Common Stock Purchase Warrant - Netgateway Inc. and King William LLC
THIS WARRANT AND THE STOCK ISSUABLE UPON THE EXERCISE HEREOF HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), AND CAN BE
TRANSFERRED ONLY IN COMPLIANCE WITH THE ACT AND APPLICABLE STATE SECURITIES
LAWS. THIS WARRANT AND SUCH SECURITIES MAY NOT BE SOLD, TRANSFERRED OR ASSIGNED
IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT, UNLESS, IN THE OPINION OF
COUNSEL FOR THE COMPANY OR COUNSEL FOR THE REGISTERED HOLDER (WHICH SHALL BE IN
FORM AND FROM SUCH COUNSEL AS SHALL BE REASONABLY SATISFACTORY TO THE COMPANY),
SUCH REGISTRATION IS NOT THEN REQUIRED.
NETGATEWAY, INC.
COMMON STOCK PURCHASE WARRANT
1. ISSUANCE. In consideration of good and valuable consideration, the
receipt of which is hereby acknowledged by NETGATEWAY, INC., a Delaware
corporation (the "Company"), KING WILLIAM, LLC, a Cayman Islands limited
liability company, or registered assigns (the "Holder") is hereby granted the
right to purchase at any time until 5:00 P.M., Pacific Coast time, on July 31,
2005 (the "Expiration Date"), Two Hundred Thirty One Thousand (231,000) fully
paid and nonassessable shares of the Company's Common Stock, no par value per
share (the "Common Stock") at an exercise price of $1.625 per share (the
"Exercise Price") subject to further adjustment as set forth in Section 6
hereof.
2. EXERCISE OF WARRANTS. This Warrant is exercisable in whole or in part
for whole shares of the Company's Common Stock at the Exercise Price per share
of Common Stock payable hereunder, payable in cash or by certified or official
bank check. In lieu of paying cash to exercise this Warrant, the Holder may, by
designating a "cashless" exercise on the Notice of Exercise Form, acquire a
number of whole shares of the Company's Common Stock equal to (a) the difference
between (i) the Market Value of the Company's Common Stock and (ii) the Exercise
Price, multiplied by (b) the number of shares of Common Stock purchasable under
the portion of the Warrant tendered to the Company, divided by (c) the Market
Value of the Company's Common Stock. Upon surrender of this Warrant Certificate
with the annexed Notice of Exercise Form duly executed, together with payment of
the Exercise Price for the shares of Common Stock purchased, the Holder shall be
entitled to receive a certificate or certificates for the shares of Common Stock
so purchased. For the purposes of this Section 2, "Market Value" shall be an
amount equal to the average closing bid price of a share of Common Stock for the
five (5) business days immediately preceding the Company's receipt of the Notice
of Exercise Form duly executed.
3. RESERVATION OF SHARES. The Company hereby agrees that at all times
during the term of this Warrant there shall be reserved for issuance upon
exercise of this Warrant such number of shares of its Common Stock as shall be
required for issuance upon exercise of this Warrant (the "Warrant Shares").
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4. MUTILATION OR LOSS OF WARRANT. Upon receipt by the Company of evidence
satisfactory to it of the loss, theft, destruction or mutilation of this
Warrant, and (in the case of loss, theft or destruction) receipt of reasonably
satisfactory indemnification, and (in the case of mutilation) upon surrender and
cancellation of this Warrant, the Company will execute and deliver a new Warrant
of like tenor and date and any such lost, stolen, destroyed or mutilated Warrant
shall thereupon become void.
5. RIGHTS OF THE HOLDER. The Holder shall not, by virtue hereof, be
entitled to any rights of a stockholder in the Company, either at law or equity,
and the rights of the Holder are limited to those expressed in this Warrant and
are not enforceable against the Company except to the extent set forth herein.
6. ADJUSTMENTS TO EXERCISE TERMS.
If the Company at any time prior to the full execution of this Warrant
shall, by subdivision, combination, merger, spin-off, re-classification or like
capital adjustment of the securities, change any of the securities to which
purchase rights under this Warrant exist into the same or different number of
securities of any class or classes, this Warrant shall thereafter entitle the
Holder to acquire such number and kind of securities as would have been issuable
as a result of such change with respect to the securities acquirable immediately
prior to such transaction. If shares of the securities acquirable upon exercise
of this Warrant are subdivided into a greater number of securities, including
any stock dividend, or if such securities are combined into a lesser number of
securities, then the purchase price for the securities acquirable upon exercise
of this Warrant and the securities acquirable pursuant to this Warrant shall be
proportionately and equitably adjusted.
7. TRANSFER TO COMPLY WITH THE SECURITIES ACT; REGISTRATION RIGHTS.
(a) This Warrant has not been registered under the Securities Act of 1933,
as amended, (the "Act") and has been issued to the Holder for investment and not
with a view to the distribution of either the Warrant or the Warrant Shares.
Neither this Warrant nor any of the Warrant Shares or any other security issued
or issuable upon exercise of this Warrant may be sold, transferred, pledged or
hypothecated in the absence of an effective registration statement under the Act
and applicable state securities laws relating to such security, unless in the
opinion of counsel satisfactory to the Company, such registrations are not
required under the Act. Each certificate for the Warrant, the Warrant Shares and
any other security issued or issuable upon exercise of this Warrant shall
contain a legend on the face thereof, in form and substance satisfactory to
counsel for the Company, setting forth the restrictions on transfer contained in
this Section.
(b) The Company agrees to file a registration statement, which shall
include the Warrant Shares, on Form S-1 or another available form (the
"Registration Statement"), pursuant to the Act, pursuant to a Registration
Rights Agreement between the Company and Holder dated as of the date hereof (the
"Registration Rights Agreement").
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8. NOTICES. Any notice or other communication required or permitted
hereunder shall be in writing and shall be delivered personally, telegraphed,
telexed, sent by facsimile transmission or sent by certified, registered or
express mail, postage pre-paid. Any such notice shall be deemed given when so
delivered personally, telegraphed, telexed or sent by facsimile transmission,
or, if mailed, two days after the date of deposit in the United States mails, as
follows:
(i) if the to Company, to:
NETGATEWAY, INC.
300 Oceangate, 5th Floor
Long Beach, CA 90802
ATTN: CEO
Telephone No.: (562) 308-0010
Telecopier No.: (562) 308-0021
(ii) if to the Holder, to:
c/o Navigator Management
P.O. Box 972
Road Town
Tortola, British Virgin Islands
Telephone: (284) 494-4770
Facsimile: (284) 494-4771
Any party may be notice given in accordance with this Section to the other
parties designate another address or person for receipt of notices hereunder.
9. SUPPLEMENTS AND AMENDMENTS; WHOLE AGREEMENT. This Warrant may be
amended or supplemented only by an instrument in writing signed by the parties
hereto. This Warrant contains the full understanding of the parties hereto with
respect to the subject matter hereof and thereof and there are no
representations, warranties, agreements or understandings other than expressly
contained herein and therein.
10. GOVERNING LAW. This Warrant shall be deemed to be a contract made
under the laws of the State of California and for all purposes shall be governed
by and construed in accordance with the laws of such State applicable to
contracts to be made and performed entirely within such State.
11. DESCRIPTIVE HEADINGS. Descriptive headings of the several Sections of
this Warrant are inserted for convenience only and shall not control or affect
the meaning or construction of any of the provisions hereof.
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IN WITNESS WHEREOF, the parties hereto have executed this Warrant as of the
31st day of July, 2000.
NETGATEWAY, INC., a Delaware corporation
By:
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Name:
Title:
Attest:
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Name:
Title:
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