Question and Answer Press Release Regarding PalWeb's Annual Meeting of Shareholders
DALLAS--March 12, 2002--PalWeb Corporation (OTCBB:PAEB) announced today that it issued a question and answer press release to help inform its shareholders about certain issues in connection with its upcoming 2002 Annual Meeting of Shareholders. "Shortly after we filed PalWeb's Preliminary Information Statement on Schedule 14C, we received several inquiries from shareholders regarding the 2002 Annual Meeting of Shareholders," said Paul Kruger, Chairman and CEO. "As a result, we decided to issue this press release to answer some of the more common questions."Q: When is PalWeb's 2002 Annual Meeting of Shareholders and where
will the meeting be held?
The 2002 Annual Meeting of Shareholders will be held on Monday,
April 22, 2002, at 10:00 a.m., local time, at the Hyatt Regency
Dallas located at 300 Reunion Blvd., Dallas, Texas.
Q: Who may attend 2002 Annual Meeting of Shareholders?
The meeting is open to all shareholders of PalWeb. If you are not
a shareholder of record, you must bring evidence of your share
ownership to the meeting.
Q: Will the shareholders receive more information about the 2002
Annual Meeting of the Shareholders?
Yes. PalWeb's Definitive Information Statement on Schedule 14C
will be mailed on or about March 25, 2002, to the holders of
record of common stock and convertible preferred stock as of the
record date, which is March 18, 2002.
Q: What will take place at the 2002 Annual Meeting of Shareholders?
The meeting is being held for the following purposes:
| -- | to elect six directors; |
| -- | to approve PalWeb's Stock Option Plan, as amended, which has been previously adopted by the Board of Directors; |
| -- | to approve the merger of PalWeb into a wholly owned Oklahoma subsidiary of PalWeb for the purposes of redomiciling PalWeb to the State of Oklahoma and authorizing additional shares of common and preferred stock and authorizing the Board of Directors to approve a reverse stock split; and |
| -- | to transact such other business as may properly be brought before the meeting. |
PalWeb from Delaware to Oklahoma?
PalWeb has a presence in Oklahoma with its corporate offices in
Norman, Oklahoma. PalWeb believes that the reincorporation will
enhance its ability to voice its opinion on legislative and
executive branch actions and other governmental decisions
affecting corporations that are incorporated and maintain offices
in Oklahoma. The Oklahoma General Corporation Act is substantially
equivalent to Delaware General Corporation Law so the move should
not materially affect PalWeb or its shareholders. Reincorporation
will also permit PalWeb to go forward with a new certificate of
incorporation and bylaws. There are certain deficiencies in the
prior certificate and bylaws, which were adopted and approved
during prior ownership of PalWeb. Finally, an insignificant
additional benefit to reincorporating in Oklahoma is that the
franchise taxes that PalWeb pays as a Delaware corporation will be
eliminated. Management estimates that, on the basis of the
business presently conducted by PalWeb, reincorporation in
Oklahoma will not result in any material savings, but savings
could be achieved in the future if PalWeb is successful.
Q: Why is PalWeb asking the shareholders to authorize additional
shares of common stock?
Currently, PalWeb only has 16,576,756 shares of common stock
authorized but unissued. This number of shares is insufficient in
the event that all holders of outstanding warrants and options
determine to exercise such warrants and options and the holders of
outstanding preferred stock determine to convert such preferred
stock. If all such warrants and options were immediately exercised
and all such preferred stock were immediately converted, PalWeb
would be required to issue 498,130,000 shares of common stock.
Therefore, PalWeb must authorize at least 481,553,244 additional
shares of common stock to meet its obligations in connection with
outstanding warrants, options and preferred stock. In addition,
PalWeb needs to authorize 90,500,000 additional shares of common
stock to meet its obligations to reserve shares under its Stock
Option Plan. After giving effect to the possible issuance of all
of these shares, plus the number of existing outstanding shares of
233,423,244, PalWeb would have 822,053,244 shares outstanding.
The Board believes that the proposed increase in authorized
capital is necessary not only to support reserves required for
issuance in the event of the exercise of outstanding warrants and
options and the conversion of outstanding preferred stock, but to
raise further capital as well. The Board anticipates that in the
future it will consider a number of possible financing and
acquisition transactions that may involve the issuance of
additional equity, debt or convertible securities. If the
authorization of additional shares of common stock is approved by
the shareholders, the Board would be able to authorize the
issuance of shares for these purposes without the necessity, and
related costs and delays, of either calling a special
shareholders' meeting or of waiting for the regularly scheduled
annual meeting of shareholders in order to increase the authorized
capital.
Q: How was it determined that 5,000,000,000 shares should be
authorized?
The authorization of 5,000,000,000 shares will give the Board
flexibility in pursuing a wide variety of possible financing and
acquisition transactions, which will only be pursued by the Board
if such transactions are in the best interests of PalWeb and its
shareholders. If in a particular instance shareholder approval
were required by law or otherwise deemed advisable by the Board,
then the matter would be referred to the shareholders for their
approval regardless of whether a sufficient number of shares
previously had been authorized. The proposed 5 billion authorized
shares will be approximately 5 times the number of shares
currently outstanding or reserved for issuance for exercise of
warrants and stock options or conversion of preferred stock. The
Board does not currently have any plans to issue additional
shares.
Q: Why is PalWeb asking the shareholders to authorize the Board of
Directors to effect a reverse stock split?
The Board believes that a reverse stock split may be beneficial
due to the large number of shares that are outstanding. The Board
also believes that PalWeb's large number of shares outstanding,
and the low trading price of its common stock will restrict its
ability to become listed on the NASDAQ SmallCap or National Market
System or a national securities exchange in the future. In
addition, the Board believes that the low trading price of
PalWeb's common stock may impair efficiency of the market for the
common stock and that brokerage commissions on the purchase or
sale of a relatively lower priced stock generally tend to
represent a higher percentage of the sales price than the
commission on a relatively higher priced stock. Furthermore, the
current low trading price of PalWeb's common stock may make PalWeb
unattractive to investors and sources of financing. The Board
believes that a reverse stock split will improve these factors and
may inure to the benefit of PalWeb, its shareholders and the
market for the PalWeb's common stock. Nevertheless, the Board of
Directors cannot predict what effect the reverse stock split would
have on the market price of the common stock. A reverse stock
split could cause PalWeb to experience a decline in its overall
market capitalization and thus decrease the value of shareholders'
investments. The Board intends to authorize a reverse split only
when it determines that such a split will be in the best interest
of shareholders.
Q: What does an exchange ratio of 1-for-100 mean?
An exchange ratio of 1-for-100 means the shareholders would
receive one (1) share of common stock for each one hundred (100)
shares of common stock that such shareholder owns. The language in
the Information Statement authorizes the Board to effect an
exchange ratio of not more than 1-for-100. In other words,
shareholders would receive at least, but not less than, one (1)
share for each one-hundred (100) shares they own. This language
allows the Board of Directors to effect a "smaller" reverse split
(e.g., 1-for-50), but not a "larger" reverse split (e.g.,
1-for-150).
Q: Will a reverse split occur if the shareholders authorize a reverse
split?
Not necessarily. If the shareholders approve the reincorporation
proposal, the Board of Directors will have the sole discretion to
elect, as it determines to be in the best interests of PalWeb and
its shareholders, whether or not to effect a reverse stock split.
In deciding whether to effect a reverse split, the Board will
likely consider the following business factors:
| -- | PalWeb's current and prospective common stock price; |
| -- | trading liquidity; |
| -- | eligibility for listing on the NASDAQ SmallCap or National Market System or a national securities exchange; |
| -- | effect on number of shareholders; |
| -- | PalWeb's business prospects; and |
| -- | certain other matters. |
to occur at the exchange ratio of 1-for-100?
The exact timing and size of a reverse split has not been
determined. The Board may use the reverse split as a mechanism to
increase the purchase price per share of the PalWeb's common stock
if it appears that it could be done without significantly altering
the overall market capitalization of PalWeb. However, the Board
will consider the various factors described above to select an
appropriate time, if any, to effect the reverse split and the
exchange ratio to be used in connection with the reverse split.
Q: If the reverse split occurs, will it affect PalWeb's outstanding
preferred stock, options and warrants?
Yes. All of the shares of PalWeb's preferred stock are convertible
into common stock. The terms and conditions of the preferred stock
require an adjustment to the number of shares into which the
preferred stock may be converted upon a reverse split. Likewise,
the number of shares that may be issued in connection with
outstanding options and warrants and the exercise prices of such
options and warrants are to be adjusted in the event that a
reverse split occurs. As such, in connection with the number of
shares of common stock to which a holder of preferred stock,
options and warrants is entitled to receive after a reverse split,
the reverse split will have the same effect on a holder of
preferred stock, options or warrants as it does on a holder of
common stock.
Q: If the reverse split occurs, will the shareholders have to do
anything and will PalWeb issue fractional shares?
It will be necessary for a shareholder to exchange certificates
representing stock issued prior to the reverse stock split for
certificates representing shares resulting after the reverse stock
split. If and when a reverse split is authorized by the Board,
shareholders will be notified in advance and will be given
instructions as to how to exchange their certificates.
If a reverse stock split is effected, PalWeb will not issue
certificates for fractional shares. Instead, persons who are
shareholders at the effective time of the reverse stock split and
who otherwise would be entitled to a fractional share would be
issued one whole share. All shares of common stock held by a
record holder will be aggregated for purposes of computing the
number of shares of common stock subject to the reverse stock
split.
PalWeb Corporation is a development stage company that develops, manufactures and sells high quality plastic pallets that provide innovative logistics solutions needed by a wide range of industries such as automotive, chemical and consumer products; grocery, produce and food production; paper and forest products; as well as retailing and steel and Metals industries. PalWeb's patented plastic pallet design has passed ASTM (American Society for Testing and Materials) standard industry testing (Standard D1185-98a and D 4728-91) for strength and durability, and the Underwriters Laboratory (UL) Standard 2335 Classification Flammability tests for commodity storage and idle pallet storage. The company's plastic pallets are 100% recyclable making them a viable alternative to wood pallets with demand for the product driven by growing environmental concerns and new government regulations. For more information visit PalWeb online at www.palweb.net.
This press release includes certain statements that may be deemed "forward-looking statements" within the meaning of the federal securities laws. All statements, other than statements of historical facts that address activities, events or developments that the Company expects, believes or anticipates will or may occur in the future, including the potential sales of pallets or other possible business developments, are forward-looking statements. Such statements are subject to a number of assumptions, risks and uncertainties, including the ability of the company to continue as a going concern. Actual results may vary materially from the forward-looking statements. For a list of certain material risks relating to PalWeb and its products, see PalWeb's Form 10-KSB for the period ended May 31, 2001, which was filed on September 13, 2001.