Exhibit 99.3
GUARANTY
THIS GUARANTY executed this 5th day of August, 1998, by PALM DESERT ART,
INC., a Delaware corporation, (the "Palm"), in favor of and Xxxxxx X. Xxxx and
Xxxxx Xxxx ("Shareholders").
WHEREAS Palm and Shareholders, among others, have entered into an Agreement
and Plan of Reorganization of even date herewith (the "Agreement"),
WHEREAS, the parties acknowledge that Shareholders shall be restricted from
transferring their shares for a period of one year pursuant to Rule 144 of the
securities regulations and that even after the one year holding period,
Shareholders may be subject to certain volume restrictions until Shareholders
have held the share for a period of two years or more.
WHEREAS to ensure that Shareholders receive at least $645,000 for the sale
of their stock when and as the Shares become available for transfer, Palm has
agreed to guarantee to Shareholders that the Stock delivered to Shareholders
pursuant to that Agreement shall have a value of no less than $1.00 per share
for the two year period from the date hereof.
WHEREAS Palm has agreed that such guarantee shall be secured by a
first-priority perfected security interest in all of the assets of R M & M
Framemakers, Inc. ("RM&M") that become assets of its wholly-owned subsidiary, R.
M. & M. Acquisition, Inc. ("RAI") as a result of the reorganization which assets
are set forth in Schedule A attached hereto (the "Collateral").
NOW WHEREFORE, FOR GOOD AND VALUABLE CONSIDERATION, the receipt and
sufficiency of which are hereby acknowledged, there parties hereto agree as
follows:
On or about August 5, 1999, the parties shall calculate the difference
between U.S. One Dollar (US $1.00) and the Current Per Share Value (as that term
is defined herein) multiplied by the number of shares of Palm's common stock
which Shareholders received pursuant to the Agreement (the "Differential #1").
The Current Per Share Value shall be calculated as the average per share trading
price of Palm's $.001 par value common stock for the five trading days
immediately prior to and the five trading days immediately following August 5,
1999.
At that time, if the Differential is a positive amount, Palm shall execute
a Promissory Note ("Note #1) in favor of Xxxx in the amount of the Differential
#1 which Note #1 shall be amortized over a period of twelve (12) months and
which shall provide for twelve (12) equal monthly installments to be made on or
about the 5th of each month commencing on September 5, 1999.
Thereafter on November 5, 1999, February 5, 2000 and May 5, 2000 the
parties will execute a note to replace any note then in existence in an amount
to be calculated as follows:
$645,000 less (i) any monies received from sales of any stock received
under the Agreement (ii) any monies that could have been received, if any, from
an offer to purchase at a price of $1 or more (iii) the current market value of
the remaining stock, and (iv) less any amounts paid under all previous notes.
On August 5, 2000, the parties will perform the above calculation and any
amount that would be due to the Shareholders based on such calculation shall be
paid in cash to the Shareholders on or before August 20, 2000.
Prior to Shareholders' sale or transfer of the Shares as such may become
unrestricted and available for transfer in compliance with U.S. securities laws,
Palm shall have the right of first refusal to purchase such shares for cash at
the then current market price but in no event shall such purchase price be less
than $1 per share. If Palm elects not to exercise its right of first refusal,
Shareholders may sell such shares in such quantities as is permissible under the
securities laws and as Shareholders deem advisable. Such right of first refusal
shall apply to all shares which Shareholders shall receive pursuant to the
Agreement, and shall survive the duration of this Guaranty.
All payments under any of the promissory notes shall be made or notes
executed and delivered to Shareholders at the address for Shareholders specified
herein or to any other address as Shareholders shall furnish to Palm in writing.
Palm's obligations under this Guaranty shall be secured by a first-priority
perfected security interest in all of the "Heart of America" assets and
inventory of RM&M that become assets or inventory of RAI as a result of the
merger which assets and inventory are set forth in Schedule A hereto, as well as
any inventory hereafter acquired by RAI. Palm agrees that it will execute, and
cause RAI to execute, any and all necessary documents, including UCC-1 financing
statements, to enable Shareholders to have a properly perfected security
interest in such assets as collateral for this Guaranty or any resulting
promissory note resulting hereunder. Palm further agrees that it will maintain
or cause RAI to maintain an aggregate of at least $400,000 worth of assets and
inventory based on book value.
This instrument incorporates all discussions and negotiations between Palm
and Shareholders concerning the guaranty provided by Palm 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 Shareholders.
Palm will pay on demand all Costs of Collection incurred by
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Shareholders' attorneys and all costs incurred by Shareholders which are
directly or indirectly related to Shareholders' efforts to collect or to enforce
any of the obligations of Palm hereunder or to enforce any of Shareholders
rights, remedies or powers against or in respect of Palm (whether or not suit is
instituted by or against Shareholder).
"Costs of Collection" include, without limitation, all reasonable
attorneys' fees and out-of-pocket expenses incurred by Shareholders' attorneys
and all costs incurred by Shareholder including, without limitation, costs and
expenses associated with travel on behalf of Shareholder, which costs and
expenses are directly or indirectly related to or incurred in respect of
Shareholders' efforts to collect or enforce the Obligation, or to enforce any of
Shareholders' rights, remedies or powers against or in respect of the Company or
any other guarantor or person liable in respect of the Obligation (whether or
not suit is instituted in connection with such efforts). The Costs of Collection
shall be added to the Obligation of the Company to Shareholder, as if such had
been lent, advanced and credited by Seller to, or for the benefit of, the
Company.
The rights, remedies, powers, privileges and discretions of Shareholders
hereunder (hereinafter, the "Shareholders' Rights and Remedies") shall be
cumulative and not exclusive of any rights or remedies which he would otherwise
have. No delay or omission by Shareholders in exercising or enforcing any of
Shareholders' Rights and Remedies shall operate as, or constitute, a waiver
thereof. No waiver by Shareholder of any of Shareholders' Rights and Remedies,
of any default, of any remedies under any other agreement with Palm shall
operate as a waiver of any other of Shareholders' Rights and Remedies or of any
default or remedy hereunder or thereunder. No exercise of any of Shareholders'
Rights and Remedies, and no other agreement or transaction of whatever nature
entered into between Shareholder and Palm, shall preclude any other exercise of
Shareholders' Rights and Remedies. No waiver by Seller of any of Shareholders'
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
Shareholders' Rights and Remedies and all of Shareholders' rights, remedies,
powers, privileges and discretion under any other agreement or transaction with
Palm shall be cumulative and not alternative or exclusive, and may be exercised
by Shareholders at such time or times and in such order of preference as
Shareholders in their sole discretion may determine.
All payments, notices, requests, demands and other communications shall be
deemed to have been duly given, if delivered by hand or mailed, certified, or
registered mail with postage prepaid:
(a) If to Shareholders to:
Xxxxxx Xxxx and Xxxxx Xxxx
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000 Xxxxxx Xxxx Xxxx
Xxxxx, Xxx Xxxx 00000
copy to:
Ganz & Wolkenbreit, LLP
Xxx Xxxxxxxx Xxxxxx
Xxxxxx, Xxx Xxxx 00000
Attn: Xxx Xxxxxxxxxxx, Esq.
or to any other person and place as Shareholders shall furnish to Palm in
writing; or
(b) If to Palm to:
Palm Desert Art, Inc.
00-000 Xxxxxx Xxxx, Xxxxx X
Xxxx Xxxxxx, XX 00000
Attn: Xx. Xxxx X. Xxxx
or to any other person and place as Palm shall furnish to Shareholders in
writing.
This instrument shall inure to the benefit of Shareholders, and his heirs,
successors and assigns, shall be binding upon the heirs, successors and assigns
of Palm.
This instrument shall take effect and shall be governed, construed and
interpreted in accordance with the laws of the State of New York. Palm submits
to the jurisdiction of the courts of the State of New York for all matters in
connection herewith as well as for all purposes in connection with any other
relationship between Palm and Shareholders. It is the intention of Palm that the
provisions of the within guaranty be liberally construed to the end that
Shareholders may be put in as good a position as if Palm had promptly,
punctually and faithfully performed all Obligations 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.
So long as Palm is not in default under the terms of this Guaranty, this
instrument shall terminate on the earlier of (a) September 5, 2000; (b) the date
upon which Shareholders receipt of $645,000 or more from the sale of its stock
either to Palm or some third party; (c) the date upon which Shareholders refuse
to sell their shares notwithstanding an offer from a third party to purchase
such shares for a price which would achieve the $645,000 threshhold; or (d) the
delivery of written notice of termination of this Guaranty dated and signed by
Shareholders.
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IN WITNESS WHEREOF, Palm has executed this Guaranty made to be effective as
of the ___ day of ________, 1998.
PALM DESERT ART, INC.
By: /s/ Xxxx X. Xxxx
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Name: Xxxx X. Xxxx
Title: President
/s/ Xxxxxx Xxxx
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Xxxxxx Xxxx
/s/ Xxxxx Xxxx
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Xxxxx Xxxx
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STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK )
On the 5th day of August, 1998 before me personally came Xxxx X. Xxxx, to
me known, who, being by me duly sworn, did depose and say that he is the
President of R. M. & M. Acquisition, Inc., a Delaware corporation, being the
corporation described in, and which executed the foregoing instrument, and that
he executed same in his capacity as President by order of the Board of Directors
of such corporation.
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Notary Public
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