<PAGE>
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
[X] Quarterly report under Section 13 or 15(d) of the Securities Exchange Act
of 1934
For the quarterly period ended March 31, 1996
[ ] Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
COMMISSION FILE NO. 1-11602
SI DIAMOND TECHNOLOGY, INC.
(Exact name of Small Business Issuer as specified in charter)
TEXAS 76-0273345
(State of (IRS Employer
Incorporation) Identification Number)
2435 NORTH BOULEVARD
HOUSTON, TEXAS 77098
(Address of principal executive office) (Zip Code)
Registrant's telephone number, including area code: (713) 529-9040
Indicate by check mark whether the issuer (1) filed all reports required to
be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes [X] No [_]
As of May 7, 1996, the registrant had 10,862,889 shares of common stock, par
value $.001 per share, issued and outstanding.
Transitional Small Business Disclosure Format.
Yes [X] No [_]
<PAGE>
SI DIAMOND TECHNOLOGY, INC.
INDEX
<TABLE>
<CAPTION>
<S> <C>
Part I Financial Information Page
Item 1. Financial Statements
Consolidated Balance Sheets--March 31, 1996 and December 31, 1995 3
Consolidated Statements of Operations--Three Months Ended
March 31, 1996 and 1995 4
Consolidated Statements of Cash Flows--Three Months Ended
March 31, 1996 and 1995 5
Notes to Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 8
Part II Other Information
Item 5. Other Information 11
Item 6. Exhibits and Reports on Form 8-K 11
</TABLE>
2
<PAGE>
SI DIAMOND TECHNOLOGY, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
<TABLE>
<CAPTION>
March 31, December 31,
ASSETS 1996 1995
------------- -------------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 5,095,026 $ 293,593
Accounts receivable, trade 442,888 151,422
Stock subscriptions receivable - 9,583,750
Notes receivable 400,000 400,000
Costs and estimated earnings in excess of billings
on uncompleted contracts 528,844 300,485
Prepaid expenses and other assets 110,273 43,238
------------ ------------
Total current assets 6,577,031 10,772,488
Property, plant and equipment, net 1,590,631 1,476,241
Intangible assets, net 477,537 500,079
Net assets of discontinued operations and net assets available for sale 1,642,920 2,542,704
Other assets, net 126,844 17,394
------------ ------------
Total assets $ 10,414,963 $ 15,308,906
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 1,722,341 $ 430,048
Notes payable 32,054 271,853
Accrued liabilities 380,977 1,864,095
Billings in excess of costs and
estimated earnings on uncompleted contracts 35,385 49,891
------------ ------------
Total current liabilities 2,170,757 2,615,887
Notes payable, long-term 82,611 86,687
Commitments and contingencies
Stockholders' equity:
Preferred Stock, $1.00 par value, 2,000,000 shares authorized;
Series A convertible preferred, 100 shares issued and out-
standing at March 31, 1996 and December 31, 1995 ($100,000
aggregate liquidation preference) 100 100
Series E convertible preferred, 1,190 shares issued and out-
standing at March 31, 1996 ($11,900,000 aggregate liquidation preference) 1,190 --
Common Stock, 120,000,000 shares authorized, $.00l par value,
10,862,889 shares issued and outstanding at March 31, 1996;
10,858,889 shares issued and outstanding at December 31, 1995 10,863 10,859
Additional paid-in capital 45,311,064 34,681,872
Preferred stock subscribed, but unissued - 8,905,072
Accumulated deficit (37,161,622) (30,991,571)
------------ ------------
Total stockholders' equity 8,161,595 12,606,332
------------ ------------
Total liabilities and stockholders' equity $ 10,414,963 $ 15,308,906
============ ============
</TABLE>
The accompanying notes are an integral part of the financial statements.
3
<PAGE>
SI DIAMOND TECHNOLOGY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
For the Three Months Ended
March 31,
-----------------------------
1996 1995
-------------- -------------
<S> <C> <C>
Revenues $ 848,367 $ 224,527
----------- -----------
Cost of sales 1,052,114 141,648
Selling, general and administrative
expenses 2,203,592 664,173
Stock compensation 16,986 9,793
Research and development 2,127,425 1,124,779
Loss on impairment of net assets held for sale 850,000 -
----------- -----------
Operating costs and expenses 6,250,117 1,940,393
----------- -----------
Other income, net 231,199 64,373
----------- -----------
Loss from continuing operations (5,170,551) (1,651,493)
----------- -----------
Discontinued operations:
Loss from discontinued operations (649,500) (280,533)
Provision for loss on disposition of
discontinued operations (350,000) -
----------- -----------
Total losses on discontinued operations (999,500) (280,533)
----------- -----------
Net loss $(6,170,051) $(1,932,026)
=========== ===========
Net loss per share from continuing operations $ (0.48) $ (0.21)
Net loss per share from discontinued operations $ (0.09) $ (0.04)
----------- -----------
Net loss per share $ (0.57) $ (0.25)
=========== ===========
Average shares outstanding 10,859,724 7,681,707
========== =========
</TABLE>
The accompanying notes are an integral part of the financial statements.
4
<PAGE>
SI DIAMOND TECHNOLOGY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
For the Three Months Ended
March 31,
--------------------------
1996 1995
------------ ------------
<S> <C> <C>
Cash flows from operating activities:
Continuing operations:
Net loss from continuing operations $(5,170,551) $(1,651,493)
Adjustments to reconcile net loss to net
cash required by operating activities:
Non-cash compensation of employees and consultants upon issuance of common stock -- 9,793
Depreciation and amortization expense 83,610 112,536
Revaluation of stock warrants 450,000 --
Loss on impairment of net assets 850,000 --
Changes in assets and liabilities:
Accounts receivable, trade (291,466) 755,213
Costs and estimated earnings in excess of billings on uncompleted contracts/projects (228,359) (43,394)
Prepaid expenses (67,035) (4,538)
Accounts payable and accrued liabilities (190,825) 11,262
Billings in excess of costs and estimated earnings on uncompleted contracts (14,506) (130,481)
Net assets available for sale (260,263) --
----------- -----------
Total adjustments 331,156 710,391
----------- -----------
Net cash required by continuing operations (4,839,395) (941,102)
----------- -----------
Discontinued operations:
Net loss from discontinued operations (999,500) (280,533)
Reserves for discontinued operations 505,000 --
Increase in net assets of discontinued operations (194,953) --
----------- -----------
Net cash required by discontinued operations (689,453) (280,533)
----------- -----------
Net cash required by operations (5,528,848) (1,221,635)
----------- -----------
Cash flows from investing activities:
Capital expenditures (175,458) --
Expenditures for intangibles and other assets (109,450) (991,822)
----------- -----------
Net cash required by investing activities (284,908) (991,822)
----------- -----------
Cash flows from financing activities:
Repayment of notes payable (243,875) --
Proceeds of stock issuance, net of costs 10,859,064 4,902,247
----------- -----------
Net cash provided by financing activities 10,615,189 4,902,247
----------- -----------
Net increase in cash and cash equivalents 4,801,433 2,688,790
Cash and cash equivalents, beginning of year 293,593 1,687,104
----------- -----------
Cash and cash equivalents, end of the period $ 5,095,026 $ 4,375,894
=========== ===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
5
<PAGE>
SI DIAMOND TECHNOLOGY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Basis of Presentation:
----------------------
The accompanying unaudited consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for
interim financial information and in compliance with the instructions to Form
10-QSB. Accordingly, they do not include all of the information and footnotes
required by generally accepted accounting principles for complete financial
statements. In the opinion of management, all adjustments consisting only of
normal recurring adjustments considered necessary for a fair presentation,
have been included. For further information, refer to the financial
statements and footnotes thereto for the year ended December 31, 1995,
included in the Company's 1995 Annual Report on Form 10-KSB. The balance
sheet information for December 31, 1995 has been derived from the audited
financial statements at that date and reclassified to present comparative
information related to discontinued operations and assets available for sale.
2. Supplemental Cash Flow Information:
-----------------------------------
Cash paid for interest for the three months was approximately $5,263 and
$12 for 1996 and 1995, respectively. The following non-cash transactions have
been excluded from the statement of cash flows :
<TABLE>
<CAPTION>
1996 1995
----- --------
<S> <C> <C>
Purchase of intangible assets through the issuance of
common stock $ - $900,000
Recognition of deferred offering costs as contra equity
in additional paid-in capital - 150,000
</TABLE>
3. Capital Stock:
--------------
Common Stock
In December 1995, the Company closed an exempt offering under Regulation D of
the Securities Act of 1933 (the "December 1995 Offering"). The Company
collected cash proceeds of $1,511,575, for the issuance of 287,919 shares of
common stock. At December 31, 1995, the Company recorded a subscription
receivable for $15,750 of these proceeds as they were received in January
1996. The registration statement covering these shares was declared effective
on April 18, 1996.
Preferred Stock
In December 1995, through an exempt offering under Regulation D of the
Securities Act of 1933 the Company received subscriptions for 1,040 shares of
its Series E Convertible Preferred Stock ( "Series E Preferred"). As of
December 31, 1995, $9,568,000 was recorded as subscriptions receivable from
issuance of the Series E Preferred. In January 1996, the Company received
subscriptions for an additional 150 shares of Series E Preferred. The Company
received the proceeds of these subscriptions and issued 1,190 shares of
Series E Preferred in January 1996. The offering provided proceeds of
$11,900,000 to the Company less expenses of approximately $1,631,000. The
registration statement covering these shares was declared effective on April
18, 1996.
4. Discontinued Operations
-----------------------
During May 1996, the Company adopted a corporate reorganization plan to cut
costs and streamline operations. Pursuant to this plan, the Company is
soliciting offers to sell its coatings operations as an operating business,
or through an asset sale. Pending this sale, the Company has significantly
reduced the operations of its subsidiary, SIDT Coatings, Inc. ("Coatings").
6
<PAGE>
SI DIAMOND TECHNOLOGY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
4. Discontinued Operations (continued)
-----------------------------------
The Company intends to divest itself of this operation as soon as possible.
The timing of this will be dependent upon market conditions. Net assets of
discontinued operations are stated at estimated net realizable value and
consist primarily of accounts receivable of $36,781, property, plant and
equipment of $800,004, accounts payable and accrued liabilities of $145,381,
and a reserve to reflect net realizable value of $999,500. First quarter
losses of $494,500 were charged against this reserve. The net of these
amounts has been classified on the balance sheet as non-current assets.
5. Net Assets Available for Sale
-----------------------------
As part of the Company's reorganization plan, operations at the Company's
Diamond Tech One, Inc. ("DTO") subsidiary will be significantly reduced and
certain assets will be made available for sale. The net assets of this
division as of March 31, 1996 were $1,456,516, which includes an $850,000
reserve for impairment of assets.
6. Customer Claim at Plasmatron Coatings and Systems, Inc.
-------------------------------------------------------
Plasmatron Coatings and Systems, Inc. ("Plasmatron") has received a demand
from a customer to recover approximately $7.9 million for an alleged breach
of contract related to $1 million of coating equipment that Plasmatron
delivered in 1993. The customer claims that the equipment does not perform as
required under the contract, but has offered to settle its claims for
approximately $3.8 million. The Company believes that Plasmatron has a
meritorious defense to the customer's claim. No lawsuit has been filed and no
discovery has been conducted. The Company believes that the ultimate
resolution of this matter will not have a material adverse effect on its
financial position, results of operations or cash flows.
7. Warrant Repricing
-----------------
In February 1996, the company repriced 219,149 warrants held by GH
Securities, Ltd. ("GH"), its former underwriter. The warrants were repriced
to compensate GH in connection with relinquishing its disputed right to place
current and future offerings. The Company recognized a $450,000 charge,
reflected in selling, general and administrative expense, in connection with
the repricing.
7
<PAGE>
ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
- - --------------------------------------------------------------------------------
OF OPERATIONS
- - --------------
Three months ended March 31, 1996 and 1995
------------------------------------------
OVERVIEW
During the quarter ended March 31, 1996, the Company's primary revenues from
continuing operations were earned through manufacture of coatings systems at
Plasmatron Coatings and Systems, Inc. ("Plasmatron") and from performing
research under government contracts. Subsequent to the end of the quarter, the
Company adopted a corporate reorganization plan to reduce expenditures and
streamline operations. See "Recent Developments." The Company continued to
incur substantial expenses in support of the development of a diamond-based
flat panel display. As more fully discussed in the Company's annual report on
Form 10-KSB for the year ended December 31, 1995, the Company expects to incur
substantial research and development expenses throughout 1996 in developing
the Company's proprietary Diamond Based Field Emission Display ("DFED") and
Diamond Based Field Emission Lamp ("DFEL").
RECENT DEVELOPMENTS
During May 1996, the Company adopted a corporate reorganization plan to reduce
expenditures and streamline operations. Pursuant to this plan, the operations
of its subsidiary, SIDT Coatings, Inc.("Coatings") have been significantly
reduced. Coatings provides industrial hard coatings services. The Company is
in the process of soliciting offers to sell the subsidiary as an operating
business, or through an asset sale. The company intends to divest itself of
these operations as soon as possible. The timing of this will be dependent
upon market conditions.
Additionally, certain operations at the Company's Diamond Tech One, Inc.
("DTO") subsidiary will be significantly reduced and the Company is soliciting
offers to buy the assets of the subsidiary. DTO provides back-end
semiconductor wafer processing and multi-chip module fabrication and assembly
services. Currently, the largest user of DTO's services is the Company. The
Company now believes it can obtain these services from outside sources at a
lower cost./(1)/
Additionally, the Company plans a Company-wide reduction in force of
approximately 50% of its employees, not associated with DTO or Coatings, to
reduce operating costs./(1)/ As a result of this reorganization, the Company
has recorded total losses on discontinued operations of $999,500 and an
$850,000 loss on impairment of net assets held for sale, for the quarter ended
March 31, 1996.
RESULTS OF OPERATIONS
The Company's revenues for the first quarter ended March 31, 1996 totaled
$848,367 compared to $224,527 for the first quarter of 1995. Commercial sales
were $266,977 for the 1996 Period compared to $177,924 for the 1995 Period.
The majority of the commercial revenues are from production under vacuum
equipment contracts through its subsidiary, Plasmatron. Plasmatron's
commercial backlog is currently $812,000 as compared with $400,000 at March
31, 1995. Contract research revenues for the 1996 Period were $581,390
compared to $46,603 for the 1995 Period. At March 31, 1996, the Company had a
research backlog of approximately $2,139,000 in anticipated future revenues
from its existing contracts, as compared with a backlog of approximately
$1,539,000 at March 31, 1995. The increased contract revenue and backlog
amounts for the 1996 Period resulted primarily from the Company's increased
DFED development related to the $2,625,000 National Institute of Science and
Technology ("NIST") contract which commenced during the third quarter of 1995.
The NIST contract is intended to provide matching grants to facilitate further
research and development on the Company's DFED. Many of the personnel
currently performing Company sponsored research on the DFED will be performing
the contract research for the NIST contract which is also related to displays.
The Company's ability to perform the research on its backlog and recent
contract awards should not require significant addition of personnel.
For the 1996 Period, the Company's costs of sales were $1,052,114, exceeding
revenues by 24%, as compared with $141,648, or a 37% gross margin, for the
1995 Period. The decreasing margin resulted primarily from a larger component
of low margin, government contract research revenues for the 1996 Period, in
addition to a negative margin at DTO of approximately 120%. The Company's
general and
8
<PAGE>
ITEM 2: MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
administrative expenses were $2,203,592 for the 1996 Period, compared with
$664,173 for the 1995 Period. The expense increase resulted primarily
from a higher level of fund raising activity during the 1996 period, as well
as $450,000 in contract settlements during this time. Company sponsored
research and development expenses for the 1996 Period were $2,127,425 as
compared to $1,124,779 for the 1995 Period. These continued costs are a
result of the Company's efforts to develop a diamond-based flat panel display.
The Company expects to incur substantial expenses in support of additional
research and development activities related to the commercial development of a
diamond based flat panel display, and the related diamond based field emission
lamp.
During May 1996, the Company adopted a corporate reorganization plan to cut
costs and streamline operations. Pursuant to this plan, it has significantly
reduced the operations of its subsidiary, SIDT Coatings, Inc. ("Coatings").
The Company is in the process of soliciting offers to sell the subsidiary as
an operating business, or through an asset sale. Net assets of discontinued
operations are stated at estimated realizable value of $691,404. A reserve of
$999,500 has been recorded during the first period of 1996 to cover
disposition.
As part of the Company's reorganization plan, operations at the Company's
Diamond Tech One, Inc. ("DTO") subsidiary will be significantly reduced and
certain assets will be made available for sale. The net assets of this
division as of March 31, 1996 were $2,306,516. The estimated reserve for
impairment of these assets is $850,000.
FINANCIAL CONDITION
At March 31, 1996, the Company had cash and cash equivalents in the amount of
$5,095,026 as compared with cash and cash equivalents of $293,593 at December
31, 1995. This increase in cash is a result of the Company's successful
Regulation D stock offerings in December 1995, for which the Company received
cash in January 1996, less costs incurred in the quarter. Based on the
developmental stages of the Company's DFED and DFEL technologies, additional
equity, sale of product distribution or technology rights or other financing
will likely be considered in the future./(1)/ There can be no assurance that
any of these financing alternatives can be arranged on commercially acceptable
terms. /(1)/
In December 1995, the Company closed an exempt offering under Regulation D of
the Securities Act of 1933 (the "December Offering"). The Company collected
cash proceeds of $1,511,575, for the issuance of 287,919 shares of common
stock. At December 31, 1995, the Company recorded a subscription receivable
for $15,750 of these proceeds as they were received in January 1996. The
registration statement concerning these shares became effective April 18,
1996.
Also in December 1995, through an exempt offering under Regulation D of the
Securities Act of 1933 the Company received subscriptions for 1,040 shares of
its Series E Convertible Preferred Stock ("Series E Preferred"). As of
December 31, 1995, $9,568,000 was recorded as subscriptions receivable from
issuance of the Series E Preferred. In January 1996, the Company received
subscriptions for an additional 150 shares of Series E Preferred. The Company
received the proceeds of these subscriptions and issued 1,190 shares of Series
E Preferred in January 1996. The offering provided proceeds of $11,900,000 to
the Company less expenses of approximately $1,631,000. The registration
statement covering these shares was declared effective on April 18, 1996.
Cash required by operating activities was $5,528,848 for the 1996 Period
compared to $1,221,635 for the 1995 Period. The increase in the requirement of
cash flows was primarily the result of a generally higher level of company
sponsored research and development and sales and marketing expenses during the
1996 Period.
Cash required by investing activities during the 1996 period was $284,908 as
compared with $991,822 for 1995. The significantly higher activity for the
1995 period resulted from the purchase of DFED licensing rights from MCC
during that period.
9
<PAGE>
ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The principal source of the Company's liquidity has been the funds received
from its initial public offering and from the subsequent foreign and exempt
offerings of common stock. The Company may receive additional funds from the
exercise of warrants, although there can be no assurance that such warrants
will be exercised./(1)/ In the event that the Company needs additional funds,
the Company may seek to sell additional debt or equity securities or certain
technology rights. /(1)/ The Company may seek to increase its liquidity
through bank borrowings or other financing. /(1)/ There can be no assurance
that any of these financing alternatives can be arranged on commercially
acceptable terms. /(1)/ The Company believes that its success in reaching
profitability will be dependent upon the viability of its products and their
acceptance in the marketplace, and its ability to obtain additional debt or
equity financing in the future. /(1)/
The Company expects to incur substantial expenses for research and development
("R&D"), product testing, product marketing and administrative overhead. /(1)/
Further, the Company believes that certain proposed products may not be
available for commercial sale or routine use for a period of one to two years.
/(1)/ Therefore, it is anticipated that the commercialization of the Company's
existing and proposed products will require additional capital in excess of
the Company's current funding. /(1)/ The combined effect of the foregoing may
prevent the Company from achieving profitability for an extended period of
time. /(1)/ Because the timing and receipt of revenues from the sale of
products will be tied to the achievement of certain product development,
testing and marketing objectives which cannot be predicted with certainty,
there may be substantial fluctuations in the Company's results of operations.
/(1)/ If revenues do not increase as rapidly as anticipated, or if product
development and testing and marketing require more funding than anticipated,
the Company may be required to curtail its expansion and seek additional
financing from other sources. /(1)/
The Company anticipates that its existing resources will enable it to maintain
its planned operations for approximately seven months after the date of this
filing. /(1)/ This belief is based on current development plans, the
successful implementation of the Company's May 1996 restructuring plan, the
current regulatory environment, historical experience in the development of
electronic products and general economic conditions. /(1)/ No assurance can be
given that there will be no change that would cause available resources to be
consumed before such time. /(1)/ Thereafter, if adequate funds are not
available from operations or additional sources of financing, the Company may
have to reduce substantially or eliminate expenditures for research and
development, testing and production of its products or obtain funds through
arrangements with other entities that may require the Company to relinquish
rights to certain of its technologies or products. /(1)/ Such results would
materially and adversely affect the Company.
OUTLOOK
It is anticipated that losses will continue throughout 1996, and into 1997, as
the Company continues to fund the development of its DFED flat panel display
and DFEL lamp products. /(1)/ Increased commercial revenues are anticipated in
the Company's Plasmatron subsidiary; however, they will not be sufficient to
offset the planned research and development efforts. Sales from the DFED
product are not anticipated until 1997. /(1)/ Full commercial development of
the Company's DFED technology may require additional funds that may not be
available at terms acceptable to the Company. /(1)/ Should the Company be
unable to obtain acceptable additional debt or equity financing, if needed,
management intends to reduce the level of internally funded research and
development. /(1)/
/(1)/ ENDNOTE
This sentence is a forward-looking statement. Please refer to the disclosure
on pages ii - v of the Company's Annual Report on Form 10-KSB for the fiscal
year ended December 31, 1995, incorporated herein by reference, and the
discussion under "Item 5. Other Information" in this Quarterly Report on Form
10-QSB for factors that could cause actual results to differ from those
projected in this statement.
10
<PAGE>
PART II. OTHER INFORMATION
ITEM 5. OTHER INFORMATION
CAUTIONARY STATEMENTS FOR PURPOSES OF THE "SAFE HARBOR" PROVISIONS OF THE
PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995
This Quarterly Report on Form 10-QSB contains forward-looking statements and
estimates such as forecasts and projections of the Company's future performance
or statements of management's plans and objectives. Additionally forward-looking
statements may be contained in the Company's other Securities and Exchange Act
filings, press releases, oral statements made by the officers of the Company,
and other sources. Actual results could differ materially from such forward-
looking statements. Therefore no assurance can be given that the results
estimated or anticipated in a forward-looking statement will be achieved. THE
COMPANY HAS ATTEMPTED TO IDENTIFY THE FORWARD-LOOKING STATEMENTS IN THE TEXT OF
THIS REPORT BY ENDNOTE 1 ON PAGE 10.
Important factors that could cause the Company's actual results to differ from
results in forward-looking statements are incorporated herein by reference, with
the following additions and revisions, from pages ii-v of the Company's Annual
Report on Form 10-KSB for the fiscal year ended December 31, 1995.
FUTURE CAPITAL NEEDS AND UNCERTAINTY OF ADDITIONAL FUNDING
The Company anticipates its existing resources will enable it to maintain its
current and planned operations for approximately seven months after the date of
this filing This belief is based on current development plans, the successful
implementation of the Company's May 1996 restructuring plan, the current
regulatory environment, historical experience in the development of electronic
products and general economic conditions. If the Company is unable to effect
its May 1996 restructuring plan, it anticipates that its existing resources will
enable it to maintain its operations until approximately August 1996. No
assurance can be made that the Company will be able to implement the program as
planned or that other factors may not arise that will affect the Company's
solvency.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits: See Index to Exhibits on page 13 for a descriptive response to
this item.
(b) Reports on Form 8-K:
None.
11
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
Registrant has duly caused this Report to be signed on its behalf by the
undersigned thereunto duly authorized.
SI DIAMOND TECHNOLOGY, INC.
(Registrant)
Date: May 15, 1996 /s/ Howard K. Schmidt
--------------------------------
Howard K. Schmidt
Chairman, President and Chief Executive
Officer (Principal Executive Officer)
Date: May 15, 1996 /s/ Anthony N. Davies
--------------------------------
Anthony N. Davies
Assistant Secretary and Controller
(Duly Authorized Officer and Principal
Accounting Officer)
12
<PAGE>
INDEX TO EXHIBITS
The following documents are filed as part of this Report:
Exhibit
-------
3(ii) Amended and Restated Bylaws, adopted April 26, 1996
10.01 Consulting Agreement between the Company and BEG Enterprises,
Inc.
10.02 Contract #01-96/01C between the Company and Microelectronics
Systems dated February 16, 1996 (Confidential
treatment has been Requested)
10.03 Contract No. 27 in 02-96 between the Company and High Technologies,
Ltd. dated February 25, 1996 (Confidential treatment has been
Requested)
10.04 Contract No. 26 in 02-96 between the Company and High Technologies,
Ltd. dated February 25,1996 (Confidential treatment
has been Requested)
11 Computation of (Loss) Per Common Share
27 Financial Data Schedule
13
<PAGE>
EXHIBIT 3(ii)
AMENDED AND RESTATED BYLAWS
OF
SI DIAMOND TECHNOLOGY, INC.
(Adopted by Resolution of
the Board of Directors on April 26, 1996)
ARTICLE I.
CAPITAL STOCK
Section 1. Form of Certificates. The Company shall deliver certificates
representing shares to which shareholders are entitled. Such certificates shall
be signed by (i) the Chairman of the Board, the President or a Vice President
and (ii) either the Secretary or an Assistant Secretary and (iii) shall be
sealed with the seal of the Company or a facsimile thereof. The signatures of
such officers upon a certificate may be facsimiles. In case any officer who has
signed or whose facsimile signature has been placed upon such certificate shall
have ceased to be such officer before such certificate is issued, it may be
issued by the Company with the same effect as if he were such officer at the
date of its issuance.
Section 2. Shareholders of Record. The Board of Directors of the Company
may appoint one or more transfer agents or registrars of any class of stock of
the Company. The Company shall be entitled to treat the holder of record of any
shares of the Company as the owner thereof for all purposes, and shall not be
bound to recognize any equitable or other claim to, or interest in, such shares
or any rights deriving from such shares, on the part of any other person,
including (but without limitation) a purchaser, assignee or transferee, unless
and until such other person becomes the holder of record of such shares, whether
or not the Company shall have either actual or constructive notice of the
interest of such other person.
Section 3. Transfer of Shares. The shares of the Company shall be
transferable on the stock certificate books of the Company by the holder of
record thereof, or his duly authorized attorney or legal representative, upon
surrender for cancellation of the certificate for such shares. All certificates
surrendered for transfer shall be canceled and no new certificate shall be
issued until a former certificate or certificates for a like number of shares
shall have been surrendered and canceled except that in the case of a lost,
destroyed or mutilated certificate, a new certificate may be issued therefor
upon such conditions for the protection of the Company and any transfer agent or
registrar as the Board of Directors or the Secretary may prescribe.
Section 4. Lost Certificates. The Board of Directors may direct a new
certificate to be issued in place of any certificate theretofore issued by the
Company alleged to have been lost, stolen or destroyed, upon the making of an
affidavit of the fact by the person claiming the certificate of stock to be
lost, stolen or destroyed. When authorizing such issue of a new certificate,
the Board of Directors may, in its discretion and as a condition precedent to
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issuance thereof, require the owner of such lost, stolen or destroyed
certificate, or such owner's legal representative, to advertise the same in such
manner as the Board of Directors shall require and/or to give the Company a bond
in such sum as it may direct as indemnity against any claim that may be made
against the Company with respect to the certificate alleged to have been lost,
stolen or destroyed.
Section 5. Voting Securities Owned by the Company. Powers of attorney,
proxies, waivers of notice of meeting, consents and other instruments relating
to securities owned by the Company may be executed in the name of and on behalf
of the Company by the Chairman of the Board, the President, any Vice President
or the Secretary, and any such officer may, in the name of and on behalf of the
Company, take all such action as any such officer may deem advisable to vote in
person or by proxy at any meeting of security holders of any corporation in
which the Company may own securities, and at any such meeting shall possess and
may exercise any and all rights and powers incident to the ownership of such
securities and which, as the owner thereof, the Company might have exercised and
possessed if present. The Board of Directors may, by resolution, from time to
time confer like powers upon any other person or persons.
ARTICLE II.
MEETINGS OF SHAREHOLDERS
Section 1. Place of Meetings. All meetings of shareholders shall be held
at the registered office of the Company, in the City of Houston, Texas, or at
such other place within or without the State of Texas as may be designated by
the Board of Directors or officer calling the meeting.
Section 2. Annual Meetings. The Annual Meetings of shareholders shall be
held on such date and at such time as shall be designated from time to time by
the Board of Directors and stated in the notice of the meeting, at which
meetings the shareholders shall elect by a plurality vote a Board of Directors,
and transact such other business as may properly be brought before the meeting.
Section 3. Special Meetings. Special Meetings of the shareholders may
only be called by the Board of Directors, the Chairman of the Board, the
President or the holders of not less than ten percent (10%) of all shares
outstanding and entitled to vote at such meeting. Only business related to the
purposes set forth in the notice of the meeting may be transacted at a special
meeting.
Section 4. Notice of Meeting. Written or printed notice of all meetings
stating the place, day and hour of the meeting and, in case of a special
meeting, the purpose or purposes for which the meeting is called, shall be
delivered to each shareholder of record entitled to vote at such meetings not
less than ten (10) nor more than sixty (60) days before the date of the meeting,
either personally or by mail, by or at the direction of the Chairman of the
Board, the
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President, the Secretary or the officer or person calling the meeting. If
mailed, such notice shall be deemed to be delivered when deposited in the United
States mail addressed to the shareholder at his address as it appears on the
stock transfer books of the Company, with postage thereon prepaid.
Section 5. Closing of Transfer Books and Fixing Record Date. For the
purpose of determining shareholders entitled to notice of or to vote at any
meeting of shareholders or any adjournment thereof, the Board of Directors may
either provide that the stock transfer books shall be closed for a stated period
of not less than ten (10) nor more than sixty (60) days before the meeting, or
it may fix in advance a record date for any such determination of shareholders,
such date to be not less than ten (10) days nor more than sixty (60) days prior
to the meeting. If the stock transfer books are not closed and no record date
is fixed for the determination of shareholders entitled to notice of or to vote
at a meeting of shareholders, then the date on which the notice of the meeting
is mailed shall be the record date for such determination of shareholders. When
a determination of shareholders entitled to vote at any meeting of shareholders
has been made as herein provided, such determination shall apply to any
adjournment thereof except where the determination has been made through the
closing of the stock transfer books and the stated period of closing has
expired.
Section 6. Voting List. The officer or agent having charge of the stock
transfer books for shares of the Company shall make, at least ten days before
each meeting of shareholders, a complete list of the shareholders entitled to
vote at such meeting or any adjournment thereof, arranged in alphabetical order,
with the address of and the number of shares held by each, which list, for a
period of ten days prior to such meeting, shall be kept on file at the
registered office of the Company and shall be subject to inspection by any
shareholder at any time during usual business hours. Such list shall also be
produced and kept open at the time and place of the meeting and shall be subject
to the inspection of any shareholder during the whole time of the meeting. The
original stock transfer books shall be prima facie evidence as to who are the
shareholders entitled to examine such list or to vote at any meeting of
shareholders. Failure to comply with any requirements of this Section 6 shall
not affect the validity of any action taken at such meeting.
Section 7. Voting at Meetings. Except as otherwise provided in the
Amended and Restated Articles of Incorporation of the Company, as amended to
date (the "Articles of Incorporation"), each holder of shares of capital stock
of the Company entitled to vote shall be entitled to one vote for each share of
such stock, either in person or by proxy executed in writing by him or by his
duly authorized attorney-in-fact. No proxy shall be valid after eleven months
from the date of its execution unless otherwise provided in the proxy. A proxy
shall be revocable unless expressly provided therein to be irrevocable and
unless otherwise made irrevocable by law. At each election for Directors, every
holder of shares of the Company entitled to vote shall have the right to vote,
in person or by proxy, the number of shares owned by him for as many persons as
there are Directors to be elected, and for whose election he has a right to
vote, but in no event shall he be permitted to cumulate his votes for one or
more Directors.
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All voting, including on the election of Directors but except where
otherwise provided herein or required by law or the Articles of Incorporation,
may be by a voice vote, provided, however, that upon demand therefor by a
shareholder entitled to vote or such shareholder's proxy, a stock vote shall be
taken. Every stock vote shall be taken by ballots, each of which shall state
the name of the shareholder or proxy voting and such other information as may be
required under the procedure established for the meeting.
All elections of Directors shall be determined by a plurality of the votes
cast, and except as otherwise required by law or the Articles of Incorporation,
all other matters shall be determined by a majority of the votes cast.
Section 8. Quorum; Adjournment. Except as otherwise provided in the
Articles of Incorporation of the Company, the holders of a majority of shares
entitled to vote, represented in person or by proxy, shall constitute a quorum
at a meeting of shareholders. Except as otherwise provided by law, the Articles
of Incorporation or these Bylaws, the affirmative vote of the holders of a
majority of the shares entitled to vote and thus represented at a meeting at
which a quorum is present shall be the act of the shareholders' meeting. If a
quorum shall fail to attend any meeting, the chairman of the meeting or the
holders of the majority of the shares of stock entitled to vote who are present,
in person or by proxy, may adjourn the meeting to another place, date or time
without notice other than announcement at the meeting, until a quorum shall be
present or represented.
When a meeting is adjourned to another place, date or time, written notice
need not be given of the adjourned meeting if the place, date and time thereof
are announced at the meeting at which the adjournment is taken; provided,
however, that if the date of any adjourned meeting is more than thirty (30) days
after the date for which the meeting was originally noticed, or if a new record
date is fixed for the adjourned meeting, written notice of the place, date and
time of the adjourned meeting shall be given in conformity herewith. At any
adjourned meeting, any business may be transacted which might have been
transacted at the original meeting.
Section 9. Officers. The Chairman of the Board shall preside at, and the
Secretary shall keep the records of, each meeting of shareholders. In the
absence of either such officer, his duties shall be performed by another officer
of the Company appointed at the meeting.
All determinations of the presiding person at each meeting of shareholders
shall be conclusive unless a matter is determined otherwise upon motion duly
adopted by the affirmative vote of the holders of at least 80% of the voting
power of the shares of capital stock of the Company entitled to vote in the
election of Directors held by shareholders present in person or represented by
proxy at such meeting.
Section 10. Inspectors of Election. In advance of any meeting of
shareholders, the Board of Directors may appoint inspectors of election, who
need not be shareholders, to act at such meeting or any adjournment thereof. If
inspectors of election are not so appointed, the person presiding at any such
meeting may, and on the request of any shareholder entitled to vote
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at the meeting and before voting begins shall, appoint inspectors of election.
If any person who is appointed fails to appear or act, the vacancy may be filled
by appointment made by the Board of Directors in advance of the meeting, or at
the meeting by the person presiding at the meeting. Each inspector, before
entering upon the discharge of his duties, shall take an oath faithfully to
execute the duties of inspector at such meeting.
If inspectors of election are appointed as aforesaid, they shall determine
from the lists referred to in Section 6 of this Article II the number of shares
outstanding, the shares represented at the meeting, the existence of a quorum
and the voting power of shares represented at the meeting, determine the
authenticity, validity and effect of proxies, receive votes or ballots, hear and
determine all challenges and questions in any way arising in connection with the
right to vote or the number of votes which may be cast, count and tabulate all
votes or ballots, determine the results, and do such acts as are proper to
conduct the election or vote with fairness to all shareholders entitled to vote
thereat.
The inspectors shall make a report in writing of any challenge or question
matter which is determined by them, and execute a sworn certificate of any facts
found by them.
ARTICLE III.
DIRECTORS
Section 1. Number and Classification of Board of Directors. The business
and affairs of the Company shall be managed by or under the direction of the
Board of Directors which may exercise all such powers of the Company and do all
such lawful acts and things as are not by law or by the Articles of
Incorporation or by these Bylaws directed or required to be exercised or done by
the shareholders of the Company. Pursuant to Article Seven of the Company's
Articles of Incorporation, the total number of Directors constituting the entire
Board of Directors shall not be less than three (3) nor more than nine (9), with
the then-authorized number of Directors being fixed from time to time solely by
or pursuant to a resolution passed by the Board of Directors. The Directors
shall be divided into three classes, Class I, Class II and Class III. Such
classes shall be as nearly equal in number of Directors as possible.
Directors need not be shareholders of the Company. All Directors shall be
elected in accordance with the procedures specified in the Company's Articles of
Incorporation, and each Director so elected shall hold office for a term of
three years and until his or her successor is duly elected and qualified, or
until his or her earlier resignation or removal.
At each annual election, the Directors chosen to succeed those whose terms
then expire shall be of the same class as the Directors they succeed, unless, by
reason of any intervening changes in the authorized number of Directors, the
Board of Directors shall designate one or more Directorships whose term then
expires as Directorships of another class in order more nearly to achieve
equality of number of Directors among the classes.
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Notwithstanding the rule that the three classes shall be as nearly equal in
number of Directors as possible, in the event of any change in the authorized
number of Directors, each Director then continuing to serve as such shall
nevertheless continue as a Director of the class of which he is a member until
the expiration of his current term, or his prior death, resignation,
disqualification or removal. No decrease in the number of Directors
constituting the Board of Directors shall shorten the term of any incumbent
Director.
Section 2. Newly Created Directorships and Vacancies. Newly created
Directorships resulting from any increase in the number of Directors may be
filled by the affirmative vote of a majority of the Directors then in office for
a term of office continuing only until the next election of one or more
Directors by the shareholders entitled to vote thereon; provided, however, that
the Board of Directors shall not fill more than two such Directorships during
the period between two successive annual meetings of shareholders. Except as
provided in Section 1 of this Article III, any vacancies on the Board of
Directors resulting from death, resignation, disqualification, removal or other
cause shall be filled by the affirmative vote of a majority of the remaining
Directors then in office, even though less than a quorum of the Board of
Directors. Any Director elected to fill any such vacancy shall hold office for
the remainder of the full term of the Director whose departure from the Board of
Directors created the vacancy and until such newly elected Director's successor
shall have been duly elected and qualified.
Section 3. Nomination of Directors. Nominations for the election of
Directors may be made by the Board of Directors or a committee appointed by the
Board of Directors or by any shareholder (a "Nominator") entitled to vote in the
election of Directors. Such nominations, other than those made by the Board of
Directors or a committee appointed by the Board of Directors, shall be made in
writing pursuant to timely notice delivered to or mailed and received by the
Secretary of the Company as set forth in Article Nine (b) of the Company's
Articles of Incorporation.
Section 4. Place of Meetings and Meetings by Telephone. Meetings of the
Board of Directors may be held either within or without the State of Texas, at
whatever place is specified by the officer calling the meeting. Meetings of the
Board of Directors may also be held by means of conference telephone or similar
communications equipment by means of which all persons participating in the
meeting can hear each other. Participation in such a meeting by means of
conference telephone or similar communications equipment shall constitute a
presence in person at such meeting, except where a Director participates in a
meeting for the express purpose of objecting to the transaction of any business
on the ground that the meeting is not lawfully called or convened. In the
absence of specific designation by the officer calling the meeting, the meetings
shall be held at the registered office of the Company in the City of Houston,
Texas.
Section 5. Regular Meetings. The Board of Directors shall meet each year
immediately following the annual meeting of the shareholders at the place of
such meeting, for the transaction of such business as may properly be brought
before the meeting. Regular meetings of the Board of Directors may be held
without notice at such time and at such place
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as may from time to time be determined by the Board of Directors. No notice of
any kind to either old or new members of the Board of Directors for such annual
or regular meetings shall be necessary.
Section 6. Special Meetings. Special meetings of the Board of Directors
may be held at any time upon the call of the Chairman of the Board, the
President or the Secretary of the Company or a majority of the Directors then in
office. Notice shall be sent by mail or telegram to the last known address of
the Director at least three days before the meeting. Notice of the time, place
and purpose of such meeting may be waived in writing before or after such
meeting, and shall be equivalent to the giving of notice. Attendance of a
Director at such meeting shall also constitute a waiver of notice thereof,
except where he attends for the announced purpose of objecting to the
transaction of any business on the ground that the meeting is not lawfully
called or convened. Except as otherwise provided by these Bylaws, neither the
business to be transacted at, nor the purpose of, any regular or special meeting
of the Board of Directors need be specified in the notice or waiver of notice of
such meeting.
Section 7. Quorum and Voting. Except as otherwise provided by law, the
Articles of Incorporation of the Company or these Bylaws, a majority of the
number of Directors fixed in the manner provided in these Bylaws as from time to
time amended shall constitute a quorum for the transaction of business. Except
as otherwise provided by law, the Articles of Incorporation of the Company or
these Bylaws, the affirmative vote of a majority of the Directors present at any
meeting at which there is a quorum shall be the act of the Board of Directors.
Any regular or special Directors' meeting may be adjourned from time to time by
those present, whether or not a quorum is present.
Section 8. Compensation. Unless otherwise restricted by the Articles of
Incorporation or these Bylaws, the Board of Directors shall have the authority
to fix the compensation of Directors. The Directors may be paid their expenses,
if any, of attendance at each meeting of the Board of Directors and may be paid
a fixed sum for attendance at each meeting of the Board of Directors or a stated
salary as Director. No such payment shall preclude any Director from serving
the Company in any other capacity and receiving compensation therefor. Members
of special or standing committees may be allowed like compensation for attending
committee meetings.
Section 9. Removal; Resignation. No Director of the Company shall be
removed from his office as a Director by vote or other action of the
shareholders or otherwise except (a) with cause, as defined below, by the
affirmative vote of the holders of at least a majority of the voting power of
all outstanding shares of capital stock of the Company entitled to vote in the
election of Directors, voting together as a single class, or (b) without cause
by (i) the affirmative vote of at least 60% of all Directors then in office at
any regular or special meeting of the Board of Directors called for that purpose
or (ii) the affirmative vote of the holders of at least 60% of the voting power
of all outstanding shares of capital stock of the Company entitled to vote in
the election of Directors, voting together as a single class.
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Except as may otherwise be provided by law, cause for removal of a Director
shall be construed to exist only if: (a) the Director whose removal is proposed
has been convicted, or where a Director is granted immunity to testify where
another has been convicted, of a felony by a court of competent jurisdiction and
such conviction is no longer subject to direct appeal; (b) such Director has
been found by the affirmative vote of at least 60% of all Directors then in
office at any regular or special meeting of the Board of Directors called for
that purpose or by a court of competent jurisdiction to have been negligent or
guilty of misconduct in the performance of his duties to the Company in a matter
of substantial importance to the Company; or (c) such Director has been
adjudicated by a court of competent jurisdiction to be mentally incompetent,
which mental incompetency directly affects his ability as a Director of the
Company.
No proposal by a shareholder to remove a Director of the Company shall be
voted upon at a meeting of the shareholders unless such shareholder shall have
delivered or mailed in a timely manner (as set forth in this Section 9) and in
writing to the Secretary of the Company (a) notice of such proposal, (b) a
statement of the grounds, if any, on which such Director is proposed to be
removed, (c) evidence, reasonably satisfactory to the Secretary of the Company,
of such shareholder's status as such and of the number of shares of each class
of the capital stock of the Company beneficially owned by such shareholder, (d)
a list of the names and addresses of other beneficial owners of shares of the
capital stock of the Company, if any, with whom such shareholder is acting in
concert, and of the number of shares of each class of the capital stock of the
Company beneficially owned by each such beneficial owner, and (e) an opinion of
counsel, which counsel and the form and substance of which opinion shall be
reasonably satisfactory to the Board of Directors of the Company (excluding the
Director proposed to be removed), to the effect that, if adopted at a duly
called special or annual meeting of the shareholders of the Company by the
required vote as set forth in the first paragraph of this Section 9, such
removal would not be in conflict with the laws of the State of Texas, the
Articles of Incorporation of the Company or these Bylaws. To be timely in
connection with an annual meeting of shareholders, a shareholder's notice and
other aforesaid items shall be delivered to or mailed and received at the
principal executive offices of the Company not less than ninety nor more than
180 days prior to the date on which the immediately preceding year's annual
meeting of shareholders was held. To be timely in connection with the removal
of any Director at a special meeting of the shareholders, a shareholder's notice
and other aforesaid items shall be delivered to or mailed and received at the
principal executive offices of the Company not less than forty days nor more
than sixty days prior to the date of such meeting; provided, however, that in
the event that less than fifty days' notice or prior public disclosure of the
date of the special meeting of shareholders is given or made to the
shareholders, the shareholder's notice and other aforesaid items to be timely
must be so received not later than the close of business on the seventh day
following the day on which such notice of date of the meeting was mailed or such
public disclosure was made. Within thirty days (or such shorter period that may
exist prior to the date of the meeting) after such shareholder shall have
delivered the aforesaid items to the Secretary of the Company, the Secretary and
the Board of Directors of the Company shall respectively determine whether the
items to be ruled upon by them are reasonably satisfactory and shall notify such
shareholder in writing of their respective
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determinations. If such shareholder fails to submit a required item in the form
or within the time indicated, or if the Secretary or the Board of Directors of
the Company determines that the items to be ruled upon by them are not
reasonably satisfactory, then such proposal by such shareholder may not be voted
upon by the shareholders of the Company at such meeting of shareholders. The
presiding person at each meeting of shareholders shall, if the facts warrant,
determine and declare to the meeting that a proposal to remove a Director of the
Company was not made in accordance with the procedures prescribed by these
Bylaws, and if he should so determine, he shall so declare to the meeting and
the defective proposal shall be disregarded. Beneficial ownership shall be
determined as specified in Section 6 of Article VIII of these Bylaws.
Any Director of the Company may resign at any time by giving written notice
to the Chairman of the Board or the Secretary. Such resignation shall take
effect at the date of the receipt of such notice or at any later time specified
therein and, unless otherwise specified therein, the acceptance of such
resignation shall not be necessary to make it effective.
Section 10. Executive and Other Committees. The Board of Directors, by
resolution adopted by a majority of the full Board of Directors, may designate
from among its members an executive committee and other committees, each of
which shall be comprised of two or more members and, to the extent provided in
such resolution, shall have and may exercise all of the authority of the Board
of Directors.
Notwithstanding the foregoing paragraph of this Section 10, no such
committee shall have the authority of the Board of Directors to:
a. amend the Articles of Incorporation of the Company;
b. amend, alter or repeal the Bylaws of the Company or adopt new Bylaws for the
Company;
c. alter or repeal any resolution of the Board of Directors;
d. approve a plan of merger or consolidation;
e. take definitive action on any reclassification or exchange of securities, or
repurchase by the Company of any of its equity securities;
f. declare a dividend on the capital stock of the Company;
g. call a special meeting of the shareholders;
h. recommend any proposal to the shareholders for action by the shareholders;
i. fill vacancies in the Board of Directors or any such committee;
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j. fill any Directorship to be filled by reason of an increase in the number of
Directors;
k. elect or remove officers or members of any such committee; or
l. fix the compensation of any member of such committee.
The designation of any such committee and the delegation thereto of
authority shall not operate to relieve the Board of Directors, or any member
thereof, of any responsibility imposed upon it or him by law, nor shall such
committee function where action of the Board of Directors is required under
applicable law. The Board of Directors shall have the power at any time to
change the membership of any such committee and to fill vacancies in it. A
majority of the members of any such committee shall constitute a quorum. Each
such committee may elect a chairman and appoint such subcommittees and
assistants as it may deem necessary. Except as otherwise provided by the Board
of Directors, meetings of any committee shall be conducted in accordance with
the provisions of Sections 4 and 6 of this Article III as the same shall from
time to time be amended. Any member of any such committee elected or appointed
by the Board of Directors may be removed by the Board of Directors whenever in
its judgment the best interests of the Company will be served thereby, but such
removal shall be without prejudice to the contract rights, if any, of the person
so removed. Election or appointment of a member of a committee shall not of
itself create contract rights.
ARTICLE IV.
OFFICERS
Section 1. General. The officers of the Company shall be appointed by the
Board of Directors and shall consist of a Chairman of the Board or a President,
or both, one or more Vice Presidents, a Treasurer and a Secretary. The Board
of Directors may also choose one or more assistant secretaries and assistant
treasurers, and such other officers and agents as the Board of Directors, in its
sole and absolute discretion, shall deem necessary or appropriate. Any number
of offices may be held by the same person, unless the Articles of Incorporation
or these By-laws provide otherwise.
Section 2. Election; Term of Office. The Board of Directors, at its first
meeting held after each Annual Meeting of Shareholders, shall elect a Chairman
of the Board or a President, or both, one or more Vice Presidents, a Secretary
and a Treasurer, and may also elect at that meeting or any other meeting, such
other officers and agents as it shall deem necessary or appropriate. Each
officer of the Company shall exercise such powers and perform such duties as
shall be determined from time to time by the Board of Directors together with
the powers and duties which are customarily exercised by such officer; and each
officer of the Company shall hold office until such officer's successor is
elected and qualified or until such officer's earlier resignation or removal.
Any officer may resign at any time upon written notice to the
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Company. The Board of Directors may at any time, with or without cause, by the
affirmative vote of a majority of Directors then in office, remove an officer.
Section 3. Chairman of the Board. The Chairman of the Board shall preside
at all meetings of the shareholders and the Board of Directors, and shall have
such other duties and powers as may be prescribed by the Board of Directors from
time to time.
Section 4. President. The President shall be the chief executive officer
of the Company, shall have general and active management of the business of the
Company, and shall see that all orders and resolutions of the Board of Directors
are carried into effect. The President shall have and exercise such further
powers and duties as may be specifically delegated to or vested in the President
from time to time by these By-laws or the Board of Directors. In the absence of
the Chairman of the Board or in the event of his inability or refusal to act, or
if the Board has not designated a Chairman, the President shall perform the
duties of the Chairman of the Board, and when so acting, shall have all the
powers and be subject to all of the restrictions upon the Chairman of the Board.
Section 5. Vice President. In the absence of the President or in the
event of his inability or refusal to act, the Vice President (or in the event
that there be more than one vice president, the vice presidents in the order
designated by the Board of Directors, or in the absence of any designation, then
in the order of their election) shall perform the duties of the President, and
when so acting, shall have all the powers of and be subject to all the
restrictions upon the President. The vice presidents shall perform such other
duties and have such other powers as the Board of Directors or the President may
from time to time prescribe.
Section 6. Secretary. The Secretary shall attend all meetings of the
Board of Directors and all meetings of the shareholders, and record all the
proceedings thereat in a book or books to be kept for that purpose; the
Secretary shall also perform like duties for the standing committees when
required. The Secretary shall give, or cause to be given notice of meetings of
shareholders and special meetings of the Board of Directors, and shall perform
such other duties as may be prescribed by the Board of Directors or the
President. If the Secretary shall be unable or shall refuse to cause to be
given notice of all meetings of the shareholders and special meetings of the
board of Directors, and if there be no assistant secretary, then either the
Board of Directors or the President may choose another officer to cause such
notice to be given. The Secretary shall have custody of the seal of the Company
and the Secretary or any assistant secretary, if there be one, shall have
authority to affix same to any instrument requiring it and when so affixed, it
may be attested to by the signature of the Secretary or by the signature of any
such assistant secretary. The Board of Directors may give general authority to
any other officer to affix the seal of the Company and to attest to the affixing
by his or her signature. The Secretary shall see that all books, reports,
statements, certificates and other documents and records required by law to be
kept or filed are properly kept or filed, as the case may be.
Section 7. Treasurer. The Treasurer shall have the custody of the
corporate funds and securities and shall keep complete and accurate accounts of
all receipts and disbursements
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of the Company, and shall deposit all moneys and other valuable effects of the
Company in its name and to its credit in such banks and other depositories as
may be designated from time to time by the Board of Directors. The Treasurer
shall disburse the funds of the Company, taking proper vouchers and receipts for
such disbursements, and shall render to the Board of Directors, at its regular
meetings, or when the Board of Directors so requires, an account of all his or
her transactions as Treasurer and of the financial condition of the Company. The
Treasurer shall, when and if required by the Board of Directors, give and file
with the Company a bond, in such form and amount and with such surety or
sureties as shall be satisfactory to the Board of Directors, for the faithful
performance of his or her duties as Treasurer. The Treasurer shall have such
other powers and perform such other duties as the Board of Directors or the
President shall from time to time prescribe.
Section 8. Other Officers. Such other officers as the Board of Directors
may choose shall perform such duties and have such powers as from time to time
may be assigned to them by the Board of Directors. The Board of Directors may
delegate to any other officer of the Company the power to choose such other
officers and to prescribe their respective duties and powers.
Section 9. Resignations. Any officer may resign at any time by giving
written notice to the Board of Directors, the Chairman of the Board, the
President or the Secretary which shall be deemed to constitute notice to the
Company. Such resignation shall take effect upon receipt of such notice or at
any later time specified therein; and, unless otherwise specified therein, the
acceptance of such resignation shall not be necessary to make it effective.
Section 10. Removal. Any officer or agent may be removed, either with or
without cause, at any time, by the Board of Directors at any meeting called for
that purpose; provided, however, that the President may remove any agent
appointed by him.
Section 11. Vacancies. Whenever any vacancies shall occur in any office
by death, resignation, increase in the number of offices of the Company, or
otherwise, the officer so elected shall hold office until his successor is
chosen and qualified. The Board of Directors may at any time remove any officer
of the company, whenever in its judgment the best interests of the Company will
be served thereby, but such removal shall be without prejudice to the contract
rights, if any, of the person so removed. Election or appointment of an officer
or agent shall not of itself create contract rights.
ARTICLE V
INDEMNIFICATION
Section 1. Indemnification of Directors and Officers in Third Party
Proceedings. The Company may indemnify any Director or officer of the Company
who was or is an "authorized representative" of the Company (which shall mean
for the purposes of this Article V a Director or officer of the Company, or a
person serving at the request of the Company as
12
<PAGE>
a Director, officer, partner or trustee of another corporation, partnership,
joint venture, trust or other enterprise) and who was or is a "party" (which
shall include for purposes of this Article V the giving of testimony or similar
involvement) or is threatened to be made a party to any "third party proceeding"
(which shall mean for purposes of this Article V any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative or
investigative, other than an action by or in the right of the Company) by reason
of the fact that such person was or is an authorized representative of the
Company, against expenses (which shall include for purposes of this Article V
attorney's fees and disbursements), judgments, penalties, fines and amounts paid
in settlement actually and reasonably incurred by such person in connection with
such third party proceeding if such person acted in good faith and in a manner
such person reasonably believed to be in, or not opposed to, the best interests
of the Company, or with respect to a criminal third party proceeding (which
shall include for purposes of this Article any investigation which could or does
lead to a criminal third party proceeding) if such person had not reasonable
cause to believe such conduct was unlawful. The termination of any third party
proceeding by judgment, order, settlement, indictment, conviction or upon a plea
of no contest or its equivalent, shall not, of itself, create a presumption that
the authorized representative did not act in good faith and in a manner which
such person reasonably believed to be in or not opposed to the best interests of
the Company, and, with respect to any criminal third party proceeding, had
reasonable cause to believe that such conduct was unlawful.
Section 2. Indemnification of Directors and Officers in Corporate
Proceedings. The Company may indemnify any Director or officer of the Company
who was or is an authorized representative of the Company and who was or is a
party or is threatened to be made a party to any "corporate proceeding" (which
shall mean for purposes of this Article V any threatened, pending or completed
action or suit by or in the right of the Company to procure a judgment in its
favor or any investigative proceeding by or on behalf of the Company) by reason
of the fact that such person was or is an authorized representative of the
Company, against expenses (including attorneys' fees and disbursements) actually
and reasonably incurred by such person in connection with the defense or
settlement of such corporate proceeding if such person acted in good faith and
in a manner such person reasonably believed to be in, or not opposed to, the
best interests of the Company, except that no indemnification shall be made in
the performance of such person's duty to the Company unless and only to the
extent that the court in which such corporate proceeding was pending shall
determine upon application that, despite the adjudication of liability but in
view of all the circumstances of the case, such authorized representative is
fairly and reasonably entitled to indemnity for such expenses which the court
shall deem proper.
Section 3. Indemnification of Authorized Representatives. To the extent
that an authorized representative of the Company who neither was nor is a
Director or officer of the Company has been successful on the merits or
otherwise in defense of any third party or corporate proceeding or in defense of
any claim, issue or matter therein, such person shall be indemnified against
expenses actually and reasonably incurred by such person in connection
therewith. Such an authorized representative may, at the discretion of the
Company, be indemnified by the Company in any other circumstance to any extent
if the Company would be
13
<PAGE>
required by Section 1 or 2 of this Article V to indemnify such person in such
circumstances to such extent as if such person were or had been a Director or
officer of the Company.
Section 4. General Terms. Any indemnification under Section 1 and Section
2 of this Article V (unless ordered by a court) shall be made by the Company
only as authorized in the specific case upon a determination that
indemnification of the Director, officer, employee or agent is proper under the
circumstances because he had met the applicable standard of conduct set forth in
Section 1 and Section 2 of this Article V. Such determination shall be made (i)
by the Board of Directors by a majority vote of a quorum consisting of Directors
who were not parties to such action, suit or proceeding, or (ii) if such a
quorum of disinterested Directors so directs, by independent legal counsel in
written opinion, or (iii) by the shareholders.
Section 5. Amendment. Any amendment to Article V shall not apply to any
liability of a Director, officer, employee or agent arising out of a transaction
or omission occurring prior to the adoption of such amendment, but any such
liability based on a transaction or omission occurring prior to the adoption of
such amendment shall be governed by Article V of these By-laws, as in effect at
the time of such transaction or omission.
Section 6. Insurance and Trust Fund. In furtherance and not in limitation
of the powers conferred by statute:
(1) the Company may purchase and maintain insurance on behalf of any person who
is or was a Director, officer, employee or agent of the Company, or is serving
at the request of another corporation as a Director, officer, employee or agent
of another corporation, partnership, joint venture, trust or other enterprise,
against any liability asserted against him and incurred by him in any such
capacity, or arising out of his power to indemnify him against such liability
under the provisions of law; and
(2) the Company may create a trust fund, grant a security interest and/or use
other means (including without limitation, letters of credit, surety bonds,
and/or other similar arrangements), as well as enter into contracts providing
indemnification to the fullest extent permitted by law and including as part
thereof provisions with respect to any or all of the foregoing, to ensure the
payment of such amount as may become necessary to effect indemnification as
provided therein, or elsewhere.
Section 7. Indemnification of Employees and Agents of the Company. The
Company may, to the extent authorized from time to time by the Board of
Directors, grant rights to indemnification, including the right to be paid by
the Company the expenses incurred in defending any proceeding in advance of its
final disposition, to any employee or agent of the Company to the fullest extent
of the provisions of the Section or otherwise with respect to the
indemnification and advancement of expenses of Directors and officers of the
Company. Notwithstanding any other provision of these by-laws, no officer,
Director, agent or employee of the Company shall receive indemnification
payments under this section in advance of the final disposition of any action or
proceeding against such officer, Director, agent or employee unless
14
<PAGE>
the Company shall have received, prior to the date of such payment, a written
undertaking to repay the amounts advanced by the Company if it shall
subsequently be determined that the officer, Director, agent or employee was not
entitled to indemnification for such costs under the terms of these By-Laws.
ARTICLE VI.
CONTRACTS AND TRANSACTIONS WITH DIRECTORS AND OFFICERS
Section 1. General Procedure. No contract or transaction between the
Company and one or more of its Directors or officers, or between the Company and
any other corporation, partnership, association or other organization in which
one or more of the Company's Directors or officers are Directors or officers or
have a financial interest, shall be void or voidable solely for this reason,
solely because the Director or officer is present at or participates in the
meeting of the Company's Board of Directors or committee which authorizes the
contract or transaction, or solely because his or their votes are counted for
such purpose, if:
a. The material facts as to his relationship or interest and as to the contract
or transaction are disclosed or are known to the Board of Directors or the
committee, and the Board of Directors or committee in good faith authorizes the
contract or transaction by the affirmative vote of a majority of the
disinterested Directors, even though the disinterested Directors constitute less
than a quorum; or
b. The material facts as to his relationship or interest and as to the contract
or transaction are disclosed or are known to the shareholders entitled to vote
thereon, and the contract or transaction is specifically approved in good faith
by vote of the shareholders; or
c. The contract or transaction is fair to the Company as of the time it is
authorized, approved or ratified by the Board of Directors, the committee
thereof, or the shareholders.
Section 2. Determination of Quorum. Common or interested Directors may be
counted in determining the presence of a quorum at a meeting of the Board of
Directors or of a committee which authorizes the contract or transaction as
provided in Section 1 of this Article VI.
ARTICLE VII.
NOTICES
Section 1. Notice. Whenever, under the provisions of the laws of Texas or
the Articles of Incorporation or these By-laws, any notice, request, demand or
other communication is required to be or may be given or made to any officer,
Director, or registered shareholder, it shall be construed to mean that such
notice, request, demand or other communication must
15
<PAGE>
be given or made in person, but the same may be given or made by mail,
telegraph, cablegram, telex, or telecopier to such officer, Director or
registered shareholder. Any such notice, request, demand or other communication
shall be considered to have been properly given or made, in the case of mail,
when deposited in the mail or delivered to the appropriate office for telegraph
or cable transmission, and in other cases when transmitted by the party giving
or making the same, directed to the officer or Director at his address as it
appears on the record of shareholders, or, if the shareholder shall have filed
with the Secretary of the Company a written request that notices to him be
mailed to some other address, then directed to the shareholder at such other
address. Notice to Directors may also be given in accordance with Section 6 of
Article III hereof.
Whenever, under the provisions of the laws of this state or the Articles of
Incorporation or these By-laws, any notice, request, demand or other
communication is required to be or may be given or made to the Company, it shall
also not be construed to mean that such notice, request, demand or other
communication must be given or made in person, but that the same may be given or
made to the Company by mail, telegraph, cablegram, telex or telecopier. Any
such notice, request, demand or other communication shall be considered to have
been properly given or made, in the case of mail, telegram or cable, when
deposited in the mail or delivered to the appropriate office for telegraph or
cable transmission.
Section 2. Waivers of Notice. Whenever any written notice is required to
be given under the provisions of the Articles of Incorporation, these By-laws or
a statute, a waiver thereof in writing, signed by the person or persons entitled
to such notice, whether before or after the time stated therein, shall be deemed
equivalent to the giving of such notice. Neither the business to be transacted
at, nor the purpose of, any regular or special meeting of the shareholders,
Directors, or members of a committee of Directors need be specified in any
written waiver of notice of such meeting.
Attendance of a person, either in person or by proxy at any meeting,
without protesting prior to the conclusion of the meeting the lack of notice of
such meeting, shall constitute a waiver of notice of such meeting.
ARTICLE VIII.
MISCELLANEOUS PROVISIONS
Section 1. Offices. The principal office of the Company shall be located
in Houston, Texas, unless and until changed by resolution of the Board of
Directors. The Company may also have offices at such other places as the Board
of Directors may designate from time to time, or as the business of the Company
may require. The principal office and registered office may be, but need not
be, the same.
Section 2. Resignations. Any Director or officer may resign at any time.
Such resignations shall be made in writing and shall take effect at the time
specified therein, or, if no
16
<PAGE>
time be specified, at the time of its receipt by the President or Secretary. The
acceptance of a resignation shall not be necessary to make it effective, unless
expressly so provided in the resignation.
Section 3. Fixing Record Dates for Payment of Dividends and Other
Purposes. For the purpose of determining shareholders entitled to receive
payment of any dividend or in order to make a determination of shareholders for
any other proper purpose, the Board of Directors of the Company may provide that
the stock transfer books shall be closed for a stated period but not to exceed,
in any case, sixty days. In lieu of closing the stock transfer books, the Board
of Directors may fix in advance a date as the record date for any such
determination of shareholders, such date to be not more than sixty days prior to
the date on which the particular action requiring such determination of
shareholders is to be taken. If the stock transfer books are not closed and no
record date is fixed for the determination of shareholders entitled to receive
payment of a dividend, then the date on which the resolution of the Board of
Directors declaring such dividend is adopted shall be the record date for such
determination of shareholders.
Section 4. Corporate Seal. The corporate seal, if the Company shall have
a corporate seal, shall have inscribed thereon the name of the Company. The
seal may be used by causing it or a facsimile thereof to be impressed or affixed
or otherwise reproduced.
Section 5. Separability. If one or more of the provisions of these Bylaws
shall be held to be invalid, illegal or unenforceable, such invalidity,
illegality or unenforceability shall not affect any other provision hereof and
these Bylaws shall be construed as if such invalid, illegal or unenforceable
provision or provisions had never been contained herein.
Section 6. Beneficial Owners. The Company shall be entitled to recognize
the exclusive right of a person registered on its books as the owner of shares
to receive dividends, and to vote as such owner, and to hold liable for calls
and assessments a person registered on its books as the owner of shares, and
shall not be bound to recognize any equitable or other claim to or interest in
such share or shares on the part of any other person, whether or not it shall
have express or other notice thereof, except as otherwise provided by law.
"Beneficial Owner" as used in these Bylaws means any of the following:
a. a person who individually or with any of his affiliates or associates
beneficially owns (within the meaning of Rule 13d-3 under the Securities
Exchange Act of 1934, as amended) any capital stock of the Company,
directly or indirectly;
b. a person who individually or with any of his affiliates or associates
has either of the following rights:
(i) to acquire capital stock of the Company, whether such right is
exercisable immediately or only after the passage of time, pursuant to
any
17
<PAGE>
agreement, arrangement or understanding, or upon the exercise of
conversion rights, exchange rights, warrants or options, or otherwise;
(ii) to vote capital stock of the Company pursuant to any agreement,
arrangement or understanding; or
c. a person who has any agreement, arrangement or understanding for the
purpose of acquiring, holding, voting or disposing of capital stock of the
Company with any other person who beneficially owns or whose affiliates
beneficially own (within the meaning of Rule 13d-3 under the Securities
Exchange Act of 1934, as amended), directly or indirectly, such shares of
capital stock.
Section 7. Dividends. Dividends upon the capital stock of the Company,
subject to the provisions of the Articles of Incorporation, if any, may be
declared by the Board of Directors at any regular or special meeting or by any
Committee of the Board of Directors having such authority at any meeting
thereof, and may be paid in cash, in property, in shares of capital stock, or in
any combination thereof. Before payment of any dividend, there may be set aside
out of any funds of the Company available for dividends such sum or sums as the
Board of Directors from time to time, in its absolute discretion, deems proper
as a reserve or reserves to meet contingencies, or for equalizing dividends, or
for any proper purpose, and the Board of Directors may modify or abolish any
such reserve.
Section 8. Disbursements. All notes, checks, drafts, and orders for the
payment of money issued by the Company shall be signed in the name of the
Company by such officers or such other persons as the Board of Directors may
from time to time designate.
ARTICLE IX.
AMENDMENT OF BYLAWS
Section 1. Vote Requirements. The Board of Directors shall have the power
to make, adopt, alter, amend and repeal from time to time the Bylaws of this
Company, subject to the right of the shareholders entitled to vote with respect
thereto to adopt, alter, amend and repeal the Bylaws; provided, however, that
Bylaws shall not be adopted, altered, amended or repealed by the shareholders of
the Company, except by the vote of the holders of not less than sixty percent
(60%) of the outstanding shares of the capital stock of the Company entitled to
vote generally in the election of Directors, considered for this purpose as one
class.
18
<PAGE>
CERTIFICATE OF SECRETARY
The undersigned, acting in his capacity as Corporate Secretary of SI
Diamond Technology, Inc. (the "Company") attests that the foregoing Amended and
Restated Bylaws were duly adopted and approved by the Board of Directors of the
Company at a meeting which was duly called and held on April 26, 1996.
/s/ Wilburn O. McDonald, Jr.
-------------------------------------
Wilburn O. McDonald, Jr.
Corporate Secretary
19
<PAGE>
Exhibit 10.01
CONSULTING AGREEMENT
This Agreement ("Agreement") is entered into this date by and between SI DIAMOND
TECHNOLOGY, INC., a Texas corporation ("Company"), and BEG Enterprises, Inc., a
Michigan corporation ("Consultant").
WHEREAS, the Consultant renders financial services and manages investments; and
WHEREAS, the Company desires to retain Consultant to advise the Company
concerning its capital raising activities.
NOW THEREFORE, IT IS AGREED AS FOLLOWS:
Section 1. Services. Consultant agrees to assist and provide financial
- - --------- --------
advisory services to the Company concerning the Company's capital raising
activities.
Section 2. Compensation. The Company agrees to compensate Consultant on the
- - --------- ------------
following basis:
2.1 $16,000 per month from November 1, 1995 through April 1, 1996.
2.2 A lump sum payment of $78,925 on February 1, 1996
Section 3. Duration. Unless automatically terminated earlier by agreement of
- - --------- --------
the parties, or by incapacity or bankruptcy of either party, or by either
party's failure to timely or properly perform the services or make payments, the
Agreement extends until December 31, 1996.
Section 4. Confidential/Proprietary Information. Consultant agrees that it
- - --------- ------------------------------------
will not disclose and will hold in confidence any and all proprietary
information, drawings, and other matters owned by the Company brought to
Consultant's attention (collectively the "Information") by Company during the
course of this Agreement, whether in written or oral form. Without the prior
written consent of Company, Consultant agrees not to use the Information for any
purpose other than the performance of the Services performed for Company.
However, Consultant shall not be so restricted where (i) Information is now or
becomes public through no fault of Consultant, or (ii) Consultant already had
Information in his/her possession from his/her own work prior to the date of
this Agreement, or (iii) Consultant received Information from a third party on a
non-confidential basis and not derived from Company.
Section 5. Law Governing. This Agreement shall be governed by and construed in
- - --------- -------------
accordance with the laws of the State of Texas.
1
<PAGE>
Section 6. Titles and Captions. All article and section titles or captions
- - --------- -------------------
contained in this Agreement are for convenience only and shall not be deemed
part of the context nor affect the interpretation of this Agreement.
Section 7. Pronouns and Plurals. All pronouns and any variations thereof shall
- - --------- --------------------
be deemed to refer to the masculine, feminine, neuter, singular or plural as the
identity of the person or persons may require.
Section 8. Entire Agreement. This Agreement contains the entire understanding
- - --------- ----------------
between and among the parties and supersedes any prior understandings and
agreements among them respecting the subject matter of this Agreement.
Section 9. Agreement Binding. This Agreement shall be binding upon the heirs,
- - --------- -----------------
executors, administrators, successors and assigns of the parties hereto.
Section 10. Arbitration. If at any time during the term of this Agreement any
- - ---------- -----------
dispute, difference, or disagreement shall arise upon or in respect of the
Agreement, and the meaning and construction hereof, every such dispute,
difference, and disagreement shall be referred to a single arbiter agreed upon
by the parties, or if no single arbiter can be agreed upon, an arbiter or
arbiters shall be selected in accordance with the rules of the American
Arbitration Association and such dispute, difference, or disagreement shall be
settled by arbitration in accordance with the then prevailing commercial rules
of the American Arbitration Association, and judgment upon the award rendered by
the arbiter may be entered in any court having jurisdiction thereof.
Section 11. Further Action. The parties hereto shall execute and deliver all
- - ---------- --------------
documents, provide all information and take or forbear from all such action as
may be necessary or appropriate to achieve the purposes of the Agreement.
Section 12. Counterparts. This Agreement may be executed in several
- - ---------- ------------
counterparts and all so executed shall constitute one Agreement, binding on all
the parties hereto even though all the parties are not signatories to the
original or the same counterpart.
Section 13. Parties in Interest. Nothing herein shall be construed to be to
- - ---------- -------------------
the benefit of any third party, nor is it intended that any provision shall be
for the benefit of any third party.
Section 14. Presumption. This Agreement or any section thereof shall not be
- - ---------- -----------
construed against any party due to the fact that said Agreement or any section
thereof was drafted by said party.
Section 15. Savings Clause. If any provision of this Agreement, or the
- - ---------- --------------
application of such provision to any person or circumstance, shall be held
invalid, the remainder of this Agreement, or the application of such provision
to persons or circumstances other than those
2
<PAGE>
as to which it is held invalid, shall not be affected thereby.
This Agreement is entered into as of the 24th day of January, 1996, effective as
of October 31, 1995.
SI DIAMOND TECHNOLOGY, INC. BEG ENTERPRISES, INC.
a Texas corporation a Michigan corporation
By: /s/ Howard K. Schmidt By: /s/ Marc W. Eller
----------------------- ---------------------
Howard K. Schmidt Marc W. Eller
President and Chief Executive Officer Vice President
3
<PAGE>
EXHIBIT 10.02
Confidential treatment has been requested for portions of this exhibit. The copy
filed herewith omits the information subject to the confidentiality request.
Omissions are designated as "XXXXX".
CONTRACT #01-96/O1C
Moscow. "16" February 1996r.
"S.I. Diamond Technology Inc." (Houston, USA), referred hereafter as the
CUSTOMER, represented by its President Howard K. Schmidt, one side and
"Microelectronics Systems" (Moscow, Russia), referred hereafter as the SUPPLIER,
represented by its General director Boris V. Kogan, on the other side, signed
present contract on following:
1. SUBJECT OF THE CONTRACT.
1.1. SUPPLIER shall perform and pass to the CUSTOMER, and CUSTOMER shall accept
and pay for the following work:
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXX
1.2. Scientific, technical, economic and other specifications of research
product and contents of separate stages and the work in total are contained in
Technical Requirements.
1.3. Titles, price, and terms of payment for each financing stage are determined
in the Schedule, being a part of this Contract (Appendix #2).
2. TERMS OF THE CONTRACT
2.1. The work required by this Court shall be done according to the terms
determined in the attached Schedule. Works for the Contract start since the
moment of signing the Contract by both sides. Change in the Contract start date
shall correspondingly shift the date of the work fulfillment.
2.2. SUPPLIER in case of CUSTOMER agreement has a right to deliver the whole
work or separate stages and get appropriate payment earlier than it is mentioned
in this Contract. CUSTOMER accepts and pays for this work (or stages of work)
according to the conditions of this Contract.
2.3. As a date of fulfillment of the obligations on each stage of the work is
considered the date when the CUSTOMER signs (confirms) the document being the
basis for closing this stage.
As a date of fulfillment of the obligations according this Contract as a whole
is considered the date of signing (confirming) of appropriate document for the
last stage of work in case, if all the conditions of all the previous stages
were fulfilled.
3. ORDER OF THE WORK DELIVERY AND ACCEPTANCE
3.1. Acceptance of the finished work as a whole or each of its stages in done
according to the
<PAGE>
Technical Requirements and is affirmed by the protocol of delivery.
3.2. In case of motivated refusal of the CUSTOMER to accept the work both sides
create bilateral protocol with the list of necessary additional works and
schedule of their fulfillment.
4. PRICE OF THE WORK AND ORDER OF PAYMENT.
4.1. The work done according to the item 1.1 and the schedule of the present
Contract is being paid with the price agreed by the SUPPLIER and the CUSTOMER.
4.2. Price of all the works ordered to the SUPPLIER with the present Contract as
determined in the Protocol on the price agreement (Appendix #1) is:
eight hundred thousand US dollars.
4.3. Payment is done by the CUSTOMER by stages with the 50% advanced payment for
each of the stages. After each stage being finished CUSTOMER is supplied with
appropriate reports.
4.4. Final payment for the work done for the present Contract is made after
signing by CUSTOMER and SUPPLIER the protocol of delivery.
4.5. Payment for each stage of work is made by money transfer from the bank
account of CUSTOMER to the bank account of SUPPLIER.
5. RESPONSIBILITY
5.1. For not performing or not proper performing the obligations according the
present Contract SUPPLIER and CUSTOMER are responsible according the civil law
of Russia Federation.
5.2. Payment of fines and penalties does not release the sides from the
obligations according the Contract.
6. ADDITIONAL CONDITIONS OF THE CONTRACT
6.1. Integral condition of scheduled fulfillment of the present Contract is the
delivery by the CUSTOMER to the SUPPLIER samples of plasma panels and plasma
displays manufactured by FUJITSU, PLASMACO and NORITAKE in quantity of two
pieces of each type.
6.2. Works on each stage of the Contract start only after appropriate 50%
advance payment for that stage has been transferred to the account of the
SUPPLIER and in case the previous stages has been paid for. Otherwise of the
work on that stage and all the scheduled terms of subsequent stages of the
Contract shall by delayed by corresponding time period.
6.3. Contract can be terminated on mutual agreement of both sides at the end of
every given stage of the Schedule of work.
<PAGE>
6.4. CUSTOMER and SUPPLIER have equal rights for intellectual property created
in the process of working on this Contract if the other will not be agreed by
separate agreements or protocols.
7. ARBITRATION
All disputes are resolved according to the civil law of Russian Federation.
8. TERMS OF THE CONTRACT
The Contract starts at January 15, 1996 and finish at November 30, 1996, unless
the stages will be shifted according to the chapter 6 of the present Contract.
9. LEGAL ADDRESSES OF THE PARTIES
SUPPLIER CUSTOMER
Address: Russia, 119899, Moscow Address: 2435, North Boulevard,
Vorobjevy gory, NPI MSU Houston, Texas 77098-5101, USA.
"Microelectronics Systems" "S.I. Diamond Technology, Inc."
Bank Account: Bank of New York,
(One Wall Street, New York, N.Y. 10286, USA),
Account #890-0056-290 (USD)
Beneficiary bank "Stolichny",
S.W.I.F.T.STOLRUMM
in favor of "Microelectronics Systems"
account # 0002-242782-018
Integral parts of the present Contract are:
1. Protocol of agreement on the Contract price.
2. Schedule of work stages and payments.
SUPPLIER CUSTOMER
General director President
"Microelectronics Systems" "S.I. Diamond Technology, Inc."
//s// Boris V. Kogan //s// Howard K. Schmidt
"16" February 1996 r. "16" February 1996 r.
<PAGE>
EXHIBIT 10.03
Confidential treatment has been requested for portions of this exhibit. The copy
filed herewith omits the information subject to the confidentiality request.
Omissions are designated as "XXXXX".
Contract No. 27in02-96 Houston, Moscow, 25.02.96
This contract by and between SI Diamond Technology, Inc. (SIDT), (USA,
Houston) and High Technologies, Ltd. (HT), (Russia, Moscow).
1. Subject of the contract.
1. SIDT orders from HT: XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXXXXX
2. HT agrees to provide this research work in accordance with schedule in
appendix No. 1 to this Contract.
3. SIDT permits HT at its sole discretion to subcontract any third party
to fulfill the work.
4. The works are splitted into three stages, each of stages if not a
separate finished work.
2. Reports and payments.
1. The price for the works of HT under this Contract is 300000 USD (Three
hundred thousands USD).
2. SIDT shall pay for the research and development works provided by HT
via bank order to bank account of HT for each finished stage of work. The terms
and prices of the stages are specified by the schedule in the appendix No. 1 to
this Contract.
3. HT shall deliver to SIDT the reports on each finished stage in
accordance with schedule (appendix No. 1). At the end of the Contract HT shall
deliver to SIDT the Final Report.
4. Terms and prices in schedule may be changed by mutual written agreement
of the Parties.
3. Duration of the Contract.
Start: 01.03.96. Finish: 28.02.97
4. Legal addresses of the parties.
1. HT: Russia, Moscow, 119899, MSU, Nuclear Phisics Institute, High
Technologies, Ltd.
<PAGE>
Bank account: Bank of New York, (New York), account #890-0060-689 "Avtobank",
in favor of "Akobank" account #08101185, in favor of "High Technology, Ltd."
#1070083/001.
2. SI Diamond Technology, Inc.: USA, 2435 North Boulevard, Houston, Texas
77098-5105.
5. Signatures.
SI Diamond Technology, Inc. High Technologies, Ltd.
//s// H. Schmidt //s// A. Olevanov
President General Director
<PAGE>
EXHIBIT 10.04
Confidential treatment has been requested for portions of this exhibit. The copy
filed herewith omits the information subject to the confidentiality request.
Omissions are designated as "XXXXX".
CONTRACT No. 26in02-96 Houston, Moscow, 25.02.96
This contract by and between SI Diamond Technology, Inc., (SIDT), (USA,
Houston) and High Technologies, Ltd. (HT), (Russia, Moscow).
1. Subject of the contract.
1. SIDT orders from HT: XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXX
2. HT agrees to provide this research work in accordance with schedule in
appendix No. 1 to this Contract.
3. SIDT permits HT at its sole discretion to subcontract any third party
to fulfill the work.
4. The Work are splitted into three stages, each of states is not a
separate finished work.
2. Reports and payments.
1. The price for the works of HT under this Contract is 200000 USD (Two
hundred thousand USD).
2. SIDT shall pay for the research and development works provided by HT
via bank order to bank account of HT for each finished stage of work. The terms
and prices of the stages are specified by the schedule in the appendix No. 1 of
this Contract.
3. HT shall deliver to SIDT the reports on each finished stage in
accordance with schedule (appendix No. 1). At the end of the Contract HT shall
deliver to SIDT the Final Report.
4. Terms and prices in schedule may be changed by mutual written agreement
of the Parties.
3. Duration of the Contract.
Start: 01.03.96. Finish 28.02.97
4. Legal addresses of the parties.
1. HT: Russia, Moscow, 119899, MSU, Nuclear Phisics Institute, High
Technologies, Ltd.
<PAGE>
Bank account: Bank of New York, (New York), account #890-0060-689 "Avotbank",
in favor of "Akobank" account #08101185, in favor of "High Technology Ltd."
#1070083/001.
2. SI Diamond Technology, Inc.: USA, 2435 North Boulevard, Houston, Texas
77098-5015.
5. Signatures.
SI Diamond Technology, Inc. High Technologies, Ltd.
//s// H. Schmidt //s// A. Olevanov
President General Director
<PAGE>
EXHIBIT 11
SI DIAMOND TECHNOLOGY, INC.
COMPUTATION OF (LOSS) PER COMMON SHARE
<TABLE>
<CAPTION>
For the Three Months Ended March 31,
-------------------------------------
1996 1995
-------------------------------------
Computation of (loss) per common share:
<S> <C> <C>
Net loss from continuing operations $(5,170,551) $(1,651,493)
Net loss from discontinued operations (999,500) (280,533)
----------- -----------
Net loss $(6,170,051) $(1,932,026)
----------- -----------
Weighted average number of common
shares outstanding 10,859,724 7,681,707
Loss per common share from continuing
operations $ (0.48) $ (0.21)
Loss per common share from discontinued
operations (0.09) (0.04)
----------- -----------
Loss per common share $ (0.57) $ (0.25)
=========== ===========
Computation of (loss) per common share
assuming full dilution (A):
Net loss from continuing operations $(5,170,551) $(1,651,493)
Net loss from discontinued operations (999,500) (280,533)
----------- -----------
Net loss $(6,170,051) $(1,932,026)
----------- -----------
Weighted average number of common
shares outstanding 10,859,724 7,681,707
Common shares issuable under
outstanding convertible instruments,
stock options and warrants 4,598,515 2,136,875
Less shares assumed repurchased with
proceeds (1,902,258) (1,561,222)
----------- -----------
13,555,981 8,257,360
Loss per common share from continuing
operations $ (0.38) $ (0.20)
Loss per common share from discontinued
operations (0.07) (0.03)
----------- -----------
Loss per common share $ (0.45) $ (0.23)
=========== ===========
</TABLE>
(A) This calculation is submitted in accordance with the Securities and Exchange
Act of 1934 Release No. 9083 although it is contrary to APB Opinion 15 because
it does not result in any dilution.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM * 10-QSB AND
IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1996
<PERIOD-END> MAR-31-1996
<CASH> 5,095,026
<SECURITIES> 0
<RECEIVABLES> 442,888
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 6,577,031
<PP&E> 1,590,631
<DEPRECIATION> 83,610
<TOTAL-ASSETS> 10,414,963
<CURRENT-LIABILITIES> 2,170,757
<BONDS> 0
0
1,290
<COMMON> 10,863
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 10,414,963
<SALES> 848,367
<TOTAL-REVENUES> 848,367
<CGS> 1,052,114
<TOTAL-COSTS> 6,250,117
<OTHER-EXPENSES> (231,199)
<LOSS-PROVISION> 350,000
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (5,170,551)
<INCOME-TAX> 0
<INCOME-CONTINUING> (5,170,551)
<DISCONTINUED> (649,500)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (6,170,051)
<EPS-PRIMARY> (.057)
<EPS-DILUTED> (.057)
</TABLE>
