COMMON STOCK PURCHASE AGREEMENT
Dated as of June 2, 2000
by and between
DBS INDUSTRIES, INC.
and
TORNEAUX LTD.
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TABLE OF CONTENTS
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Page
ARTICLE IDefinitions 1
Section 1.1 Definitions.....................................................................................1
ARTICLE II Purchase and Sale of Common Stock......................................................................3
Section 2.1 Purchase and Sale of Stock......................................................................3
Section 2.2 The Shares......................................................................................3
Section 2.3 The Warrants....................................................................................3
Section 2.4 Closing.........................................................................................4
ARTICLE III Representations and Warranties........................................................................4
Section 3.1 Representations and Warranties of the Company...................................................4
Section 3.2 Representations, Warranties and Covenants of the Purchaser.....................................11
ARTICLE IV Covenants of the Company..............................................................................13
Section 4.1 Securities.....................................................................................13
Section 4.2 Registration and Listing.......................................................................14
Section 4.3 Registration Statement.........................................................................14
Section 4.4 Compliance with Laws...........................................................................14
Section 4.5 Keeping of Records and Books of Account........................................................14
Section 4.6 Reporting Requirements.........................................................................14
Section 4.7 Other Agreements...............................................................................15
Section 4.8 Non-public Information.........................................................................15
Section 4.9 No Stop Orders.................................................................................15
Section 4.10 Amendments to the Registration Statement.......................................................16
Section 4.11 Prospectus Delivery............................................................................16
Section 4.12 Legends........................................................................................16
ARTICLE V Conditions to Closing, Draw Downs and Warrant Exercise.................................................17
Section 5.1 Conditions Precedent to the Obligation of the Company to Close this Agreement..................17
Section 5.2 Conditions Precedent to the Obligation of the Purchaser to Close this Agreement................17
Section 5.3 Conditions Precedent to the Obligation of the Purchaser to Accept a Draw Down or Exercise the
Warrants and Purchase the Shares..............................................................................18
ARTICLE VI Draw Down Terms.......................................................................................19
Section 6.1 Draw Down Terms................................................................................19
ARTICLE VII Legends..............................................................................................21
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Section 7.1 Legend.........................................................................................21
Section 7.2 No Other Legend or Stock Transfer Restrictions.................................................22
Section 7.3 Purchaser's Compliance.........................................................................22
ARTICLE VIII Termination.........................................................................................23
Section 8.1 Termination by Mutual Consent..................................................................23
Section 8.2 Other Termination..............................................................................23
Section 8.3 Effect of Termination..........................................................................23
ARTICLE IX Indemnification.......................................................................................23
Section 9.1 General Indemnity..............................................................................23
Section 9.2 Indemnification Procedures.....................................................................25
ARTICLE X Miscellaneous..........................................................................................26
Section 10.1 Fees and Expenses..............................................................................26
Section 10.2 Specific Enforcement, Consent to Jurisdiction..................................................26
Section 10.3 Entire Agreement; Amendment....................................................................27
Section 10.4 Notices........................................................................................27
Section 10.5 Waivers........................................................................................28
Section 10.6 Headings.......................................................................................28
Section 10.7 Successors and Assigns.........................................................................28
Section 10.8 Governing Law..................................................................................28
Section 10.9 Survival.......................................................................................28
Section 10.10 Counterparts...................................................................................28
Section 10.11 Publicity......................................................................................29
Section 10.12 Severability...................................................................................29
Section 10.13 Further Assurances.............................................................................29
Section 10.14 Confidentiality................................................................................29
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COMMON STOCK PURCHASE AGREEMENT
This COMMON STOCK PURCHASE AGREEMENT (this "Agreement") is dated as of
June 2, 2000 by and between DBS Industries, Inc., a Delaware corporation (the
"Company") and Torneaux Ltd., a company organized under the laws of the
Commonwealth of The Bahamas (the "Purchaser").
WHEREAS, the parties desire that, upon the terms and subject to the
conditions contained herein, the Company shall issue and sell to the Purchaser,
from time to time as provided herein, and the Purchaser shall purchase, up to
$44,100,000 worth of shares of the Company's common stock, par value $.0004 per
share (the "Common Stock"); and
WHEREAS, such investments shall be made in reliance upon the provisions
of Section 4(2) ("Section 4(2)") and Regulation D ("Regulation D") or Regulation
S ("Regulation S") of the United States Securities Act of 1933, as amended and
the rules and regulations promulgated thereunder (the "Securities Act"), and/or
upon such other exemption from the registration requirements of the Securities
Act as may be available with respect to any or all of the purchases of Common
Stock to be made hereunder from time to time.
The parties hereto agree as follows:
ARTICLE I
Definitions
Section 1.1 Definitions.
(a) "Alternate Market" shall mean the Nasdaq National Market, the Nasdaq
Small Cap Market, the American Stock Exchange, or the New York Stock Exchange,
whichever is at the time the principal trading exchange or market for the Common
Stock.
(b) "Commission" shall have the meaning assigned to such term in Section
3.1(f) hereof.
(c) "Commission Documents" shall have the meaning assigned to such term in
Section 3.1(f) hereof.
(d) "Commission Filings" means the Company's Form 10-KSB for the fiscal
year ended December 31, 1999, its Form 10-QSB for the fiscal quarter ended March
31, 2000, its definitive proxy statement on Schedule 14a filed with the
Commission on April 11, 2000 and all other filings made by the Company after the
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date hereof pursuant to the Securities Exchange Act of 1934, as amended (the
"Exchange Act").
(e) "Draw Down" shall have the meaning assigned to such term in Section
6.1(a) hereof.
(f) "Draw Down Amount" means the actual amount of a Draw Down, with a
minimum amount of $100,000 and a maximum amount of $2,450,000.
(g) "Draw Down Discount Percentage" means 87% if the Threshold Price is
equal to or less than $1.00; provided, however, that for every $1.00 increase of
the Threshold Price above $1.00 up to $12.00, such draw down discount percentage
shall increase by 0.50%, incrementally, until such draw down discount percentage
shall equal 92.50%.
(h) "Draw Down Exercise Date" shall have the meaning assigned to such term
in Section 5.3 hereof.
(i) "Draw Down Notice" shall have the meaning assigned to such term in
Section 6.1(i) hereof.
(j) "Draw Down Pricing Period" shall mean a period of eighteen (18)
consecutive trading days on the OTC Bulletin Board or an Alternate Market
starting with the first trading day specified in a Draw Down Notice (or such
other period of consecutive trading days as mutually agreed upon by the Company
and the Purchaser).
(k) "DWAC" shall have the meaning assigned to such term in Section 6.1(j)
hereof.
(l) "Investment Period" shall have the meaning assigned to such term in
Section 6.1(a) and Section 8.1 hereof.
(m) "Material Adverse Effect" shall mean any effect on the business,
results of operations, prospects, properties, assets or financial condition of
the Company that is material and adverse to the Company and its subsidiaries and
affiliates, taken as a whole and/or any condition, circumstance, or situation
that would prohibit or otherwise interfere with the ability of the Company to
enter into and perform any of its obligations under this Agreement in any
material respect.
(n) "Material Change in Ownership" shall mean that, as of any particular
measurement date, the officers and directors of the Company, as a group, shall
sell in the aggregate more than 15% of their combined outstanding Common Stock
of the Company owned as of the date of this Agreement.
(o) "Permitted Transactions" shall have the meaning ascribed to such term
in Section 4.7 hereof.
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(p) "Prospectus" as used in this Agreement means the prospectus in the form
included in the Registration Statement, as supplemented from time to time
pursuant to Rule 424(b) of the Securities Act.
(q) "Registration Statement" shall mean the registration statement on Form
SB-2, to be filed with the Securities and Exchange Commission for the
registration for resale of the Shares, as such Registration Statement may be
amended from time to time.
(r) "Settlement Date" shall have the meaning assigned to such term in
Section 6.1(d) hereof.
(s) "Shares" shall mean the shares of Common Stock of the Company that may
be purchased hereunder pursuant to a Draw Down and/or upon exercise of the
Warrants (as defined Section 2.3).
(t) "Threshold Price" is the lowest price which the Company will set in the
Draw Down Notice in order to sell Shares during each Draw Down Pricing Period,
which Threshold Price may be set in increments of at least $.01.
(u) "VWAP" shall mean the daily volume weighted average price (based on a
trading day from 9:30 a.m. to 4:00 p.m., eastern time) of the Company's Common
Stock on the OTC Bulletin Board or an Alternate Market as reported by Bloomberg
Financial LP using the AQR function.
ARTICLE II
Purchase and Sale of Common Stock
Section 2.1 Purchase and Sale of Stock. Subject to the terms and conditions
of this Agreement, the Company shall issue and sell to the Purchaser and the
Purchaser shall purchase from the Company (i) up to 7,500,000 shares of Common
Stock, based on Draw Downs in accordance with Section 6.1, and (ii) the Warrants
in accordance with Section 2.3 hereof. In no event shall the amount of Common
Stock required to be purchased by the Purchaser be less than $100,000 or exceed
$2,450,000 per Draw Down during any Draw Down Pricing Period.
Section 2.2 The Shares. The Company has authorized and has reserved and
covenants to continue to reserve, subject to Section 4.4(b) hereof, free of
preemptive rights and other similar contractual rights of stockholders, a
sufficient number of shares of its Common Stock to cover the Shares to be issued
in connection with all Draw Downs and the shares of Common Stock issuable
pursuant to the exercise of Warrants.
Section 2.3 The Warrants. At each Settlement Date, the Company shall issue
to the Purchaser a warrant (the "Warrant"), to purchase up to 50% of the number
of shares of Common Stock purchased for each Settlement Period (such percentage,
as may be adjusted below, the "Warrant Coverage"), each Warrant being
exercisable for a period of three (3) years commencing on date of issuance of
such Warrant. Each Warrant shall be exercisable at the exercise price of 115% of
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the price per Share paid by the Purchaser during such Settlement Period. The
Warrant Coverage shall be adjusted as follows:
(1) If the Threshold Price is at or below $1.00, the Warrants Coverage
shall be 50%;
(2) If the Threshold Price exceeds $1.00, up to and including $3.00, the
Warrant Coverage shall be 40%;
(3) If the Threshold Price exceeds $3.00, up to and including $5.00, the
Warrant Coverage shall be 30%; and
(4) If the Threshold Price exceeds $5.00, the Warrant Coverage shall be
20%.
No Warrant shall be exercisable if the shares of Common Stock issuable upon any
exercise of such Warrant, when aggregated with all other shares of Common Stock
then owned by the Purchaser, would result in the Purchaser owning more than
9.99% of all of such Common Stock as would be outstanding on such date of
exercise, as determined in accordance with Section 16 of the Exchange Act and
the regulations promulgated thereunder.
Section 2.4 Closing. In consideration of and in express reliance upon the
representations, warranties, covenants, terms and conditions of this Agreement,
the Company agrees to issue and sell to the Purchaser and the Purchaser agrees
to purchase from the Company, that number of the Shares to be issued in
connection with each Draw Down. The closing of the execution and delivery of
this Agreement (the "Closing") shall take place at the offices of Parker Chapin
LLP, The Chrysler Building, 405 Lexington Avenue, New York, NY 10174 at 5:00
p.m. Eastern Time on (i) June 2, 2000, or (ii) such other time and place or on
such date as the Purchaser and the Company may agree upon (the "Closing Date").
Each party shall deliver all documents, instruments and writings required to be
delivered by such party pursuant to this Agreement at or prior to the Closing.
ARTICLE III
Representations and Warranties
Section 3.1 Representations and Warranties of the Company. The Company
hereby makes the following representations and warranties to the Purchaser:
(a) Organization, Good Standing and Power. The Company is a corporation
duly incorporated, validly existing and in good standing under the laws of
Delaware and has the requisite corporate power to own, lease and operate its
properties and assets and to conduct its business as it is now being conducted.
As of the date hereof, the Company does not have any subsidiaries (as defined in
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Section 3.1(g)) except as set forth in the Company's most recent Form 10-KSB,
including the accompanying financial statements (the "Form 10-KSB"), or in the
Company's most recent Form 10-QSB (the "Form 10-QSB"), or on Schedule 3.1(g)
attached hereto. The Company and each such subsidiary is duly qualified to do
business as a foreign corporation and is in good standing in every jurisdiction
in which the nature of the business conducted or property owned by it makes such
qualification necessary except for any jurisdiction in which the failure to be
so qualified shall not have a Material Adverse Effect.
(b) Authorization; Enforcement. The Company has the requisite corporate
power and authority to enter into and perform this Agreement and to issue and
sell the Shares in accordance with the terms hereof. The execution, delivery and
performance of this Agreement by the Company and the consummation by it of the
transactions contemplated hereby have been duly and validly authorized by all
necessary corporate action, and, except as contemplated by Section 3.1(e). This
Agreement has been duly executed and delivered by the Company. This Agreement
constitutes, or when executed and delivered shall constitute, a valid and
binding obligation of the Company enforceable against the Company in accordance
with its terms, except as such enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium, liquidation,
conservatorship, receivership or similar laws relating to, or affecting
generally the enforcement of creditor's rights and remedies or by other
equitable principles of general application.
(c) Capitalization. The authorized capital stock of the Company and the
shares thereof issued and outstanding as of the date hereof are set forth on
Schedule 3.1(c) attached hereto. All of the outstanding shares of the Company's
Common Stock have been duly and validly authorized, and are fully paid and
non-assessable. Except as set forth on Schedule 3.1(c) to the Agreement, the
Commission Documents or the Commission Filings, as of the date hereof, no shares
of Common Stock are entitled to preemptive rights or registration rights and
there are no outstanding options, warrants, scrip, rights to subscribe to, call
or commitments of any character whatsoever relating to, or securities or rights
convertible into, any shares of capital stock of the Company. Except as set
forth on Schedule 3.1(c) to the Agreement, the Commission Documents or the
Commission Filings, as of the date hereof, there are no contracts, commitments,
understandings, or arrangements by which the Company is or may become bound to
issue additional shares of the capital stock of the Company or options,
securities or rights convertible into shares of capital stock of the Company.
Except for the list of stockholders with registration rights set forth in
Schedule 3.1(c) to the Agreement, and the customary transfer restrictions
contained in agreements entered into by the Company in order to sell restricted
securities, as of the date hereof, the Company is not a party to any agreement
granting registration rights to any person with respect to any of its equity or
debt securities. The Company is not a party to, and it has no knowledge of, any
agreement restricting the voting or transfer of any shares of the capital stock
of the Company. The offer and sale of all capital stock, convertible securities,
rights, warrants, or options of the Company issued prior to the Closing complied
with all applicable federal and state securities laws, and no stockholder has a
right of rescission or damages with respect thereto which would have a Material
Adverse Effect. The Company has furnished or made available to the Purchaser
true and correct copies of the Company's Certificate of Incorporation and any
amendments thereto as in effect on the date hereof (the "Certificate"), and the
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Company's Bylaws and any amendments thereto as in effect on the date hereof (the
"Bylaws").
(d) Issuance of Shares. The sale and issuance of the Shares in accordance
with the terms and on the basis of the representations and warranties set forth
in this Agreement shall be exempt from the registration requirements of the
Securities Act in reliance upon Regulation D or Regulation S promulgated
thereunder. The Shares have been duly authorized by all necessary corporate
action and, when paid for or issued in accordance with the terms hereof, the
Shares shall be validly issued and outstanding, fully paid and non-assessable,
and the Purchaser shall be entitled to all rights accorded to a holder of Common
Stock.
(e) No Conflicts. The execution, delivery and performance of this Agreement
by the Company and the consummation by the Company of the transactions
contemplated herein does not (i) violate any provision of the Company's
Certificate or Bylaws, (ii) conflict with, or constitute a default (or an event
which with notice or lapse of time or both would become a default) under, or
give to others any rights of termination, amendment, acceleration or
cancellation of, any material agreement, mortgage, deed of trust, indenture,
note, bond, license, lease agreement, instrument or obligation to which the
Company is a party, (iii) create or impose a lien, charge or encumbrance on any
property of the Company under any agreement or any commitment to which the
Company is a party or by which the Company is bound or by which any of its
respective properties or assets are bound, or (iv) result in a violation of any
federal, state, local or foreign statute, rule, regulation, order, judgment or
decree (including federal and state securities laws and regulations) applicable
to the Company or any of its subsidiaries or by which any property or asset of
the Company or any of its subsidiaries are bound or affected, except, in all
cases, for such conflicts, defaults, terminations, amendments, acceleration,
cancellations and violations as would not, individually or in the aggregate,
have a Material Adverse Effect. The Company is not required under federal, state
or local law, rule or regulation to obtain any consent, authorization or order
of, or make any filing or registration with, any court or governmental agency in
order for it to execute, deliver or perform any of its obligations under this
Agreement, or issue and sell the Shares in accordance with the terms hereof
(other than any filings which may be required to be made by the Company with the
Commission subsequent to the Closing, and, any registration statement which may
be filed pursuant hereto); provided that, for purpose of the representation made
in this sentence, the Company is assuming and relying upon the accuracy of the
relevant representations and agreements of the Purchaser herein.
(f) Commission Documents, Financial Statements. The Common Stock of the
Company is registered pursuant to Section 12(b) or 12(g) of the Exchange Act,
and, the Company has timely filed all reports, schedules, forms, statements and
other documents required to be filed by it with the Securities and Exchange
Commission (the "Commission") pursuant to the reporting requirements of the
Exchange Act, including material filed pursuant to Section 13(a) or 15(d) of the
Exchange Act (all of the foregoing including filings incorporated by reference
therein being referred to herein as the "Commission Documents"). The Company has
delivered or made available to the Purchaser true and complete copies of the
Commission Documents filed with the Commission since May 15, 2000 and prior to
the Closing Date. The Company has not provided to the Purchaser any information
which, according to applicable law, rule or regulation, should have been
disclosed publicly by the Company but which has not been so disclosed, other
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than with respect to the transactions contemplated by this Agreement. The Form
10-KSB for the year ended December 31, 1999 complied in all material respects
with the requirements of the Exchange Act and the rules and regulations of the
Commission promulgated thereunder and other federal, state and local laws, rules
and regulations applicable to such document, and, as of its date, such Form
10-KSB did not contain any untrue statement of a material fact or omit to state
a material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading. The financial statements of the Company included in the
Commission Documents complied as to form in all material respects with
applicable accounting requirements and the published rules and regulations of
the Commission or other applicable rules and regulations with respect thereto.
Such financial statements have been prepared in accordance with generally
accepted accounting principles ("GAAP") applied on a consistent basis during the
periods involved (except (i) as may be otherwise indicated in such financial
statements or the notes thereto or (ii) in the case of unaudited interim
statements, to the extent they may not include footnotes or may be condensed or
summary statements), and fairly present in all material respects the financial
position of the Company and its subsidiaries as of the dates thereof and the
results of operations and cash flows for the periods then ended (subject, in the
case of unaudited statements, to normal year-end audit adjustments).
(g) Subsidiaries. The Commission Documents or Schedule 3.1(g) attached
hereto set forth each subsidiary of the Company as of the date hereof, showing
the jurisdiction of its incorporation or organization and showing the percentage
of each person's ownership of the outstanding stock or other interests of such
subsidiary. For the purposes of this Agreement, "subsidiary" shall mean any
corporation or other entity of which at least a majority of the securities or
other ownership interest having ordinary voting power (absolutely or
contingently) for the election of directors or other persons performing similar
functions are at the time owned directly or indirectly by the Company and/or any
of its other subsidiaries. Except as set forth in the Commission Documents or
the Commission Filings, none of such subsidiaries is a "significant subsidiary"
as defined in Regulation S-X.
(h) No Material Adverse Change. Since May 15, 2000, the Company has not
experienced or suffered any Material Adverse Effect, except continued losses
from operations.
(i) No Undisclosed Liabilities. Neither the Company nor any of its
subsidiaries has any liabilities, obligations, claims or losses (whether
liquidated or unliquidated, secured or unsecured, absolute, accrued, contingent
or otherwise) that would be required to be disclosed on a balance sheet of the
Company or any subsidiary (including the notes thereto) in conformity with GAAP
and are not disclosed in the Commission Documents or Commission Filings, other
than those incurred in the ordinary course of the Company's or its subsidiaries'
respective businesses since May 15, 2000 and which, individually or in the
aggregate, do not or would not have a Material Adverse Effect.
(j) No Undisclosed Events or Circumstances. No event or circumstance has
occurred or exists with respect to the Company or its subsidiaries or their
respective businesses, properties, prospects, operations or financial condition,
which, under applicable law, rule or regulation, requires public disclosure or
announcement by the Company but which has not been so publicly announced or
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disclosed and which, individually or in the aggregate, has or would have a
Material Adverse Effect.
(k) Indebtedness. The Commission Documents or the Commission Filings set
forth as of March 31, 2000 all outstanding secured and unsecured Indebtedness of
the Company or any subsidiary, or for which the Company or any subsidiary has
commitments. For the purposes of this Agreement, "Indebtedness" shall mean (a)
any liabilities for borrowed money or amounts owed in excess of $100,000 (other
than trade accounts payable incurred in the ordinary course of business), (b)
all guaranties, endorsements and other contingent obligations in respect of
Indebtedness of others, whether or not the same are or should be reflected in
the Company's balance sheet (or the notes thereto), except guaranties by
endorsement of negotiable instruments for deposit or collection or similar
transactions in the ordinary course of business; and (c) the present value of
any lease payments in excess of $100,000 due under leases required to be
capitalized in accordance with GAAP. Neither the Company nor any subsidiary is
in default with respect to any Indebtedness.
(l) Title to Assets. Each of the Company and the subsidiaries has good and
marketable title to all of its real and personal property reflected in the
Commission Documents, free of any mortgages, pledges, charges, liens, security
interests or other encumbrances. All leases of the Company and each of its
subsidiaries are valid and subsisting and in full force and effect in all
material respects.
(m) Actions Pending. There is no action, suit, claim, investigation or
proceeding pending or, to the knowledge of the Company, threatened against the
Company or any subsidiary which questions the validity of this Agreement or the
transactions contemplated hereby or any action taken or to be taken pursuant
hereto or thereto. Except as set forth in the Commission Documents or the
Commission Filings, there is no action, suit, claim, investigation or proceeding
pending or, to the knowledge of the Company, threatened, against or involving
the Company, any subsidiary or any of their respective properties or assets and
which, if adversely determined, is reasonably likely to result in a Material
Adverse Effect.
(n) Compliance with Law. The business of the Company and the subsidiaries
has been and is presently being conducted in accordance with all applicable
federal, state and local governmental laws, rules, regulations and ordinances,
except as set forth in the Commission Documents or the Commission Filings or
such that do not cause a Material Adverse Effect. The Company and each of its
subsidiaries have all franchises, permits, licenses, consents and other
governmental or regulatory authorizations and approvals necessary for the
conduct of its business as now being conducted by it, except for such
franchises, permits, licenses, consents and other governmental or regulatory
authorizations and approvals, the failure to possess which, individually or in
the aggregate, could not reasonably be expected to have a Material Adverse
Effect.
(o) Certain Fees. Except as set forth on Schedule 3.1(o) attached hereto,
no brokers, finders or financial advisory fees or commissions shall be payable
by the Company or any subsidiary with respect to the transactions contemplated
by this Agreement.
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(p) Disclosure. Neither this Agreement or the Schedules hereto nor any
other documents, certificates or instruments furnished to the Purchaser by or on
behalf of the Company or any subsidiary in connection with the transactions
contemplated by this Agreement contain any untrue statement of a material fact
or omit to state a material fact necessary in order to make the statements made
herein or therein, in the light of the circumstances under which they were made
herein or therein, not misleading.
(q) Operation of Business. The Company or its subsidiaries own or possess
all patents, trademarks, domain names (whether or not registered) and any
patentable improvements or copyrightable derivative works thereof, websites and
intellectual property rights relating thereto, service marks, trade names,
copyrights, licenses and authorizations as set forth in the Commission Documents
or the Commission Filings and all rights with respect to the foregoing, which
are necessary for the conduct of its business as now conducted without any
conflict with the rights of others, except to the extent set forth in the
Commission Documents or that a Material Adverse Effect could not reasonably be
expected to result from such conflict.
(r) Environmental Compliance. The Company and each of its subsidiaries have
obtained all material approvals, authorization, certificates, consents,
licenses, orders and permits or other similar authorizations of all governmental
authorities, or from any other person, that are required under any Environmental
Laws. "Environmental Laws" shall mean all applicable laws relating to the
protection of the environment including, without limitation, all requirements
pertaining to reporting, licensing, permitting, controlling, investigating or
remediating emissions, discharges, releases or threatened releases of hazardous
substances, chemical substances, pollutants, contaminants or toxic substances,
materials or wastes, whether solid, liquid or gaseous in nature, into the air,
surface water, groundwater or land, or relating to the manufacture, processing,
distribution, use, treatment, storage, disposal, transport or handling of
hazardous substances, chemical substances, pollutants, contaminants or toxic
substances, material or wastes, whether solid, liquid or gaseous in nature.
Except for such instances as would not individually or in the aggregate have a
Material Adverse Effect, there are no past or present events, conditions,
circumstances, incidents, actions or omissions relating to or in any way
affecting the Company or its subsidiaries that violate or could violate any
Environmental Law after the Closing or that could give rise to any environmental
liability, or otherwise form the basis of any claim, action, demand, suit,
proceeding, hearing, study or investigation (i) under any Environmental Law, or
(ii) based on or related to the manufacture, processing, distribution, use,
treatment, storage (including without limitation underground storage tanks),
disposal, transport or handling, or the emission, discharge, release or
threatened release of any hazardous substance.
(s) Material Agreements. Except for agreements in connection with the
Company's private placement of Series A Convertible Preferred Stock, neither the
Company nor any subsidiary is a party to any written or oral contract,
instrument, agreement, commitment, obligation, plan or arrangement, a copy of
which would be required to be filed, and has not previously been filed, with the
Commission as an exhibit to a Commission Filing (collectively, "Material
Agreements") if the Company or any subsidiary were registering securities under
the Securities Act immediately prior to the effectiveness of this Agreement. The
Company and each of its subsidiaries has in all material respects performed all
the obligations required to be performed by them to date under the foregoing
agreements, have received no notice of default and, are not in default under any
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Material Agreement now in effect other than as set forth in the Commission
Documents or the Commission Filings.
(t) Transactions with Affiliates. Except as set forth in the Commission
Documents or the Commission Filings, there are no loans, leases, agreements,
contracts, royalty agreements, management contracts or arrangements or other
continuing transactions exceeding $100,000 between (a) the Company, any
subsidiary or any of their respective customers (excluding agreements related to
the purchase or lease of the Company's products) or suppliers on the one hand,
and (b) on the other hand, any officer, employee, consultant or director of the
Company, or any of its subsidiaries, or any person who would be covered by Item
404(a) of Regulation S-K or any corporation or other entity controlled by such
officer, employee, consultant, director or person.
(u) Securities Act of 1933. The Company has complied in all material
respects with all applicable federal and state securities laws in connection
with the offer, issuance and sale of the Shares hereunder. The Company has not
distributed and, prior to the completion of the sale of the Shares to the
Purchaser, shall not distribute any offering material in connection with the
offer and sale of the Shares other than the Registration Statement, the
Prospectus or other materials, if any, permitted by the Securities Act. The
offer was not and, prior to the completion of the sale of the Shares to the
Purchaser, shall not be accompanied by any form of advertising in the United
States or other "directed selling efforts" within the United States within the
meaning of Rule 902(c) of Regulation S.
(v) No Integrated Offering. Neither the Company, nor any of its affiliates,
nor any person acting on its or their behalf has, directly or indirectly, made
any offers or sales of any security or solicited any offers or sales of any
security or solicited any offers to buy any security, other than pursuant to
this Agreement, under circumstances that would have required the Common Stock
offered and sold in those transactions to be registered under the Securities
Act. Neither the Company nor any of its affiliates nor any person acting on its
behalf has conducted or shall conduct any general solicitation (as that term is
defined in Rule 502(c) of Regulation D) or general advertising with respect to
any of the Shares, the Warrants or any of the shares of Common Stock issuable
pursuant to exercise of the Warrants.
(w) Employees. As of the date hereof, neither the Company nor any
subsidiary has any collective bargaining arrangements or agreements covering any
of its employees, except as set forth in the Commission Documents or the
Commission Filings. Each of the Company and its subsidiaries requires its
officers, employees and certain consultants to enter into agreements regarding
proprietary information, noncompetition, nonsolicitation, confidentiality, or
other similar agreements containing restrictive covenants. As of the date
hereof, except as disclosed in Schedule 3.1(w), no officer, consultant or key
employee of the Company or any subsidiary whose termination, either individually
or in the aggregate, could reasonably be expected to have a Material Adverse
Effect, has terminated or, to the knowledge of the Company, has any present
intention of terminating his or her employment or engagement with the Company or
any subsidiary.
<PAGE>
(x) Use of Proceeds. The proceeds from the sale of the Shares shall be used
by the Company and its subsidiaries for the purposes set forth in the Prospectus
under "Use of Proceeds."
(y) Public Utility Holding Company Act and Investment Company Act Status.
The Company is not a "holding company" or a "public utility company" as such
terms are defined in the Public Utility Holding Company Act of 1935, as amended.
The Company is not, and as a result of and immediately upon Closing shall not
be, an "investment company" or a company "controlled" by an "investment
company," within the meaning of the Investment Company Act of 1940, as amended.
(z) ERISA. No liability to the Pension Benefit Guaranty Corporation has
been incurred with respect to any Plan by the Company or any of its subsidiaries
which is or would have a Material Adverse Effect. The execution and delivery of
this Agreement and the issue and sale of the Shares shall not involve any
transaction which is subject to the prohibitions of Section 406 of ERISA or in
connection with which a tax could be imposed pursuant to Section 4975 of the
Internal Revenue Code of 1986, as amended, provided that, if any of the
Purchaser, or any person or entity that owns a beneficial interest in any of the
Purchaser, is an "employee pension benefit plan" (within the meaning of Section
3(2) of ERISA) with respect to which the Company is a "party in interest"
(within the meaning of Section 3(14) of ERISA), the requirements of Sections
407(d)(5) and 408(e) of ERISA, if applicable, are met. As used in this Section
3.1(y), the term "Plan" shall mean an "employee pension benefit plan" (as
defined in Section 3 of ERISA) which is or has been established or maintained,
or to which contributions are or have been made, by the Company or any
subsidiary or by any trade or business, whether or not incorporated, which,
together with the Company or any subsidiary, is under common control, as
described in Section 414(b) or (c) of the Code.
(aa) Acknowledgment Regarding Purchaser's Purchase of Shares. The Company
acknowledges and agrees that the Purchaser is acting solely in the capacity of
arm's length purchaser with respect to this Agreement and the transactions
contemplated hereunder. The Company further acknowledges that the Purchaser is
not acting as a financial advisor or fiduciary of the Company (or in any similar
capacity) with respect to this Agreement and the transactions contemplated
hereunder and any advice given by the Purchaser or any of its representatives or
agents in connection with this Agreement and the transactions contemplated
hereunder is merely incidental to the Purchaser's purchase of the Shares.
Section 3.2 Representations, Warranties and Covenants of the Purchaser. The
Purchaser hereby makes the following representations, warranties and covenants
to the Company:
(a) Organization and Standing of the Purchaser. The Purchaser is a limited
liability company duly organized, validly existing and in good standing under
the laws of the Commonwealth of The Bahamas.
(b) Authorization and Power. The Purchaser has the requisite corporate
power and authority to enter into and perform this Agreement and to purchase the
Shares in accordance with the terms hereof. The execution, delivery and
<PAGE>
performance of this Agreement by Purchaser and the consummation by it of the
transactions contemplated hereby have been duly authorized by all necessary
corporate action, and no further consent or authorization of the Purchaser, its
Board of Directors or stockholders is required. This Agreement has been duly
executed and delivered by the Purchaser. This Agreement constitutes a valid and
binding obligation of the Purchaser enforceable against the Purchaser in
accordance with its terms, except as such enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium, liquidation,
conservatorship, receivership, or similar laws relating to, or affecting
generally the enforcement of creditor's rights and remedies or by other
equitable principles of general application.
(c) No Conflicts. The execution, delivery and performance of this Agreement
and the consummation by the Purchaser of the transactions contemplated hereby
and thereby or relating hereto do not and shall not (i) result in a violation of
such Purchaser's charter documents or bylaws or (ii) conflict with, or
constitute a default (or an event which with notice or lapse of time or both
would become a default) under, or give to others any rights of termination,
amendment, acceleration or cancellation of any material agreement, mortgage,
deed of trust, indenture, note, bond, license, lease agreement, instrument or
obligation to which the Purchaser is a party, (iii) create or impose any lien,
charge or encumbrance on any property of the Purchaser under any agreement or
any commitment to which the Purchaser is party or by which the Purchaser is on
or by which any of its respective properties or assets are bound or (iv) result
in a violation of any law, rule or regulation, or any order, judgment or decree
of any court or governmental agency applicable to the Purchaser or its
properties, except for such conflicts, defaults and violations as would not,
individually or in the aggregate, prohibit or otherwise interfere with the
ability of the Purchaser to enter into and perform its obligations under this
Agreement in any material respect. The Purchaser is not required to obtain any
consent, authorization or order of, or make any filing or registration with, any
court or governmental agency in order for it to execute, deliver or perform any
of its obligations under this Agreement or to purchase the Shares in accordance
with the terms hereof, provided that, for purposes of the representation made in
this sentence, the Purchaser is assuming and relying upon the accuracy of the
relevant representations and agreements of the Company herein.
(d) Information. The Purchaser and its advisors, if any, have been
furnished with all materials relating to the business, finances and operations
of the Company and materials relating to the offer and sale of the Shares which
have been requested by the Purchaser. The Purchaser and its advisors, if any,
have been afforded the opportunity to ask questions of the Company. The
Purchaser has sought such accounting, legal and tax advice as it has considered
necessary to make an informed investment decision with respect to its
acquisition of the Shares. Purchaser understands that it (and not the Company)
shall be responsible for its own tax liabilities that may arise as a result of
this investment or the transactions contemplated by this Agreement.
(e) Actions Pending. There is no action, suit, claim, investigation or
proceeding pending or, to the knowledge of the Purchaser, threatened against the
Purchaser or any affiliate of the Purchaser which questions the validity of this
Agreement or the transactions contemplated hereby or any action taken or to be
taken pursuant hereto or thereto.
<PAGE>
(f) Acquisition for Investment. The Purchaser is purchasing the Shares
solely for its own account for the purpose of investment and not with a view to
or for sale in connection with a distribution. The Purchaser has no present
intention to sell the Shares, nor a present arrangement (whether or not legally
binding) to effect any distribution of the Shares to or through any person or
entity; provided, however, that by making the representations herein, the
Purchaser does not agree to hold the Common Stock for any minimum or other
specific term and reserves the right to dispose of the Common Stock at any time
in accordance with federal and state securities laws applicable to such
disposition.
(g) Sophisticated Investor. The Purchaser is a sophisticated investor (as
described in Rule 506(b) (2) (ii) of Regulation D) and an accredited investor
(as defined in Rule 501 of Regulation D), and the Purchaser has such experience
in business and financial matters that it is capable of evaluating the merits
and risks of an investment in Common Stock. The Purchaser acknowledges that an
investment in the Common Stock is speculative and involves a high degree of
risk.
(h) General. The Purchaser understands that the Shares are being offered
and sold in reliance on a transactional exemption from the registration
requirement of federal and state securities laws and the Company is relying upon
the truth and accuracy of the representations, warranties, agreements,
acknowledgments and understandings of the Purchaser set forth herein in order to
determine the applicability of such exemptions and the suitability of the
Purchaser to acquire the Shares.
(i) Compliance with Law. The Purchaser's trading activities with respect to
the purchase and resale of the shares shall be in compliance with all applicable
federal securities laws, rules and regulations.
(j) Purchaser not a U.S. Person. The Purchaser is not a "U.S. Person"
within the meaning of Rule 902(k) of Regulation S.
ARTICLE IV
Covenants of the Company
The Company covenants with the Purchaser as follows, which covenants are
for the benefit of the Purchaser and its permitted assignees.
Section 4.1 Securities. The Company shall notify the Commission and the OTC
Bulletin Board or an Alternate Market, if applicable, in accordance with their
rules and regulations, of the transactions contemplated by this Agreement, and
shall take all other necessary actions and proceedings as may be required and
permitted by applicable law, rule and regulation, for the legal and valid
issuance of the Shares to the Purchaser and the resale of the Shares by the
Purchaser.
<PAGE>
Section 4.2 Registration and Listing. The Company shall take all action
necessary to cause its Common Stock to continue to be registered under Sections
12(b) or 12(g) of the Exchange Act, shall comply in all respects with its
reporting and filing obligations under the Exchange Act, and shall not take any
action or file any document (whether or not permitted by the Securities Act or
the rules promulgated thereunder) to terminate or suspend such registration or
to terminate or suspend its reporting and filing obligations under the Exchange
Act or Securities Act, except as permitted herein. The Company shall take all
action necessary to continue the listing or trading of its Common Stock and the
listing of the Shares purchased by Purchaser hereunder on the OTC Bulletin Board
or an Alternate Market, if applicable, and shall comply in all respects with the
Company's reporting, filing and other obligations under the bylaws or rules of
the OTC Bulletin Board or an Alternate Market.
Section 4.3 Registration Statement.
(a) On or before June 30, 2000 (the "Filing Date"), the Company shall cause
to be filed with the Commission a Registration Statement on Form SB-2 (or any
other comparable form) to register for resale the Shares (pursuant to a Draw
Down or the exercise of any Warrant) to be purchased by the Purchaser pursuant
to this Agreement. The Company shall use its reasonable best efforts to take all
steps necessary to cause the Registration Statement to be declared effective as
soon as practicable after filing, but in no event later than 120 days after the
Filing Date.
(b) Before the Purchaser shall be obligated to accept any Draw Down request
from the Company, the Company shall have caused a sufficient number of shares of
Common Stock to be registered to cover the Shares to be issued in connection
with such Draw Down request (including any Warrants to be exercised in
connection therewith).
Section 4.4 Compliance with Laws. The Company shall comply, and cause each
subsidiary to comply, with all applicable laws, rules, regulations and orders,
noncompliance with which could reasonably be expected to have a Material Adverse
Effect.
Section 4.5 Keeping of Records and Books of Account. The Company shall keep
and cause each subsidiary to keep adequate records and books of account, in
which complete entries shall be made in accordance with GAAP consistently
applied, reflecting all financial transactions of the Company and its
subsidiaries, and in which, for each fiscal year, all proper reserves for
depreciation, depletion, obsolescence, amortization, taxes, bad debts and other
purposes in connection with its business shall be made.
Section 4.6 Reporting Requirements. Upon written request, the Company shall
furnish the following to the Purchaser so long as such Purchaser shall be
obligated hereunder to purchase Shares:
(a) Quarterly Reports filed with the Commission on Form 10-QSB as soon as
available, and in any event within 45 days after the end of each of the first
three fiscal quarters of the Company; and
<PAGE>
(b) Annual Reports filed with the Commission on Form 10-KSB as soon as
available, and in any event within 90 days after the end of each fiscal year of
the Company.
Section 4.7 Other Agreements. The Company is restricted from entering into
any other financing agreement during a Draw Down Pricing Period (an "Other
Financing"), the primary purpose of which would be to obtain equity financing
for the Company, without the prior written consent of the Purchaser, except that
the Company may (i) enter into a firm commitment public financing with an
investment bank reasonably acceptable to the Purchaser, (ii) enter into a
private financing where the Company receives gross proceeds of more than $50
million, (iii) issue shares of Common Stock in connection with the Company's
current option plans, stock purchase plans or rights plans, (iv) issue warrants
not to exceed 100,000 shares of Common Stock on a quarterly basis to consultants
or advisors to the Company for services (the primary purpose of which is not to
raise equity), or (v) consummate a private placement of its Series A Convertible
Preferred Stock in an amount not to exceed $15,000,000, which private placement
shall be completed no later than 60 days from the date hereof (each a "Permitted
Transaction"). If the Purchaser consents to the Company entering into an Other
Financing, the Purchaser shall have the option (the "Purchase Option"), which
option shall be exercised within five (5) calendar days of the date the
Purchaser gives such consent, to (i) purchase up to the same number of shares of
Common Stock issued or to be issued in the Other Financing at the price and on
such terms as the Company would issue Shares to the Purchaser during such Draw
Down Pricing Period, (ii) purchase up to the same number of shares of Common
Stock issued or to be issued in the Other Financing at the price and on such
terms of the Other Financing or (iii) elect not to purchase any Shares during
such Draw Down Pricing Period. If the Purchaser does not exercise its Purchase
Option in writing before 5 p.m., eastern time, on such fifth (5th) calendar day
following the Purchaser's consent to the applicable Other Financing, the Company
shall have the right to close such Other Financing on the scheduled closing date
with a third party; provided that all of the financial terms and conditions of
such closing are substantially the same as those provided to the Purchaser prior
to the Purchaser giving its consent to such Other Financing.
Section 4.8 Non-Public Information. Neither the Company nor any of its
directors, officers or agents shall
disclose any material non-public information about the Company to the Purchaser.
Section 4.9 No Stop Orders. The Company shall advise the Purchaser promptly
and, if requested by the Purchaser, shall confirm such advice in writing: (i) of
its receipt of notice of any request by the Commission for amendment of or a
supplement to the Registration Statement, any Prospectus or for additional
information; (ii) of its receipt of notice of the issuance by the Commission of
any stop order suspending the effectiveness of the Registration Statement or of
the suspension of qualification of the Shares for offering or sale in any
jurisdiction or the initiation of any proceeding for such purpose; and (iii) of
its becoming aware of the happening of any event, which makes any statement of a
material fact made in the Registration Statement or the Prospectus (as then
amended or supplemented) untrue or which requires the making of any additions to
or changes in the Registration Statement or the Prospectus (as then amended or
<PAGE>
supplemented) in order to state a material fact required by the Securities Act
or the regulations thereunder to be stated therein or necessary in order to make
the statements therein not misleading, or of the necessity to amend or
supplement the Prospectus (as then amended or supplemented) to comply with the
Securities Act or any other law. If at any time the Commission shall issue any
stop order suspending the effectiveness of the Registration Statement, the
Company shall make commercially reasonable efforts to obtain the withdrawal of
such order at the earliest possible time.
Section 4.10 Amendments to the Registration Statement. The Company shall
not (i) file any amendment to the Registration Statement or make any amendment
or supplement to the Prospectus of which the Purchaser shall not previously have
been advised or to which the Purchaser shall reasonably object after being so
advised or (ii) so long as, in the reasonable opinion of counsel for the
Purchaser, a Prospectus is required to be delivered in connection with sales by
any Purchaser or dealer, file any information, documents or reports pursuant to
the Exchange Act without delivering a copy of such information, documents or
reports to the Purchaser promptly following such filing.
Section 4.11 Prospectus Delivery. Prior to any Settlement Date, the Company
will deliver to the Purchaser, without charge, in such quantities as reasonably
requested by the Purchaser, copies of each form of Prospectus. As soon after the
Registration Statement has been declared effective by the Commission and
thereafter from time to time for such period as in the opinion of counsel for
the Purchaser a prospectus is required by the Securities Act to be delivered in
connection with sales by the Purchaser, the Company shall expeditiously deliver
to the Purchaser, without charge, as many copies of the Prospectus (and of any
amendment or supplement thereto) as the Purchaser may reasonably request. The
Company consents to the use of the Prospectus (and of any amendment or
supplement thereto) in accordance with the provisions of the Securities Act and
with the securities or Blue Sky laws of the jurisdictions in which the Shares
may be sold by the Purchaser, in connection with the offering and sale of the
Shares and for such period of time thereafter as the Prospectus is required by
the Securities Act to be delivered in connection with sales of the Shares. If
during such period of time any event shall occur that in the judgment of the
Company or in the opinion of counsel for the Purchaser is required to be set
forth in the Prospectus (as then amended or supplemented) or should be set forth
therein in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading, or if it is necessary
to supplement or amend the Prospectus to comply with the Securities Act or any
other law, the Company shall forthwith prepare and, subject to the provisions of
Section 4.10 above, file with the Commission an appropriate supplement or
amendment thereto, and shall expeditiously furnish to the Purchaser a reasonable
number of copies thereof. The Company shall file a prospectus supplement to its
current Registration Statement on the first business day immediately following
the end of each Settlement Period, and the Company shall deliver to the
Purchaser an appropriate Prospectus and prospectus supplement on each Settlement
Date.
Section 4.12 Legends. The certificates evidencing the Shares and the shares
of Common Stock issuable upon exercise of the Warrants shall be free of legends,
except as provided for in Article VII.
<PAGE>
ARTICLE V
Conditions to Closing and Draw Downs
Section 5.1 Conditions Precedent to the Obligation of the Company to Close
this Agreement. The obligation hereunder of the Company to enter into this
Agreement is subject to the satisfaction or waiver, at or before the Closing, of
each of the conditions set forth below. These conditions are for the Company's
sole benefit and may be waived by the Company at any time in its sole
discretion.
(a) No Injunction. No statute, regulation, executive order, decree, ruling
or injunction shall have been enacted, entered, promulgated or endorsed by any
court or governmental authority of competent jurisdiction which prohibits the
consummation of any of the transactions contemplated by this Agreement.
(d) No Proceedings or Litigation. No action, suit or proceeding before any
arbitrator or any governmental authority shall have been commenced, and no
investigation by any governmental authority shall have been threatened, against
the Company or any subsidiary, or any of the officers, directors or affiliates
of the Company or any subsidiary seeking to restrain, prevent or change the
transactions contemplated by this Agreement, or seeking damages in connection
with such transactions.
Section 5.2 Conditions Precedent to the Obligation of the Purchaser to
Close this Agreement. The obligation hereunder of the Purchaser to enter this
Agreement is subject to the satisfaction or waiver, at or before the Closing, of
each of the conditions set forth below. These conditions are for the Purchaser's
sole benefit and may be waived by the Purchaser at any time in its sole
discretion.
(a) No Injunction. No statute, rule, regulation, executive order, decree,
ruling or injunction shall have been enacted, entered, promulgated or endorsed
by any court or governmental authority of competent jurisdiction which prohibits
the consummation of any of the transactions contemplated by this Agreement.
(b) No Proceedings or Litigation. No action, suit or proceeding before any
arbitrator or any governmental authority shall have been commenced, and no
investigation by any governmental authority shall have been threatened, against
the Company or any subsidiary, or any of the officers, directors or affiliates
of the Company or any subsidiary seeking to restrain, prevent or change the
transactions contemplated by this Agreement, or seeking damages in connection
with such transactions.
(c) Opinion of Counsel, etc. At the Closing, the Purchaser shall have
received an opinion of counsel to the Company, dated the date of Closing,
substantially in the form of Exhibit A hereto, and such other certificates and
documents as the Purchaser or its counsel shall reasonably require incident to
the Closing.
<PAGE>
Section 5.3 Conditions Precedent to the Obligation of the Purchaser to
Accept a Draw Down and Purchase the Shares. The obligation hereunder of the
Purchaser to accept a Draw Down request and to acquire and pay for the Shares is
subject to the satisfaction or waiver, at or before the date of each Draw Down
request (the "Draw Down Exercise Date"), of each of the conditions set forth
below. The conditions are for the Purchaser's sole benefit and may be waived by
the Purchaser at any time in its sole discretion.
(a) Accuracy of the Company's Representations and Warranties. Each of the
representations and warranties of the Company shall be true and correct in all
material respects as of the date when made and as of the Draw Down Exercise Date
as though made at that time except for representations and warranties that speak
as of a particular date.
(b) Effective Registration Statement. The Registration Statement
registering the Shares shall have been declared effective by the Commission
prior to the initial Draw Down Exercise Date, and such Registration Statement
shall remain effective on each Settlement Date, and shall be amended or
supplemented, as required, to disclose the sale of the Shares at least one (1)
trading day prior to each Settlement Date.
(c) No Suspension. Trading in the Company's Common Stock shall not have
been suspended by the Commission or the OTC Bulletin Board or an Alternate
Market (except for any suspension of trading of limited duration agreed to by
the Company, which suspension shall be terminated prior to each Draw Down
request), and, at any time prior to such request, trading in securities
generally as reported on the OTC Bulletin Board or an Alternate Market shall not
have been suspended or limited. The Common Stock shall not have been delisted
from the OTC Bulletin Board or an Alternate Market.
(d) Performance by the Company. The Company shall have performed, satisfied
and complied in all material respects with all covenants, agreements and
conditions required by this Agreement to be performed, satisfied or complied
with by the Company at or prior to the Closing. The Company shall have issued
transfer agent instructions to its transfer agent, and an original copy of the
transfer agent instructions shall have been signed by the transfer agent as
acknowledged and agreed.
(e) No Injunction. No statute, rule, regulation, executive order, decree,
ruling or injunction shall have been enacted, entered, promulgated or endorsed
by any court or governmental authority of competent jurisdiction which prohibits
the consummation of any of the transactions contemplated by this Agreement.
(f) No Proceedings or Litigation. No action, suit or proceeding before any
arbitrator or any governmental authority shall have been commenced, and no
investigation by any governmental authority shall have been threatened, against
the Company or any subsidiary, or any of the officers, directors or affiliates
of the Company or any subsidiary seeking to restrain, prevent or change the
transactions contemplated by this Agreement, or seeking damages in connection
with such transactions.
<PAGE>
(g) Material Adverse Effect; Material Change in Ownership. No Material
Adverse Effect and no Material Change in Ownership shall have occurred.
(h) Ten Percent Limitation. On each Settlement Date, the number of Shares
then to be purchased by the Purchaser shall not exceed the number of such shares
that, when aggregated with all other shares of Common Stock then owned by the
Purchaser beneficially or deemed beneficially owned by the Purchaser, would
result in the Purchaser owning more than 9.99% of all of such Common Stock as
would be outstanding on such Settlement Date, as determined in accordance with
Section 16 of the Exchange Act and the regulations promulgated thereunder. For
purposes of this Section 5.3(h), in the event that the amount of Common Stock
outstanding as determined in accordance with Section 16 of the Exchange Act and
the regulations promulgated thereunder is greater on a Settlement Date than on
the date upon which the Draw Down Notice associated with such Settlement Date is
given, the amount of Common Stock outstanding on such Settlement Date shall
govern for purposes of determining whether the Purchaser, when aggregating all
purchases of Common Stock made pursuant to this Agreement would own more than
9.99% of the Common Stock following such Settlement Date.
(i) No Knowledge. The Company shall have no knowledge of any event more
likely than not to have the effect of causing the Registration Statement to be
suspended or otherwise ineffective (which event is more likely than not to occur
within the 25 trading days following the trading day on which the Draw Down
Notice is deemed delivered.)
(j) Other. On each Settlement Date, the Purchaser shall have received a
certificate in substantially the form and substance of Exhibit B hereto,
executed by an executive officer of the Company to the effect that all the
conditions to such Settlement Date shall have been satisfied as at the date of
each such certificate.
ARTICLE VI
Draw Down Terms
Section 6.1 Draw Down Terms. Subject to the satisfaction of the conditions
set forth in this Agreement, the parties agree as follows:
(a) During the Investment Period, the Company, may, in its sole discretion,
issue up to eighteen (18) Draw Down Notices, each with respect to a draw down (a
"Draw Down"), which Draw Down the Purchaser shall be obligated to accept, of a
Draw Down Amount from a minimum amount of $100,000 up to $250,000 if the
Threshold Price is equal to or exceeds $1.00, and an additional $200,000 for
every $1.00 increase of the Threshold Price above $1.00. The maximum Threshold
Price shall be $12.00 for a maximum Draw Down Amount of up to $2,450,000. Prior
to issuing any Draw Down Notice, the Company shall have Shares representing at
least the Draw Down Amount registered under the Registration Statement.
(b) The number of Shares to be issued in connection with each Draw Down
shall be equal to the sum of the quotients (for each trading day of the Draw
Down Pricing Period for which the VWAP equals or exceeds the Threshold Price) of
(x) 1/18th (or such other fraction based upon the agreed upon Draw Down Pricing
<PAGE>
Period) of the Draw Down Amount and (y) (A) the applicable Draw Down Discount
Percentage multiplied by (B) the VWAP for such day.
(c) Only one Draw Down shall be allowed in each Draw Down Pricing Period.
Each Draw Down Pricing Period shall consist of two (2) periods of nine (9)
consecutive trading days beginning on the date set forth in the Draw Down Notice
as the Draw Down Pricing Period start date (each, a "Settlement Period").
(d) The number of Shares purchased by the Purchaser with respect to each
Draw Down shall be determined on a daily basis during each Draw Down Pricing
Period and settled on the second business day following the end of each
Settlement Period (the "Settlement Date").
(e) There shall be a minimum of five (5) trading days (or such other number
of trading days mutually agreed upon by the Purchaser and the Company) between
Draw Downs. For example, if the last trading day of the Draw Down Pricing Period
is August 1, 2000, then the earliest date on which the next Draw Down Pricing
Period may commence is August 9, 2000.
(f) There shall be a maximum of eighteen (18) Draw Downs during the term of
this Agreement.
(g) Each Draw Down shall expire on the last trading day of each Draw Down
Pricing Period.
(h) For each trading day during the Draw Down Pricing Period that the VWAP
is at or above the Threshold Price, 1/18th (or such other fraction based upon
the agreed upon Draw Down Pricing Period) of the Draw Down Amount shall be
allocated to purchase Shares at a price equal to the product of (x) the Draw
Down Discount Percentage multiplied by (y) the VWAP for such day. If the VWAP on
a given trading day is less than the Threshold Price, then the amount of the
Draw Down for the relevant Draw Down Pricing Period shall be reduced by 1/18th
(or such other fraction based upon the agreed upon Draw Down Pricing Period). At
no time shall the Threshold Price be set below $1.00, unless agreed upon by both
parties. If trading in the Company's Common Stock is suspended for any reason
for more than three (3) hours in any trading day, the price of the Common Stock
shall be deemed to be below the Threshold Price for that trading day and the
Draw Down Amount for the relevant Draw Down Pricing Period will be reduced by
1/18th.
(i) The Company must inform the Purchaser via facsimile transmission as to
the Draw Down Amount the Company wishes to exercise before commencement of
trading on the first trading day of the Draw Down Pricing Period (the "Draw Down
Notice"), substantially in the form attached hereto as Exhibit C. In addition to
the Draw Down Amount, the Company shall set the Threshold Price and shall
designate the first trading day of the Draw Down Pricing Period with each Draw
Down Notice.
(j) On each Settlement Date, the Company shall deliver the Shares purchased
by the Purchaser during the Draw Down Pricing Period to the Purchaser or its
designees via DWAC, and upon receipt of the Shares, the Purchaser shall cause
payment therefor to be made to the Company's designated account by wire transfer
<PAGE>
of immediately available funds; provided that the Shares are received by the
Purchaser no later than 1:00 p.m., eastern time, or next day available funds if
the Shares are received thereafter. (k) If on the Settlement Date, the Company
fails to deliver the Shares to be purchased by the Purchaser, and such failure
continues for ten (10) trading days, the Company shall pay, in cash or
restricted shares of Common Stock (subject to the Company's compliance with
applicable securities laws), at the option of the Purchaser, as liquidated
damages and not as a penalty, to the Purchaser an amount equal to two percent
(2%) of the Draw Down Amount for the initial thirty (30) days and each
additional thirty (30) day period thereafter until such failure has been cured,
which shall be pro rated for such periods less than thirty (30) days (the
"Periodic Amount"). Cash payments to be made pursuant to this Section 6.1
(k) shall be due and payable immediately upon demand in immediately
available cash funds. Certificates evidencing the restricted shares of Common
Stock shall be delivered immediately upon demand. The parties agree that the
Periodic Amount represents a reasonable estimate on the part of the parties, as
of the date of this Agreement, of the amount of damages that may be incurred by
the Purchaser if the Company fails to deliver the Shares on the Settlement Date.
If the Purchaser elects to receive shares of Common Stock instead of cash, the
Purchaser shall have the right to demand registration once within twelve (12)
months of the date of issuance of such shares of Common Stock and piggyback
registration rights if the Company files a separate registration statement.
(l) If the Company's transfer agent is unable to issue the Shares via DWAC,
then prior to issuing a Draw Down Notice, the Company shall place in escrow,
with an entity designated by the Purchaser (the "Escrow Agent"), such number of
shares of Common Stock as shall equal the maximum number of Shares which the
Purchaser could purchase during the Draw Down Pricing Period. The shares of
Common Stock subject to the escrow shall be released by the Escrow Agent to the
Purchaser only in the event that the Company fails to deliver the Shares on the
relevant Settlement Date. The Purchaser's obligation to purchase the Shares to
be issued on the Settlement Date shall be contingent upon the fulfillment by the
Company of the escrow requirements contained in this Section 4.3(l). The
Purchaser may, at its sole discretion, waive the escrow requirements contained
in this Section 4.3(l) at any time prior to the relevant Settlement Date.
ARTICLE VII
Legends
Section 7.1 Legend. Unless otherwise provided below, each certificate
representing the Shares and the shares of Common Stock issuable upon exercise of
the Warrants shall be stamped or otherwise imprinted with a legend substantially
in the following form (the "Legend"):
THESE SECURITIES REPRESENTED BY THIS CERTIFICATE (THE
"SECURITIES") HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED (THE "SECURITIES ACT") OR ANY STATE
SECURITIES LAWS AND MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE
<PAGE>
DISPOSED OF UNLESS REGISTERED UNDER THAT ACT AND UNDER
APPLICABLE STATE SECURITIES LAWS OR DBS INDUSTRIES, INC. (THE
"COMPANY") SHALL HAVE RECEIVED AN OPINION OF ITS COUNSEL THAT
REGISTRATION OF SUCH SECURITIES UNDER THE SECURITIES ACT AND
UNDER THE PROVISIONS OF APPLICABLE STATE SECURITIES LAWS IS NOT
REQUIRED.
As soon as practicable after the execution and delivery hereof, the Company
shall issue to the transfer agent instructions in substantially the form of
Exhibit D hereto. Such instructions shall be irrevocable by the Company from and
after the date thereof or from and after the issuance thereof. It is the intent
and purpose of such instructions, as provided therein, to require the transfer
agent to issue to the Purchaser, at the Purchaser's option, via DWAC or in the
form of certificates evidencing the Shares incident to a Draw Down and issued on
a Settlement Date, free of the Legend, without consultation by the transfer
agent with the Company or its counsel and without the need for any further
advice or instruction or documentation to the Transfer Agent by or from the
Company or its counsel or the Purchaser; provided, that (a) the Registration
Statement shall then be effective, (b) the Purchaser confirms to the transfer
agent and the Company that it has or intends to sell such Shares to a third
party that is not an affiliate of the Purchaser or the Company and the Purchaser
agrees to redeliver the certificate representing such Shares to the transfer
agent to add the Legend in the event the Shares are not sold, and (c) if
reasonably requested by the transfer agent or the Company, the Purchaser
confirms to the transfer agent and the Company that the Purchaser has complied
with the prospectus delivery requirement under the Securities Act. At any time
after the date the Registration Statement has been declared effective by the
Commission, upon surrender of one or more certificates evidencing Common Stock
that bear the Legend, to the extent accompanied by a notice requesting the
issuance of new certificates free of the Legend to replace those surrendered,
the transfer agent shall reissue such shares of common stock via DWAC or free of
the Legend. If the transfer agent fails to deliver the Shares on the Settlement
Date, then the Company shall pay liquidated damages to the Purchaser in the
amount of 2% of the purchase price of the Shares to be delivered on such
Settlement Date.
Section 7.2 No Other Legend or Stock Transfer Restrictions. No legend other
than the one specified in Section 7.1 has been or shall be placed on the share
certificates representing the Shares and the shares of Common Stock issuable
upon exercise of the Warrants and no instructions or "stop transfer orders," so
called, "stock transfer restrictions," or other restrictions have been or shall
be given to the Company's transfer agent with respect thereto other than as
expressly set forth in this Article VII.
Section 7.3 Purchaser's Compliance. Nothing in this Article VII shall
affect in any way the Purchaser's obligations under any agreement to comply with
all applicable securities laws upon resale of the Shares and the shares of
Common Stock issuable upon exercise of the Warrants.
<PAGE>
ARTICLE VIII
Termination
Section 8.1 Termination by Mutual Consent. The term of this Agreement shall
be twenty-four (24) months from the date on which the Commission declares the
Registration Statement effective (the "Investment Period"). This Agreement may
be terminated at any time by mutual consent of the parties. The Company may
terminate this Agreement by written notice to the Purchaser of its intention to
terminate; provided, that such notice must be received by the Purchaser at least
5 days prior to termination; provided, further that neither the Company's
Termination of this Agreement nor any of the 5 days preceding such termination
shall occur during a Draw Down Pricing Period.
Section 8.2 Other Termination. The Purchaser may terminate this Agreement
upon one (1) day's notice (v) if the Company issues convertible debentures or
enters an equity financing facility without the Purchaser's prior written
consent, other than a Permitted Transaction, or (w) if an event resulting in a
Material Adverse Effect or a Material Change of Control in Ownership has
occurred, or (x) the Registration Statement is not declared effective within 120
days following the Filing Date, or (y) there shall occur any stop order or
suspension of the effectiveness of the Registration Statement for an aggregate
of five (5) trading days during the Investment Period, for any reason other than
deferrals or suspension during a blackout period as a result of corporate
developments subsequent to the Closing Date that would require such Registration
Statement to be amended to reflect such event in order to maintain its
compliance with the disclosure requirements of the Securities Act, or (z) the
Company shall at any time fail to comply with the requirements of Section 4.2,
4.3 or 4.4 hereof.
Section 8.3 Effect of Termination. In the event of termination by the
Company or the Purchaser, written notice thereof shall forthwith be given to the
other party and the transactions contemplated by this Agreement shall be
terminated without further action by either party. If this Agreement is
terminated as provided in Section 8.1 or 8.2 herein, this Agreement shall become
void and of no further force and effect, except as provided in Section 10.9.
Nothing in this Section 8.3 shall be deemed to release the Company or the
Purchaser from any liability for any breach under this Agreement, or to impair
the rights of the Company and the Purchaser to compel specific performance by
the other party of its obligations under this Agreement.
ARTICLE IX
Indemnification
Section 9.1 General Indemnity.
(a) Indemnification by the Company. The Company shall indemnify and hold
harmless the Purchaser and each person, if any, who controls the Purchaser
within the meaning of Section 15 of the Securities Act or Section 20(a) of the
<PAGE>
Exchange Act from and against any losses, claims, damages, liabilities and
expenses (including reasonable costs of defense and investigation and all
reasonable attorney's fees) to which the Purchaser and each person, if any, who
controls the Purchaser may become subject, under the Securities Act or
otherwise, insofar as such losses, claims, damages, liabilities and expenses (or
actions in respect thereof) arise out of or are based upon, (i) any untrue
statement or alleged untrue statement of a material fact contained, or
incorporated by reference, in the Registration Statement or the Prospectus
relating to the shares being sold to the Purchaser, or any amendment or
supplement to it, or (ii) the omission or alleged omission to state in that
Registration Statement or any document incorporated by reference in the
Registration Statement, a material fact required to be stated therein or
necessary to make the statements therein not misleading, provided that the
Company shall not be liable under this Section 9.1(a) to the extent that a court
of competent jurisdiction shall have determined by a final judgment that such
loss, claim, damage, liability or action resulted directly from any such acts or
failures to act, undertaken or omitted to be taken by the Purchaser or such
person through its bad faith or willful misconduct; provided, however, that the
foregoing indemnity shall not apply to any loss, claim, damage, liability or
expense to the extent, but only to the extent, arising out of or based upon any
untrue statement or alleged untrue statement or omission or alleged omission
made in reliance upon and in conformity with written information furnished to
the Company by the Purchaser expressly for use in the Registration Statement,
any preliminary prospectus or the Prospectus (or any amendment or supplement
thereto).
The Company shall reimburse the Purchaser and each such controlling person
promptly upon demand for any legal or other costs or expenses reasonably
incurred by the Purchaser or the controlling person in investigating, defending
against, or preparing to defend against any such claim, action, suit or
proceeding, except that the Company shall not be liable to the extent a claim or
action which results in a loss, claim, damage, liability or expense arises out
of, or is based upon, an untrue statement, alleged untrue statement, omission or
alleged omission, included in the Registration Statement or any Prospectus in
reliance upon, and in conformity with, written information furnished by the
Purchaser to the Company for inclusion in the Registration Statement or
Prospectus.
(b) Indemnification by the Purchaser. The Purchaser shall indemnify and
hold harmless the Company, each of its directors and officers, and each person,
if any, who controls the Company within the meaning of Section 15 of the
Securities Act or Section 20(a) of the Exchange Act from and against any
expenses (including reasonable costs of defense and investigation and all
reasonable attorneys fees) to which the Company and any director or officer of
the Company and each person, if any, who controls the Company may become
subject, under the Securities Act or otherwise, insofar as such losses, claims,
damages, liabilities and expenses (or actions in respect thereof) arise out of
or are based upon, (i) any untrue statement or alleged untrue statement of a
material fact contained in any Prospectus or (ii) the omission or alleged
omission to state in the Registration Statement or any Prospectus a material
fact required to be stated therein or necessary to make the statements therein
not misleading, to the extent, but only to the extent, the untrue statement,
alleged untrue statement, omission or alleged omission was made in reliance
upon, and in conformity with, written information furnished by the Purchaser to
the Company for inclusion in the Registration Statement or Prospectus, and the
Purchaser shall reimburse the Company and each such director, officer or
<PAGE>
controlling person promptly upon demand for any legal or other costs or expenses
reasonably incurred by the Company or the other person in investigating,
defending against, or preparing to defend against any such claim, action, suit
or proceeding.
Section 9.2 Indemnification Procedures. Promptly after a person receives
notice of a claim or the commencement of an action for which the person intends
to seek indemnification under paragraph (a) or (b) of Section 9.1, the person
shall notify the indemnifying party in writing of the claim or commencement of
the action, suit or proceeding, but failure to notify the indemnifying party
shall not relieve the indemnifying party from liability under paragraph (a) or
(b) of Section 9.1, except to the extent it has been materially prejudiced by
the failure to give notice. The indemnifying party shall be entitled to
participate in the defense of any claim, action, suit or proceeding as to which
indemnification is being sought, and if the indemnifying party acknowledges in
writing the obligation to indemnify the party against whom the claim or action
is brought, the indemnifying party may (but shall not be required to) assume the
defense against the claim, action, suit or proceeding with counsel satisfactory
to it. After an indemnifying party notifies an indemnified party that the
indemnifying party wishes to assume the defense of a claim, action, suit or
proceeding the indemnifying party shall not be liable for any legal or other
expenses incurred by the indemnified party in connection with the defense
against the claim, action, suit or proceeding except that if, in the opinion of
counsel to the indemnifying party, one or more of the indemnified parties should
be separately represented in connection with a claim, action, suit or proceeding
the indemnifying party shall pay the reasonable fees and expenses of one
separate counsel for the indemnified parties. Each indemnified party, as a
condition to receiving indemnification as provided in Paragraph (a) or (b) or
Section 9.1, shall cooperate in all reasonable respects with the indemnifying
party in the defense of any action or claim as to which indemnification is
sought. No indemnifying party shall be liable for any settlement of any action
effected without its prior written consent. No indemnifying party shall, without
the prior written consent of the indemnified party, effect any settlement of a
pending or threatened action with respect to which an indemnified party is, or
is informed that it may be, made a party and for which it would be entitled to
indemnification, unless the settlement includes an unconditional release of the
indemnified party from all liability and claims which are the subject matter of
the pending or threatened action.
If for any reason the indemnification provided for in this Agreement is not
available to, or is not sufficient to hold harmless, an indemnified party in
respect of any loss or liability referred to in paragraph (a) or (b) of Section
9.1, each indemnifying party shall, in lieu of indemnifying the indemnified
party, contribute to the amount paid or payable by the indemnified party as a
result of the loss or liability, (i) in the proportion which is appropriate to
reflect the relative benefits received by the indemnifying party on the one hand
and by the indemnified party on the other from the sale of stock which is the
subject of the claim, action, suit or proceeding which resulted in the loss or
liability or (ii) if that allocation is not permitted by applicable law, in such
proportion as is appropriate to reflect not only the relative benefits of the
sale of stock, but also the relative fault of the indemnifying party and the
indemnified party with respect to the statements or omissions which are the
subject of the claim, action, suit or proceeding that resulted in the loss or
liability, as well as any other relevant equitable considerations.
<PAGE>
ARTICLE X
Miscellaneous
Section 10.1 Fees and Expenses.
(a) Except as set forth in Article IX, the Company shall pay (i) all of its
reasonable fees and expenses related to the transactions contemplated by this
Agreement; provided, that the Company shall pay, at the Closing, all reasonable
attorneys fees and expenses (exclusive of disbursements and out-of-pocket
expenses and reasonably itemized) incurred by the Purchaser up to $30,000 in
connection with the preparation, negotiation, execution and delivery of this
Agreement and (ii) all reasonable fees and expenses incurred by the Purchaser in
connection with any amendments, modifications or waivers of this Agreement
requested by the Company or incurred in connection with the enforcement of this
Agreement, including, without limitation, all reasonable attorneys fees and
expenses.
(b) If on the seven (7) month anniversary of the commencement of the
Investment Period the Company has not requested Draw Down Amounts in an
aggregate of $500,000, the Company shall, at its option, either (i) pay the
Purchaser a fee equal to $24,000 in cash, or (ii) issue warrants to purchase
24,000 shares of the Company's Common Stock at an exercise price of 100% of the
VWAP of the Common Stock on the Closing Date. If the Company elects to issue
warrants instead of cash, the Company shall register the shares of Common Stock
issuable upon exercise of such warrants on the next registration statement the
Company files with the Commission (other than a registration statement for an
underwritten offering if the underwriter elects not to include such shares.)
Section 10.2 Specific Enforcement, Consent to Jurisdiction.
(a) The Company and the Purchaser acknowledge and agree that irreparable
damage would occur in the event that any of the provisions of this Agreement
were not performed in accordance with their specific terms or were otherwise
breached. It is accordingly agreed that the parties shall be entitled to an
injunction or injunctions to prevent or cure breaches of the provisions of this
Agreement and to enforce specifically the terms and provisions hereof or
thereof, this being in addition to any other remedy to which any of them may be
entitled by law or equity.
(b) Each of the Company and the Purchaser (i) hereby irrevocably submits to
the jurisdiction of the United States District Court and other courts of the
United States sitting in the State of New York for the purposes of any suit,
action or proceeding arising out of or relating to this Agreement and (ii)
hereby waives, and agrees not to assert in any such suit, action or proceeding,
any claim that it is not personally subject to the jurisdiction of such court,
that the suit, action or proceeding is brought in an inconvenient forum or that
the venue of the suit, action or proceeding is improper. Each of the Company and
the Purchaser consents to process being served in any such suit, action or
proceeding by mailing a copy thereof to such party at the address in effect for
notices to it under this Agreement and agrees that such service shall constitute
good and sufficient service of process and notice thereof. Nothing in this
<PAGE>
Section 10.2 shall affect or limit any right to serve process in any other
manner permitted by law.
Section 10.3 Entire Agreement; Amendment. This Agreement contains the
entire understanding of the parties with respect to the matters covered hereby
and, except as specifically set forth herein, neither the Company nor the
Purchaser makes any representations, warranty, covenant or undertaking with
respect to such matters. No provision of this Agreement may be waived or amended
other than by a written instrument signed by the party against whom enforcement
of any such amendment or waiver is sought.
Section 10.4 Notices. Any notice, demand, request, waiver or other
communication required or permitted to be given hereunder shall be in writing
and shall be effective (a) upon hand delivery, by telex (with correct answer
back received), telecopy or facsimile at the address or number designated below
(if delivered on a business day during normal business hours where such notice
is to be received), or the first business day following such delivery (if
delivered other than on a business day during normal business hours where such
notice is to be received) or (b) on the second business day following the date
of mailing by express courier service, fully prepaid, addressed to such address,
or upon actual receipt of such mailing, whichever shall first occur. The
addresses for such communications shall be:
If to the Company: DBS Industries, Inc.
100 Shoreline Highway, Suite 190A
Mill Valley, California 94941
Tel. No.: (415) 380-8055
Fax No.: (415) 380-8199
Attention: Randy Stratt
With copies to: Bartel Eng Linn & Schroder
300 Capitol Mall, Suite 1100
Sacramento, California 95814
Tel. No.: (916) 442-0400
Fax No.: (916) 442-3442
Attention: Scott E. Bartel
If to the Purchaser: Torneaux Ltd.
c/o Mees Pierson Fund Services (Bahamas) Ltd.
Montague Sterling Centre
East Bay Street, P. O. Box SS-6238
Nassau, Bahamas
Tel. No.: (242) 394-2700
Fax No.: (242) 394-9667
Attention: Anthony L.M. Inder Rieden
<PAGE>
With copies to: Parker Chapin LLP
The Chrysler Building
405 Lexington Avenue
New York, New York 10174
Tel. No.: (212) 704-6000
Fax No.: (212) 704-6288
Attention: Christopher S. Auguste
Any party hereto may from time to time change its address for notices by
giving at least ten (10) days prior written notice of such changed address to
the other party hereto.
Section 10.5 Waivers. No waiver by either party of any default with respect
to any provision, condition or requirement of this Agreement shall be deemed to
be a continuing waiver in the future or a waiver of any other provisions,
condition or requirement hereof, nor shall any delay or omission of any party to
exercise any right hereunder in any manner impair the exercise of any such right
accruing to it thereafter.
Section 10.6 Headings. The article, section and subsection headings in this
Agreement are for convenience only and shall not constitute a part of this
Agreement for any other purpose and shall not be deemed to limit or affect any
of the provisions hereof.
Section 10.7 Successors and Assigns. The Purchaser may not assign this
Agreement to any person without the prior written consent of the Company, which
consent shall not be unreasonably withheld. This Agreement shall be binding upon
and inure to the benefit of the parties and their successors and assigns. After
Closing, the assignment by a party to this Agreement of any rights hereunder
shall not affect the obligations of such party under this Agreement.
Section 10.8 Governing Law. This Agreement shall be governed by and
construed in accordance with the internal laws of the State of New York, without
giving effect to the choice of law provisions.
Section 10.9 Survival. The representations and warranties of the Company
and the Purchaser contained in Article III and the covenants contained in
Article IV shall survive the execution and delivery hereof and the Closing until
the termination of this Agreement, and the agreements and covenants set forth in
Article IX of this Agreement shall survive the execution and delivery hereof and
the Closing hereunder. Section 10.14 shall survive the termination of this
Agreement.
Section 10.10 Counterparts. This Agreement may be executed in any number of
counterparts, all of which taken together shall constitute one and the same
instrument and shall become effective when counterparts have been signed by each
party and delivered to the other parties hereto, it being understood that all
parties need not sign the same counterpart. In the event any signature is
delivered by facsimile transmission, the party using such means of delivery
shall cause four additional executed signature pages to be physically delivered
to the other parties within five (5) days of the execution and delivery hereof.
<PAGE>
Section 10.11 Publicity. Except as required by applicable law, the Company
shall not issue any press release or otherwise make any public statement or
announcement with respect to this Agreement or the transactions contemplated
hereby or the existence of this Agreement without the prior consent of the
Purchaser, which consent shall not be unreasonably withheld.
Section 10.12 Severability. The provisions of this Agreement are severable
and, in the event that any court of competent jurisdiction shall determine that
any one or more of the provisions or part of the provisions contained in this
Agreement shall, for any reason, be held to be invalid, illegal or unenforceable
in any respect, such invalidity, illegality or unenforceability shall not affect
any other provision or part of a provision of this Agreement, and this Agreement
shall be reformed and construed as if such invalid or illegal or unenforceable
provision, or part of such provision, had never been contained herein, so that
such provisions would be valid, legal and enforceable to the maximum extent
possible.
Section 10.13 Further Assurances. From and after the date of this
Agreement, upon the request of the Purchaser or the Company, each of the Company
and the Purchaser shall execute and deliver such instrument, documents and other
writings as may be reasonably necessary or desirable to confirm and carry out
and to effectuate fully the intent and purposes of this Agreement.
Section 10.14 Confidentiality. Purchaser agrees to maintain the
confidentiality of all information about the Company received from any officer,
employee or agent of the Company, until such time as that confidential
information is released to the public generally other than as a result of any
disclosure by Purchaser.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their respective authorized officer as of the date first above
written.
DBS INDUSTRIES, INC.
By:
Name: Fred W. Thompson
Title: President
TORNEAUX LTD.
By:
Name:
Title:
<PAGE>
EXHIBIT A
TO THE
COMMON STOCK PURCHASE AGREEMENT
OPINION OF COUNSEL
1. The Company is a corporation duly incorporated, validly existing and in
good standing under the laws of the State of Delaware. The Company has the
requisite corporate power to own and operate its properties and assets, and to
carry on its business as presently conducted. The Company and each such
subsidiary is duly qualified to do business as a foreign corporation and is in
good standing in every jurisdiction in which the nature of the business
conducted or property owned by it makes such qualification necessary.
2. The Company has the requisite corporate power and authority to enter
into and perform its obligations under the Purchase Agreement and to issue and
sell the Common Stock, the Warrants and the Common Stock issuable upon exercise
of the Warrants (the "Warrant Shares"). The execution, delivery and performance
of the Purchase Agreement by the Company and the consummation by it of the
transactions contemplated thereby have been duly and validly authorized by all
necessary corporate action and no further consent or authorization of the
Company or its Board of Directors or stockholders is required. The Purchase
Agreement has been duly executed and delivered, and the Common Stock and the
Warrants have been duly executed, issued and delivered by the Company and the
Purchase Agreement constitutes a legal, valid and binding obligations of the
Company enforceable against the Company in accordance with its respective terms.
The Common Stock is not subject to preemptive rights under the Company's
certificate of incorporation or bylaws.
3. The Common Stock and the Warrants have been duly authorized and the
Common Stock, when delivered against payment in full as provided in the Purchase
Agreement, shall be validly issued, fully paid and nonassessable. The Warrants
Shares have been duly authorized and reserved for issuance, and, when delivered
upon exercise or against payment in full as provided in the Warrants, shall be
validly issued, fully paid and nonassessable.
4. The execution, delivery and performance of and compliance with the terms
of the Purchase Agreement and the consummation by the Company of the
transactions contemplated thereby (i) do not violate any provision of the
Company's certificate of incorporation or bylaws, (ii) to our knowledge,
conflict with, or constitute a default (or an event which with notice or lapse
of time or both would become a default) under, or give to others any rights of
termination, amendment, acceleration or cancellation of, any material agreement,
mortgage, deed of trust, indenture, note, bond, license, lease agreement,
instrument or obligation to which the Company is a party, (iii) to our
knowledge, create or impose a lien, charge or encumbrance on any property of the
Company under any agreement or any commitment to which the Company is a party or
by which the Company is bound or by which any of its respective properties or
assets are bound, or (iv) result in a violation of any federal, state, local or
foreign statute, rule, regulation, order, judgment or decree (including federal
and state securities laws and regulations) applicable to the Company or any of
its subsidiaries or by which any property or asset of the Company or any of its
<PAGE>
subsidiaries are bound or affected, except, in all cases other than violations
pursuant to clause (i) above, for such conflicts, defaults, terminations,
amendments, acceleration, cancellations and violations as would not,
individually or in the aggregate, have a Material Adverse Effect.
5. To our knowledge, there is no action, suit, claim, investigation or
proceeding pending or threatened against the Company or any subsidiary which
questions the validity of this Agreement or the transactions contemplated hereby
or any action taken or to be taken pursuant hereto or thereto. There is no
action, suit, claim, investigation or proceeding pending or, to our knowledge,
threatened, against or involving the Company, any subsidiary or any of their
respective properties or assets and which, if adversely determined, is
reasonably likely to result in a Material Adverse Effect.
6. No consent, approval or authorization of or designation, declaration or
filing with any governmental authority on the part of the Company is required in
connection with the valid execution and delivery of the Purchase Agreement, or
the offer, sale or issuance of the Common Stock and the Warrants or the
consummation of any other transaction contemplated by the Purchase Agreement
(other than any state securities filings or other filings which may be required
to be made by the Company with the Commission, or the OTC Bulletin Board or an
Alternate Market subsequent to the Closing, and, any registration statement
which may be filed pursuant to the Purchase Agreement).
7. Assuming the accuracy of the representations and warranties made by the
Company and the Purchaser in the Purchase Agreement at the time of execution and
as of the Closing, and the representations and warranties made by the Company in
the certificate of representation provided to us in connection with this
opinion, the offer, issuance and sale of the Common Stock and the Warrants
pursuant to the Purchase Agreement, and the issuance of the Warrant Shares to
the Purchaser pursuant to the Purchase Agreement, shall be exempt from
registration under the Securities Act of 1933, as amended, in reliance upon
Section 4(2) and Regulation D or Regulation S promulgated thereunder.
8. The Company is not a "holding company" or a "public utility company" as
such terms are defined in the Public Utility Holding Company Act of 1935, as
amended. The Company is not, and as a result of and immediately upon Closing
shall not be, an "investment company" or a company "controlled" by an
"investment company," within the meaning of the Investment Company Act of 1940,
as amended.
<PAGE>
EXHIBIT B
TO THE COMMON STOCK PURCHASE AGREEMENT
COMPLIANCE CERTIFICATE
In connection with the issuance of shares of common stock of DBS
Industries, Inc. (the "Company") pursuant to the Draw Dawn Notice, dated
___________ delivered by the Company to Torneaux Ltd. (the "Purchaser") pursuant
to Article VI of the Common Stock Purchase Agreement dated June 2, 2000, by and
between the Company and the Purchaser (the "Agreement"), the undersigned hereby
certifies as follows:
1. The undersigned is the duly elected Chief [Executive/Financial] Officer
of the Company.
2. The representations and warranties of the Company set forth in Section
3.1 of the Agreement are true and correct in all material respects as though
made on and as of the date hereof, except for representations and warranties
that speak as of a particular date.
3. The Company has performed in all material respects all covenants and
agreements to be performed by the Company on or prior to the Draw Down Exercise
Date and the Settlement Date related to the Draw Down Notice and has complied in
all material respects with all obligations and conditions contained in Section
5.3 of the Agreement.
The terms used herein but not defined herein shall have the meanings
specified in the Agreement.
The undersigned has executed this Certificate this ________ day of
_________, 2000.
By:_____________________________
Name:___________________________
Title:__________________________
<PAGE>
EXHIBIT C
TO THE COMMON STOCK PURCHASE AGREEMENT
FORM OF
DRAW DOWN NOTICE
Reference is made to the Common Stock Purchase Agreement dated as of
________, ____ (the "Purchase Agreement ") between DBS Industries, Inc., a
Delaware corporation (the "Company") and Torneaux Ltd. Capitalized terms used
and not otherwise defined herein shall have the meanings given such terms in the
Purchase Agreement.
In accordance with and pursuant to Section 6.1 of the Purchase
Agreement, the Company hereby issues this Draw Down Notice to exercise a Draw
Down request for the Draw Down Amount indicated below.
Draw Down Amount:
Draw Down Pricing Period start date:
Draw Down Pricing Period end date:
Settlement Date 1:
Settlement Date 2:
Threshold Price: $1.00
Minimum Threshold Price:
The Company hereby certifies that the conditions set forth in Section
5.3 of the Purchase Agreement have been satisfied as of the date hereof.
Dated:
By:______________________________
Name:
Title:
Address:
Facsimile No.:
Wire Instructions:
Contact Name:
<PAGE>
EXHIBIT D
TO THE COMMON STOCK PURCHASE AGREEMENT
FORM OF
TRANSFER AGENT INSTRUCTIONS
________________, 2000
[Name and address
of Transfer Agent]
Ladies & Gentlemen:
Reference is made to that certain Common Stock Purchase Agreement (the
"Agreement") between DBS Industries, Inc., a Delaware corporation (the
"Company"), and Tourneau Ltd., a company organized under the laws of the
Commonwealth of The Bahamas (the "Purchaser") pursuant to which the Company is
issuing to the Purchaser shares (the "Shares") of the Company's common stock,
$.0004 par value per share (the "Common Stock") and certain warrants (the
"Warrants") which shall be exercisable into shares of Common Stock. The shares
of Common Stock issuable upon exercise of the Warrants are referred to herein as
"Warrant Shares." The Shares and Warrant Shares are collectively referred to
herein as "Underlying Shares."
This letter shall serve as our irrevocable authorization and direction
to you (provided that you are the transfer agent for the Company with respect to
its Common Stock at such time) to issue Underlying Shares from time to time upon
notice from the Company to issue such Underlying Shares. So long as you have
previously received (x) a notice of effectiveness of the Company's outside
counsel substantially in the form of Exhibit I attached hereto (which the
Company shall direct be delivered to you by such outside counsel upon the
effectiveness of the registration statement covering resales of Underlying
Shares) stating that a registration statement covering resales of Underlying
Shares has been declared effective by the Securities and Exchange Commission
under the Securities Act of 1933, as amended, and that Underlying Shares may be
issued (or reissued if they have been issued at a time when there was not such
an effective registration statement) or resold without any restrictive legend
(the "Notice of Effectiveness"), (y) a copy of such registration statement and
(z) an appropriate representation that the resale prospectus contained in the
registration statement has been delivered in compliance with applicable rules
and regulations, then certificates representing Underlying Shares shall not bear
any legend restricting transfer of Underlying Shares thereby and should not be
subject to any stop-transfer restriction. Provided, however, that if you have
not previously received a copy of the Notice of Effectiveness, such registration
statement and such representation, then certificates representing Underlying
Shares shall bear the following legend:
THESE SECURITIES REPRESENTED BY THIS CERTIFICATE (THE
"SECURITIES") HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
<PAGE>
ACT OF 1933, AS AMENDED (THE "SECURITIES ACT") OR ANY STATE
SECURITIES LAWS AND MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE
DISPOSED OF UNLESS REGISTERED UNDER THAT ACT AND UNDER
APPLICABLE STATE SECURITIES LAWS OR DBS INDUSTRIES, INC. (THE
"COMPANY") SHALL HAVE RECEIVED AN OPINION OF ITS COUNSEL THAT
REGISTRATION OF SUCH SECURITIES UNDER THE SECURITIES ACT AND
UNDER THE PROVISIONS OF APPLICABLE STATE SECURITIES LAWS IS
NOT REQUIRED.
and, provided, further, that the Company may, from time to time, notify you to
place stop-transfer restrictions on the certificates for Underlying Shares in
the event, but only in the event, a registration statement covering Underlying
Shares is subject to amendment for events then current.
Please be advised that the Purchaser has relied upon this instruction
letter as an inducement to enter into the Purchase Agreement and, accordingly,
the Purchaser, is a third party beneficiary to these instructions.
Please execute this letter in the space indicated to acknowledge your
agreement to act in accordance with these instructions. Should you have any
questions concerning this matter, please contact me at _________.
Very truly yours,
________________________
By: ________________________
Name: ___________________
Title: __________________
ACKNOWLEDGED AND AGREED:
[TRANSFER AGENT]
By: ________________________________
Name: ________________________
Title: _________________________
Tel.: ___________________________
<PAGE>
FORM OF NOTICE OF EFFECTIVENESS
[Addressee]
[Address]
TO WHOM IT MAY CONCERN:
We are counsel to DBS Industries, Inc., a Delaware corporation (the
"Company"), and we have represented the Company in connection with that certain
Common Stock Purchase Agreement (the "Agreement") between the Company and the
Purchaser named therein, pursuant to which the Company agreed to issue shares
(the "Shares") of its common stock (the "Common Stock") and warrants to purchase
shares of the Common Stock (the "Warrant Shares"). Pursuant to the Agreement,
the Company agreed to register the Common Stock and the Warrant Shares.
In connection with the foregoing, we advise you that the Registration
Statement on Form ____ (File No. 333-______________) of the Company (the
"Registration Statement"), a copy of which is enclosed, was declared effective
at ____________M. eastern time on ____________, 2000. Upon issuance of the
Underlying Shares referred to in the Company's instruction letter attached, and
provided that you have received a copy of the representation pursuant to item
(z) in the second paragraph of such instruction letter, you are authorized to
issue certificates for the Company's common stock without restrictive legends.
No stop order suspending the effectiveness of the Registration Statement
covering any or _________ ________________________.
Very truly yours,
<PAGE>
FORM OF WARRANT
THIS WARRANT AND THE SHARES OF COMMON STOCK ISSUABLE UPON
EXERCISE HEREOF (THE "SECURITIES") HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES
ACT") OR ANY STATE SECURITIES LAWS AND MAY NOT BE SOLD,
TRANSFERRED OR OTHERWISE DISPOSED OF UNLESS REGISTERED UNDER
THE SECURITIES ACT AND UNDER APPLICABLE STATE SECURITIES LAWS
OR DBS INDUSTRIES, INC. (THE "COMPANY") SHALL HAVE RECEIVED AN
OPINION OF ITS COUNSEL THAT REGISTRATION OF SUCH SECURITIES
UNDER THE SECURITIES ACT AND UNDER THE PROVISIONS OF APPLICABLE
STATE SECURITIES LAWS IS NOT REQUIRED.
WARRANT TO PURCHASE
SHARES OF COMMON STOCK
OF
DBS INDUSTRIES, INC.
Expires [__], 20__
No.: W-__ Number of Shares: _____
Date of Issuance: [__], 20__
FOR VALUE RECEIVED, subject to the provisions hereinafter set forth,
the undersigned, DBS Industries, Inc., a Delaware corporation (together with its
successors and assigns, the "Issuer"), hereby certifies that ___________________
or its registered assigns is entitled to subscribe for and purchase, during the
period specified in this Warrant, up to _____ shares (subject to adjustment as
hereinafter provided) of the duly authorized, validly issued, fully paid and
non-assessable Common Stock (the "Common Stock") of the Issuer, at an exercise
price per share equal to the Warrant Price then in effect, subject, however, to
the provisions and upon the terms and conditions hereinafter set forth.
Capitalized terms used in this Warrant and not otherwise defined herein shall
have the respective meanings specified in Section 7 hereof.
<PAGE>
1. Term. The right to subscribe for and purchase shares of Warrant Stock
represented hereby shall commence on the date of issuance of this Warrant and
shall expire at 5:00 p.m., eastern time, on [__], 20__ (such period being the
"Term"); provided, however, that the exercise of this Warrant shall be subject
to the following limitations:
(i) the right to subscribe for and purchase the first [_______] shares
(subject to adjustment as hereinafter provided) of Warrant Stock pursuant to the
exercise of a portion of this Warrant shall be immediately granted to the Holder
as of the date of this Warrant (the "First Exercise");
(ii) the right to subscribe for and purchase the next [_______] shares
(subject to adjustment as hereinafter provided) of Warrant Stock pursuant to the
exercise of a portion of this Warrant shall be immediately granted to the Holder
upon the sale of that number of shares of Common Stock purchased pursuant to the
First Exercise (the "Second Exercise");
(iii) the right to subscribe for and purchase the next [_______] shares
(subject to adjustment as hereinafter provided) of Warrant Stock pursuant to the
exercise of a portion of this Warrant shall be immediately granted to the Holder
upon the sale of that number of shares of Common Stock purchased pursuant to the
Second Exercise (the "Third Exercise"); and
(iv) the right to subscribe for and purchase the final [_______] shares
(subject to adjustment as hereinafter provided) of Warrant Stock pursuant to the
exercise of the remaining portion of this Warrant shall be immediately granted
to the Holder upon the sale of that number of shares of Common Stock purchased
pursuant to the Third Exercise.
If the registration statement contemplated by the Purchase Agreement is not
declared effective by the Securities and Exchange Commission, this Warrant, or
any unexercised portion thereof, may, at the Company's option, be canceled.
2. Method of Exercise Payment; Issuance of New Warrant; Transfer and
Exchange.
(a) Time of Exercise. The purchase rights represented by this Warrant may
be exercised in whole or in part at any time and from time to time during the
Term.
(b) Method of Exercise. The Holder hereof may exercise this Warrant, in
whole or in part, by the surrender of this Warrant (with the exercise form
attached hereto duly executed) at the principal office of the Issuer, and by the
payment to the Issuer of an amount of consideration therefor equal to the
Warrant Price in effect on the date of such exercise multiplied by the number of
shares of Warrant Stock with respect to which this Warrant is then being
exercised, payable at such Holder's election by certified or official bank
check.
(c) Issuance of Stock Certificates. In the event of any exercise of the
rights represented by this Warrant in accordance with and subject to the terms
and conditions hereof, (i) certificates for the shares of Warrant Stock so
purchased shall be dated the date of such exercise and delivered to the Holder
hereof within a reasonable time, not exceeding three (3) Trading Days after such
exercise, and the Holder hereof shall be deemed for all purposes to be the
Holder of the shares of Warrant Stock so purchased as of the date of such
exercise, and (ii) unless this Warrant has expired, a new Warrant representing
the number of shares of Warrant Stock, if any, with respect to which this
<PAGE>
Warrant shall not then have been exercised shall also be issued to the Holder
hereof at the Issuer's expense within such time.
(d) Transferability of Warrant. Subject to Section 2(e), this Warrant may
be transferred by a Holder without the consent of the Issuer. If transferred
pursuant to this subsection and subject to the provisions of subsection (e) of
this Section 2, this Warrant may be transferred on the books of the Issuer by
the Holder hereof in person or by duly authorized attorney, upon surrender of
this Warrant at the principal office of the Issuer, properly endorsed (by the
Holder executing an assignment in the form attached hereto) and upon payment of
any necessary transfer tax imposed upon such transfer. This Warrant is
exchangeable at the principal office of the Issuer for Warrants for the purchase
of the same aggregate number of shares of Warrant Stock, each new Warrant to
represent the right to purchase such number of shares of Warrant Stock as the
Holder hereof shall designate at the time of such exchange. All Warrants issued
on transfers or exchanges shall be dated the Original Issue Date and shall be
identical with this Warrant except as to the number of shares of Warrant Stock
issuable pursuant hereto.
(e) Compliance with Securities Laws.
(i) The Holder of this Warrant, by acceptance hereof, acknowledges
that this Warrant or the shares of Warrant Stock to be issued upon exercise
hereof are being acquired solely for the Holder's own account and not as a
nominee for any other party, and for investment, and that the Holder will
not offer, sell or otherwise dispose of this Warrant or any shares of
Warrant Stock to be issued upon exercise hereof except pursuant to an
effective registration statement, or an exemption from registration, under
the Securities Act and any applicable state securities laws.
(ii) Except as provided in paragraph (iii) below, this Warrant and all
certificates representing shares of Warrant Stock issued upon exercise
hereof shall be stamped or imprinted with a legend in substantially the
following form:
THIS WARRANT AND THE SHARES OF COMMON STOCK ISSUABLE UPON
EXERCISE HEREOF (THE "SECURITIES") HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES
ACT") OR ANY STATE SECURITIES LAWS AND MAY NOT BE SOLD,
TRANSFERRED OR OTHERWISE DISPOSED OF UNLESS REGISTERED UNDER
THE SECURITIES ACT AND UNDER APPLICABLE STATE SECURITIES LAWS
OR DBS INDUSTRIES, INC. (THE "COMPANY") SHALL HAVE RECEIVED AN
OPINION OF ITS COUNSEL THAT REGISTRATION OF SUCH SECURITIES
UNDER THE SECURITIES ACT AND UNDER THE PROVISIONS OF APPLICABLE
STATE SECURITIES LAWS IS NOT REQUIRED.
<PAGE>
(iii) The restrictions imposed by this subsection (e) upon the
transfer of this Warrant or the shares of Warrant Stock to be purchased
upon exercise hereof shall terminate (A) when such securities shall have
been resold pursuant to an effective registration statement under the
Securities Act, (B) upon the Issuer's receipt of an opinion of counsel, in
form and substance reasonably satisfactory to the Issuer, addressed to the
Issuer to the effect that such restrictions are no longer required to
ensure compliance with the Securities Act and state securities laws or (C)
upon the Issuer's receipt of other evidence reasonably satisfactory to the
Issuer that such registration and qualification under the Securities Act
and state securities laws are not required. Whenever such restrictions
shall cease and terminate as to any such securities, the Holder thereof
shall be entitled to receive from the Issuer (or its transfer agent and
registrar), without expense (other than applicable transfer taxes, if any),
new Warrants (or, in the case of shares of Warrant Stock, new stock
certificates) of like tenor not bearing the applicable legend required by
paragraph (ii) above relating to the Securities Act and applicable state
securities laws.
(f) Continuing Rights of Holder. The Issuer will, at the time of or at any
time after each exercise of this Warrant, upon the written request of the Holder
hereof, acknowledge in writing the extent, if any, of its continuing obligation
to afford to such Holder all rights to which such Holder shall continue to be
entitled after such exercise in accordance with the terms of this Warrant;
provided that if any such Holder shall fail to make any such request, the
failure shall not affect the continuing obligation of the Issuer to afford such
rights to such Holder.
3. Stock Fully Paid; Reservation and Listing of Shares; Covenants; Ten
Percent Rule.
(a) Stock Fully Paid. The Issuer represents, warrants, covenants and agrees
that all shares of Warrant Stock which may be issued upon the exercise of this
Warrant or otherwise hereunder will, upon issuance, be duly authorized, validly
issued, fully paid and non-assessable and free from all taxes and liens,
security interest, charges and encumbrances of any nature whatsoever created by
or through the Issuer. The Issuer further represents, warrants, covenants and
agrees that during the period within which this Warrant may be exercised, the
Issuer will at all times have authorized and reserved for the purpose of the
issue upon exercise of this Warrant a sufficient number of shares of Common
Stock to provide for the exercise of this Warrant.
(b) Reservation. If any shares of Common Stock required to be reserved for
issuance upon exercise of this Warrant or as otherwise provided hereunder
require registration or qualification with any governmental authority under any
federal law before such shares may be so issued, the Issuer will in good faith
use its best efforts as expeditiously as possible at its expense to cause such
shares to be duly registered. If the Issuer shall list any shares of Common
Stock on any securities exchange or market it will, at its expense, list
thereon, maintain and increase when necessary such listing, of, all shares of
Warrant Stock from time to time issued upon exercise of this Warrant or as
otherwise provided hereunder, and, to the extent permissible under the
applicable securities exchange rules, all unissued shares of Warrant Stock which
are at any time issuable hereunder, so long as any shares of Common Stock shall
be so listed. The Issuer will also so list on each securities exchange or
market, and will maintain such listing of, any other securities which the Holder
<PAGE>
of this Warrant shall be entitled to receive upon the exercise of this Warrant
if at the time any securities of the same class shall be listed on such
securities exchange or market by the Issuer.
(c) Covenants. The Issuer will (i) not permit the par value, if any, of its
Common Stock to exceed the then effective Warrant Price, (ii) not amend or
modify any provision of the Certificate of Incorporation or by-laws of the
Issuer in any manner that would adversely affect in any way the powers,
preferences or relative participating, optional or other special rights of the
Common Stock or which would adversely affect the rights of the Holders of the
Warrants, (iii) take all such action as may be reasonably necessary in order
that the Issuer may validly and legally issue fully paid and nonassessable
shares of Common Stock, free and clear of any liens, security interests,
charges, claims, encumbrances and restrictions (other than as provided herein or
created by the Holders hereof) upon the exercise of this Warrant, and (iv)
obtain all such authorizations, exemptions or consents from any public
regulatory body having jurisdiction thereof as may be necessary to enable the
Issuer to perform its obligations under this Warrant.
(d) Ten Percent Rule. This Warrant shall not be exercisable to the extent
that the shares of Common Stock issuable upon any exercise of hereof, when
aggregated with all other shares of Common Stock then owned by the Holder (as
defined in the Purchase Agreement), would result in the Holder owning more than
9.99% of all of such Common Stock as would be outstanding on such date of
exercise, as determined in accordance with Section 16 of the Securities Exchange
Act of 1934 and the regulations promulgated thereunder.
(e) Loss, Theft, Destruction of Warrants. Upon receipt of evidence
satisfactory to the Issuer of the ownership of and the loss, theft, destruction
or mutilation of any Warrant and, in the case of any such loss, theft or
destruction, upon receipt of indemnity or security satisfactory to the Issuer
or, in the case of any such mutilation, upon surrender and cancellation of such
Warrant, the Issuer will make and deliver, in lieu of such lost, stolen,
destroyed or mutilated Warrant, a new Warrant of like tenor and representing the
right to purchase the same number of shares of Common Stock.
4. Adjustment of Warrant Price and Warrant Share Number. The number and
kind of Securities purchasable upon the exercise of this Warrant and the Warrant
Price shall be subject to adjustment from time to time upon the happening of
certain events as follows:
(a) Recapitalization, Reorganization, Reclassification, Consolidation,
Merger or Sale.
(i) In case the Issuer after the Original Issue Date shall do any of
the following (each, a "Triggering Event"): (a) consolidate with or merge
into any other Person and the Issuer shall not be the continuing or
surviving Person of such consolidation or merger, or (b) permit any other
Person to consolidate with or merge into the Issuer and the Issuer shall be
the continuing or surviving Person but, in connection with such
consolidation or merger, any Capital Stock of the Issuer shall be changed
into or exchanged for Securities of any other Person or cash or any other
property, or (c) transfer all or substantially all of its properties or
assets to any other Person, or (d) effect a capital reorganization or
reclassification of its Capital Stock, then, and in the case of each such
Triggering Event, proper provision shall be made so that, upon the basis
and the terms and in the manner provided in this Warrant, the Holder of
this Warrant shall be entitled upon the exercise hereof at any time after
<PAGE>
the consummation of such Triggering Event, to the extent this Warrant is
not exercised prior to such Triggering Event, to receive at the Warrant
Price in effect at the time immediately prior to the consummation of such
Triggering Event in lieu of the Common Stock issuable upon such exercise of
this Warrant prior to such Triggering Event, the Securities, cash and
property to which such Holder would have been entitled upon the
consummation of such Triggering Event if such Holder had exercised the
rights represented by this Warrant immediately prior thereto, subject to
adjustments (subsequent to such corporate action) as nearly equivalent as
possible to the adjustments provided for in Section 4 hereof.
(ii) Notwithstanding anything contained in this Warrant to the
contrary, the Issuer will not effect any Triggering Event unless, prior to
the consummation thereof, each Person (other than the Issuer) which may be
required to deliver any Securities, cash or property upon the exercise of
this Warrant as provided herein shall assume, by written instrument
delivered to, and reasonably satisfactory to, the Holder of this Warrant,
(A) the obligations of the Issuer under this Warrant (and if the Issuer
shall survive the consummation of such Triggering Event, such assumption
shall be in addition to, and shall not release the Issuer from, any
continuing obligations of the Issuer under this Warrant) and (B) the
obligation to deliver to such Holder such shares of Securities, cash or
property as, in accordance with the foregoing provisions of this subsection
(a), such Holder shall be entitled to receive, and such Person shall have
similarly delivered to such Holder an opinion of counsel for such Person,
which counsel shall be reasonably satisfactory to such Holder, stating that
this Warrant shall thereafter continue in full force and effect and the
terms hereof (including, without limitation, all of the provisions of this
subsection (a)) shall be applicable to the Securities, cash or property
which such Person may be required to deliver upon any exercise of this
Warrant or the exercise of any rights pursuant hereto.
(b) Subdivision or Combination of Shares. If the Issuer, at any time while
this Warrant is outstanding, shall subdivide or combine any shares of Common
Stock, (i) in case of subdivision of shares, the Warrant Price shall be
proportionately reduced (as at the effective date of such subdivision or, if the
Issuer shall take a record of holders of its Common Stock for the purpose of so
subdividing, as at the applicable record date, whichever is earlier) to reflect
the increase in the total number of shares of Common Stock outstanding as a
result of such subdivision, or (ii) in the case of a combination of shares, the
Warrant Price shall be proportionately increased (as at the effective date of
such combination or, if the Issuer shall take a record of holders of its Common
Stock for the purpose of so combining, as at the applicable record date,
whichever is earlier) to reflect the reduction in the total number of shares of
Common Stock outstanding as a result of such combination.
(c) Certain Dividends and Distributions. If the Issuer, at any time while
this Warrant is outstanding, shall:
(i) Stock Dividends. Pay a dividend in, or make any other distribution
to its stockholders (without consideration therefor) of, shares of Common
Stock, the Warrant Price shall be adjusted, as at the date the Issuer shall
take a record of the holders of the Issuer's Capital Stock for the purpose
of receiving such dividend or other distribution (or if no such record is
<PAGE>
taken, as at the date of such payment or other distribution), to that price
determined by multiplying the Warrant Price in effect immediately prior to
such record date (or if no such record is taken, then immediately prior to
such payment or other distribution), by a fraction (1) the numerator of
which shall be the total number of shares of Common Stock outstanding
immediately prior to such dividend or distribution, and (2) the denominator
of which shall be the total number of shares of Common Stock outstanding
immediately after such dividend or distribution (plus in the event that the
Issuer paid cash for fractional shares, the number of additional shares
which would have been outstanding had the Issuer issued fractional shares
in connection with said dividends); or
(ii) Other Dividends. Pay a dividend on, or make any distribution of
its assets upon or with respect to (including, but not limited to, a
distribution of its property as a dividend in liquidation or partial
liquidation or by way of return of capital), the Common Stock (other than
as described in clause (i) of this subsection (c)), or in the event that
the Company shall offer options or rights to subscribe for shares of Common
Stock, or issue any Common Stock Equivalents, to all of its holders of
Common Stock, then on the record date for such payment, distribution or
offer or, in the absence of a record date, on the date of such payment,
distribution or offer, the Holder shall receive what the Holder would have
received had it exercised this Warrant in full immediately prior to the
record date of such payment, distribution or offer or, in the absence of a
record date, immediately prior to the date of such payment, distribution or
offer.
(d) Issuance of Additional Shares of Common Stock. If the Issuer, at any
time while this Warrant is outstanding, shall issue any Additional Shares of
Common Stock (otherwise than as provided in the foregoing subsections (a)
through (c) of this Section 4), at a price per share less than the Warrant Price
then in effect or less than the Per Share Market Value then in effect or without
consideration, then the Warrant Price upon each such issuance shall be adjusted
to that price (rounded to the nearest cent) determined by multiplying the
Warrant Price then in effect by a fraction:
(i) the numerator of which shall be equal to the sum of (A) the number
of shares of Common Stock outstanding immediately prior to the issuance of
such Additional Shares of Common Stock plus (B) the number of shares of
Common Stock (rounded to the nearest whole share) which the aggregate
consideration for the total number of such Additional Shares of Common
Stock so issued would purchase at a price per share equal to the greater of
the Per Share Market Value then in effect and the Warrant Price then in
effect, and
(ii) the denominator of which shall be equal to the number of shares
of Common Stock outstanding immediately after the issuance of such
Additional Shares of Common Stock.
The provisions of this subsection (d) shall not apply under any of the
circumstances for which an adjustment is provided in subsections (a), (b) or (c)
of this Section 4. No adjustment of the Warrant Price shall be made under this
subsection (d) upon the issuance of any Additional Shares of Common Stock which
are issued pursuant to any Common Stock Equivalent if upon the issuance of such
Common Stock Equivalent (x) any adjustment shall have been made pursuant to
subsection (e) of this Section 4 or (y) no adjustment was required pursuant to
<PAGE>
subsection (e) of this Section 4. No adjustment of the Warrant Price shall be
made under this subsection (d) in an amount less than $.01 per share, but any
such lesser adjustment shall be carried forward and shall be made at the time
and together with the next subsequent adjustment, if any, which together with
any adjustments so carried forward shall amount to $.01 per share or more;
provided that upon any adjustment of the Warrant Price as a result of any
dividend or distribution payable in Common Stock or Convertible Securities or
the reclassification, subdivision or combination of Common Stock into a greater
or smaller number of shares, the foregoing figure of $.01 per share (or such
figure as last adjusted) shall be adjusted (to the nearest one-half cent) in
proportion to the adjustment in the Warrant Price.
(e) Issuance of Common Stock Equivalents. If the Issuer, at any time while
this Warrant is outstanding, shall issue any Common Stock Equivalent and the
price per share for which Additional Shares of Common Stock may be issuable
thereafter pursuant to such Common Stock Equivalent shall be less than the
Warrant Price then in effect or less than the Per Share Market Value then in
effect, or if, after any such issuance of Common Stock Equivalents, the price
per share for which Additional Shares of Common Stock may be issuable thereafter
is amended or adjusted, and such price as so amended shall be less than the
Warrant Price or less than the Per Share Market Value in effect at the time of
such amendment, then the Warrant Price upon each such issuance or amendment
shall be adjusted as provided in the first sentence of subsection (d) of this
Section 4 on the basis that (1) the maximum number of Additional Shares of
Common Stock issuable pursuant to all such Common Stock Equivalents shall be
deemed to have been issued (whether or not such Common Stock Equivalents are
actually then exercisable, convertible or exchangeable in whole or in part) as
of the earlier of (A) the date on which the Issuer shall enter into a firm
contract for the issuance of such Common Stock Equivalent, or (B) the date of
actual issuance of such Common Stock Equivalent, and (2) the aggregate
consideration for such maximum number of Additional Shares of Common Stock shall
be deemed to be the minimum consideration received or receivable by the Issuer
for the issuance of such Additional Shares of Common Stock pursuant to such
Common Stock Equivalent. No adjustment of the Warrant Price shall be made under
this subsection (e) upon the issuance of any Convertible Security which is
issued pursuant to the exercise of any warrants or other subscription or
purchase rights therefor, if any adjustment shall previously have been made in
the Warrant Price then in effect upon the issuance of such warrants or other
rights pursuant to this subsection (e). If no adjustment is required under this
subsection (e) upon issuance of any Common Stock Equivalent or once an
adjustment is made under this subsection (e) based upon the Per Share Market
Value in effect on the date of such adjustment, no further adjustment shall be
made under this subsection (e) based solely upon a change in the Per Share
Market Value after such date.
(f) Purchase of Common Stock by the Issuer. If the Issuer at any time while
this Warrant is outstanding shall, directly or indirectly through a Subsidiary
or otherwise, purchase, redeem or otherwise acquire any shares of Common Stock
at a price per share greater than the Per Share Market Value then in effect,
then the Warrant Price upon each such purchase, redemption or acquisition shall
be adjusted to that price determined by multiplying such Warrant Price by a
fraction (i) the numerator of which shall be the number of shares of Common
Stock outstanding immediately prior to such purchase, redemption or acquisition
minus the number of shares of Common Stock which the aggregate consideration for
the total number of such shares of Common Stock so purchased, redeemed or
acquired would purchase at the Per Share Market Value; and (ii) the denominator
<PAGE>
of which shall be the number of shares of Common Stock outstanding immediately
after such purchase, redemption or acquisition. For the purposes of this
subsection (f), the date as of which the Per Share Market Value shall be
computed shall be the earlier of (x) the date on which the Issuer shall enter
into a firm contract for the purchase, redemption or acquisition of such Common
Stock, or (y) the date of actual purchase, redemption or acquisition of such
Common Stock. For the purposes of this subsection (f), a purchase, redemption or
acquisition of a Common Stock Equivalent shall be deemed to be a purchase of the
underlying Common Stock, and the computation herein required shall be made on
the basis of the full exercise, conversion or exchange of such Common Stock
Equivalent on the date as of which such computation is required hereby to be
made, whether or not such Common Stock Equivalent is actually exercisable,
convertible or exchangeable on such date.
(g) Other Provisions Applicable to Adjustments Under this Section 4. The
following provisions shall be applicable to the making of adjustments in the
Warrant Price hereinbefore provided in Section 4:
(i) Computation of Consideration. The consideration received by the
Issuer shall be deemed to be the following: to the extent that any
Additional Shares of Common Stock or any Common Stock Equivalents shall be
issued for a cash consideration, the consideration received by the Issuer
therefor, or if such Additional Shares of Common Stock or Common Stock
Equivalents are offered by the Issuer for subscription, the subscription
price, or, if such Additional Shares of Common Stock or Common Stock
Equivalents are sold to underwriters or dealers for public offering without
a subscription offering, the public offering price, in any such case
excluding any amounts paid or receivable for accrued interest or accrued
dividends and without deduction of any compensation, discounts,
commissions, or expenses paid or incurred by the Issuer for or in
connection with the underwriting thereof or otherwise in connection with
the issue thereof; to the extent that such issuance shall be for a
consideration other than cash, then, except as herein otherwise expressly
provided, the fair market value of such consideration at the, time of such
issuance as determined in good faith by the Board. The consideration for
any Additional Shares of Common Stock issuable pursuant to any Common Stock
Equivalents shall be the consideration received by the Issuer for issuing
such Common Stock Equivalents, plus the additional consideration payable to
the Issuer upon the exercise, conversion or exchange of such Common Stock
Equivalents. In case of the issuance at any time of any Additional Shares
of Common Stock or Common Stock Equivalents in payment or satisfaction of
any dividend upon any class of Capital Stock of the Issuer other than
Common Stock, the Issuer shall be deemed to have received for such
Additional Shares of Common Stock or Common Stock Equivalents a
consideration equal to the amount of such dividend so paid or satisfied. In
any case in which the consideration to be received or paid shall be other
than cash, the Board shall notify the Holder of this Warrant of its
determination of the fair market value of such consideration prior to
payment or accepting receipt thereof. If, within thirty (30) days after
receipt of said notice, the Majority Holders shall notify the Board in
writing of their objection to such determination, a determination of the
fair market value of such consideration shall be made by an Independent
Appraiser selected by the Majority Holders with the approval of the Board
(which approval shall not be unreasonably withheld), whose fees and
expenses shall be paid by the Issuer.
<PAGE>
(ii) Readjustment of Warrant Price. Upon the expiration or termination
of the right to convert, exchange or exercise any Common Stock Equivalent
the issuance of which effected an adjustment in the Warrant Price, if such
Common Stock Equivalent shall not have been converted, exercised or
exchanged in its entirety, the number of shares of Common Stock deemed to
be issued and outstanding by reason of the fact that they were issuable
upon conversion, exchange or exercise of any such Common Stock Equivalent
shall no longer be computed as set forth above, and the Warrant Price shall
forthwith be readjusted and thereafter be the price which it would have
been (but reflecting any other adjustments in the Warrant Price made
pursuant to the provisions of this Section 4 after the issuance of such
Common Stock Equivalent) had the adjustment of the Warrant Price been made
in accordance with the issuance or sale of the number of Additional Shares
of Common Stock actually issued upon conversion, exchange or issuance of
such Common Stock Equivalent and thereupon only the number of Additional
Shares of Common Stock actually so issued shall be deemed to have been
issued and only the consideration actually received by the Issuer (computed
as in clause (i) of this subsection (g)) shall be deemed to have been
received by the Issuer.
(iii) Outstanding Common Stock. The number of shares of Common Stock
at any time outstanding shall (A) not include any shares thereof then
directly or indirectly owned or held by or for the account of the Issuer or
any of its Subsidiaries, and (B) be deemed to include all shares of Class A
or Class B common stock outstanding as of such time, all shares of Class A
or Class B common stock then issuable upon conversion, exercise or exchange
of any then outstanding Common Stock Equivalents or any other evidences of
Indebtedness, shares of Capital Stock or other Securities which are or may
be at any time convertible into or exchangeable for shares of Class A or
Class B common stock or Other Common Stock.
(h) Other Action Affecting Common Stock. In case after the Original Issue
Date the Issuer shall take any action affecting its Common Stock, other than an
action described in any of the foregoing subsections (a) through (g) of this
Section 4, inclusive, and the failure to make any adjustment would not fairly
protect the purchase rights represented by this Warrant in accordance with the
essential intent and principle of this Section 4, then the Warrant Price shall
be adjusted in such manner and at such time as the Board may in good faith
determine to be equitable in the circumstances.
(i) Adjustment of Warrant Share Number. Upon each adjustment in the Warrant
Price pursuant to any of the foregoing provisions of this Section 4, the Warrant
Share Number shall be adjusted, to the nearest one hundredth of a whole share,
to the product obtained by multiplying the Warrant Share Number immediately
prior to such adjustment in the Warrant Price by a fraction, the numerator of
which shall be the Warrant Price immediately before giving effect to such
adjustment and the denominator of which shall be the Warrant Price immediately
after giving effect to such adjustment.
(j) Form of Warrant after Adjustments. The form of this Warrant need not be
changed because of any adjustments in the Warrant Price or the number and kind
of Securities purchasable upon the exercise of this Warrant.
<PAGE>
5. Notice of Adjustments. Whenever the Warrant Price or Warrant Share
Number shall be adjusted pursuant to Section 4 hereof (for purposes of this
Section 5, each an "adjustment"), the Issuer shall cause its Chief Financial
Officer to prepare and execute a certificate setting forth, in reasonable
detail, the event requiring the adjustment, the amount of the adjustment, the
method by which such adjustment was calculated (including a description of the
basis on which the Board made any determination hereunder), and the Warrant
Price and Warrant Share Number after giving effect to such adjustment, and shall
cause copies of such certificate to be delivered to the Holder of this Warrant
promptly after each adjustment. Any dispute between the Issuer and the Holder of
this Warrant with respect to the matters set forth in such certificate may at
the option of the Holder of this Warrant be submitted to one of the national
accounting firms currently known as the "big five" selected by the Holder,
provided that the Issuer shall have ten (10) days after receipt of notice from
such Holder of its selection of such firm to object thereto, in which case such
Holder shall select another such firm and the Issuer shall have no such right of
objection. The firm selected by the Holder of this Warrant as provided in the
preceding sentence shall be instructed to deliver a written opinion as to such
matters to the Issuer and such Holder within thirty (30) days after submission
to it of such dispute. Such opinion shall be final and binding on the parties
hereto. The fees and expenses of such accounting firm shall be paid by the
Issuer if the Issuer's calculation of the adjustment was incorrect.
6. Fractional Shares. No fractional shares of Warrant Stock will be issued
in connection with and exercise hereof, but in lieu of such fractional shares,
the Issuer shall make a cash payment therefor equal in amount to the product of
the applicable fraction multiplied by the Per Share Market Value then in effect.
7. Definitions. For the purposes of this Warrant, the following terms have
the following meanings:
"Additional Shares of Common Stock" means all shares of Common
Stock issued by the Issuer after the Original Issue Date, and all
shares of Other Common, if any, issued by the Issuer after the Original
Issue Date, except: (i) the Warrant Stock, or any shares of Common
Stock issued pursuant to the Purchase Agreement, (ii) a firm commitment
public financing with an investment bank reasonably acceptable to the
Holder, (iii) a private financing where the Issuer receives gross
proceeds of more than $50 million, (iv) the Issuer's current option
plans, stock purchase plans or rights plans, (v) an issuance of
warrants not to exceed 100,000 shares of Common Stock on a quarterly
basis to consultants or advisors to the Issuer for services, or (vi) a
private placement of the Issuer's Series A Convertible Preferred Stock
in an amount not to exceed $15,000,000, which private placement shall
be completed no later than 60 days from the date of the Closing (as
defined in the Purchase Agreement) (the primary purpose of which is not
to raise equity).
"Alternate Market" shall mean the Nasdaq National Market, the
Nasdaq Small Cap Market, the American Stock Exchange, or the New York
Stock Exchange, whichever is at the time the principal trading exchange
or market for the Common Stock.
"Board" shall mean the Board of Directors of the Issuer.
<PAGE>
"Capital Stock" means and includes (i) any and all shares,
interests, participations or other equivalents of or interests in
(however designated) corporate stock, including, without limitation,
shares of preferred or preference stock, (ii) all partnership interests
(whether general or limited) in any Person which is a partnership,
(iii) all membership interests or limited liability company interests
in any limited liability company, and (iv) all equity or ownership
interests in any Person of any other type.
"Certificate of Incorporation" means the Certificate of
Incorporation, as amended, of the Issuer as in effect on the Original
Issue Date, and as hereafter from time to time amended, modified,
supplemented or restated in accordance with the terms hereof and
thereof and pursuant to applicable law.
"Common Stock" means the Common Stock, $.0004 par value, of
the Issuer and any other Capital Stock into which such stock may
hereafter be changed.
"Common Stock Equivalent" means any Convertible Security or
warrant, option or other right to subscribe for or purchase any
Additional Shares of Common Stock or any Convertible Security.
"Convertible Securities" means evidences of Indebtedness,
shares of Capital Stock or other Securities which are or may be at any
time convertible into or exchangeable for Additional Shares of Common
Stock. The term "Convertible Security" means one of the Convertible
Securities.
"Governmental Authority" means any governmental, regulatory or
self-regulatory entity, department, body, official, authority,
commission, board, agency or instrumentality, whether federal, state or
local, and whether domestic or foreign.
"Holders" mean the Persons who shall from time to time
own any Warrant. The term "Holder" means one of the Holders.
"Independent Appraiser" means a nationally recognized or major
regional investment banking firm or firm of independent certified
public accountants of recognized standing (which may be the firm that
regularly examines the financial statements of the Issuer) that is
regularly engaged in the business of appraising the Capital Stock or
assets of corporations or other entities as going concerns, and which
is not affiliated with either the Issuer or the Holder of any Warrant.
"Issuer" means DBS Industries, Inc., a Delaware corporation,
and its successors.
"Majority Holders" means at any time the Holders of Warrants
exercisable for a majority of the shares of Warrant Stock issuable
under the Warrants at the time outstanding.
"Original Issue Date" means [__], 20__.
"Other Common" means any other Capital Stock of the Issuer of
any class which shall be authorized at any time after the date of this
Warrant (other than Common Stock) and which shall have the right to
<PAGE>
participate in the distribution of earnings and assets of the Issuer
without limitation as to amount.
"Person" means an individual, corporation, limited liability
company, partnership, joint stock company, trust, unincorporated
organization, joint venture, Governmental Authority or other entity of
whatever nature.
"Per Share Market Value" means on any particular date (a) the
closing bid price per share of the Common Stock on such date the OTC
Bulletin Board or an Alternate Market or if there is no such price on
such date, then the closing bid price on such exchange or quotation
system on the date nearest preceding such date, or (b) if the Common
Stock is not then reported by the OTC Bulletin Board or an Alternate
Market, then the average of the "Pink Sheet" quotes for the relevant
conversion period, as determined in good faith by the Holder, or (c) if
the Common Stock is not then publicly traded the fair market value of a
share of Common Stock as determined by an Independent Appraiser
selected in good faith by the Majority Holders; provided, however, that
the Issuer, after receipt of the determination by such Independent
Appraiser, shall have the right to select an additional Independent
Appraiser, in which case, the fair market value shall be equal to the
average of the determinations by each such Independent Appraiser; and
provided, further that all determinations of the Per Share Market Value
shall be appropriately adjusted for any stock dividends, stock splits
or other similar transactions during such period. The determination of
fair market value by an Independent Appraiser shall be based upon the
fair market value of the Issuer determined on a going concern basis as
between a willing buyer and a willing seller and taking into account
all relevant factors determinative of value, and shall be final and
binding on all parties. In determining the fair market value of any
shares of Common Stock, no consideration shall be given to any
restrictions on transfer of the Common Stock imposed by agreement or by
federal or state securities laws, or to the existence or absence of, or
any limitations on, voting rights.
"Purchase Agreement" means the Common Stock Purchase Agreement
dated as of June [__], 2000 between the Issuer and Tourneau Ltd., a
company organized under the laws of the Commonwealth of The Bahamas.
"Securities" means any debt or equity securities of the
Issuer, whether now or hereafter authorized, any instrument convertible
into or exchangeable for securities or a security, and any option,
warrant or other right to purchase or acquire any security. "Security"
means one of the Securities.
"Securities Act" means the Securities Act of 1933, as amended,
or any similar federal statute then in effect.
"Subsidiary" means any corporation at least 50% of whose
outstanding Voting Stock shall at the time be owned directly or
indirectly by the Issuer or by one or more of its Subsidiaries, or by
the Issuer and one or more of its Subsidiaries.
"Term" has the meaning specified in Section 1 hereof.
<PAGE>
"Trading Day" means a day on which the Common Stock is traded
on the OTC Bulletin Board or an Alternate Market; provided, however,
that in the event that the Common Stock is not listed or quoted as
hereinbefore set forth, then Trading Day shall mean any day except
Saturday, Sunday and any day which shall be a legal holiday or a day on
which banking institutions in the State of New York are authorized or
required by law or other government action to close.
"Voting Stock", as applied to the Capital Stock of any
corporation, means Capital Stock of any class or classes (however
designated) having ordinary voting power for the election of a majority
of the members of the Board of Directors (or other governing body) of
such corporation, other than Capital Stock having such power only by
reason of the happening of a contingency.
"Warrants" means the Warrants issued and sold pursuant to the
Purchase Agreement, including, without limitation, this Warrant, and
any other warrants of like tenor issued in substitution or exchange for
any thereof pursuant to the provisions of Section 2(c), 2(d) or 2(e)
hereof or of any of such other Warrants.
"Warrant Price" means $[_______] [115% of the price per Share
paid by the Purchaser during the relevant Settlement Period], as such
price may be adjusted from time to time as shall result from the
adjustments specified in Section 4 herein.
"Warrant Share Number" means at any time the aggregate number
of shares of Warrant Stock which may at such time be purchased upon
exercise of this Warrant, after giving effect to all adjustments and
increases to such number made or required to be made under the terms
hereof.
"Warrant Stock" means Common Stock issuable upon exercise of
any Warrant or Warrants or otherwise issuable pursuant to any Warrant
or Warrants.
8. Other Notices. In case at any time:
(A) the Issuer shall make any distributions to the holders of Common
Stock; or
(B) the Issuer shall authorize the granting to all holders of its Common
Stock of rights to subscribe for or purchase any shares of Capital
Stock of any class or of any Common Stock Equivalents or Convertible
Securities or other rights; or
(C) there shall be any reclassification of the Capital Stock of the
Issuer; or
(D) there shall be any capital reorganization by the Issuer; or
(E) there shall be any (i) consolidation or merger involving the Issuer or
(ii) sale, transfer or other disposition of all or substantially all
of the Issuer's property, assets or business (except a merger or other
reorganization in which the Issuer shall be the surviving corporation
and its shares of Capital Stock shall continue to be outstanding and
<PAGE>
unchanged and except a consolidation, merger, sale, transfer or other
disposition involving a wholly-owned Subsidiary); or
(F) there shall be a voluntary or involuntary dissolution, liquidation or
winding-up of the Issuer or any partial liquidation of the Issuer or
distribution to holders of Common Stock;
then, in each of such cases, the Issuer shall give written notice to the Holder
of the date on which (i) the books of the Issuer shall close or a record shall
be taken for such dividend, distribution or subscription rights or (ii) such
reorganization, reclassification, consolidation, merger, disposition,
dissolution, liquidation or winding-up, as the case may be, shall take place.
Such notice also shall specify the date as of which the holders of Common Stock
of record shall participate in such dividend, distribution or subscription
rights, or shall be entitled to exchange their certificates for Common Stock for
securities or other property deliverable upon such reorganization,
reclassification, consolidation, merger, disposition, dissolution, liquidation
or winding-up, as the case may be. Such notice shall be given at least twenty
(20) days prior to the action in question and not less than twenty (20) days
prior to the record date or the date on which the Issuer's transfer books are
closed in respect thereto. The Issuer shall give to the Holder notice of all
meetings and actions by written consent of its stockholders, at the same time in
the same manner as notice of any meetings of stockholders is required to be
given to stockholders who do not waive such notice (or, if such actions require
no notice, then two (2) Trading Days written notice thereof describing the
matters upon which action is to be taken). The Holder shall have the right to
send two representatives selected by it to each meeting of stockholders, who
shall be permitted to attend, but not vote at, such meeting of stockholders and
any adjournments thereof. This Warrant entitles the Holder to receive, upon
request, copies of all financial and other information distributed or required
to be distributed to the holders of the Common Stock.
9. Amendment and Waiver. Any term, covenant, agreement or condition in this
Warrant may be amended, or compliance therewith may be waived (either generally
or in a particular instance and either retroactively or prospectively), by a
written instrument or written instruments executed by the Issuer and the
Majority Holders; provided, however, that no such amendment or waiver shall
reduce the Warrant Share Number, increase the Warrant Price, shorten the period
during which this Warrant may be exercised or modify any provision of this
Section 9 without the consent of the Holder of this Warrant.
10. Governing Law. THIS WARRANT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT GIVING EFFECT TO
PRINCIPLES OF CONFLICTS OF LAW. THIS WARRANT SHALL NOT BE INTERPRETED OR
CONSTRUED WITH ANY PRESUMPTION AGAINST THE PARTY CAUSING THIS WARRANT TO BE
DRAFTED.
11. Notices. Any and all notices or other communications or deliveries
required or permitted to be provided hereunder shall be in writing and shall be
deemed given and effective on the earlier of (i) the date of transmission, if
<PAGE>
such notice or communication is delivered via facsimile at the facsimile
telephone number specified for notice prior to 5:00 p.m., eastern standard time,
on a Trading Day, (ii) the Trading Day after the date of transmission, if such
notice or communication is delivered via facsimile at the facsimile telephone
number specified for notice later than 5:00 p.m., eastern standard time, on any
date and earlier than 11:59 p.m., eastern standard time, on such date, (iii) the
Trading Day following the date of mailing, if sent by nationally recognized
overnight courier service or (iv) actual receipt by the party to whom such
notice is required to be given. The addresses for such communications shall be
with respect to the Holder of this Warrant or of Warrant Stock issued pursuant
hereto, addressed to such Holder at its last known address or facsimile number
appearing on the books of the Issuer maintained for such purposes, or with
respect to the Issuer, addressed to:
DBS Industries, Inc.
100 Shoreline Highway, Suite 190A
Mill Valley, California 94941
Telephone Number: (415) 380-8055
Facsimile Number: (415) 380-8199
Attention: Randy Stratt
or to such other address or addresses or facsimile number or numbers as
any such party may most recently have designated in writing to the other parties
hereto by such notice.
Copies of notices to the Issuer shall be sent to:
Bartel Eng Linn & Schroder
300 Capitol Mall, Suite 1100
Sacramento, California 95814
Tel. No.: (916) 442-0400
Fax No.: (916) 442-3442
Attention: Scott E. Bartel
Copies of notices to the Holder shall be sent to:
Parker Chapin LLP
The Chrysler Building
405 Lexington Avenue
New York, New York 10174
Tel. No.: (212) 704-6000
Fax No.: (212) 704-6288
Attention: Christopher S. Auguste
12. Warrant Agent. The Issuer may, by written notice to each Holder of this
Warrant, appoint an agent having an office in New York, New York for the purpose
of issuing shares of Warrant Stock on the exercise of this Warrant pursuant to
subsection (b) of Section 2 hereof, exchanging this Warrant pursuant to
subsection (d) of Section 2 hereof or replacing this Warrant pursuant to
subsection (d) of Section 3 hereof, or any of the foregoing, and thereafter any
such issuance, exchange or replacement, as the case may be, shall be made at
such office by such agent.
<PAGE>
13. Remedies. The Issuer stipulates that the remedies at law of the Holder
of this Warrant in the event of any default or threatened default by the Issuer
in the performance of or compliance with any of the terms of this Warrant are
not and will not be adequate and that, to the fullest extent permitted by law,
such terms may be specifically enforced by a decree for the specific performance
of any agreement contained herein or by an injunction against a violation of any
of the terms hereof or otherwise.
14. Successors and Assigns. This Warrant and the rights evidenced hereby
shall inure to the benefit of and be binding upon the successors and assigns of
the Issuer, the Holder hereof and (to the extent provided herein) the Holders of
Warrant Stock issued pursuant hereto, and shall be enforceable by any such
party.
15. Modification and Severability. If, in any action before any court or
agency legally empowered to enforce any provision contained herein, any
provision hereof is found to be unenforceable, then such provision shall be
deemed modified to the extent necessary to make it enforceable by such court or
agency. If any such provision is not enforceable as set forth in the preceding
sentence, the unenforceability of such provision shall not affect the other
provisions of this Warrant, but this Warrant shall be construed as if such
unenforceable provision had never been contained herein.
16. Headings. The headings of the Sections of this Warrant are for
convenience of reference only and shall not, for any purpose, be deemed a part
of this Warrant.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
<PAGE>
IN WITNESS WHEREOF, the Issuer has executed this Warrant as of the day
and year first above written.
DBS INDUSTRIES, INC.
By:
Name:
Title:
<PAGE>
EXERCISE FORM
[NAME OF ISSUER]
The undersigned _______________, pursuant to the provisions of the
within Warrant, hereby elects to purchase _____ shares of Common Stock of
___________________ covered by the within Warrant.
Dated: _________________ Signature
Address
ASSIGNMENT
FOR VALUE RECEIVED, _________________ hereby sells, assigns and
transfers unto __________________ the within Warrant and all rights evidenced
thereby and does irrevocably constitute and appoint _____________, attorney, to
transfer the said Warrant on the books of the within named corporation.
Dated: _________________ Signature
Address
PARTIAL ASSIGNMENT
FOR VALUE RECEIVED, _________________ hereby sells, assigns and
transfers unto __________________ the right to purchase _________ shares of
Warrant Stock evidenced by the within Warrant together with all rights therein,
and does irrevocably constitute and appoint ___________________, attorney, to
transfer that part of the said Warrant on the books of the within named
corporation.
Dated: _________________ Signature
Address
FOR USE BY THE ISSUER ONLY:
This Warrant No. W-__ canceled (or transferred or exchanged) this _____
day of ___________, _____, shares of Common Stock issued therefor in the name of
_______________, Warrant No. W-__ issued for ____ shares of Common Stock in the
name of _______________.
<PAGE>
DISCLOSURE SCHEDULES
RELATING TO THE COMMON STOCK
SCHEDULES OMITTED
