CERTIFICATE OF DESIGNATIONS
of
SERIES A CONVERTIBLE PREFERRED STOCK
of
DBS INDUSTRIES, INC.
Pursuant to Section 151(g) of the General Corporation Law of the State
of Delaware:
DBS INDUSTRIES, INC., a Delaware corporation (the "Corporation"), certifies
that pursuant to the authority contained in its Certificate of Incorporation and
in accordance with the provisions of Section 151(g) of the General Corporation
Law of the State of Delaware, its Board of Directors (the "Board of Directors")
has adopted the following resolution creating a series of its Preferred Stock,
$.0004 par value, designating a segment thereof as Series A Convertible
Preferred Stock;
WHEREAS, the Certificate of Incorporation of the Corporation presently
authorizes the issuance of 5,000,000 shares of Preferred Stock, $.0004 par
value, in one or more series upon terms and conditions that are to be designated
by the Board of Directors;
WHEREAS, in order to accommodate a business purpose deemed proper by the
Board of Directors, i.e., to facilitate a private placement of securities, the
Board of Directors does hereby seek to provide for the designation of a segment
of the Company's Preferred Stock as "Series A Convertible Preferred Stock";
WHEREAS, the Board of Directors desires, pursuant to the authority granted,
to fix rights, preferences, privileges and restrictions relating to such series,
and the number of shares constituting the designation of such series as provided
in this Certificate of Designation.
NOW THEREFORE, be it:
RESOLVED, that a series of the class of authorized Preferred Stock, $.0004
par value, of the Corporation hereinafter designated "Series A Convertible
Preferred Stock," is hereby created, and that the designation and amount thereof
and the voting powers, preferences and relative participating, optional and
other special rights of the shares of such series, and the qualifications,
limitations or restrictions thereof are as follows:
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Section 1. Designation and Amount.
The shares of such series shall be designated as Series A Convertible
Preferred Stock, par value $.0004 per share (the "Series A Convertible Preferred
Stock") and the initial number of shares constituting such series shall be
700,000.
Section 2. Dividend Rights.
The holders of shares of Series A Convertible Preferred Stock shall be
entitled to receive, out of any funds legally available, cumulative dividends
equal to five percent (5%) of the "Liquidation Preference", as defined in
Section 4 below, per annum from the date the Series A Convertible Preferred
Stock is originally issued to the holder thereof (the "Series A Original Issue
Date") payable on each December 31 thereafter. All dividends (including
cumulative unpaid dividends) must be paid on the Series A Convertible Preferred
Stock before any dividends may be declared and paid on the Common Stock.
Section 3. Voting Rights.
(a) General. Except as otherwise required by law or expressly provided
in this Section 3, the holders of Series A Convertible Preferred Stock
shall be entitled to notice of any shareholders' meeting and to vote upon
any matter submitted to shareholders for a vote, at any time on the
following basis:
(i) Each holder of Series A Convertible Preferred Stock shall be
entitled for each share of Series A Convertible Preferred Stock held
by such holder to the number of votes equal to the highest number of
full shares of Common Stock to which each share of Series A
Convertible Preferred Stock is convertible pursuant to Section 5
hereof at the record date for the determination of shareholders
entitled to vote on such matters; and
(ii) All shares of Common Stock (including fractions) issuable
upon conversion of more than one share of Series A Convertible
Preferred Stock by a holder of such stock shall be aggregated for
purposes of determining the number of votes pursuant to Section
3(a)(i) above; and
(iii) Except as otherwise required by law or expressly provided
herein, the holders of Series A Convertible Preferred Stock and Common
Stock shall vote together and not as separate classes.
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Section 4. Liquidation Preference.
In the event of any voluntary or involuntary liquidation, dissolution or
winding up of the affairs of the Corporation (any such event a "Liquidation
Event") the holders of Series A Convertible Preferred Stock shall be entitled to
receive prior and in preference to any distribution of any of the assets of the
Corporation to the holders of Common Stock or to the holders of any other series
of preferred stock by reason of their ownership thereof, an amount in cash or
equivalent value in securities or other consideration equal to the Liquidation
Preference. If the amount of such distribution is insufficient to permit full
payment of the Liquidation Preference, then such distribution shall be
distributed ratably to the holders of the Series A Convertible Preferred Stock
on the basis of the number of shares of Series A Convertible Preferred Stock
held. After payment in full of the Liquidation Preference owed to the holders of
the Series A Convertible Preferred Stock, the holders of the Common Stock shall
be entitled, to the exclusion of the holders of the Series A Convertible
Preferred Stock, to share in all remaining assets of the Corporation in
accordance with their respective interests.
The term"Aliquidation preference" shall mean, with respect to the Series A
Convertible Preferred Stock, an amount equal to $30.00 per share.
Section 5. Conversion Rights.
(a) Right to Convert Series A Convertible Preferred Stock. Each share
of Series A Convertible Preferred Stock shall be convertible, without the
payment of any additional consideration and at the option of the holder
thereof, at any time after the Series A Original Issue Date at the office
of the Corporation (or any transfer agent for the Series A Convertible
Preferred Stock) into shares of Common Stock at the then effective Series A
Conversion Rate (as defined in Section 5(b) hereof) and adjusted on a per
share basis giving effect to any adjustments required by Section 5 hereof.
(b) Series A Conversion Rate. Subject to the adjustments provided in
subsections (d) through (g) of this Section 5, each share of Series A
Convertible Preferred Stock shall be convertible into ten (10) shares of
Common Stock. However, if the five (5) day Average Trading Price of the
Common Stock for the five trading days immediately prior to ninety (90)
days after the Series A Original Issue Date is less than $3.00 per share,
then each share of Series A Convertible Preferred Stock shall be
convertible into the number of shares derived by dividing the Liquidation
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Preference by the five (5) day Average Trading Price.
(c) Mechanics of Conversion. Before any holder of Series A Convertible
Preferred Stock shall be entitled to convert the same into full shares of
Common Stock pursuant to Section 5(a) hereof, the holder shall surrender
the certificate or certificates therefor, duly endorsed, at the office of
the Corporation or of any transfer agent for the Series A Convertible
Preferred Stock and shall give written notice to the Corporation at such
office that such holder elects to convert the same and shall state therein
such holder's name or the name or names of the nominees in which such
holder wishes the certificate or certificates for shares of Common Stock to
be issued. The Corporation shall, as soon as practicable thereafter but in
no event later than ten (10) business days after the Corporation receives
all documents, including notice and certificates, necessary to effect the
conversion, issue and deliver at the address of such holder on the books
and records of the Corporation, or to such holder's nominee or nominees, a
certificate or certificates for the number of shares of Common Stock to
which such holder shall be entitled as aforesaid, together with cash in
lieu of any fractional shares. Such conversion shall be deemed to occur
immediately prior to the close of business on the date of surrender of the
shares of Series A Convertible Preferred Stock to be converted, and the
person or persons entitled to receive the shares of Common Stock issuable
upon conversion shall be treated for all purposes as the record holder or
holders of such shares of Common Stock on such date.
Notwithstanding anything to the contrary contained herein, if any
holder of Series A Convertible Preferred Stock elects to convert such
holder's shares at any time prior to the record date for any vote,
dividend, redemption, liquidation, dissolution or winding up, or other
actions for which a record date is set and the holder receives prior notice
pursuant to Section 7, or prior to the effective date of any such event for
which either no record date is set or respecting which notice pursuant to
Section 7 is not received, then for all purposes such conversion shall be
treated as having occurred prior to such date or effective date and the
holder shall be treated as the owner of the Common Stock into which such
Series A Convertible Preferred Stock is convertible for all purposes.
(d) Adjustments for Subdivisions and Combinations. If the Corporation
shall at any time, or from time to time after the Series A Original Issue
Date, effect a subdivision of the outstanding Common Stock, the Series A
Conversion Rate then in effect immediately before such subdivision shall be
proportionately increased, and conversely, if the Corporation shall at any
time or from time to time after the Series A Original Issue Date combine
the outstanding shares of Common Stock, the Series A Conversion Rate then
in effect immediately before such combination shall be proportionately
decreased. Any adjustment under this Section 5(d) shall become effective at
the close of business on the date such subdivision or combination becomes
effective.
(e) Adjustments for Certain Dividends and Distributions. In the event
the Corporation at any time, or from time to time after the Series A
Original Issue Date, shall make or issue or fix a record date for the
determination of holders of Common Stock entitled to receive a dividend or
other distribution payable in additional shares of Common Stock, then and
in each such event the Series A Conversion Rate then in effect shall be
increased as of the time of such issuance or, in the event such a record
date shall have been fixed, as of the close of business on such record
date, by multiplying the Series A Conversion Rate then in effect by a
fraction:
(i) the numerator of which shall be the total number of shares of
Common Stock issued and outstanding immediately prior to the time of
such issuance or the close of business on such record date plus the
number of shares of Common Stock issuable in payment of such dividend
or distribution; and
(ii) the denominator of which shall be the total number of shares
of Common Stock issued and outstanding immediately prior to the time
of such issuance or the close of business on such record date;
provided, however, if such record date shall have been fixed and such
dividend is not fully paid or if such distribution is not fully made
on the date fixed therefor, the Series A Conversion Rate shall be
recomputed accordingly as of the close of business on such record date
and thereafter the Series A Conversion Rate shall be adjusted pursuant
to this Section 5(e) as of the time of actual payment of such
dividends or distributions.
(f) Adjustment for Other Dividends and Distributions. In the event the
Corporation at any time, or from time to time after the Series A Original
Issue Date shall make or issue, or fix a record date for the determination
of holders of Common Stock entitled to receive, a dividend or other
distribution payable in securities of the Corporation other than shares of
Common Stock (but including securities convertible into Common Stock), then
and in each such event provisions shall be made so that the holders of
Series A Convertible Preferred Stock shall receive upon conversion thereof,
in addition to the number of shares of Common Stock receivable thereupon,
the amount and type of securities of the Corporation that they would have
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received on a per share basis had their Series A Convertible Preferred
Stock been converted into Common Stock on the date of such event and had
such holders thereafter, during the period from the date of such event to
and including the conversion date, retained such securities receivable by
them as aforesaid during such period giving application to all adjustments
called for during such period under this Section 5 with respect to the
rights of the holders of the Series A Convertible Preferred Stock.
(g) Adjustments for Reclassification, Exchange or Substitution. If the
Common Stock issuable upon the conversion of the Series A Convertible
Preferred Stock shall be changed into the same or a different number of
shares of any class or classes of stock of the Corporation, whether by
capital reorganization, reclassification or otherwise (other than by a
subdivision, a combination or a stock dividend as provided for elsewhere in
this Section 5), then and in each event the holder of each share of Series
A Convertible Preferred Stock shall have the right thereafter to convert
such share into the kind and amount of shares of stock or other securities
and property receivable upon such reorganization, reclassification or other
change by the holders of the number of shares of Common Stock into which
each such share of Series A Convertible Preferred Stock might have been
converted immediately prior to such reorganization, reclassification or
other change, all subject to further adjustment as provided elsewhere in
this Section 5.
(h) Issue Taxes. The Corporation shall pay any and all issue and other
taxes that maybe payable in respect of any issue or delivery of shares of
Common Stock on conversion of shares of Series A Convertible Preferred
Stock, excluding any tax or other charge imposed in connection with any
transfer involved in the issue and delivery of shares of Common Stock in a
name other than that in which the shares of Series A Convertible Preferred
Stock so converted were registered, which tax or charge shall be borne by
the transferor.
(i) Reservation of Stock. The Corporation shall at all times reserve
and keep available out of its authorized but unissued shares of Common
Stock solely for the purpose of effecting the conversion of the shares of
the Series A Convertible Preferred Stock the number of its shares of Common
Stock as shall from time to time be sufficient to effect any conversion of
any or all outstanding shares of the Series A Convertible Preferred Stock.
If at any time the number of authorized but unissued shares of Common Stock
shall not be sufficient to effect the conversion of all then outstanding
shares of the Series A Convertible Preferred Stock, the Corporation shall
<PAGE>
take such corporate action as may, in the opinion of its counsel, be
necessary to increase its authorized but unissued shares of Common Stock to
such number of shares as shall be sufficient for such purpose.
(j) Fractional Shares. No fractional share shall be issued upon the
conversion of any share or shares of Series A Convertible Preferred Stock.
All shares of Common Stock (including fractions) issuable upon conversion
of more than one share of Series A Convertible Preferred Stock by a holder
of such stock shall be aggregated for purposes of determining whether the
conversion would result in the issuance of any fractional share, if, after
aggregation, the conversion would result in the issuance of a fractional
share of Common Stock, the Corporation shall, in lieu of issuing any
fractional share, pay the holder otherwise entitled to such fraction a sum
in cash equal to the fair market value of such fraction on the date of
conversion (as determined in good faith by the Board of Directors).
(k) Successive Changes. The above provisions of this Section 5 shall
similarly apply to successive combinations, subdivisions, dividends and
distributions on or of the Common Stock after the Series A Original Issue
Date.
(l) Subsequent Events. On the Series A Original Issue Date, and
thereafter, from time to time, within ten (10) Business Days of the
occurrence of any event which would have the result of changing the Series
A Conversion Rate, the Corporation shall make reasonable efforts to notify
the holders of the Series A Convertible Preferred Stock of the nature of
such event and of the newly calculated figures resulting from such change
and the calculation in reasonable detail.
Section 6. Redemption at the Option of the Corporation.
If the Average Trading Price for the Common Stock is $6.00 or
more for twenty (20) consecutive trading days, then the Corporation may redeem
all or part of the Series A Preferred Stock, subject to the holder's right to
convert set forth in Section 5 above. The Corporation shall give written notice
of its intention to redeem all or part of the Series A Preferred Stock twenty
(20) calendar days prior to redemption pursuant to Section 7 below (the
"Redemption Notice Period"). At any time during the Redemption Notice Period,
the holder of Series A Preferred Stock may convert the Series A Preferred Stock
into Common Stock pursuant to Section 5 above. The redemption price for shares
of Series A Preferred Stock shall be the Liquidation Preference plus any accrued
unpaid dividends.
<PAGE>
Section 7. Notices of Record Date.
In the event of (i) any taking by the Corporation of a record of the
holders of any class or series of securities for the purpose of determining the
holders thereof who are entitled to receive any dividend or other distribution
or (ii) any reclassification or recapitalization of the capital stock of the
Corporation or any voluntary or involuntary dissolution, liquidation or winding
up of the affairs of the Corporation, the Corporation shall send by (1) personal
delivery to such holder, (2) first class mail addressed, postage prepaid, and
addressed to the holder at the address appearing on the books of the
Corporation, or (3) facsimile to such holder at the facsimile number provided by
such holder to the Secretary of the Corporation, at least ten (10) days prior to
the record date specified therein, a notice specifying (A) the date on which any
such record is to be taken for the purpose of such dividend or other
distribution and a description of such dividend or distribution, (B) the date on
which any such reorganization, reclassification, dissolution, liquidation or
winding up is expected to become effective, and (C) the time, if any is to be
fixed, as to when the holders of record of Series A Convertible Preferred Stock
shall be entitled to exchange their Series A Convertible Preferred Stock for
securities or other property deliverable upon such reorganization,
reclassification, dissolution, liquidation or winding up. For purposes of this
notice provision, notice shall be deemed to have been given (1) the next day in
the case of notice by a national courier service, or (2) in the case of
facsimile, upon sending the facsimile.
Section 8. Reacquired Shares.
Any shares of Series A Convertible Preferred Stock converted, redeemed
or otherwise acquired by the Corporation in any manner whatsoever shall be
retired and canceled promptly after the acquisition thereof, and, if necessary
to provide for the lawful purchase of such shares, the capital represented by
such shares shall be reduced in accordance with the General Corporation Law of
the State of Delaware. All such shares shall upon their cancellation become
authorized but unissued shares of Preferred Stock, $.0004 par value, of the
Corporation and may be reissued as part of another series of Preferred Stock,
$.0004 par value, of the Corporation.
<PAGE>
Section 9. Certain Definitions.
Under the context otherwise required for the purposes of this
resolution, the terms defined in this Section 9 shall have the meanings herein
specified.
"Series A Original Issue Date" means the effective date of a written
agreement by the Corporation for the sale of the Series A Convertible Preferred
Stock.
"Aggregate Original Amount" means the aggregate number of shares of
Series A Convertible Preferred Stock issued on the Series A Original Issue Date
plus any amount of shares issued pursuant to subsequent sales of Series A
Convertible Preferred Stock by the Corporation, from and after the date of
issuance thereof all such shares as adjusted pursuant to this Certificate of
Designation.
"Average Trading Price" with respect to Common Stock means, on any day,
the trade weighted average of the sales prices for such shares as reported on
Bloomberg News Services (i) on the largest national securities exchange (based
on the aggregate dollar value of securities listed) on which such shares are
listed or traded or (ii) if such shares are not listed on any national
securities exchange, then the prices at which transactions are effected through
the NASDAQ National Market as reported by NASDAQ or, (iii) if such shares shall
not be listed thereon, the trade weighted average of all transactions in Common
Stock in an over-the-counter market.
IN WITNESS WHEREOF, the Corporation has caused this Certificate of
Designations of Series A Convertible Preferred Stock to be duly executed by its
President and Chief Executive Officer and attested to by its Secretary and has
caused its corporate seal to be affixed hereto, this ___ day of January, 2000.
DBS INDUSTRIES, INC.
By: /s/ FRED W. THOMPSON
----------------------------
Fred W. Thompson, CEO and
President
ATTEST:
By: /s/ RANDY STATT
-------------------------
Randy Stratt, Secretary
