
to whom and the time or times at which grants of such awards shall be made,
the number of shares of Common Stock to be awarded pursuant to such awards,
and all other terms and conditions of the awards.
9.3 Terms and Conditions. Each Other Stock-Based Award shall be
subject to such terms and conditions as may be determined by the Committee.
Section 10. Amendment and Termination.
The Board may at any time, and from time to time, amend, alter,
suspend or discontinue any of the provisions of the Plan, but no amendment,
alteration, suspension or discontinuance shall be made which would impair
the rights of a Holder under any Agreement theretofore entered into
hereunder, without his consent.
Section 11. Term of Plan.
11.1 Effective Date. The Plan shall be effective as of February 16,
1999 ("Effective Date"). Any awards granted under the Plan prior to
approval of the Plan by the shareholders of the Company shall be effective
when made (unless otherwise specified by the Committee at the time of
grant), but may be, but are not necessarily required to be, conditioned
upon and/or subject to, such approval of the Plan by the Company's
stockholders.
11.2 Termination Date. Unless terminated by the Board, this Plan
shall continue to remain effective until such time no further awards may be
granted and all awards granted under the Plan are no longer outstanding.
Notwithstanding the foregoing, grants of Incentive Stock Options may only
be made during the ten year period following the Effective Date.
Section 12. General Provisions.
12.1 Written Agreements. Each Stock Option, Restricted Stock or
Deferred Stock award granted under the Plan shall be confirmed by, and
shall be subject to the terms of the Agreement executed by the Company and
the Holder. The Committee may terminate any award made under the Plan if
the Agreement relating thereto is not executed and returned to the Company
within sixty (60) days after the Agreement has been delivered to the Holder
for his or her execution.
12.2 Unfunded Status of Plan. The Plan is intended to constitute an
"unfunded" plan for incentive and deferred compensation. With respect to
any payments not yet made to a Holder by the Company, nothing contained
herein shall give any such Holder any rights that are greater than those of
a general creditor of the Company.
12.3 Employees.
(a) Engaging in Competition With the Company. In the event an
employee Holder terminates his employment with the Company or a Subsidiary
for any reason whatsoever, and within one year after the date thereof
accepts employment with any competitor of, or otherwise engages in
competition with, the Company, the Committee, in its sole discretion may
require such Holder to return to the Company the economic value of any
award which was realized or obtained (measured at the date of exercise,
vesting or payment) by such Holder at any time during the period beginning
on that date which is six months prior to the date of such Holder's
termination of employment with the Company.
(b) Termination for Cause. The Committee may, in the event an
employee is terminated for cause, annul any award granted under this Plan
to such employee and, in such event, the Committee, in its sole discretion,
may require such Holder to return to the Company the economic value of any
award which was realized or obtained (measured at the date of exercise,
vesting or payment) by such Holder at any time during the period beginning
on that date which is six months prior to the date of such Holder's
termination of employment with the Company.
(c) No Right of Employment. Nothing contained in the Plan or
in any award hereunder shall be deemed to confer upon any employee of the
Company or any Subsidiary any right to continued employment with the
Company or any Subsidiary, nor shall it interfere in any way with the right
of the Company or any Subsidiary to terminate the employment of any of its
employees at any time.
12.4 Investment Representations. The Committee may require each
person acquiring shares of Stock pursuant to a Stock Option or other award
under the Plan to represent to and agree with the Company in writing that
the Holder is acquiring the shares for investment without a view to
distribution thereof.
12.5 Additional Incentive Arrangements. Nothing contained in the
Plan shall prevent the Board from adopting such other or additional
incentive arrangements as it may deem desirable, including, but not limited
to, the granting of stock options and the awarding of stock and cash
otherwise than under the Plan; and such arrangements may be either
generally applicable or applicable only in specific cases.
12.6 Withholding Taxes. Not later than the date as of which an
amount first becomes includable in the gross income of the Holder for
Federal income tax purposes with respect to any Option or other award under
the Plan, the Holder shall pay to the Company, or make arrangements
satisfactory to the Committee regarding the payment of, any Federal, state
and local taxes of any kind required by law to be withheld or paid with
respect to such amount. If permitted by the Committee, tax withholding or
payment obligations may be settled with Common Stock, including Common
Stock that is part of the award that gives rise to the withholding
requirement. The obligations of the Company under the Plan shall be
conditional upon such payment or arrangements satisfactory to the Company
and the Company or the Holder's employer (if not the Company) shall, to the
extent permitted by law, have the right to deduct any such taxes from any
payment of any kind otherwise due to the Holder from the Company or any
Subsidiary.
12.7 Governing Law. The Plan and all awards made and actions taken
thereunder shall be governed by and construed in accordance with the laws
of the State of Delaware (without regard to choice of law provisions).
12.8 Other Benefit Plans. Any award granted under the Plan shall
not be deemed compensation for purposes of computing benefits under any
retirement plan of the Company or any Subsidiary and shall not affect any
benefits under any other benefit plan no or subsequently in effect under
which the availability or amount of benefits is related to the level of
compensation (unless required by specific reference in any such other plan
to awards under this Plan).
12.9 Non-Transferability. Except as otherwise expressly provided in
the Plan, no right or benefit under the Plan may be alienated, sold,
assigned, hypothecated, pledged, exchanged, transferred, encumbranced or
charged, and any attempt to alienate, sell, assign, hypothecate, pledge,
exchange, transfer, encumber or charge the same shall be void.
12.10 Applicable Laws. The obligations of the Company with respect
to all Stock Options and awards under the Plan shall be subject to (i) all
applicable laws, rules and regulations and such approvals by any
governmental agencies as may be required, including, without limitation,
the effectiveness of a registration statement under the Securities Act of
1933, as amended, and (ii) the rules and regulations of any securities
exchange on which the Stock may be listed.
12.11 Conflicts. If any of the terms or provisions of the Plan
conflict with the requirements of (with respect to Incentive Stock
Options), Section 422 of the Code, then such terms or provisions shall be
deemed inoperative to the extent they so conflict with the requirements of
said Section 422 of the Code. Additionally, if this Plan does not contain
any provision required to be included herein under Section 422 of the Code,
such provision shall be deemed to be incorporated herein with the same
force and effect as if such provision had been set out at length herein.
12.12 Non-Registered Stock. The shares of Stock being distributed
under this Plan have not been registered under the Securities Act of 1933,
as amended (the "1933 Act"), or any applicable state or foreign securities
laws and the Company may, but has no obligation to any Holder to, register
the Stock or assist Holder in obtaining an exemption from the various
registration requirements, or list the Stock on a national securities
exchange or inter-dealer quotation system.
Accepted by the Board of Directors:
PALM DESERT ART, INC.
February 16, 1998
By: /s/ John Anderholt,
-------------------
Secretary
Exhibit 5.1
[Letterhead of Francis D. Parisi, Esq.]
February 22, 1999
Palm Desert Art, Inc.
74-350 Alessandro Dr., Suite A-2
Palm Desert, CA 92260
Dear Sirs or Madams:
I refer to the Registration Statement on Form S-8 (the Registration
Statement") to be filed with the Securities and Exchange Commission under
the Securities Act of 1933, as amended (the "Act"), on behalf of Palm
Desert Art, Inc (the "Company"), relating to (1) 166,000 shares of the
Company's Common Stock, $.001 par value per share (the "Shares"),
previously issued to certain Selling Shareholders listed therein and (2)
450,000 to be issued under the Palm Desert Art, Inc. 1995 Stock
Compensation Plan (the "Plan"). As counsel for the Company, I have
examined such corporate records, other documents, and such questions of law
as we have considered necessary or appropriate for the purposes of this
opinion. Upon the basis of such examination, I advise you that, in my
opinion, all necessary corporate proceedings by the Company have been duly
taken to authorize the issuance of the Shares to the Selling Stockholders
and that said Shares have been duly authorized, validly issued, fully paid
and non-assessable, and that the Shares to be issued pursuant to the Plan,
when issued and paid for under the Plan in accordance with the terms of the
Plan, will be duly authorized, validly issued, fully paid and non-
assessable. We hereby consent to the filing of this opinion as an exhibit
to the Registration Statement. This consent is not be construed as an
admission that I am a person whose consent is required to be filed with the
Registration Statement under the provisions of the Act.
Very truly yours,
/s/ Francis D. Parisi, Esq.
Exhibit 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the
incorporation by reference in this Registration Statement on Form S-8 of
our report dated June 17, 1998 in Palm Desert Art, Inc's Form 10-K for
the year ended April 30, 1998 and to all references to our Firm included in
this Registration Statement.
/S/ Berry, Dunn, McNeil & Parker
Manchester, NH
February 22, 1999
