EXHIBIT 10.3
------------
SECURITIES PURCHASE AGREEMENT
PALWEB CORPORATION
▇▇▇▇ ▇. ▇▇▇▇
▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
____________, 2004
TO: _______________________
_______________________
_______________________
The undersigned, PalWeb Corporation, an Oklahoma corporation (the
"Company"), hereby agrees with you as follows, effective as of the date above
written:
1. Authorization and Sale of the Securities.
1.1 Authorization. The Company represents that it has authorized the
issuance to you pursuant to the terms and conditions hereof of:
(a) _____________shares of its common stock, par value $0.0001
per share ("Common Stock"); and
(b) a warrant (the "Warrant") to purchase ____________ shares
of the Company's Common Stock ("Warrant Shares") in accordance with the
terms set forth in the form of the Common Share Warrant Certificate
attached hereto as Exhibit A.
The shares of Common Stock and Warrant to be purchased pursuant to the terms of
this Agreement are collectively referred to herein as the "Securities."
1.2 Sale. Subject to the terms and conditions hereof, on the Purchase
Date (defined below), the Company shall issue and sell to you and you shall
purchase from the Company, the Securities for an aggregate purchase price of
$_____________ (the "Purchase Price").
2. Payment of Purchase Price; Delivery.
Upon the execution of this Agreement, you shall deliver to the Company
wire funds or a check payable to the Company in the amount of the Purchase
Price. Upon receipt of the Purchase Price from you (the "Purchase Date"), the
Company shall promptly issue and deliver to you the Securities.
3. Representations and Warranties of the Company.
The Company hereby represents and warrants to you as follows:
3.1 Organization and Standing; Articles and Bylaws. The Company is a
corporation duly organized and existing under, and by virtue of, the laws of the
State of Oklahoma and is in good standing under such laws. The Company is
qualified, licensed or domesticated as a foreign corporation in all
jurisdictions where the nature of its business conducted or the character of its
properties owned or leased makes such qualification, licensing or domestication
necessary at this time except in those jurisdictions where the failure to be so
qualified or licensed and in good standing does not and will not have a
materially adverse effect on the Company, the conduct of its business or the
ownership or operation of its properties. The Company has furnished you with
copies of its Certificate of Incorporation and Bylaws. Said copies are true,
correct and complete and contain all amendments through the date of this
Agreement.
3.2 Corporate Power. The Company has the requisite corporate power to
own and operate its properties and assets, and to carry on its business as
presently conducted and as proposed to be conducted. The Company has now, and
will have at the Purchase Date, all requisite legal and corporate power to enter
into this Agreement, to sell the Securities hereunder, and to carry out and
perform its obligations under the terms of this Agreement.
3.3 Subsidiaries. The Company has two wholly owned subsidiaries:
Plastic Pallet Production, Inc., a Texas corporation ("PPP"), and Greystone
Manufacturing, LLC, an Oklahoma limited liability company ("Greystone"). Other
than the shares of PPP and the membership interests of Greystone, the Company
does not own, directly or indirectly, shares of stock or other interests in any
other corporation, association, joint venture or business organization.
3.4 Capitalization. The authorized capital stock of the Company
consists of 100,000,000 shares of common stock and 20,750,000 shares of
preferred stock, par value $0.0001 per share. There are issued and outstanding
approximately 12,790,451 shares of common stock and 50,000 shares of Series 2003
Cumulative Convertible Senior Preferred Stock (the "2003 Preferred Stock"). The
issued and outstanding shares of common stock and 2003 Preferred Stock are fully
paid and nonassessable. Except as disclosed in the Disclosure Materials (as
defined in Section 4.1 below), there are no outstanding options, warrants or
other rights, including preemptive rights, entitling the holder thereof to
purchase or acquire shares of common stock or 2003 Preferred Stock of the
Company.
3.5 Authorization.
(a) All corporate action on the part of the Company, its
officers, directors and shareholders necessary for the sale and
issuance of the Securities pursuant hereto and the performance of the
Company's obligations hereunder has been taken or will be taken prior
to the Purchase Date. This Agreement is a legal, valid and binding
obligation of the Company, enforceable against the Company in
accordance with its terms, except as limited by bankruptcy, insolvency,
reorganization, moratorium or similar laws of general application
affecting enforcement of creditors' rights, and except as limited by
application of legal principles affecting the availability of equitable
remedies.
2
(b) The Securities, when issued in compliance with the
provisions of this Agreement, will be validly issued, fully paid and
nonassessable, and will be free of any liens or encumbrances; provided,
however, that such Securities and the Warrant Shares will be subject to
restrictions on transfer under state and/or federal securities laws,
and as may be required by future changes in such laws.
(c) No shareholder of the Company has any right of first
refusal or any preemptive rights in connection with the issuance of the
Securities or of any other capital stock of the Company.
3.6 Compliance with Instruments. The Company is not in violation of any
terms of its Certificate of Incorporation or Bylaws, or, to the knowledge of the
Company, any judgment, decree or order applicable to it. The execution, delivery
and performance by the Company of this Agreement, and the issuance and sale of
the Securities pursuant hereto, will not result in any such violation or be in
conflict with or constitute a default under any such term, or cause the
acceleration of maturity of any loan or material obligation to which the Company
is a party or by which it is bound or with respect to which it is an obligor or
guarantor, or result in the creation or imposition of any material lien, claim,
charge, restriction, equity or encumbrance of any kind whatsoever upon, or, to
the knowledge of the Company, give to any other person any interest or right
(including any right of termination or cancellation) in or with respect to any
of the material properties, assets, business or agreements of the Company.
3.7 Litigation, etc. Except as described in the Disclosure Materials,
there are no actions, proceedings or, to the knowledge of the Company,
investigations pending which might result in any material adverse change in the
business, prospects, conditions, affairs or operations of the Company or in any
of its properties or assets, or in any impairment of the right or ability of the
Company to carry on its business as proposed to be conducted, or in any material
liability on the part of the Company, or which question the validity of this
Agreement or any action taken or to be taken in connection herewith.
3.8 Governmental Consent, etc. Except as may be required in connection
with any filings required under the federal securities laws and/or the
securities laws of any state due to the offer and sale of the Securities
pursuant to this Agreement, no consent, approval or authorization of, or
designation, declaration or filing with, any governmental unit is required on
the part of the Company in connection with the valid execution and delivery of
this Agreement, or the offer, sale or issuance of the Securities or the
consummation of any other transaction contemplated hereby.
3.9 Securities Registration and Filings. The outstanding shares of the
Company's Common Stock are registered pursuant to Section 12(g) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"). The Company
has filed all reports required by Section 13 or 15(d) of the Exchange Act since
June 10, 1999. All of such reports were, at the time they were filed, complete
and accurate in all material respects and did not include an untrue statement of
a material fact or omit to state a material fact necessary in order to make the
statements made therein, in the light of the circumstances under which they were
made, not misleading.
3
4. Representations and Warranties of Purchaser and Restrictions on
Transfer Imposed by the Securities Act.
4.1 Representations and Warranties by Purchaser. You represent and
warrant to the Company as follows:
(a) The Company has provided to you: a copy of the Company's
Annual Report on Form 10-KSB for year ended May 31, 2003; copies of the
Company's Quarterly Reports on Form 10-QSB for the periods ended August
31, 2003, November 30, 2003 and February 29, 2004; copies of the
Company's Current Reports on Form 8-K or Form 8-K/A, as the case may
be, filed by the Company on September 23, 2003, January 12, 2004,
January 20, 2004, January 27, 2004, February 18, 2004, March 24, 2004
and July 19, 2004; and, a supplement describing certain aspects of this
offering. The said materials are referred to herein collectively as the
"Disclosure Materials."
(b) You are experienced in evaluating and investing in
companies such as the Company. Further, you understand that the
Securities purchased hereby are of a highly speculative nature and
could result in the loss of your entire investment.
(c) You have been furnished by the Company with all
information requested concerning the proposed operations, affairs and
current financial condition of the Company. Such information and access
have been available to the extent you consider necessary and advisable
in making an intelligent investment decision. In addition, you have
received and reviewed copies of the Disclosure Materials and have had
the opportunity to discuss the Company's business, management and
financial affairs with its Chief Executive Officer. You understand that
such discussions, as well as the Disclosure Materials and any other
written information issued by the Company, were intended to describe
certain aspects of the Company's business and prospects which it
believes to be material but were not necessarily a thorough or
exhaustive description.
(d) The Securities to be acquired by you will be acquired,
solely for your account, for investment purposes only and not with a
view to the resale or distribution thereof, are not being purchased for
subdivision or fractionalization thereof, and you have no contract,
undertaking, agreement or arrangement with any person to sell or
transfer such Securities to any person and do not intend to enter into
such contract or arrangement.
(e) You understand that the Securities have not been
registered under the Securities Act of 1933, as amended (the
"Securities Act"), nor are they registered or qualified under the blue
sky or securities laws of any state, by reason of their issuance in a
transaction exempt from the registration and prospectus delivery
requirements of the Securities Act pursuant to Sections 3(b) or 4(2) of
the Securities Act and available exemptions from the registration
requirements of any applicable state securities laws. You further
understand that the Securities must be held by you indefinitely and you
must therefore bear the economic risk of such investment indefinitely,
unless a subsequent disposition thereof is registered under the
Securities Act or is exempt from registration.
(f) You have the full right, power and authority to enter into
and perform this Agreement, and this Agreement constitutes a legal,
valid and binding obligation upon you
4
except as may be limited by bankruptcy, insolvency, reorganization,
moratorium or similar laws of general application affecting enforcement
of creditors' rights, and except as limited by application of legal
principles affecting the availability of equitable remedies.
(g) You are able to bear the full economic risk of your
investment in the Securities, including the risk of a total loss of
your investment in connection therewith. You are an accredited investor
as that term is defined in Rule 501(a) of Regulation D promulgated by
the Securities and Exchange Commission (the "SEC").
(h) You were not offered the Securities by means of general
solicitations, publicly disseminated advertisements or sales
literature.
4.2 Legends. Each instrument representing the Securities and the
Warrant Shares shall be endorsed with the legend set forth below:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR UNDER
ANY STATE SECURITIES ACT. THE SECURITIES HAVE BEEN ACQUIRED FOR
INVESTMENT AND MAY NOT BE SOLD, TRANSFERRED, PLEDGED OR
HYPOTHECATED UNLESS (I) THEY HAVE BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, AND ANY APPLICABLE STATE
SECURITIES ACT, OR (II) THE COMPANY SHALL HAVE BEEN FURNISHED AN
OPINION OF COUNSEL, SATISFACTORY TO COUNSEL FOR THE COMPANY, THAT
REGISTRATION IS NOT REQUIRED UNDER ANY OF SUCH ACTS.
In addition, each instrument representing the Securities and the Warrant Shares
shall be endorsed with any other legend required by any state securities laws.
The Company need not register a transfer of legended Securities and the Warrant
Shares, and may also instruct its transfer agent not to register the transfer of
the Securities and the Warrant Shares, unless one of the conditions specified in
each of the foregoing legends is satisfied.
5. Indemnification by Purchaser.
You acknowledge and understand that the Company has agreed to offer and
sell the Securities to you based upon the representations and warranties made by
you in this Agreement, and you hereby agree to indemnify the Company and to hold
the Company and its incorporators, officers, directors and professional advisors
harmless against all liability, costs or expenses (including attorneys' fees)
arising by reason of or in connection with any misrepresentation or any breach
of such representations and warranties by you, or arising as a result of the
sale or distribution of any Securities by you in violation of the Securities Act
or other applicable law.
6. Registration Rights.
6.1 Filing of Registration Statement. The Company shall use
commercially reasonable
5
efforts to cause a registration statement relating to, among other things, the
Common Stock sold to you pursuant to this Agreement and the Warrant Shares to be
filed and to be declared effective on or before December 31, 2004 (the
"Registration Statement") and, thereafter, the Company shall use commercially
reasonable efforts to cause the Registration Statement to remain effective until
June 30, 2005. The Registration Statement shall be prepared in accordance with
the requirements of Form SB-2 under the Securities Act or any equivalent
thereof. The Company shall pay for the cost of the Registration Statement
(excluding underwriter discounts and commissions, if any, and the fees and
expenses of your counsel).
6.2 Blue Sky Qualification. The Company shall use commercially
reasonable efforts to qualify the Common Stock sold to you pursuant to this
Agreement and the Warrant Shares under the securities or "Blue Sky" laws of such
states of the United States of America as you may reasonably request.
6.3 Obligations of Company Relating to the Registration Statement.
(a) Following the filing of the Registration Statement
by the Company, the Company agrees to notify you as soon as
practicable after it becomes aware that Registration Statement has
become effective or any supplement to any prospectus forming part of
the Registration Statement has been filed.
(b) As soon as practicable after the effective date of
the Registration Statement, the Company shall furnish you with such
numbers of copies of the Registration Statement and the related
prospectus as you may from time to time reasonably request.
(c) If, during the period when the Registration
Statement is effective, any event occurs as a result of which the
prospectus included in the Registration Statement would include an
untrue statement of a material fact or omit to state a material fact
necessary in order to make the statements made, not misleading, or
it shall be necessary to amend or supplement such prospectus to
comply with applicable law, the Company will notify you thereof and
upon your request: (i) prepare and file under the Securities Act
such amendments and supplements as may be necessary to keep
available a prospectus covering such registered stock meeting the
requirements of the Securities Act; and (ii) furnish to you such
numbers of copies of the Registration Statement and prospectus, as
amended or supplemented, as may reasonably be requested from time to
time.
(d) The Company agrees to notify you promptly of any
request by the SEC for the amendment or supplementation of the
Registration Statement or prospectus, or for additional information.
(e) The Company shall use commercially reasonable
efforts to prepare and file with the SEC promptly upon your request
any amendment of, or supplement to, the Registration Statement or
prospectus relating to information respecting you that, in the
opinion of your counsel, may be necessary or advisable in connection
with the distribution of the Common Stock owned by you and covered
by the Registration Statement.
(f) In the event that the Company receives notice or
obtains knowledge of the issuance of a stop order by the SEC
suspending the effectiveness of the Registration
6
Statement or of the initiation or threat of any proceeding for that
purpose, the Company shall promptly advise you of such circumstances
and shall use commercially reasonable efforts to prevent the
issuance of any stop order and to obtain the withdrawal of any stop
order in the event that one is issued.
6.5 Obligations of Purchaser Relating to the Registration Statement.
(a) You shall furnish to the Company such information as
may be reasonably requested by the Company in connection with the
preparation and filing of the Registration Statement, any prospectus
contained in the Registration Statement and any amendment thereof or
supplement thereto.
(b) You will cooperate with the Company as reasonably
requested by the Company in connection with causing the Registration
Statement to become and remain effective as contemplated in this
Agreement.
(c) You agree that at any time and from time to time the
Company may suspend your use of any prospectus contained in the
Registration Statement for a period not to exceed 30 calendar days
by providing written notice to you provided an event has occurred
and is continuing as a result of which the Registration Statement
would, in the Company's judgment, contain an untrue statement of a
material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein not misleading.
6.6 Indemnification Relating to the Registration Statement.
(a) The Company agrees that it will: (i) indemnify and
hold harmless you in connection with any losses, claims, damages,
expenses or liabilities to which you become subject, whether under
the Securities Act or otherwise, insofar as such losses, claims,
damages, expenses or liabilities (or actions in respect thereof) are
caused by (A) any untrue statement or alleged untrue statement of
any material fact contained in the Registration Statement, any
prospectus contained therein, any amendment thereof or supplement
thereto or any documents incorporated by reference into any of the
foregoing; or (B) any omission or alleged omission to state therein
a material fact required to be stated therein or necessary to make
the statements therein not misleading; and (ii) reimburse you for
any legal or other expenses reasonably incurred by you in connection
with investigating or defending any such loss, claim, damage,
expense, liability or action arising under clause (i) of this
Section 6.6(a); provided, however, the Company will not be liable
under clauses (i) or (ii) of this Section 6.6(a) to the extent that
any such loss, claim, damage, expense or liability arises out of, or
is based upon, an untrue statement or alleged untrue statement or
omission, or alleged omission, made in reliance upon, and in
conformity with, written information furnished by you specifically
for use in the preparation of the Registration Statement or
prospectus contained therein or amendment thereof or supplement
thereto, or is attributable your failure to carry out your
obligations under this Agreement.
(b) You agree that you will: (i) indemnify and hold
harmless the Company, each of its directors and officers who have
signed the Registration Statement, and each person, if any, who
controls the Company within the meaning of the Securities Act,
against any losses, claims, damages, expenses or liabilities (or
actions in respect thereof) caused by (A) any
7
untrue statement or alleged untrue statement of any material fact
contained in the Registration Statement, any prospectus contained in
the Registration Statement, or any amendment thereof or supplement
thereto; or (B) any omission or alleged omission to state a material
fact required to be stated therein, or necessary to make the
statement contained therein not misleading; in each case to the
extent, but only to the extent, that such untrue statement or
alleged untrue statement or omission, or alleged omission, was so
made in reliance upon, and in conformity with, written information
furnished by you specifically for use in the preparation of the
Registration Statement or prospectus contained therein or amendment
thereof or supplement thereto, or is attributable your failure to
carry out your obligations under this Agreement; and (ii) reimburse
any legal and other expenses reasonably incurred by the Company or
any such director, officer or controlling person in connection with
investigating or defending any such loss, claim, damage, expense,
liability or action.
(c) Any party seeking to be indemnified under the
provisions of this Section 6.6 shall give the indemnifying party
prompt written notice of any loss, claim, damage, expense, liability
or action subject to this Section 6.6 and shall, to the extent the
indemnified party is not adversely affected, cooperate fully with
the indemnifying party in defense and settlement of said loss,
claim, damage, expense, liability or action. The indemnifying party
shall not have the right to settle any such loss, claim, damage,
expense, liability or action without the written consent of the
indemnified party, which consent shall not be unreasonably withheld.
In the event of the assumption of the defense by an indemnifying
party, such indemnifying party shall not be liable for any further
legal or other expenses subsequently incurred by the indemnified
party in connection with such defense unless otherwise provided
herein; provided, however, the indemnified party shall have the
right to participate in such defense, at its own cost. If an
indemnifying party refuses or fails at any time to defend an
indemnified party against any loss, claim, damage, expense,
liability or action pursuant to this Section 6.6, the indemnified
party shall have the right to undertake the defense and to
compromise or settle such loss, claim, damage, expense, liability or
action on behalf of, for the account of and at the risk of such
indemnifying party.
7. Miscellaneous.
7.1 Successors and Assigns. All the provisions of this Agreement by or
for the benefit of the parties shall bind and inure to the benefit of respective
successors and permitted assigns of each party.
7.2 Notices. All notices and other communications required or permitted
hereunder shall be in writing and shall be mailed by first class mail, postage
prepaid, addressed (a) if to you, at your address set forth on the first page
hereof, or at such other address as you shall have furnished to the Company in
writing, or (b) if to the Company, at its address set forth on the first page
hereof, or at such other address as the Company shall have furnished to you in
writing in accordance with this Section 7.2.
7.3 Waivers; Amendments. Any provision of this Agreement may be amended
or modified with (but only with) the written consent of the Company and you. Any
amendment, modification or waiver effected in compliance with this Section 7.3
shall be binding upon the Company and you. No failure or delay of the Company or
you in exercising any power or
8
right hereunder shall operate as a waiver thereof, nor shall any single or
partial exercise of any such right or power, or any abandonment or
discontinuance of steps to enforce such a right or power, preclude any other or
further exercise thereon or the exercise of any other right or power. The rights
and remedies of the Company and you hereunder are cumulative and not exclusive
of any rights or remedies which each would otherwise have.
7.4 Separability. In case any one or more of the provisions contained
in this Agreement shall be invalid, illegal or unenforceable in any respect, the
validity, legality and enforceability of the remaining provisions contained
herein shall not in any way be affected or impaired thereby. The parties shall
endeavor in good faith negotiations to replace the invalid, illegal or
unenforceable provisions with valid provisions, the economic effect of which
comes as close as possible to that of the invalid, illegal or unenforceable
provisions.
7.5 Governing Law. This Agreement shall be construed and enforced in
accordance with the laws of the state of Oklahoma without regard to principles
of conflicts of law, except as otherwise required by mandatory provisions of
law.
7.6 Section Headings. The section headings used herein are for
convenience of reference only and shall not be construed in any way to affect
the interpretation of any provisions of this Agreement.
7.7 Entire Agreement. This Agreement and the other documents delivered
pursuant hereto constitute the full and entire understanding and agreement
between the parties hereto with regard to the subjects hereof and thereof.
7.8 Finder's Fees. Each of the Company and you (i) represent and
warrant to the other that no finder or broker has been retained by it or you in
connection with the transactions contemplated by this Agreement and (ii) each
hereby agrees to indemnify and to hold the other, and its respective officers,
directors and controlling persons, harmless of and from any liability for any
commission or compensation in the nature of a finder's fee to any broker or
other person or firm (and the costs and expenses of defending against such
liability or asserted liability) for which it, or any of its employees or
representatives, are responsible.
7.9 Other Documents. The parties to this Agreement shall in good faith
execute such other and further instruments, assignments or documents as may be
necessary or advisable to carry out the transactions contemplated by this
Agreement.
7.10 Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be an original, but all of which together
shall constitute one instrument, and which shall become effective when there
exist copies signed by the Company and by you.
[Signatures on Next Page]
9
IN WITNESS WHEREOF, the undersigned have caused this Agreement to be
executed by their duly authorized representatives effective as of the date set
forth on the first page hereof.
PALWEB CORPORATION
By:
--------------------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Chief Executive Officer
Accepted and agreed to this ______ day of ____________, 2004.
--------------------------------------------
10
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, OR UNDER ANY STATE SECURITIES ACT. THE
SECURITIES HAVE BEEN ACQUIRED FOR INVESTMENT AND MAY NOT BE SOLD, TRANSFERRED,
PLEDGED OR HYPOTHECATED UNLESS (I) THEY HAVE BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, AND ANY APPLICABLE STATE SECURITIES ACT, OR
(II) THE COMPANY SHALL HAVE BEEN FURNISHED AN OPINION OF COUNSEL, SATISFACTORY
TO COUNSEL FOR THE COMPANY, THAT REGISTRATION IS NOT REQUIRED UNDER ANY OF SUCH
ACTS.
No. _____ ____________, 2004
PALWEB CORPORATION
COMMON SHARE WARRANT CERTIFICATE
Warrant to Purchase _________ Common Shares
Expiring __________, 2009
THIS CERTIFIES THAT ____________ (the "Warrant Holder"), in
consideration for entering into that certain Securities Purchase Agreement dated
as of ___________, 2004 ("Purchase Agreement"), by and between the Warrant
Holder and PalWeb Corporation, an Oklahoma corporation (the "Company"), at any
time following the date hereof, on any Business Day on or prior to 5:00 p.m.,
Pacific Time, on the Expiration Date, is entitled to subscribe for and purchase
from the Company, up to ____________ Common Shares (as defined in Section 1
below) at a price per Common Share equal to the Exercise Price (as defined in
Section 1 below); provided, however, that the number of Common Shares issuable
upon any exercise of this Warrant (as defined in Section 1 below) shall be
adjusted and readjusted from time to time in accordance with Section 4 below.
1. Certain Definitions.
The following terms, as used herein, have the following meanings:
"Affiliate" means, with respect to any Person, any other Person that
directly or indirectly controls, is controlled by, or is under common control
with such Person.
"Business Day" means any day except a Saturday, Sunday or other day on
which commercial banks in New York City are authorized by law to close.
"Commission" means the Securities and Exchange Commission.
"Common Share(s)" means the Company's currently authorized class of
Common Stock, par value $0.0001.
"Exchange Act" means the Securities Exchange Act of 1934, as amended,
or any successor Federal statute, and the rules and regulations of the
Commission thereunder, all as the same shall be in effect at the time. Reference
to a particular section of the Exchange Act shall include a reference to the
comparable section, if any, of any such successor Federal statute.
"Exercise Price" means $0.6625 with respect to up to __________ Warrant
Shares, $0.795 with respect to up to ___________ Warrant Shares and $0.9275 with
respect to up to ___________ Warrant Shares.
"Early Expiration Date" has the meaning specified in Section 2.3
hereof.
"Expiration Date" means the earlier to occur of (i) _____________,
2009, or (ii) an Early Expiration Date.
"Person" means an individual, a corporation, a partnership, a limited
liability company, an association, a trust or any other entity or organization,
including a government or political subdivision or an agency or instrumentality
thereof.
"Securities Act" means the Securities Act of 1933, as amended, or any
successor Federal statute, and the rules and regulations of the Commission
thereunder, all as the same shall be in effect at the time. Reference to a
particular section of the Securities Act shall include a reference to the
comparable section, if any, of any such successor Federal statute.
"Warrant" means the rights granted to the Warrant Holder pursuant to
this Warrant Certificate.
"Warrant Certificate" means this Common Share Warrant Certificate.
"Warrant Share(s)" means the ___________ Common Shares issued or
issuable upon exercise of this Warrant, as adjusted from time to time pursuant
to Section 4.
2. Vesting, Exercise and Early Expiration.
2.1 Vesting. The Warrant and the Warrant Shares shall immediately vest
upon the execution of this Warrant Certificate.
2.2 Exercise of Warrant.
2
(a) The Warrant Holder may exercise this Warrant by delivering
to the Company a duly executed notice (a "Notice of Exercise") in the
form of Annex A attached hereto, at the election of the Warrant Holder,
in which the Warrant Holder shall receive from the Company the number
of Warrant Shares as to which this Warrant is being exercised and shall
pay to the Company the Exercise Price for each such Warrant Share by
check payable to the order of the Company in an amount equal to the
product of: (a) the Exercise Price times (b) the number of Warrant
Shares as to which the Warrant is being exercised.
(b) As soon as practicable, but not later than five (5)
Business Days after the Company shall have received such Notice of
Exercise and payment, the Company shall execute and deliver or cause to
be executed and delivered, in accordance with such Notice of Exercise,
a certificate or certificates representing the number of Common Shares
specified in such Notice of Exercise, issued in the name of the Warrant
Holder. This Warrant shall be deemed to have been exercised and such
share certificate or certificates shall be deemed to have been issued,
and such Warrant Holder shall be deemed for all purposes to have become
a holder of record of Common Shares, as of the date that such Notice of
Exercise and payment shall have been received by the Company.
(c) The Warrant Holder shall surrender this Warrant
Certificate to the Company when it delivers the Notice of Exercise, and
in the event of a partial exercise of the Warrant, the Company shall
execute and deliver to the Warrant Holder, at the time the Company
delivers the share certificate or certificates issued pursuant to such
Notice of Exercise, a new Warrant Certificate for the unexercised
portion of this Warrant Certificate, but in all other respects
identical to this Warrant Certificate.
(d) The Company shall pay all expenses, taxes and other
charges payable in connection with the preparation, issuance and
delivery of certificates for the Warrant Shares and a new Warrant
Certificate, if any, except that if the certificates for the Warrant
Shares or the new Warrant Certificate, if any, are to be registered in
a name or names other than the name of the Warrant Holder, funds
sufficient to pay all transfer taxes payable as a result of such
transfer shall be paid by the Warrant Holder at the time of its
delivery of the Notice of Exercise or promptly upon receipt of a
written request by the Company for payment.
(e) No fractional Common Shares will be issued in connection
with any exercise of the Warrant, and any fractional Common Share
(resulting from any adjustment pursuant to Section 4 or otherwise) in
the aggregate number of Common Shares being purchased upon any exercise
of the Warrant shall be eliminated.
2.3 Early Expiration.
(a) In the event that the closing bid price of the Company's
Common
3
Shares, as reported by the Nasdaq Stock Market, Inc., exceeds the
Exercise Price for any Warrant Shares to which the Warrant Holder is
entitled to receive upon exercising any portion of this Warrant for any
period of 30 consecutive trading days, the Warrant shall expire with
respect to such Warrant Shares on the 180th day thereafter (each, an
"Early Expiration Date"); provided, however, that the Company must give
prior written notice to the Warrant Holder not less than 30 days prior
to any Early Expiration Date for such Early Expiration Date to be
applicable to the Warrant Holder; and, provided further, that the
Warrant Holder shall remain entitled to exercise this Warrant with
respect to such Warrant Shares at any time up to and including the
Business Day immediately preceding the applicable Early Expiration
Date.
(b) In the event that the Warrant Holder fails to exercise any
portion of the Warrant subject to expiration in accordance with Section
2.3(a) above prior to any Early Expiration Date, all rights of the
Warrant Holder under this Warrant Certificate with respect to such
Warrant Shares shall cease and this Warrant shall no longer be deemed
to be outstanding with respect to such Warrant Shares.
3. Validity of Warrant and Issuance of Common Shares.
The Company represents and warrants that this Warrant has been duly
authorized and is validly issued. The Company further represents and warrants
that on the date hereof it has duly authorized and reserved, and the Company
hereby agrees that it will at all times until the Expiration Date have duly
authorized and reserved, such number of Common Shares as will be sufficient to
permit the exercise in full of the Warrant, and that all such Common Shares are
and will be duly authorized and, when issued upon exercise of the Warrant, will
be validly issued, fully paid and nonassessable, and free and clear of all
security interests, claims, liens, equities and other encumbrances.
4. Adjustment Provisions.
The number of Warrant Shares that may be purchased upon any exercise of
the Warrant, shall be subject to change or adjustment as follows:
4.1 Common Share Reorganization. If the Company shall subdivide its
outstanding Common Shares into a greater number of shares, by way of share
split, share dividend or otherwise, or consolidate its outstanding Common Shares
into a smaller number of shares (any such event being herein called a "Common
Share Reorganization"), then (a) the definition of Exercise Price shall be
adjusted, effective immediately after the effective date of such Common Share
Reorganization, so that each amount contained in the definition of the Exercise
Price is equal to such amount multiplied by a fraction, the numerator of which
shall be the number of Common Shares outstanding on such effective date before
giving effect to such Common Share Reorganization and the denominator of which
shall be the number of Common Shares outstanding after giving effect to such
Common Shares Reorganization, and (b) the number of Common Shares subject to
purchase upon exercise of this Warrant shall be
4
adjusted, effective at such time, to a number determined by multiplying the
number of Common Shares subject to purchase immediately before such Common Share
Reorganization by a fraction, the numerator of which shall be the number of
shares outstanding after giving effect to such Common Share Reorganization and
the denominator of which shall be the number of Common Shares outstanding
immediately before giving effect to such Common Share Reorganization.
4.2 Capital Reorganization. If there shall be any consolidation or
merger to which the Company is a party, other than a consolidation or a merger
of which the Company is the continuing corporation and that does not result in
any reclassification of, or change (other than a Common Share Reorganization)
in, outstanding Common Shares, or any sale or conveyance of the property of the
Company as an entirety or substantially as an entirety, or any recapitalization
of the Company (any such event being called a "Capital Reorganization"), then,
effective upon the effective date of such Capital Reorganization, the Warrant
Holder shall no longer have the right to purchase Common Shares, but shall have
instead the right to purchase, upon exercise of this Warrant, the kind and
amount of Common Shares and other securities and property (including cash) which
the Warrant Holder would have owned or have been entitled to receive pursuant to
such Capital Reorganization, if the Warrant had been exercised immediately prior
to the effective date of such Capital Reorganization.
4.3 Adjustment Rules.
(a) Any adjustments pursuant to this Section 4 shall be made
successively whenever any event referred to herein shall occur, except
that, notwithstanding any other provision of this Section 4, no
adjustment shall be made to the number of Warrant Shares to be
delivered to the Warrant Holder (or to the Exercise Price) if such
adjustment represents less than one-percent (1%) of the number of
Warrant Shares previously required to be so delivered, but any lesser
adjustment shall be carried forward and shall be made at the time and
together with the next subsequent adjustment which together with any
adjustments so carried forward shall amount to one-percent (1%) or more
of the number of Warrant Shares to be so delivered.
(b) If the Company shall take a record of the holders of its
Common Shares for any purpose referred to in this Section 4, then (i)
such record date shall be deemed to be the date of the issuance, sale,
distribution or grant in question and (ii) if the Company shall legally
abandon such action prior to effecting such action, no adjustment shall
be made pursuant to this Section 4 in respect of such action.
(c) As a condition precedent to the taking of any action which
would require an adjustment pursuant to this Section 4, the Company
shall take any action which may be necessary, including obtaining
regulatory approvals or exemptions, in order that the Company may
thereafter validly and legally issue as
5
fully paid and nonassessable all Common Shares which the Warrant Holder
is entitled to receive upon exercise of this Warrant.
5. Transfer of Warrant.
5.1 No Transfer Without the Consent of the Company. This Warrant is
personal to the Warrant Holder and this Warrant Certificate and the rights of
the Warrant Holder hereunder may not be sold, assigned, transferred or conveyed,
in whole or in part, except with the prior written consent of the Company.
5.2 Permitted Transfers. Upon transfer of the Warrant permitted under
Section 5.1 above, the Warrant Holder must deliver to the Company a duly
executed Warrant Assignment in the form of Annex B, attached hereto, with funds
sufficient to pay any transfer tax imposed in connection with such assignment.
Upon surrender of this Warrant to the Company, the Company shall execute and
deliver a new Warrant in the form of this Warrant, with appropriate changes to
reflect such assignment, in the name or names of the assignee or assignees
specified in the fully executed Warrant Assignment or other instrument of
assignment and, if the Warrant Holder's entire interest is not being transferred
or assigned, in the name of the Warrant Holder, and this Warrant shall promptly
be canceled. In connection with any transfer or exchange of this Warrant
permitted hereunder, the transferring Warrant Holder shall pay all costs and
expenses relating thereto, including, without limitation, all transfer taxes, if
any, and all reasonable expenses incurred by the Company (including legal fees
and expenses). Any new Warrant issued shall be dated the date hereof. The terms
"Warrant" and "Warrant Holder" as used herein include all Warrants into which
this Warrant (or any successor Warrant) may be exchanged or issued in connection
with the permitted transfer or assignment of this Warrant, any successor Warrant
and the holders of those Warrants, respectively.
6. Lost Mutilated or Missing Warrant Certificates.
Upon receipt by the Company of evidence satisfactory to it of the loss,
theft, destruction or mutilation of this Warrant Certificate and, in the case of
loss, theft or destruction, upon receipt of indemnification satisfactory to the
Company, or, in the case of mutilation, upon surrender and cancellation of the
mutilated Warrant Certificate, the Company shall execute and deliver a new
Warrant Certificate of like tenor and representing the right to purchase the
same aggregate number of Warrant Shares. The recipient of any such Warrant
Certificate shall reimburse the Company for all reasonable expenses incidental
to the replacement of such lost, mutilated or missing Warrant Certificate.
7. Miscellaneous.
7.1 Successors and Assigns. All the provisions of this Warrant
Certificate by or for the benefit of the Company or the Warrant Holder shall
bind and inure to the benefit of their respective successors and permitted
assigns.
6
7.2 Notices. All notices, requests, demands and other communications
hereunder shall be given in accordance with the terms of the Purchase Agreement.
7.3 Waivers; Amendments. Any provision of this Warrant Certificate may
be amended or modified with (but only with) the written consent of the Company
and the Warrant Holder. Any amendment, modification or waiver effected in
compliance with this Section 7.3 shall be binding upon the Company and the
Warrant Holder. No failure or delay of the Company or the Warrant Holder in
exercising any power or right hereunder shall operate as a waiver thereof, nor
shall any single or partial exercise of any such right or power, or any
abandonment or discontinuance of steps to enforce such a right or power,
preclude any other or further exercise thereon or the exercise of any other
right or power. The rights and remedies of the Company and the Warrant Holder
hereunder are cumulative and not exclusive of any rights or remedies which each
would otherwise have.
7.4 No Rights a Shareholder. The Warrant shall not entitle the Warrant
Holder, prior to the exercise of the Warrant, to any rights as a holder of
shares of the Company.
7.5 Separability. In case any one or more of the provisions contained
in this Warrant shall be invalid, illegal or unenforceable in any respect, the
validity, legality and enforceability of the remaining provisions contained
herein shall not in any way be affected or impaired thereby. The parties shall
endeavor in good faith negotiations to replace the invalid, illegal or
unenforceable provisions with valid provisions, the economic effect of which
comes as close as possible to that of the invalid, illegal or unenforceable
provisions.
7.6 Governing Law. This Warrant shall be construed and enforced in
accordance with the laws of the state of Oklahoma without regard to principles
of conflicts of law, except as otherwise required by mandatory provisions of
law.
7.7 Section Headings. The section headings used herein are for
convenience of reference only and shall not be construed in any way to affect
the interpretation of any Provisions of the Warrant.
IN WITNESS WHEREOF, the Company has caused this Warrant Certificate to
be duly executed and attested by its Chief Executive Officer, all as of the day
and year first above written.
PALWEB CORPORATION
By:
-----------------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Chief Executive Officer
7
ANNEX A
-------
Form of Notice of Exercise
Date: __________
To: PalWeb Corporation
Reference is made to the Common Share Purchase Warrant dated
____________ issued to the undersigned by PalWeb Corporation. Terms defined
therein are used herein as therein defined.
The undersigned, pursuant to the provisions set forth in the Warrant
Certificate, hereby irrevocably elects and agrees to purchase the number of
Common Shares at the Exercise Price(s) set forth below, and makes payment
herewith by check payable to the order of the Company in an amount equal to
$____________ .
Number of Warrant Shares Applicable Exercise Price
---------------------- -------------------------
---------------------- -------------------------
---------------------- -------------------------
If said number of shares is less than all of the shares purchasable hereunder,
the undersigned hereby requests that a new Warrant Certificate representing the
remaining balance of the Warrant Shares be issued to me.
The undersigned hereby represents that it is exercising the Warrant for its own
account for investment purposes and not with the view to any sale or
distribution and that the Warrant Holder will not offer, sell or otherwise
dispose of the Warrant or any underlying Warrant Shares in violation of
applicable securities laws.
By:
----------------------------------------
Name:
-------------------------------------
Title:
-------------------------------------
A-1
ANNEX B
-------
Form of Warrant Assignment
Reference is made to the Common Share Purchase Warrant dated
__________, issued to the undersigned by PalWeb Corporation. Terms defined
therein are used herein as therein defined.
FOR VALUE RECEIVED __________________ (the "Assignor") hereby sells,
assigns and transfers all of the rights of the Assignor as set forth in the
Warrant Certificate with respect to the number of Warrant Shares covered thereby
as set forth below, to the Assignee(s) as set forth below:
Name(s) of Number of Applicable Exercise
Assignee(s) Address(es) Warrant Shares Price of Warrant Share
---------- ---------- ------------------ -------------------
---------- ---------- ------------------ -------------------
All notices to be given by the Company to the Assignor as Warrant
Holder shall be sent to the Assignee(s) at the above listed address(es), and, if
the number of Warrant Shares being hereby assigned is less than all of the
Warrant Shares covered by the Warrant Certificate held by the Assignor, then
also to the Assignor.
In accordance with Section 5 of the Warrant Certificate, the Assignor
requests that the Company execute and deliver a new Warrant Certificate or
Warrant Certificates in the name or names of the Assignee or Assignees, as is
appropriate, or, if the number of Warrant Shares being hereby assigned is less
than all of the Warrant Shares covered by the Warrant held by the Assignor, new
Warrant Certificates in the name or names of the Assignee or the Assignees, as
is appropriate, and in the name of the Assignor.
The undersigned represents that the Assignee has represented to the
Assignor that the Assignee or each Assignee, as is appropriate, is acquiring the
Warrant for its own account or the account of an Affiliate for investment
purposes and not with the view to sell or distribute, and that the Assignee or
each Assignee, as is appropriate, will not offer, sell or otherwise dispose of
the Warrant or the Warrant Shares except under circumstances as will not result
in a violation of applicable securities laws.
Dated:__________
By:
----------------------------------------
Name:
-------------------------------------
Title:
-------------------------------------
B-1