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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
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WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT PURSUANT TO SECTION 13 OR 15 (D) OF THE
SECURITIES EXCHANGE ACT OF 1934
DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED):
SEPTEMBER 8, 2003
PALWEB CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
OKLAHOMA 000-26331 75-2954680
(STATE OR OTHER JURISDICTION OF (COMMISSION FILE NUMBER) (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
1607 WEST COMMERCE STREET, DALLAS, TEXAS 75208
(Address of principal executive offices) (Zip Code)
(214) 698-8330
(Registrant's telephone number, including area code)
NOT APPLICABLE
(Former name or former address, if changed since last report)
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ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
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(a) On September 8, 2003, PalWeb Corporation completed the acquisition
of all of the assets of Greystone Plastics, Inc., an Iowa corporation, through
the purchase of such assets by a newly formed, wholly-owned subsidiary of PalWeb
Corporation, Greystone Manufacturing, L.L.C., an Oklahoma limited liability
company. Greystone Plastics, Inc. is a manufacturer of plastic pallets, which
are used in the beverage industry. The purchase price for the assets was
$12,500,000, of which $4,200,000 was paid in cash and $8,300,000 was paid by
issuing the following notes: a $5,000,000 note payable to Greystone Plastics,
Inc. at 7.5% interest, due October 1, 2008; a $2,500,000 note payable to
Greystone Plastics, Inc. at 7.5% interest, due October 1, 2018; and an $800,000
note payable to Bill Hamilton, one of the owners of Greystone Plastics, Inc, at
6% interest, due October 26, 2007. The cash payment was financed through the
issuance of the preferred stock discussed under Item 5. The notes issued to
Greystone Plastics, Inc. are secured by the assets acquired from Greystone
Plastics, Inc. The $800,000 note issued to Bill Hamilton is a wraparound note
pursuant to which PalWeb Corporation has assumed the liabilities of Greystone
Plastics, Inc. under that certain loan agreement between US Bancorp Equipment
Finance, Inc. and Greystone Plastics, Inc. dated February 12, 2003 (which loan
was guaranteed by Bill Hamilton) pursuant to which US Bancorp loaned Greystone
Plastics, Inc. the money necessary to purchase an extruder, which was included
in the assets acquired from Greystone Plastics, Inc. In connection with the
acquisition, Greystone Manufacturing, L.L.C. hired Mr. Hamilton to oversee the
operation of the assets acquired from Greystone Plastics, Inc. and assist PalWeb
with other production matters. The consideration paid in these transactions was
determined through arm's-length negotiations between the parties. The material
terms and conditions of these transactions are set forth in the agreements
included as exhibits to this Form 8-K.
Also on September 8, 2003, PalWeb completed a sale and leaseback
transaction whereby it sold its Dallas plant for $1,350,000 and certain
production equipment located in its Dallas plant for $5,650,000 to a company
owned by Paul Kruger, a major stockholder of PalWeb, in exchange for the
cancellation of debt in the amount of $7,000,000 owed by PalWeb Corporation to
Paul Kruger. The assets were sold at the assets' approximate net book value. The
lease agreement for the plant is a three year triple net lease with a monthly
rental of $17,720. The equipment lease is for 130 months with a monthly rental
of $48,000 beginning six months after the first day of the lease. The material
terms and conditions of these transactions are set forth in the agreements
included as exhibits to this Form 8-K.
(b) Greystone Plastics, Inc. was engaged in the business of
manufacturing and selling plastic pallets to one large customer in the beverage
industry. Through its wholly-owned subsidiary, Greystone Plastics, L.L.C.,
PalWeb Corporation intends to continue to use the assets acquired from Greystone
Plastics, Inc. to supply Greystone Plastics, Inc.'s customer and to use such
assets in combination with PalWeb's existing assets to expand sales to other
participants in the beverage industry.
ITEM 5. OTHER EVENTS AND REGULATION FD DISCLOSURE
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Simultaneously with the acquisition described in Item 2 above and in
order to partially finance such acquisition, PalWeb sold 50,000 shares of
preferred stock designated "Series 2003 Cumulative Convertible Senior Preferred
Stock" ("2003 Preferred Stock"), to Paul Kruger, a major stockholder of PalWeb,
at $100 per share for a total purchase price of $5,000,000. The 2003 Preferred
Stock has a dividend rate equal to the prime rate of interest plus 3.25% and may
be converted into common stock at the conversion rate of $1.50 per share, or for
an aggregate of 3,333,333 shares of common stock. In addition, the holder of the
2003 Preferred Stock has been granted certain
voting rights so that such holder has the right to elect a majority of the Board
of Directors of PalWeb. The material terms and conditions of this 2003 Preferred
Stock are set forth in the Certificate of Designation relating to such 2003
Preferred Stock included as an exhibit to this Form 8-K. The offer and sale of
the shares of the 2003 Preferred Stock was not registered under the Securities
Act of 1933, as amended, in reliance upon the exemption from the registration
requirements of that act provided by Section 4(2) thereof and Regulation D
promulgated by the Securities and Exchange Commission thereunder. Paul Kruger is
a sophisticated accredited investor with the experience and expertise to
evaluate the merits and risks of an investment in PalWeb Corporation stock and
the financial means to bear the risks of such an investment. Paul Kruger was
provided access to all of the material information regarding PalWeb Corporation
that he would have received if the offer and sale of the securities had been
registered.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
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(a) and (b) FINANCIAL STATEMENTS OF BUSINESS ACQUIRED AND PRO FORMA
FINANCIAL INFORMATION. It is impracticable to provide the financial statements
and pro forma financial information related to the acquisition of the assets
from Greystone Plastics, Inc. at the time of this filing. The information
required to be reported shall be filed by an amendment to this report on or
before November 24, 2003.
(c) EXHIBITS.
4.1 Certificate of the Designation, Preferences, Rights and
Limitations of PalWeb Corporation's Series 2003
Cumulative Convertible Senior Preferred Stock
10.1 Asset Purchase Agreement between Greystone Plastics, Inc.
and Greystone Manufacturing, L.L.C. dated September 3,
2003
10.2 Senior Secured Promissory Note in the amount of
$5,000,000 payable to Greystone Plastics, Inc.
10.3 Real Estate Note in the amount of $2,500,000 payable to
Greystone Plastics, Inc.
10.4 Wraparound Promissory Note in the amount of $799,454.06
payable to Bill Hamilton
10.5 Security Agreement between Greystone Plastics, Inc. and
Greystone Manufacturing, L.L.C. dated September 3, 2003
10.6 Employment Agreement between Greystone Manufacturing,
L.L.C. and Bill Hamilton dated September 3, 2003
10.7 Asset Purchase Agreement between Plastic Pallet
Production, Inc. and 1607 Commerce Limited Partnership
dated September 8, 2003
10.8 Letter Agreement between Plastic Pallet Production, Inc.
and 1607 Commerce Limited Partnership dated September 8,
2003 10.9 Sale Agreement between Plastic Pallet
Production, Inc. and 1607 Commerce Limited Partnership
dated September 8, 2003
10.10 Equipment Lease between 1607 Commerce Limited Partnership
and Plastic Pallet Production, Inc. dated September 8,
2003
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10.11 Lease Agreement between 1607 Commerce Limited Partnership
and Plastic Pallet Production, Inc. dated September 8,
2003
10.12 Security Agreement among PalWeb Corporation, Plastic
Pallet Production, Inc., Greystone Manufacturing, L.L.C.
and 1607 Commerce Limited Partnership dated September 8,
2003
10.13 Guaranty of Obligations of Tenant Pursuant to Equipment
Lease by PalWeb Corporation and Greystone Manufacturing,
L.L.C. dated September 8, 2003
10.14 Guaranty of Obligations of Tenant Pursuant to Lease by
PalWeb Corporation and Greystone Manufacturing, L.L.C.
dated September 8, 2003
10.15 Stock Pledge Agreement between PalWeb Corporation and
1607 Commerce Limited Partnership dated September 8, 2003
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
PALWEB CORPORATION
Date: September 23, 2003 By: /s/ Warren F. Kruger
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Warren F. Kruger
President, Chief Financial Officer and
Principal Executive Officer
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