<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) 3/7/97
--------------
SI DIAMOND TECHNOLOGY, INC.
(Exact name of Registrant as specified in charter)
TEXAS 1-11602 76-0273345
(State of (Commission (IRS Employer
Incorporation) File Number) Identification Number)
12100 Technology Boulevard
Austin, Texas 78727
(Address of principal executive office) (Zip Code)
Registrant's telephone number, including area code: (512) 331-6200
Not Applicable
--------------
(Former name or former address, if changed since last report)
----------------------
----------------------
<PAGE>
Item 5. Other Events
On March 11, 1997, the Company issued 1,500 shares of its Series F
Preferred Stock in a transaction under Regulation D promulgated under the
Securities Act of 1933, as amended (the "Securities Act"), for which the Company
received $1,500,000 (less a 10% commission). As of March 21, 1997 the Company
also had a subscription for the issuance of an additional 200 shares of the
Series F Preferred Stock for which it will receive an additional $200,000 (less
a 10% commission). The Company has authorized the issuance of up to 2,500 shares
of Series F Preferred Stock. The Series F Preferred Stock does not pay any
dividends and has no voting rights except as otherwise required by law.
The shares of Series F Preferred Stock are convertible into shares of the
Company's common stock, par value $.001 (the "Common Stock"), at any time after
the earlier of (i) the effective date of a registration statement covering the
shares of Common Stock into which the Series F Preferred Stock is convertible
(the "Conversion Shares"), or (ii) 90 days after the date of issuance of the
Series F Preferred Stock. Each share of Series F Preferred Stock is convertible
into the number of shares of Common Stock determined by dividing (i) the product
of (a) the original Issue price of the shares of Series F Preferred Stock,
multiplied by (b) .04 times the number of years (or portion thereof) from the
date of issuance of the Series F Preferred Stock, by (ii) the Conversion Price
(as hereinafter defined). The "Conversion Price" shall be the lesser of (x)
$1.75 or (y) 80% of the ten-day average closing bid price of the Common Stock
prior to the conversion date. Upon conversion, if the Conversion Price is $.75
or less the Company shall have the right to redeem the Series F Preferred Stock
being converted in cash by paying the holder an amount equal to the number of
Conversion Shares it would have received had conversion taken place multiplied
by the Conversion Price. Each share of Series F Preferred Stock outstanding on
March 10, 1999 automatically shall be converted into Common Stock on such date
in accordance with the Conversion Price and the other terms of conversion then
in effect.
Under the Regulation D Subscription Agreement between the Company and the
purchasers of the Series F Preferred Stock (the "Reg D Subscription Agreement"),
the Company has agreed not to issue any debt or equity securities for cash in
private (non-registered) capital raising transactions for 90 days without
obtaining the prior written approval of holders of a majority of the Series F
Preferred Stock then outstanding. Notwithstanding this limitation, (i) the
Company may make an offering of convertible debentures pursuant to Regulation S
(see Item 9 below) and (ii) because the Company did not issue Series F Preferred
Stock with a stated value of $2,500,000 by March 20, 1997, the Company may after
such date make an offering or otherwise raise additional funds up to a net
amount to be received by the Company of $800,000.
The Company and the purchasers of the Series F Preferred Stock are also
parties to a Registration Rights Agreement. Pursuant to such agreement the
Company will file a registration statement within 30 days covering the resale of
the Conversion Shares. The Company is obligated to keep the registration
statement effective for one year. If the registration statement is not declared
effective within 90 days as a result of the Company's failure to file or failure
to diligently strive to have it declared effective by such date, the Company
shall pay the holders 1.5% of the stated value of the Series F Preferred Stock
sold per month until the registration statement is declared effective, payable
in Common Stock.
The Statement of Resolutions regarding the Series F Preferred Stock, the
Reg D Subscription Agreement and the Registration Rights Agreement are filed as
exhibits hereto and the foregoing description is qualified it its entirety by
reference thereto.
<PAGE>
Item 7. Financial Statements and Exhibits
3.1 Statement of Resolutions Establishing and Designating the Company's
Series F Preferred Stock, as filed with the Secretary of State of the State of
Texas on March 10, 1997.
4.1 Form of Subscription Agreement by and between the Company and the
Holders of the Company's Eight Percent (8%) Convertible Debentures.
4.2 Form of the Company's Eight Percent (8%) Convertible Debentures.
4.3 Form of Regulation D Subscription Agreement by and between the
Company and the Holders of the Company's Series F Preferred Stock.
4.4 Form of Registration Rights Agreement by and between the Company and
the Holders of the Company's Series F Preferred Stock.
Item 9. Sales of Equity Securities Pursuant to Regulation S.
On March 7, 1997, the Company issued an 8% Convertible Debenture (the
"Debenture") in the principal amount of $555,555 pursuant to Regulation S
promulgated under the Securities Act. After commissions, the Company received
net proceeds of $500,000. The purchaser of the Debenture was Income Partnership
of America, Ltd., a Belize corporation (the "Purchaser"). The Debenture matures
on March 7, 1999. Interest will accrue and also be payable (either in cash or
Common Stock, at the Company's option) on the maturity date.
The Debenture is convertible into Common Stock at any time after 60 days.
The conversion price shall be 75% of the average of the closing bid price per
share of Common Stock on the NASDAQ Small Cap Market (or such other principal
market for such Common Stock as the case may be) for the 10 consecutive trading
days immediately prior to the conversion date.
The Purchaser, or its affiliates, also agreed to purchase an additional
Debenture, of the same principal amount and under identical terms and
conditions, within 60 days.
The Subscription Agreement between the Company and the Purchaser and the
Debenture are filed as exhibits hereto and the foregoing description is
qualified in its entirety by reference thereto.
2
<PAGE>
Pursuant to the Securities Act of 1934, the Registrant has duly caused
this report to be signed on its behalf by the undersigned, thereto duly
authorized.
SI DIAMOND TECHNOLOGY, INC.
Dated: March 21, 1997 By: /s/ Douglas P. Baker
--------------------------
Douglas P. Baker
Vice President and
Chief Financial Officer
3
<PAGE>
EXHIBIT 3.1
STATEMENT OF RESOLUTIONS OF BOARD OF DIRECTORS
OF SI DIAMOND TECHNOLOGY, INC.
ESTABLISHING AND DESIGNATING SERIES OF PREFERRED STOCK
AS "SERIES F PREFERRED STOCK" AND FIXING AND
DETERMINING THE RELATIVE RIGHTS AND PREFERENCES THEREOF
TO THE SECRETARY OF STATE OF THE STATE OF TEXAS:
SI Diamond Technology, Inc., a Texas corporation (the "Corporation")
pursuant to the provisions of Article 2.13 of the Texas Business Corporation
Act, submits the following statement for the purpose of establishing and
designating a series of shares and fixing and determining the preferences,
limitations and relative rights thereof:
I. The name of the corporation is SI DIAMOND TECHNOLOGY, INC.
II. The Amended and Restated Articles of Incorporation of the Corporation
authorizes the issuance of up to 2,000,000 shares of Preferred Stock, $1.00 par
value per share, and expressly vests in the Board of Directors of the
Corporation the authority provided therein to issue any or all of said shares in
one or more series and by resolution or resolutions to establish the
designation, number, full or limited voting powers, or the denial of voting
powers, preferences and relative, participating, optional, and other special
rights and the qualifications, limitations, restrictions, and other
distinguishing characteristics of each series to be issued.
III. The Board of Directors of the Corporation, pursuant to the authority
expressly vested in it as aforesaid, has adopted the following resolutions
creating a Series F issue of Preferred Stock and that such resolution was duly
adopted by all necessary action on the part of the Corporation on March 7, 1997:
RESOLVED, that Two Thousand Five Hundred (2,500) of the 2,000,000
authorized shares of Preferred Stock of the Corporation shall be designated
Series F Preferred Stock (the "Series F Preferred Stock") and shall possess the
rights and privileges set forth below:
A. Par Value, Stated Value, Accretion Rate, Purchase Price and
Certificates.
1. Each share of Series F Preferred Stock shall have a par value of
$1.00, and a stated value (face amount) of One Thousand Dollars ($1,000) (the
"Stated Value"), with an accretion rate of four percent (4%) per annum on the
Stated Value as set forth herein.
2. The Series F Preferred Stock shall be offered at a purchase
price of One Thousand Dollars ($1,000) per share.
<PAGE>
3. Certificates representing the shares of Series F Preferred Stock
purchased shall be issued by the Corporation to the purchasers immediately upon
acceptance of the subscriptions to purchase such shares.
B. Dividends.
1. The Series F Preferred Stock will bear no dividends, and the
holders of the Series F Preferred Stock shall not be entitled to the receipt of
dividends on the Series F Preferred Stock.
C. Liquidation Preference.
1. In the event of any liquidation, dissolution or winding-up of
the Corporation, either voluntary or involuntary (a "Liquidation"), the holders
of shares of the Series F Preferred Stock then issued and outstanding shall be
entitled to be paid out of the assets of the Corporation available for
distribution to its shareholders, whether from capital, surplus or earnings,
before any payment shall be made to the holders of shares of the Common Stock or
upon any other series of Preferred Stock of the Corporation with a liquidation
preference subordinate to the liquidation preference of the Series A or Series E
Preferred Stock, an amount per share equal to the sum of (i) the Stated Value
and (ii) an amount equal to four percent (4%) of the Stated Value multiplied by
the fraction N/365, where N equals the number of days elapsed since the issue
date of the Series F Preferred Stock. If, upon any Liquidation of the
Corporation, the assets of the Corporation available for distribution to its
shareholders shall be insufficient to pay the holders of shares of the Series F
Preferred Stock and the holders of any other series of Preferred Stock with a
liquidation preference equal to the liquidation preference of the Series F
Preferred Stock the full amounts to which they shall respectively be entitled,
the holders of shares of the Series F Preferred Stock and the holders of any
other series of Preferred Stock with liquidation preference equal to the
liquidation preference of the Series F Preferred Stock shall receive all of the
assets of the Corporation available for distribution and each such holder of
shares of the Series F Preferred Stock and the holders of any other series of
Preferred Stock with a liquidation preference equal to the liquidation
preference of the Series F Preferred Stock shall share ratably in any
distribution in accordance with the amounts due such shareholders. In the event
of Liquidation, the Series F Preferred Stock shall be subordinate to Series A
and Series E Preferred Stock. After payment shall have been made to the holders
of shares of the Series F Preferred Stock of the full amount to which they shall
be entitled, as aforesaid, the holders of shares of the Series F Preferred Stock
shall be entitled to no further distributions thereon and the holders of shares
of the Common Stock and of shares of any other series of stock of the
Corporation shall be entitled to share, according to their respective rights and
preferences, in all remaining assets of the Corporation available for
distribution to its shareholders.
2. A merger or consolidation of the Corporation with or into any
other corporation, or a sale, lease, exchange, or transfer of all or any part of
the assets of the Corporation which shall not in fact result in the Liquidation
(in whole or in part) of the Corporation
2
<PAGE>
and the distribution of its assets to its shareholders shall not be deemed to be
a voluntary or involuntary Liquidation (in whole or in part) of the Corporation.
D. Conversion of Series F Preferred Stock.
The holders of Series F Preferred Stock shall have the following
conversion rights:
1. Right to Convert. Each share of Series F Preferred Stock
shall be convertible, on the Conversion Dates and at the Conversion Prices set
forth below, into fully paid and nonassessable shares of Common Stock (sometimes
referred to herein as "Conversion Shares").
2. Mechanics of Conversion. Each holder of Series F Preferred
Stock who desires to convert the same into shares of Common Stock shall provide
notice ("Conversion Notice") via telecopy (facsimile) on a business day, during
business hours in Austin, Texas, to the Corporation, and a facsimile of the
Conversion Notice shall be transmitted to the Corporation's Transfer Agent at
the same time as transmission is made to the Corporation. On the same day, the
original Conversion Notice shall be delivered to the Corporation but the
certificate or certificates representing the Series F Preferred Stock for which
conversion is elected, shall be delivered to the Transfer Agent by international
courier, duly endorsed. The later of the date upon which the Corporation
receives the original Conversion Notice or the date the Transfer Agent receives
the Certificates representing the Series F Preferred Stock for which conversion
is elected, shall be a "Notice Date."
Upon receipt by the Corporation of a Conversion Notice, as provided above,
the Corporation shall immediately send to the holder, via telecopy (facsimile),
a confirmation of receipt of the Conversion Notice which shall specify that the
Conversion Notice has been received and the name and telephone number of a
contact person at the Corporation whom the holder should contact regarding
information related to the conversion. The Corporation shall use all reasonable
efforts to issue and deliver within three (3) business days after the Notice
Date, to such holder of Series F Preferred Stock at the address of the holder on
the stock books of the Corporation, a certificate or certificates for the number
of shares of Common Stock to which the holder shall be entitled as aforesaid;
provided that the original shares of Series F Preferred Stock to be converted
are received by the transfer agent or the Corporation within three (3) business
days after the receipt of the original Conversion Notice and the person or
persons entitled to receive the shares of Common Stock issuable upon such
conversion shall be treated for all purposes as the record holder or holders of
such shares of Common Stock on the Notice Date. If the original certificate(s)
representing the shares of Series F Preferred Stock to be converted are not
received by the transfer agent or the Corporation within three (3) business days
after the receipt of the original Conversion Notice, the Conversion Notice shall
become null and void.
3. Lost or Stolen Certificates. Upon receipt by the Corporation
of evidence reasonably satisfactory to it of the loss, destruction, theft or
mutilation of any Series F Preferred Stock certificates (the "Certificates") and
(in the case of loss, theft or destruction) of indemnity or security reasonably
satisfactory to the Corporation, and upon surrender and cancellation
3
<PAGE>
of the Certificates, if mutilated, the Corporation shall execute and deliver new
Series F Preferred Stock Certificates of like tenor and date. However, the
Corporation shall not be obligated to re-issue such lost or stolen Series F
Preferred Stock Certificates if the holder thereof contemporaneously requests
the Corporation to convert such Series F Preferred Stock into Common Stock, in
which event the Corporation shall be entitled to rely on an affidavit of loss,
destruction or theft of the Series F Preferred Stock Certificate (and the
receipt of indemnity or security reasonably satisfactory to the Corporation) or,
in the case of mutilation, tender of the mutilated certificate, and shall issue
the Conversion Shares.
4. Conversion Dates. The shares of Series F Preferred Stock shall
become convertible into shares of Common Stock at any time commencing after the
earlier of (i) the effective date of a registration statement covering the
Conversion Shares; or (ii) ninety (90) days after the date of issuance of the
shares of Preferred Stock. The date on which a Conversion Notice is transmitted
by facsimile to the Corporation shall be referred to as a "Conversion Date".
5. Conversion Formula/Conversion Price. Each share of Series F
Preferred Stock shall be convertible into the number of shares of Common Stock
in accordance with the following formula (the "Conversion Formula"):
[(.04) x (N/365) x (1,000)] + 1,000
-----------------------------------
Conversion Price
where,
N = the number of days between (i) the issue date of the Series F
Preferred Stock being converted , and (ii) the Notice Date.
Conversion
Price = the lesser of (x) $1.75 or (y) 80% of the ten (10) day
average Closing Bid Price prior to the Conversion Date.
For purposes hereof, the term "Closing Bid Price" shall mean the closing
bid price on the Nasdaq SmallCap Stock Market, or if no longer traded thereon,
the closing bid price on the principal national securities exchange on which the
Common Stock is so traded.
Upon Conversion, if the Conversion Price is $.75 or less, the Company shall
have the right to redeem in cash by paying the Holder an amount equal to the
number of Common Shares it would have received had Conversion taken place
multiplied by the Conversion Price.
6. Automatic Conversion. Each share of Series F Preferred Stock
outstanding on March 10,1999 automatically shall be converted into Common Stock
on such date in
4
<PAGE>
accordance with the Conversion Formula and the Conversion Price then in effect,
and March 10, 1999 shall be deemed to be the Notice Date and Conversion Date
with respect to such conversion.
7. No Fractional Shares. If any conversion of the Series F
Preferred Stock would create a fractional share of Common Stock or a right to
acquire a fractional share of Common Stock, no fractional shares shall be issued
and an equivalent of the fractional share shall be paid in cash.
8. Reservation of Stock Issuable Upon Conversion. The Corporation
shall at all times reserve and keep available out of its authorized but unissued
shares of Common Stock, solely for the purpose of effecting the conversion of
the shares of the Series F Preferred Stock, such number of its shares of Common
Stock as shall from time to time be sufficient to effect the conversion of all
then outstanding shares of the Series F Preferred Stock; and if at any time the
number of authorized but unissued shares of Common Stock shall not be sufficient
to effect the conversion of all then outstanding shares of the Series F
Preferred Stock, the Corporation will take such corporate action as may be
necessary to increase its authorized but unissued shares of Common Stock to such
number of shares as shall be sufficient for such purpose.
9. Adjustment to Conversion Price.
(a) If, prior to the conversion of all shares of Series F
Preferred Stock, the number of outstanding shares of Common Stock is increased
by a stock split, stock dividend, or other similar event, the Conversion Price
shall be proportionately reduced, or if the number of outstanding shares of
Common Stock is decreased by a combination or reclassification of shares, or
other similar event, the Conversion Price shall be proportionately increased.
(b) If, prior to the conversion of all shares of Series F
Preferred Stock, there shall be any merger, consolidation, exchange of shares,
recapitalization, reorganization, or other similar event, as a result of which
shares of Common Stock of the Corporation shall be changed into the same or a
different number of shares of the same or another class or classes of stock or
securities of the Corporation or another entity, then the holders of Series F
Preferred Stock shall thereafter have the right to purchase and receive upon
conversion of shares of Series F Preferred Stock, upon the basis and upon the
terms and conditions specified herein and in lieu of the shares of Common Stock
immediately theretofore issuable upon conversion, such shares of stock and/or
securities as may be issued or payable with respect to or in exchange for the
number of shares of Common Stock immediately theretofore purchasable and
receivable upon the conversion of shares of Series F Preferred Stock held by
such holders had such merger, consolidation, exchange of shares,
recapitalization or reorganization not taken place, and in any such case
appropriate provisions shall be made with respect to the rights and interests of
the holders of the Series F Preferred Stock to the end that the provisions
hereof (including, without limitation, provisions for adjustment of the
Conversion Price and of the number of shares issuable upon conversion of the
Series F Preferred Stock) shall thereafter be applicable, as nearly as may be
practicable in relation to any shares of stock or securities thereafter
deliverable upon the exercise hereof. The Corporation shall not effect any
5
<PAGE>
transaction described in this subsection unless the resulting successor or
acquiring entity (if not the Corporation) assumes by written instrument the
obligation to deliver to the holders of the Series F Preferred Stock such shares
of stock and/or securities as, in accordance with the foregoing provisions, the
holders of the Series F Preferred Stock may be entitled to purchase.
(c) If any adjustment under this subsection would create a
fractional share of Common Stock or a right to acquire a fractional share of
Common Stock, no fractional shares shall be issued upon conversion and an
equivalent of the fractional share shall be paid in cash.
E. Voting. Except as otherwise provided below or by the Texas
Business Corporation Act, the holders of the Series F Preferred Stock shall have
no voting power whatsoever, and no holder of Series F Preferred Stock shall vote
or otherwise participate in any proceeding in which actions shall be taken by
the Corporation or the shareholders thereof or be entitled to notification as to
any meeting of the Board of Directors or the shareholders.
Notwithstanding the above, the Corporation shall provide holders of the
Series F Preferred Stock ("Holders") with notification of any meeting of the
shareholders regarding any major corporate events affecting the Corporation. In
the event of any taking by the Corporation of a record of its shareholders for
the purpose of determining shareholders who are entitled to receive payment of
any dividend or other distribution, any right to subscribe for, purchase or
otherwise acquire any share of any class or any other securities or property
(including by way of merger, consolidation or reorganization), or to receive any
other right, or for the purpose of determining shareholders who are entitled to
vote in connection with any proposed sale, lease or conveyance of all or
substantially all of the assets of the Corporation, or any proposed liquidation,
dissolution or winding up of the Corporation, the Corporation shall mail a
notice to the Holders, at least ten (10) days prior to the record date specified
therein, of the date on which any such record is to be taken for the purpose of
such dividend, distribution, right or other event, and a brief statement
regarding the amount and character of such dividend, distribution, right or
other event to the extent known at such time.
To the extent that, under Texas law, the vote of the Holders, voting
separately as a class, is required to authorize a given action of the
Corporation, the affirmative vote or consent of the Holders of at least a
majority of the shares of the Series F Preferred Stock represented at a duly
held meeting at which a quorum is present or by written consent of the shares as
required by Texas law of Series F Preferred Stock (except as otherwise may be
required under Texas law) shall constitute the approval of such action by the
class. To the extent that under Texas law the Holders are entitled to vote on a
matter with holders of Common Stock, voting together as one (1) class, each
share of Series F Preferred Stock shall be entitled to a number of votes equal
to the number of shares of Common Stock into which it is then convertible using
the record date for the taking of such vote of shareholders as the date as of
which the Conversion Price is calculated. The Holders also shall be entitled to
notice of all shareholder meetings or written consents with respect to which
they would be entitled to vote, which notice would be provided pursuant to the
Corporation's by-laws and applicable statutes.
6
<PAGE>
F. Protective Provisions. So long as shares of Series F Preferred
Stock are outstanding, the Corporation shall not, without first obtaining the
approval (by vote or written consent, as provided by law) of the Holders of at
least seventy-five percent (75%) of the then outstanding shares of Series F
Preferred Stock:
(a) alter or change the rights, preferences or privileges of the
Series F Preferred Stock so as to affect adversely the Series F Preferred Stock;
(b) create any new class or series of stock or issue any capital
stock senior to or having a preference over or parity with the Series F
Preferred Stock with respect to payments upon Liquidation or increase the number
of authorized shares of Series F Preferred Stock or change the Stated Value
thereof; or
(c) do any act or thing not authorized or contemplated by this
Resolution which would result in taxation of the holders of shares of the Series
F Preferred Stock under Section 305 of the Internal Revenue Code of 1986, as
amended (or any comparable provision of the Internal Revenue Code as hereafter
from time to time amended).
G. Status of Converted Stock. In the event any shares of Series F
Preferred Stock shall be converted as contemplated by this Statement, the shares
so converted shall be canceled, shall return to the status of authorized but
unissued Preferred Stock of no designated class or series, and shall not be
issuable by the Corporation as Series F Preferred Stock.
H. Taxes. All shares of Common Stock issued upon conversion of
Series F Preferred Stock will be validly issued, fully paid and nonassessable.
The Corporation shall pay any and all documentary stamp or similar issue or
transfer taxes that may be payable in respect of any issue or delivery of shares
of Common Stock on conversion of Series F Preferred Stock pursuant hereto. The
Corporation shall not, however, be required to pay any tax which may be payable
in respect of any transfer involved in the issue and delivery of shares of
Common Stock in a name other than that in which the Series F Preferred Stock so
converted were registered, and no such issue or delivery shall be made unless
and until the person requesting such transfer has paid to the Corporation the
amount of any such tax or has established to the satisfaction of the Corporation
that such tax has been paid or that no such tax is payable.
7
<PAGE>
FURTHER RESOLVED, that the statements contained in the foregoing
resolutions creating and designating the said Series F Preferred Stock and
fixing the number, powers, preferences and relative, optional, participating,
and other special rights and the qualifications, limitations, restrictions, and
other distinguishing characteristics thereof shall, upon the effective date of
said series, be deemed to be included in and be a part of the Amended and
Restated Articles of Incorporation of the Corporation pursuant to the provisions
of the Texas Business Corporation Act.
Signed on March 7, 1997.
SI DIAMOND TECHNOLOGY, INC.
By: /s/ MARC W. ELLER
______________________________________
Title: Chief Executive Officer
___________________________________
Attest:
By:/s/ Trey Fecteau
------------------------
Title: Senior Vice President
& Corporate Secretary
8
<PAGE>
EXHIBIT 4.1
Dated 24 February 1997
---------------------------------------------------
(1) INCOME PARTNERSHIP OF AMERICA, LTD.
(2) SI DIAMOND TECHNOLOGY, INC.
---------------------------------------------------
SUBSCRIPTION AGREEMENT
relating to the purchase of a Convertible Debenture
issued by SI Diamond Technology, Inc.
---------------------------------------------------
<PAGE>
AGREEMENT dated 24 February 1997
PARTIES:
(1) INCOME PARTNERSHIP OF AMERICA, LTD., a Belize Corporation whose registered
office is located at 35 Barrack Road, Belize City, Belize (the "Purchaser")
(2) S I DIAMOND TECHNOLOGY, INC., a Texas corporation, whose registered office
is located at 12100 Technology Blvd., Austin, TX 78727 (the "Issuer")
RECITALS:
(A) The Issuer, a corporation whose common stock is publicly traded on the
NASDAQ Small Cap Market, has agreed to sell an 8% Convertible Debenture in
the principal amount of US$555,555.00, the agreed form of which is attached
as Schedule 1 (the "Debenture").
(B) The Purchaser, a non-US Person, as defined in Rule 902(o) of Regulation S,
promulgated under the US Securities Act of 1933, as amended (the "33
Act"), has agreed to subscribe for the Debenture on the terms set out
herein.
IT IS AGREED as follows:
1. Agreement to Subscribe; Purchase Price
The Purchaser hereby agrees to purchase the Debenture in the principal
amount of US$555,555.00 to be issued by the Issuer in the agreed form
attached hereto as Schedule 1. The Debenture and any securities obtainable
on the conversion thereof or as payment of interest thereon are collectively
hereinafter referred to as the "Securities."
2. Completion
The Purchaser shall pay the purchase price by delivering immediately
available funds in United States Dollars to the Escrow Agent for delivery of
the Debenture to the Purchaser, pursuant to the instructions contained in
the Escrow Agreement, the agreed form of which is attached hereto as
Schedule 2. Payment in the amount of US$555,555.00, less withheld commission
of 10%, shall be made by wire transfer of immediately available funds to the
issuer's bank account, by the Escrow Agent, pursuant to instructions to be
furnished by the Issuer.
2
<PAGE>
3. Representations (Offshore Transaction); Access to Information; Independent
Investigation.
3.1 Purchaser represents and warrants to, and covenants with, Issuer as
follows:
3.1.1 Purchaser is a Belize corporation and does not do business in the
United States;
3.1.2 At the time the decision to buy the Securities was made and this
Agreement was executed, Purchaser (and Purchaser's agents
involved in the decision making process) was outside the United
States;
3.1.3 Purchaser is purchasing the Securities for its own account and
not on behalf of or for the account or benefit of any US person,
and a sale of any of the Securities has not been prearranged with
a purchaser in the United States;
3.1.4 All offering documents and information received by Purchaser
include statements to the effect that the Securities have not
been registered under the 33 Act and may not be offered or sold
in the United States or to US Persons unless the Securities are
registered under the 33 Act or unless an exemption from the
registration requirements of the 33 Act is available.
3.1.5 Purchaser acknowledges that the purchase of the Securities
involves a high degree of risk, including those disclosed in the
SEC Filings (as subsequently defined), and further acknowledges
that it can bear the economic risk of the purchase of the
Securities, including the total loss of its investment.
3.1.6 Purchaser understands that the Securities are being offered and
sold to it in reliance on specific exemptions from the
registration requirements of Federal and State securities laws
and that the Issuer is relying upon the truth and accuracy of the
representations, warranties, agreements, acknowledgments and
understandings of Purchaser set forth herein in order to
determine the applicability of such exemptions and the
suitability of Purchaser to acquire the Securities.
3.1.7 The purchase of the Securities by Purchaser is not a transaction
(or any element of a series of transactions) that is
3
<PAGE>
part of any plan or scheme to evade the registration provision of the
33 Act.
3.2 Purchaser acknowledges that the Purchaser has been furnished with or has
acquired copies of the Issuer's most recent Annual Report on Form 10-KSB
filed with the Securities and Exchange Commission, and all Forms 10-QSB,
8-K, and S-3, and all amendments thereof filed in 1996 and thereafter;
through the date of this agreement (collectively "SEC Filings").
3.3 Purchaser acknowledges that Purchaser, in making the decision to purchase
the Securities, has relied upon independent investigations made by it and
its purchaser representatives, has, prior to any sale to it, been given
access and the opportunity to examine all material books and records of the
Issuer, all material contracts and documents and an opportunity to ask
questions of, and to receive answers from Issuer or any persons acting on
its behalf concerning the terms and conditions of the issuance of the
Securities or the Issuer. Purchaser and its advisors have been furnished
with access to all publicly available materials relating to the business,
finances, and operation of the Issuer and its subsidiaries and materials
relating to the Issuance of the Securities which have been requested.
Purchaser and its advisors have received complete and satisfactory answers
to any such inquiries.
3.4 Purchaser is highly knowledgeable and sophisticated in investing and
analyzing proposed investments and financial opportunities such as those
involved in this transaction; and Purchaser has the ability to determine
and require the disclosure of any of Issuer's Information needed for
Purchaser to make an informed investment decision.
3.5 Purchaser understands that no federal or state agency, or any other
governmental body has passed on or made any recommendation or endorsement
of the Securities.
3.6 Purchaser has retained independent securities counsel, admitted to practice
in the United States, to advise it in connection with this transaction.
Further, Purchaser shall cooperate with the Issuer, and shall provide the
Issuer in a timely manner with all the information concerning the Purchaser
requested by the Issuer in connection with the Issuer's reporting
requirements under the Securities Exchange Act of 1934, as amended, (the
"Exchange Act"), all other applicable securities laws and all listing
requirements of securities exchanges and the NASDAQ Stock Market, Inc.
4
<PAGE>
3.7 Purchaser agrees that so long as any part of the Debenture remains
outstanding, the Purchaser will not directly or indirectly, or through
one or more intermediaries, maintain or cause to be maintained by
others, any short position in the securities of the Company.
3.8 Purchaser agrees that it will not sell, assign, pledge, hypothecate, or
otherwise transfer the Debenture.
4. Issuer Representations.
4.1 Issuer is in full compliance, to the extent applicable, with all
reporting obligations under either Section 12(b), or 15(d) of the
Exchange Act. Issuer has registered its common stock pursuant to
Section 12 of the Exchange Act and the common stock is traded on the
NASDAQ Small Cap Market. Issuer shall make all filings required under
securities laws while the Debenture is outstanding.
4.2 In regard to this transaction, Issuer has not conducted any "directed
selling efforts" as that term is defined in Rule 902 of Regulation S,
nor has Issuer conducted any general solicitation relating to the offer
and sale of the Securities to persons resident within the United
States, or any US person.
4.3 The Issuer has full power and authority to enter into the transactions
contemplated by this agreement.
5. Legend on Debenture
The following legend shall be placed upon the Debenture:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED ("ACT"), OR THE SECURITIES LAWS
OF ANY OTHER JURISDICTION AND MAY NOT BE OFFERED, SOLD, TRANSFERRED,
PLEDGED, HYPOTHECATED OR OTHERWISE DISPOSED OF IN ANY MANNER IN THE UNITED
STATES OR TO US PERSONS, UNLESS THEY ARE REGISTERED UNDER SUCH ACT AND THE
SECURITIES LAWS OF ANY APPLICABLE JURISDICTION, OR UNLESS PURSUANT TO AN
EXEMPTION THEREFROM.
6. Exemption; Reliance on Representations.
5
<PAGE>
Purchaser understands that the Securities are not being registered under
the 33 Act and is purchasing the Securities in reliance on the exemption
from registration provided in Regulation S, promulgated under the 33 Act.
Purchaser agrees that it will not effect an offer and sale of the
Securities unless it has first obtained and provided to the Issuer and its
transfer agent an opinion of US counsel, reasonably acceptable to the
Issuer, to the effect that the offer and sale are being made in accordance
with the registration requirements of the 33 Act, or an applicable
exemption from registration thereunder.
7. Completion Date.
The date of issuance of the Debenture (the "Completion Date") shall be the
date of receipt of the Proceeds by the Issuer.
8. Conditions Precedent.
8.1 The Issuer's obligation to issue the Debenture is conditioned upon
delivery to the Escrow Agent by Purchaser of immediately available
funds, as aforesaid, and receipt by the Issuer of the Proceeds.
8.2 The Purchaser's obligation to purchase the Debenture is conditioned
upon delivery of the Debenture to the Purchaser by the Escrow Agent
and fulfillment by the Issuer of all conditions required of it prior
to closing which are contained in this Agreement.
9. Registration Rights.
The Purchaser shall be entitled to demand registration of the securities
into which the Debenture is convertible under the 33 Act in the event that
there is an amendment or change to Regulation S, or any other event, other
than those within the control of the Purchaser, which would result in the
Purchaser being denied an exemption from registration under the 33 Act for
the resale of such securities.
10. Due Diligence.
Prior to closing, the Issuer shall deliver to Purchaser its constitutional
documents, including Articles of Incorporation and By-laws, and all SEC
Filings, all press releases issued, and all documentation sent to
shareholders since 1 January 1996. Purchaser, in its sole discretion, may
decide not to close this transaction based upon the results of its due
diligence.
11. Board Approval.
6
<PAGE>
At Completion, the Issuer shall deliver a resolution of its Board of
Directors approving this transaction, satisfactory to Issuer, together with
a certificate executed by the Issuer's Secretary as to the validity of such
resolution.
12. Additional Transaction.
The Purchaser, or its affiliates, agrees to purchase and the Issuer agrees
to sell an additional Debenture, for the same principal amount and under
identical terms and conditions as this Agreement (excluding this Section)
within 60 days from the date of issuance of the original Debenture. Each
party shall be obligated to comply with this Section provided that the
other party is not in breach of the terms, conditions, and continuing
obligations of this Agreement.
13. Facsimile Signatures.
This Agreement may be executed in several counterparts, in person or by
facsimile, each of which may be deemed an original, but all of which
together shall be deemed one instrument.
EXECUTED on the day and year first above written
EXECUTED by INCOME PARTNERSHIP )
OF AMERICA, LTD. and signed by an )
officer duly authorised on its behalf )
EXECUTED by S I DIAMOND )
TECHNOLOGY, INC. and signed by an )
officer duly authorised on its behalf )
<PAGE>
EXHIBIT 4.2
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED ("ACT"), OR THE SECURITIES LAWS OF ANY
OTHER JURISDICTION AND MAY NOT BE, OFFERED SOLD, TRANSFERRED, PLEDGED,
HYPOTHECATED OR OTHERWISE DISPOSED OF IN ANY MANNER IN THE UNITED STATES OR
TO US PERSONS, UNLESS THEY ARE REGISTERED UNDER SUCH ACT AND THE SECURITIES
LAWS OF ANY APPLICABLE JURISDICTION, OR UNLESS PURSUANT TO AN EXEMPTION
THEREFROM.
8% CONVERTIBLE DEBENTURE
U.S.$555,555.00 Date of Issuance:_____________, 1997
For value received, S I Diamond Technology, Inc., a Texas corporation (the
"Issuer"), promises to pay to Income Partnership of America, Ltd. a Belize
corporation ("Lender") Five Hundred Fifty Five Thousand, Five Hundred Fifty Five
Dollars (US$555,555.00) (the "Principal"), plus interest ("Interest") at the
annual rate of 8% (the "Interest Rate") on the amount of Principal from time-to-
time remaining unpaid.
1. Payments.
(a) The entire unpaid Principal and any accumulated unpaid interest
thereon shall be due and payable on the second anniversary of the Date of
Issuance hereof (the "Maturity Date"), or as set forth in Section 7(a).
(b) Interest shall be calculated on the basis of the actual number of
days elapsed divided by three hundred sixty-five (365) and shall accrue and be
payable upon the Maturity Date, prepayment, or conversion of this Debenture.
The Issuer may elect to pay interest payments in cash or as Conversion Shares as
provided in Section 7(a) of this Debenture. The Issuer shall give notice to the
Lender of such election at least five business days prior to the date the
payment is due.
(c) All payments hereunder shall be made in lawful money of the United
States of America without set-off, deduction or counterclaim, except as provided
in Section 7 of this Debenture.
2. Application of Payments. All payments hereunder shall first be applied
to Interest and the remainder to Principal.
3. Prepayment. The Company may prepay all outstanding principal and accrued
interest on this Debenture without penalty after at least 10 days prior notice,
except that the Lender shall have the right to elect at least five business days
prior to the specified prepayment date to convert the then outstanding principal
and accrued interest into the Issuer's common stock, pursuant to Section 7(a) of
this Debenture.
4. Events of Default.
1
<PAGE>
(a) The following shall constitute events of default:
(1) The nonpayment by the Issuer within ten (10) days subsequent to
receipt of notice thereof given to Issuer by Lender that any payment of
Principal, Interest or other sum due Lender hereunder has not been paid.
(2) The termination of the Issuer's existence.
(3) The Issuer shall become the subject of an order or decree for
relief, or a liquidator, assignee, custodian, sequestrator, trustee, or receiver
shall be appointed for all or a substantial portion of its property in any
insolvency proceeding under any applicable bankruptcy, insolvency, or other
similar law now or hereafter in affect, for its reorganization, dissolution,
liquidation, or winding up, and such order, decree or appointment shall not be
discharged or such jurisdiction relinquished or vacated or stayed within ninety
(90) days.
(4) The Issuer voluntarily commences a bankruptcy or insolvency
proceeding or consents to the entry of an order for relief in connection
therewith or the appointment of a liquidator, assignee, custodian, sequestrator,
trustee, or receiver of all or a substantial part of its property.
(5) The Issuer violates any of the provisions of the Subscription
Agreement providing for the issuance of this Debenture.
(b) Upon the occurrence of an event of default, the Lender, at its option,
may declare the entire unpaid Principal balance of this Debenture, together with
accrued interest, to be immediately due and payable without notice or demand.
(c) In addition to payment of Interest and Principal, if upon an event of
default the Lender declares the entire unpaid Principal balance of this
Debenture, together with accrued Interest, to be immediately due and payable,
the Lender shall be entitled to recover from the Issuer all the Lender's costs
of collection, including the Lender's reasonable attorney's fees (whether
incurred in connection with any judicial, bankruptcy, reorganization,
administrative, appeals, or other proceedings and whether such fees or expenses
arise before proceedings are commenced or after entry of any judgment).
5. Waivers. The Issuer waives presentment for payment, demand, notice of
demand, notice of non-payment or dishonor, protest and notice of protest of this
Debenture, and all other notices in connection with the delivery, acceptance,
performance, default, or enforcement of the payment of this Debenture, except as
set forth in Section 4(a)(1), above.
6. Miscellaneous Provisions.
(a) The term Lender as used herein shall mean only Income Partnership of
America, Ltd., a Belize corporation, since this Debenture is not transferable.
(b) Time is of the essence in this Debenture.
2
<PAGE>
(c) The captions of sections of this Debenture are for convenience of
reference only, and shall not affect the construction or interpretation of any
of the terms and provisions set forth in this Debenture.
(d) If more than one person signs this Debenture, each is and shall be
jointly and severally liable hereunder.
(e) This Debenture shall be construed, interpreted, enforced, and governed
by and in accordance with the laws of the State of Texas (excluding the
principles thereof governing conflicts of law), and Federal law.
(f) If any provision or portion of this Debenture is declared or found by
a court of competent jurisdiction to be unenforceable or null and void, such
provision or portion thereof shall be deemed stricken and severed from this
Debenture, and the remaining provisions and portions thereof shall continue in
full force and effect.
(g) This Debenture may not be amended, extended, renewed, or modified nor
shall any waiver of any provision hereof be effective, except by an instrument
in writing executed by an authorized officer of the Lender. Any waiver of any
provision hereof shall be effective only in the specific instance and for the
specific purpose for which given.
7. Conversion Rights of Lender. The Lender shall have conversion rights as
follows:
(a) At the option of the Lender, the outstanding principal amount of this
Debenture (including accrued interest payments at the election of the Issuer)
shall be convertible, in whole or in part, into the common stock of the Issuer
(the "Conversion Shares") at any time after sixty (60) days from the Date of
Issuance until such time as the Debenture is paid or converted. For purposes of
determining the number of Conversion Shares to be issued to the Lender upon any
such conversion, the price of each of the Conversion Shares shall be
conclusively deemed to be seventy five percent (75%) of the average of the
closing bid price of a share of the Issuer's common stock on NASDAQ Small Cap
Market (or such other principal market for such common stock as the case may be)
for the ten consecutive trading days immediately prior to the Conversion Date,
as that term is hereinafter defined.
(b) The conversion of this Debenture shall be effected on the business day
during normal business hours in Austin, Texas that the Issuer receives notice
from the Lender of a conversion (the "Conversion Date") at the Issuer's
principal executive office, either by post or facsimile (the "Conversion
Notice"). In order to complete the conversion, the Debenture must be surrendered
at the principal executive office of the Issuer during normal business hours,
within five business days of receipt of the Conversion Notice. Failure to timely
surrender the Debenture shall render the Conversion Notice ineffective. The
Conversion Notice must specify the dollar amount to be converted and the address
outside the United States to which the certificate representing the Common
Shares issuable upon conversion shall be delivered and shall include reasonable
instructions for delivery thereof. The Issuer shall have five business days from
the receipt of the Debenture to deliver the Conversion Shares as requested in
the Conversion Notice. The Issuer shall also deliver within five business days,
from receipt of this Debenture, a replacement convertible
3
<PAGE>
debenture, in the same form as this Debenture, for the remaining principal
amount, if any, stating on the first page the original date of issue and the
date of reissue.
(c) No securities issuable upon conversion of this Debenture shall be
delivered in the United States, nor shall they be issued, unless Issuer has been
furnished: (i) a written certificate from a duly authorized representative of
Lender certifying that Lender is not a US Person and that Lender is not seeking
to convert the Debenture to obtain Common Stock for the benefit of or transfer
to a US Person; and (ii) an opinion of counsel admitted to practice in the
United States, reasonably acceptable to and addressed to Lender, opining that
the Common Stock into which the Debenture is sought to be converted either has
been registered under the Act or that an exemption from such registration is
available.
(d) No fractional shares or scrip representing fractional shares shall be
issued upon the conversion hereof. If any such conversion would otherwise
require the issuance of a fractional share, the number of common shares to be
issued shall be rounded to the nearest full share.
(e) The number and kind of securities purchasable upon the conversion of
this Debenture shall be subject to adjustment from time-to-time upon the
happening of certain events as follows:
(1) Reclassification, Consolidation or Merger. In case of any
reclassification or change of outstanding securities of the class of securities
which are issuable upon conversion of this Debenture (other than a change in par
value, or from par value to no par value, or from no par value to par value or
as a result of a subdivision or combination or an increase in the number of such
securities outstanding) or in case of any consolidation or merger of the Issuer
with or into another corporation (other than a merger with another corporation
in which the Issuer is the surviving corporation and which does not result in
any reclassification or change, other than a change in par value, or from par
value to no par value, or from no par value to par value, or as a result of a
subdivision or combination of outstanding securities issuable upon the
conversion of this Debenture or an increase or decrease in the number of such
securities outstanding), or in case of any sale or transfer to another
corporation of the property of the Issuer as an entirety or substantially as an
entirety, the holder of this Debenture shall have the right to convert this
Debenture (upon terms not less favorable to the holder than those theretofore
applicable to this Debenture) and to receive upon such conversion, in lieu of
the Conversion Shares theretofore issuable upon conversion of this Debenture,
the kind and amount of shares of stock, and other securities, money or property
receivable upon such reclassification, change, consolidation, merger, sale, or
transfer by the holder of the Conversion Shares had the Debenture been converted
immediately prior to such reclassification, change, consolidation, merger, sale
or transfer. The adjustment provisions hereof shall similarly apply to
successive reclassifications, changes, consolidations, mergers, sales, and
transfers.
(2) Subdivision or Combination. If subsequent to a Conversion Date and
prior to the date Issuer transmits the Conversion Shares to the Lender, the
Issuer shall subdivide or combine its outstanding securities of the class of
securities which are issuable upon conversion of this Debenture, the amount of
securities to be received upon such conversion shall be proportionately
increased in the case of a subdivision of such securities,
4
<PAGE>
or shall be proportionately reduced, in the case of a combination of such
securities, as of the effective date of such subdivision or combination, as the
case may be.
[CORPORATE SEAL] S I DIAMOND TECHNOLOGY, INC.
By:____________________________
Its:___________________________
5
<PAGE>
EXHIBIT 4.3
REGULATION D SUBSCRIPTION AGREEMENT
THE SECURITIES OFFERED HEREBY HAVE NOT BEEN REGISTERED WITH THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE OR OTHER SECURITIES AUTHORITIES. THEY
MAY NOT BE SOLD OR TRANSFERRED EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT OR AN EXEMPTION TO THE REGISTRATION REQUIREMENTS OF THOSE
SECURITIES LAWS.
THIS SUBSCRIPTION AGREEMENT DOES NOT CONSTITUTE AN OFFER TO SELL, OR A
SOLICITATION OF AN OFFER TO PURCHASE, ANY OF THE SECURITIES DESCRIBED
HEREIN BY OR TO ANY PERSON IN ANY JURISDICTION IN WHICH SUCH OFFER OR
SOLICITATION WOULD BE UNLAWFUL. THESE SECURITIES HAVE NOT BEEN RECOMMENDED
BY ANY FEDERAL, STATE OR FOREIGN SECURITIES AUTHORITIES, NOR HAVE ANY SUCH
AUTHORITIES REVIEWED OR DETERMINED THE ACCURACY OF THIS DOCUMENT. ANY
REPRESENTATION TO THE CONTRARY IS UNLAWFUL.
INVESTMENT IN THESE SECURITIES INVOLVES A HIGH DEGREE OF RISK, INCLUDING
BUT NOT LIMITED TO THOSE RISK FACTORS IDENTIFIED IN THE COMPANY'S FORMS S-3
FILED DURING 1996. INVESTORS MUST RELY ON THEIR OWN ANALYSIS OF THE
INVESTMENT TERMS AND CONDITIONS OF THE PROPOSED INVESTMENT AND THEIR OWN
ASSESSMENT OF THE RISKS INVOLVED.
This Regulation D Securities Subscription Agreement (the "Agreement") is
executed by the undersigned (the "Subscriber") in connection with the offer to
the Subscriber of, and the subscription by the Subscriber for, shares of Series
F Preferred Stock, $1.00 par value per share (the "Preferred Stock"), of SI
DIAMOND TECHNOLOGY, INC., a Texas corporation (the "Company"). Each share of
Preferred Stock has a stated value (i.e., is in the face amount) of One Thousand
Dollars ($1,000), and the purchase price for each share of Preferred Stock is
One Thousand Dollars ($1,000), which represents One Hundred percent (100%) of
the stated value. The Company is offering to qualified investors (the
"Offering") a minimum aggregate stated value (face amount) of Preferred Stock of
One Million Five Hundred Thousand ($1,500,000) (representing 1,500 shares) for
an aggregate purchase price of One Million Five Hundred Thousand Dollars
($1,500,000) (the "Minimum") and an aggregate maximum stated value (face amount)
of Preferred Stock of Two Million Five Hundred Thousand (2,500,000)
(representing 2,500 shares) for a purchase price of Two Million Five Hundred
Thousand Dollars ($2,500,000) (the "Maximum"). The minimum subscription per
investor is One Thousand (1,000) shares of Preferred Stock, representing a
stated value (face amount) of One Million Dollars ($1,000,000), and representing
a purchase price of One Million Dollars ($1,000,000). Subject to approval by
the Company, an investor may be eligible to subscribe for a specific number of
shares less than the minimum subscription per investor as set forth herein.
The terms of the Preferred Stock, including the terms on which the
Preferred Stock may be converted into common stock, $.001 par value, of the
Company (the "Common Stock"), are set forth in the Statement of Resolutions of
Series F Preferred Stock (the "Statement of Resolutions"), substantially in the
form attached hereto as Exhibit A. The solicitation of this Subscription by the
Company, and, if accepted by the Company, the sale of the shares of Preferred
Stock subscribed for, are being made in reliance upon the provisions of
Regulation D ("Regulation D") promulgated under the Securities Act of 1933, as
amended (the "Securities Act"). The Preferred Stock and the Common Stock
issuable upon conversion thereof (the "Conversion Shares") are sometimes
referred to herein collectively as the "Securities."
The undersigned Subscriber and the Company, upon acceptance of this
Agreement, hereby agree as follows:
<PAGE>
1. Offering
1.1 Offer to Subscribe; Purchase Price and Closing; and Placement
Fees.
Subject to satisfaction of the conditions to the closing of a purchase and
sale of Preferred Stock as to each purchaser of Preferred Stock (the "Closing")
set forth in Section 1.2 below, the Subscriber hereby offers to subscribe for
and purchase shares of Preferred Stock, for the aggregate purchase price set
forth in Section 9 of this Agreement, all in accordance with the terms and
conditions of this Agreement. Assuming that funds representing the Offering,
together with corresponding subscription agreements accepted by the Company, are
deposited into the Company's designated escrow account for this Offering (the
"Escrow Account"), the Closing shall be deemed to occur when this Agreement has
been executed by both the Subscriber and the Company, and full payment for the
shares of Preferred Stock subscribed for shall have been made by the Subscriber,
by wire transfer in United States Dollars, to the Escrow Account as set forth in
Section 7.1(a) and forwarded by wire transfer to the Company, in consideration
for the Company's delivery of certificates representing the shares of Preferred
Stock so subscribed for.
The parties hereto acknowledge that J.P. Carey Enterprises, Inc. is acting
as the placement agent (the "Placement Agent") for the placement of the
Preferred Stock and will be compensated by the Company in cash.
1.2 Conditions to Subscriber's Obligations. The Subscriber's obligations
hereunder are conditioned upon the occurrence of all of the following:
(a) the following documents shall have been deposited with the Company's
escrow agent for the Offering ("Escrow Agent"): the Registration
Rights Agreement, substantially in the form attached hereto as Exhibit
B (executed by the Company), the Opinion of Counsel, substantially in
the form attached hereto as Exhibit C (signed by the Company's
counsel), and the Statement of Resolutions, substantially in the form
attached hereto as Exhibit A (together with evidence showing that it
has been duly filed with the Secretary of State of Texas);
(b) the Company's Common Stock is currently traded on the Nasdaq SmallCap
Stock Market;
(c) other than as described on Schedule 1.2 attached hereto, there have
been no material adverse changes in the Company's business prospects
or financial condition since the date of the last balance sheet
included in the Disclosure Documents (as defined below in Section
4.2);
(d) the representations and warranties of the Company shall be true and
correct in all material respects on the date of Closing, as if made on
such date, and the Company shall deliver a certificate, signed by an
officer of the Company, to such effect, to the Escrow Agent;
(e) the Subscription Agreement has been accepted by the Company and
received by the Escrow Agent;
2
<PAGE>
(f) the Company shall have reserved for issuance upon conversion of the
Preferred Stock a sufficient number of Conversion Shares, which number
of shares shall initially be equal to Two Million Five Hundred
Thousand (2,500,000) shares; and
(g) the escrow agreement ("Escrow Agreement") to which the Escrow Agent is
a party and which governs the Escrow Account shall have been fully
executed by all parties thereto.
2. Representations and Warranties of the Subscriber. The Subscriber
hereby represents and warrants to the Company as follows (which representations
and warranties shall be true as of the date of Closing):
2.1 Accredited Investor. The Subscriber hereby represents and
warrants to the Company that it is an "accredited investor," as defined in Rule
501 of Regulation D, and has marked the applicable box set forth in Section 10
of this Agreement signifying such status.
2.2 Investment Experience; Access to Information; Independent
Investigation.
2.2.1 Access to Information. The Subscriber or its professional
advisor has been granted the opportunity to ask questions of and receive answers
from representatives of the Company, and its officers, directors, employees and
agents concerning the terms and conditions of the Offering, and the Company and
its business and prospects, and to obtain any additional information which the
Subscriber or its professional advisor deems necessary to verify the accuracy of
the information received. The foregoing, however, does not limit or modify the
Subscriber's right to rely upon representations and warranties of the Company in
Section 4 of this Agreement.
2.2.2 Ability to Evaluate. The Subscriber has such knowledge and
experience in financial and business matters that it is fully capable of
evaluating the merits and risks of an investment in the Company, including
without limitation those set forth in the Disclosure Documents (as defined below
in Section 4.2).
2.2.3 Disclosure Documents. The Subscriber has received and
reviewed the Disclosure Documents (as defined below in Section 4.2). The
foregoing, however, does not limit or modify the Subscriber's right to rely upon
the representations and warranties of the Company in Section 4 of this
Agreement.
2.2.4 Investment Experience; Fend for Self. The Subscriber has
substantial experience in investing in securities and has made investments in
securities other than those of the Company. The Subscriber acknowledges that it
is able to fend for itself in the transaction contemplated by this Agreement and
that it has the ability to bear the economic risk of its investment in the
Company. The Subscriber has not been organized for the purpose of investing in
securities of the Company.
2.2.5 Not an Affiliate. The Subscriber is not an officer,
director or "affiliate" (as that term is defined in Rule 415 of the Securities
Act) of the Company.
2.3 Exempt Offering Under Regulation D
3
<PAGE>
2.3.1 Investment; No Distribution. The Subscriber is acquiring
the shares of Preferred Stock subscribed for (the "Preferred Shares") solely for
investment purposes for the Subscriber's own account (or for beneficiaries'
accounts over which the Subscriber has investment discretion but no
discretionary authority as to voting or disposition) and not with a view to a
distribution of all or any part thereof. The Subscriber is aware that there are
legal and practical limits on its ability to sell or dispose of the Preferred
Shares and the Conversion Shares (collectively, the "Securities"), and
therefore, that the Subscriber must bear the economic risk of its investment for
an indefinite period of time. The Subscriber has adequate means of providing
for its current needs and anticipated contingencies and has no need for
liquidity of this investment. The Subscriber's commitment to illiquid
investments is reasonable in relation to its net worth.
2.3.2 No General Solicitation. The Preferred Shares were not
offered to the Subscriber through, and the Subscriber is not aware of, any form
of general solicitation or general advertising, including, without limitation,
(i) any advertisement, articles, notice or other communication published in any
newspaper, magazine or similar media or broadcast over television or radio, and
(ii) any seminar or meeting whose attendees have been invited by any general
solicitation or general advertising.
2.3.3 No Registration of Preferred Shares and Conversion Shares.
The Subscriber understands that the Preferred Shares are not registered and
therefore are "restricted securities" under the federal securities laws inasmuch
as they are being acquired from the Company in a transaction not involving a
public offering, and that, under such laws and applicable regulations, such
securities may not be transferred or resold without registration under the
Securities Act or pursuant to an exemption therefrom. In this connection, the
Subscriber represents that it is familiar with Rule 144 under the Securities
Act, as presently in effect, and understands the resale limitations imposed
thereby and by the Securities Act. The Subscriber further understands, however,
that the Company is obligated to register the Conversion Shares within ninety
(90) days from the date of the Closing (the "Closing") of a purchase and sale of
Preferred Stock.
2.3.4 Disposition. Without in any way limiting the
representations set forth above, the Subscriber further agrees not to make any
disposition of all or any portion of the Securities unless and until:
(a) There is then in effect a registration statement under the Securities
Act covering such proposed disposition and such disposition is made in
accordance with such Registration Statement; or
(b) (i) The Subscriber shall have notified the Company of the proposed
disposition and shall have furnished the Company with a detailed
statement of the circumstances surrounding the proposed disposition,
and (ii) if reasonably requested by the Company, the Subscriber shall
have furnished the Company with an opinion of counsel, reasonably
satisfactory to the Company, that such disposition will not require
registration of the Securities under the Securities Act.
2.4 Due Authorization.
2.4.1 Authority. The Subscriber, if executing this Subscription
Agreement in a representative or fiduciary capacity, has full power and
authority to execute and deliver this Subscription
4
<PAGE>
Agreement and each other document referred to herein for which a signature is
required in such capacity and on behalf of the subscribing individual,
partnership, trust, estate, corporation or other entity for whom or which the
Subscriber is executing this Subscription Agreement.
2.4.2 Due Authorization. The Subscriber is duly and validly
organized, validly existing and in good standing as such entity under the laws
of the jurisdiction of its organization, with full power and authority to
purchase the Preferred Shares subscribed for and to execute and deliver this
Agreement.
3. Acknowledgements. The Subscriber is aware of the following:
3.1 Risks of Investment. The Subscriber recognizes that investment
in the Company involves certain risks, including the potential loss of the
Subscriber's investment herein. The Subscriber recognizes that this Agreement
and the exhibits hereto do not purport to contain all the information which
would be contained in a registration statement under the Securities Act;
3.2 No Government Approval. The Subscriber acknowledges that no
federal, state or foreign agency has passed upon or reviewed the terms and
conditions of the Offering or made any finding or determination as to the
fairness of the Offering;
3.3 Restrictions on Transfer. The Subscriber may not sell, transfer,
assign, pledge or otherwise dispose of all or any portion of the Securities in
the absence of either an effective registration statement or an exemption from
the registration requirements of the Securities Act and applicable state
securities law;
3.4 Exempt Transaction. The Preferred Shares are being offered and
sold in reliance on specific exemptions from the registration requirements of
federal and state law and the Subscriber's representations, warranties,
agreements, acknowledgements and applicability of such exemptions and the
suitability of the Subscriber to acquire Preferred Shares.
3.5 Legends. It is understood that any certificates evidencing the
Preferred Shares and (prior to registration as provided in Section 5.1) the
Conversion Shares shall bear the following legend:
"The securities represented hereby have not been registered under the
Securities Act of 1933, as amended, or applicable state securities
laws, nor the securities laws of any other jurisdiction. They may not
be sold or transferred in the absence of an effective registration
statement under those securities laws or an opinion of counsel,
reasonable satisfactory to the Company, that the sale or transfer is
pursuant to an exemption to the registration requirements of those
securities laws."
4. Representations and Warranties of the Company. The Company hereby
makes the following representations and warranties to the Subscriber, except as
disclosed in the Disclosure Documents or otherwise disclosed to Subscriber,
which representations and warranties shall be true as of the date of acceptance
of this Agreement by the Company and as of Closing:
5
<PAGE>
4.1 Organization, Good Standing, and Qualification. The Company is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Texas, USA and has all requisite corporate power and authority
to carry on its business as now conducted and as currently proposed to be
conducted. The Company is duly qualified to transact business and is in good
standing in each jurisdiction in which the failure to so qualify would have a
material adverse effect on the business or properties of the Company and its
subsidiaries taken as a whole. The Company is not the subject of any pending
or, to its knowledge, threatened or contemplated investigation or administrative
or legal proceeding by the Internal Revenue Service, the taxing authorities of
any state or local jurisdiction, or the Securities and Exchange Commission, or
any state securities commission, or any other governmental entity, which are
required to be disclosed in the Disclosure Documents and have not been
disclosed.
4.2 Corporate Condition. The Company has timely filed all forms, and
reports and documents with the Securities and Exchange Commission required to be
filed by it under the Securities Exchange Act 1934, as amended (the "Exchange
Act") through the date hereof (collectively,the "SEC Reports"). Each of the SEC
Reports, at the time filed, complied in all material respects with the
requirements of the Exchange Act. The Company has made available to the
Subscriber a copy of the Company's Form 10-KSB/A for the fiscal year ended
December 31, 1995, and a copy of the Company's Forms 10-QSB, 8-K and S-3 filed
by the Company since January 1, 1996 (the "Most Recent Filings Report"). Other
than as set forth in Schedule 4.2 attached hereto and made a part hereof, there
have been no material adverse changes in the Company's business, prospects,
operations or financial condition since the date of the Most Recent Filings
Report. The SEC Reports, together with Schedule 4.2 and any other documents
listed on Schedule 4.2(a) attached hereto and made a part hereof and furnished
herewith by the Company to the Subscriber are referred to collectively as the
"Disclosure Documents." The financial statements contained in the Disclosure
Documents have been prepared in accordance with generally accepted accounting
principles, consistently applied, and fairly present in all material respects
the consolidated financial condition of the Company as of the dates of the
balance sheets included therein and the consolidated results of its operations
and cash flows for the periods then ended. Without limiting the foregoing,
there are no material liabilities, contingent or actual that are not disclosed
in the Disclosure Documents (other than liabilities incurred by the Company in
the ordinary course of its business, consistent with its past practice, after
the periods covered by the Disclosure Documents). The Company has paid all
material taxes which are due, except for taxes which it reasonably disputes.
There is no material claim, litigation, or administrative proceeding pending,
or, to the best of the Company's knowledge, threatened or contemplated against
the Company, except as disclosed in the Disclosure Documents. This Agreement
and the Disclosure Documents do not contain any untrue statement of material
fact and do not omit to state any material fact required to be stated
therein or herein necessary to make the statements contained therein or herein
not misleading in the light of the circumstances under which they were made.
4.3 Authorization. All corporate action on the part of the Company
by its officers, directors and shareholders necessary for the authorization,
execution and delivery of this Agreement, the performance of all obligations of
the Company hereunder and the authorization, issuance and delivery of the
Preferred Shares and reservation for issuance of the Conversion Shares
obtainable on conversion of the Preferred Shares have been taken, and this
Agreement, the Statement of Resolutions and the Registration Rights Agreement
constitute valid and legally binding obligations of the Company, enforceable in
accordance with their terms; provided, however that enforceability is subject
to: (i) applicable bankruptcy, reorganization, insolvency, moratorium,
fraudulent conveyance, and similar federal and state laws affecting the rights
and remedies of creditors generally, and (ii) general principles of equity
limiting the availability of equitable remedies (including but not limited to
the remedy of specific performance),
6
<PAGE>
whether considered in a proceeding at law or in equity. The Company has obtained
all consents and approvals required for it to execute, deliver and perform this
Agreement and the Registration Rights Agreement.
4.4 Valid Issuance of Preferred Shares and Conversion Shares. The
Preferred Shares, when issued, sold and delivered in accordance with the terms
hereof, for the consideration expressed herein, will be validly issued, fully
paid and nonassessable and, based in part upon the representations of the
Subscriber in this Agreement, will be issued in compliance with all applicable
federal and state securities laws. The Conversion Shares when issued in
accordance with the terms of the Statement of Resolutions shall be duly and
validly issued and outstanding, fully paid and nonassessable, and based in part
on the representations and warranties of the Subscriber, will be issued in
compliance with all applicable U.S. federal and state securities laws. The
Securities will be issued free of any preemptive rights.
4.5 Compliance with Other Instruments. The Company is not in
violation or default of any provisions of its Amended and Restated Articles of
Incorporation or Bylaws as amended and in effect on and as of the date of this
Agreement or of any material provision of any material instrument or contract to
which it is a party or by which it is bound or, to its knowledge, of any
provision of any federal or state judgment, writ, decree, order, statute, rule
or governmental regulation applicable to the Company, which would have a
material adverse effect on the Company's business or prospects, except as
described in the Disclosure Documents. The execution, delivery and performance
of this Agreement and the consummation of the transactions contemplated hereby
will not result in any such violation or be in conflict with or constitute, with
or without the passage of time and giving of notice, either a default under any
such provision, instrument or contract or an event which results in the creation
of any lien, charge or encumbrance upon any assets of the Company.
4.6 Reporting Company. The Company is subject to the reporting
requirements of the Exchange Act, and has a class of securities registered under
Section 12 or Section 15 of the Exchange Act. When requested by the Subscriber,
the Company shall furnish copies of reports filed by the Company with the
Securities and Exchange Commission.
4.7 Authorized and Issued Shares. The authorized and issued shares
of Preferred Stock, Common Stock and warrants, options, instruments convertible
into Common Stock and rights to acquire Preferred or Common Stock, as of
February 14, 1997, are as set forth on Exhibit D.
4.8 Use of Proceeds. As of the date hereof, the Company expects to
use the proceeds from the Offering (less fees and expenses) for the purposes set
forth on Exhibit E hereto. These purposes are estimates and are subject to
change, but represent the Company's good faith best estimate of anticipated
uses.
4.9 Compliance with Laws. As of the date hereof, the conduct of the
business of the Company complies in all material respects with all material
statutes, laws, regulations, ordinances, rules, judgments, orders or decrees
applicable thereto. The Company has not received notice of any alleged
violation of any statute, law, regulations, ordinance, rule, judgement, order or
decree from any governmental authority. The Company shall comply with all
applicable securities laws with respect to the Offering.
4.10 No Rights of Participation. No person or entity, including, but
not limited to, current or former shareholders of the Company, underwriters,
brokers, agents or other third parties, has
7
<PAGE>
any right of first refusal, preemptive right, right of participation, or any
similar right to participate in the Offering which has not been waived.
4.11 Disclosures. There is no fact known to the Company (other than
general economic conditions known to the public generally) that has not been
disclosed in the Disclosure Documents that (a) could reasonably be expected to
have a material adverse effect on the business, financial condition or results
of operations of the Company, or which could reasonably be expected to
materially and adversely affect the properties or assets of the Company or (b)
could reasonably be expected to materially and adversely affect the ability of
the Company to perform its obligations pursuant to this Agreement and the
issuance of the Securities.
4.12 Representations True and Correct. The foregoing representations,
warranties and agreements are true, correct and complete in all material
respects, and shall survive the Closing and the issuance of the Preferred
Shares.
4.13 Termination Date of Offering. In no event shall the Closing
occur later than March 10, 1997, with any extension based upon an agreement
between the Company and the Subscriber.
4.14 Underwriter's Fees and Rights of First Refusal. The Company is
not obligated to pay any compensation or other fees, costs or related
expenditures in cash or securities to any underwriter, broker, agent or other
representative other than the Placement Agent in connection with the Offering.
5. Covenants of the Company
5.1 Independent Auditors. The Company shall, until at least three
(3) years after the date of the Closing, maintain as its independent auditors an
accounting firm authorized to practice before the Securities and Exchange
Commission.
5.2 Corporate Existence and Taxes. The Company shall, until at least
three (3) years after the date of the Closing, maintain its corporate existence
in good standing (provided, however, that the foregoing covenant shall not
prevent the Company from entering into any merger or corporate reorganization so
long as the surviving entity in such transaction, if not the Company, assumes
all of the Company's obligations with respect to the Securities) and shall pay
all its taxes when due, except for taxes which the Company disputes.
5.3 Registration of Conversion Shares. The Company will register the
Conversion Shares on the terms of the Registration Rights Agreement
(substantially in the form attached as Exhibit B).
5.4 Capital Raising Limitations. The Company shall not issue any
debt or equity securities for cash in private (non-registered) capital raising
transactions ("Future Offerings") for a period beginning on the date hereof and
ending ninety (90) days after the Closing without obtaining the prior written
approval of holders of a majority of the Preferred Shares then outstanding.
Notwithstanding anything else contained herein to the contrary, (i) the Company
may make an offering of convertible debentures pursuant to Regulation S
anticipated to be closed by May 5, 1997, and (ii) in the event the Company does
not issue Preferred Stock with a stated value of $2,500,000 by March 20, 1997,
the Company may, after such date, make an offering or otherwise raise additional
funds up to a net amount to be received by
8
<PAGE>
the Company equal to $2,500,000 minus the stated value of the Preferred Stock
issued on or before March 20, 1997.
5.5 Filings with Securities and Exchange Commission. The Company
shall provide the Subscriber with copies of its annual reports on Form 10-KSB,
quarterly reports on Form 10-QSB and current reports on Form 8-K for as long as
the Preferred Shares remain outstanding.
5.6 Opinion of Counsel. Purchasers of the Preferred Stock shall,
upon purchase, receive an opinion letter from Donald T. Locke, Esquire, counsel
to the Company, substantially in the form Legal Opinion attached hereto as
Exhibit C.
5.7 Payments for Late Conversion or Failure to Reserve Authorized but
Unissued Common.
5.7.1 Payments for Late Conversion. As set forth in the
Statement of Resolutions, the Company shall use all reasonable efforts to issue
and deliver to the Subscriber or any party receiving Preferred Shares by
transfer from the Subscriber (together with the Subscriber, sometimes referred
to herein as the "Holder"), within three (3) business days (the "Deadline")
after the Holder has fulfilled all conditions and delivered all necessary
documents duly executed and in proper form, required for conversion pursuant to
the Statement of Resolutions, including the original certificate(s) representing
the Shares to be converted, all in accordance with the subscription documents
(or, in the case of lost or stolen certificates, after provision of security or
indemnification), a certificate or certificates for the number of shares of
Common Stock to which the Holder shall be entitled upon submission of a notice
of conversion. The Company understands that a delay in the issuance of the
Conversion Shares beyond the Deadline could result in economic loss to the
Holder. As compensation to the Holder for such loss, the Company agrees to pay
the Holder for late issuance of Conversion Shares upon Conversion one-fifth of
one percent (.002%) of the stated value of Preferred Shares submitted for
conversion for each business day beyond four business days after the Deadline
until the Conversion Shares are issued to Holder (up to a maximum of six percent
(6%) of such stated value).
The Company shall pay any late payments to Holder incurred under this
Section by check upon the earlier to occur of: (i) issuance of Conversion Shares
to the Holder or (ii) each monthly anniversary of the receipt by the Company of
such Holder's Notice of Conversion. Nothing herein shall limit the Holder's
right to pursue actual damages for the Company's failure to issue and delivery
Conversion Shares to the Subscriber in accordance with the terms of the
Statement of Resolutions.
5.7.2 Payments for Failure to Reserve Authorized but Unissued Common
Stock. If, at any time a Holder or Holders of Shares submit a Notice of
Conversion (as defined in the Statement of Resolutions) and the Company does not
have sufficient authorized but unissued Conversion Shares available to effect,
in full, a conversion of the Series F Preferred Stock under Section 5 of the
Statement of Resolutions (a "Conversion Default", the date of such default being
referred to herein as the "Conversion Default Date"), the Company shall issue to
such Holder(s), pro rata, all of the Conversion Shares of Common Stock which are
available, and the Notice of Conversion as to any Conversion Shares of Series F
Preferred Stock requested to be converted but not converted (the "Unconverted
Preferred Conversion Shares") shall become null and void. The Company shall
provide notice of such Conversion Default ("Notice of Conversion Default") to
all Holders of outstanding Preferred Stock, by facsimile, within one (1)
business day of such default (with the original delivered by overnight or two
(2) day courier). No Holder may submit a Notice of Conversion after receipt of
a Notice of Conversion Default until the date additional Conversion Shares
9
<PAGE>
are authorized by the Company. The Company will use best efforts to authorize an
appropriate number of additional shares as soon as practicable. If the Company
is unable to cure the Conversion Default within forty-five (45) days, then the
Company agrees to make to all Holders of outstanding Preferred Shares a payment
(the "Conversion Default Payments") for a Conversion Default in the amount of
(N/365) X .40 X the stated value of the outstanding Preferred Stock held by each
Holder, where N=the number of days from the Conversion Default Date to the date
(the "Authorization Date") that the Company authorizes a sufficient number of
Conversion Shares to effect conversion of all remaining shares of Preferred
Stock. The Company shall send notice ("Authorization Notice") via facsimile,
with a copy by overnight or two (2) day courier, to all Holders of outstanding
Preferred Shares that additional Conversion Shares have been authorized, the
Authorization Date and the amount of Holder's accrued Conversion Default
Payments. The accrued Conversion Default Payments for each calendar month shall
be paid in cash or shall be convertible into Common Stock in accordance with the
Conversion Formula, at the Company's option, payable as follows: (i) in the
event Company elects to make such payment in cash, cash payments shall be made
to each Holder of outstanding Preferred Shares by the fifth (5th) day of the
following calendar month after the Authorization Notice was received or (ii) in
the event the Company elects to make such payment in stock, such payment amount
will be converted into Common Stock in accordance with the Conversion Formula at
any time after the fifth (5th) day of the calendar month following the month the
Authorization Notice was received, until the automatic conversion date set forth
in the Statement of Resolutions. Nothing herein shall limit the Holder's right
to seek actual damages for the Company's failure to maintain a sufficient number
of authorized Conversion Shares of Common Stock.
5.8 Removal of Legend Upon Registration. The restrictive legend
described in Section 3.5 above will be removed from the Common Stock after the
Registration Statement is effective and when the stock is to be sold.
5.9 Listing. The Company shall use its best efforts to maintain the
listing of its Conversion Shares and its Common Stock on the Nasdaq SmallCap
Stock Market or another national securities exchange or national quotation
system.
6. Miscellaneous
6.1 Representations and Warranties Survive the Closing; Severability.
The Subscriber's and the Company's representations and warranties shall survive
the Closing of the transaction provided for hereby notwithstanding any due
diligence investigation made by or on behalf of the party seeking to rely
thereon. In the event that any provision of this Agreement becomes or is
declared by a court of competent jurisdiction to be illegal, unenforceable or
void, this Agreement shall continue in full force and effect without said
provision.
6.2 Successors and Assigns. The terms and conditions of this
Agreement shall inure to the benefit of and be binding upon the respective
successors and assigns of the parties. Nothing in this Agreement, express or
implied, is intended to confer upon any party other than the parties hereto or
their respective successors and assigns any rights, remedies, obligations, or
liabilities under or by reason of this Agreement, except as expressly provided
in this Agreement. Neither party may assign its rights hereunder without the
prior written consent of the other parties.
6.3 Governing Law. This Agreement shall be governed by and construed
under the laws of the State of Texas without respect to conflict of laws.
10
<PAGE>
6.4 Execution in Counterparts Permitted. This Agreement may be
executed in any number of counterparts, each of which shall be enforceable
against the parties actually executing such counterparts, and all of which
together shall constitute one (1) instrument.
6.5 Titles and Subtitles; Gender. The titles and subtitles used in
this Agreement are used for convenience only and are not to be considered in
construing or interpreting this Agreement. The use in this Agreement of a
masculine, feminine or neither pronoun shall be deemed to include a reference to
the others.
6.6 Written Notices, Etc. Any notice, demand or request required or
permitted to be given by the Company or the Subscriber pursuant to the terms of
this Agreement shall be in writing and shall be deemed given when delivered
personally, or by facsimile (with a hard copy to follow by overnight or two (2)
day courier), addressed to the parties at the addresses and/or facsimile
telephone number of the parties set forth at the end of this Agreement or such
other address as a party may request by notifying the other in writing.
6.7 Expenses. Each of the Company and the Subscriber shall pay all
costs and expenses that it respectively incurs, with respect to the negotiation,
execution, delivery and performance of this Agreement.
6.8 Entire Agreement; Written Amendments Required. This Agreement,
the Statement of Resolutions, the Preferred Stock certificates, the Registration
Rights Agreement and the other documents delivered pursuant hereto constitute
the full and entire understanding and agreement between the parties with regard
to the subjects hereof and thereof, and no party shall be liable or bound to any
other party in any manner by any warranties, representations or covenants except
as specifically set forth herein. Neither this Agreement nor any terms hereof
may be amended, waived, discharged or terminated other than by a written
instrument signed by the party against whom enforcement of any such amendment,
waiver, discharge or termination is sought.
7. Subscription and Wiring Instructions; Irrevocability.
7.1 Subscription
(a) Wire transfer of Subscription Funds. Subscriber shall send a
signed Subscription Agreement by facsimile to Escrow Agent at
(404) 817-6050, and its subscription funds by wire transfer, to
the Escrow Agent as follows:
Bank: First Union National Bank
Account Name: Nelson Mullins Riley & Scarborough IOLTA Account
Account No.: #2080000501666
ABA Routing No.: #061000227
ATTN: Steve Cunningham
Re: J.P. Carey Enterprises, Inc.
Notify: (404) 817-6700
(b) Irrevocable Subscription. The Subscriber hereby acknowledges and
agrees, subject to the provisions of any applicable laws
providing for the refund of subscription
11
<PAGE>
amounts submitted by the Subscriber, that this Agreement is
irrevocable and that the Subscriber is not entitled to cancel,
terminate or revoke this Agreement; provided, however, that if
the conditions to Closing are not satisfied or if the Disclosure
Documents are discovered prior to Closing to contain statements
which are materially inaccurate, or omit statements of material
facts, the Subscriber may revoke or cancel this Agreement.
(c) Company's Right to Reject Subscription. This Agreement shall be
accepted by the Company when the Company countersigns this
Agreement. The Subscriber hereby confirms that the Company has
full right in its sole discretion to accept or reject the
subscription of the Subscriber, in whole or in part, provided
that, if the Company decides to reject such subscription, the
Company must do so promptly and in writing. In the case of
rejection, the Company will promptly return any rejected payments
and (if rejected in whole) copies of all executed subscription
documents (including without limitation this Agreement) to
Subscriber.
7.2 Acceptance of Subscription. In the case of acceptance of this
subscription, ownership of the number of securities being purchased hereby will
pass to the Subscriber upon the Closing.
7.3 Subscriber to Forward Original Signed Subscription Agreement to
Company. The Subscriber agrees to courier to the Company its original inked
signed Subscription Agreement within three (3) days after faxing said signed
Agreement to the Escrow Agent.
8. Number of Shares and Purchase Price. The undersigned Subscriber
hereby subscribes for and agrees to purchase _________________ shares of Series
F Preferred Stock with a stated value of $1,000 per share and a per share
purchase price of $1,000, for a total purchase price (to be paid by wire
transfer) in the amount of ______________________________ Dollars
($____________) (the "Purchase Price").
9. Accredited Investor. The Subscriber is (please check applicable box):
(a) [ ] a corporation, business trust, or partnership not formed for
the specific purpose of acquiring the securities offered,
with total assets in excess of $5,000,000.
(b) [ ] any trust, with total assets in excess of $5,000,000, not
formed for the specific purpose of acquiring the securities
offered, whose purchase is directed by a sophisticated
person who has such knowledge and experience in financial
and business matters that he is capable of evaluating the
merits and risks of the prospective investment.
(c) [ ] an individual, who
[ ] is a director, executive officer or general partner of the
issuer of the securities being offered or sold or a
director, executive officer or general partner of a general
partner of that issuer.
12
<PAGE>
[ ] has an individual net worth, or joint net worth with that
person's spouse, at the time of his purchase exceeding
$1,000,000.
[ ] had an individual income in excess of $200,000 in each of
the two most recent years or joint income with that person's
spouse in excess of $300,000 in each of those years and has
a reasonable expectation of reaching the same income level
in the current year.
(d) [ ] an entity, each owner of which is an entity described in (a)
or (b) above or is an individual described in (c) above.
The undersigned acknowledges that this Agreement and the subscription
represented hereby shall not be effective unless accepted by the Company as
indicated below.
13
<PAGE>
IN WITNESS WHEREOF, the undersigned Subscriber does hereby execute this
Agreement this _______ day of ________________, 1997.
- ------------------------------------ -------------------------------------
Name of Company You Represent EXACT NAME IN WHICH YOU WANT THE
(if applicable) SECURITIES TO BE REGISTERED
DELIVERY INSTRUCTIONS:
- ------------------------------------ ---------------------
Your Signature Please type or print address where your
security is to be delivered
- ------------------------------------ ATTN:
Your Name: Please Print -------------------------
- ------------------------------------ ---------------------------------
Title/Representative Capacity Street Address
(if applicable)
- ------------------------------------ ---------------------------------
Place of Execution of this Agreement City, State or Province, Country,
Offshore Postal Code
---------------------------------
Telephone Number
---------------------------------
Facsimile Number
14
<PAGE>
ACCEPTANCE BY COMPANY:
THIS SUBSCRIPTION IS ACCEPTED BY THE COMPANY AND THE COMPANY AGREES TO BE
BOUND BY THE TERMS AND CONDITIONS THEREOF THIS _____ DAY OF
_______________________, 1997.
By:_________________________________________
Name:_______________________________________
Title:______________________________________
Attest:_____________________________________
Name:_______________________________________
Title:______________________________________
15
<PAGE>
NOTICE OF CONVERSION
(To be Executed by the Registered Holder in order to Convert the Preferred
Stock)
The undersigned Holder hereby irrevocably elects to convert ___________
shares of Series F Preferred Stock, represented by stock certificate No(s).
______________ (the "Preferred Stock Certificates") into shares of common stock
("Common Stock") of SI Diamond Technology, Inc. (the "Company") according to the
conditions of the Statement of Resolutions of Series F Preferred Stock, as of
the date written below. If shares are to be issued in the name of a person
other than the undersigned, the undersigned will pay all transfer taxes payable
with respect thereto and is delivering herewith such Certificates. With respect
to those shares to be issued in the name of a person other than the Holder, the
Holder should execute a Notice of Transfer or Assignment Form with the signature
of the Holder and the signature of each other person in whose name the shares
are to be issued guaranteed by a commercial bank or trust company in the United
States or a member firm of the New York Stock Exchange. No fee will be charged
to the Holder for any conversion, except for transfer taxes, if any. A copy of
each of the Preferred Stock Certificates being converted its attached hereto.
Date of Conversion:____________________
Applicable Conversion Price:___________
Number of Shares of
Common Stock to be Issued:_____________
Name of Holder:________________________
By:____________________________________
Title:_________________________________
Address:_______________________________
_______________________________
_______________________________
*Conversion shall be processed in accordance hereto and with the Statement of
Resolutions governing the Series F Preferred Stock.
16
<PAGE>
EXHIBIT 4.4
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT ("Agreement") is entered into as of
__________, 1997, by and between SI Diamond Technology, Inc., a Texas
corporation (the "Company") and the subscribers (hereinafter referred to as
"Subscribers" or "Investors") to the Company's offering ("Offering") of up to
Two Thousand Five Hundred (2500) shares of Series F Convertible Preferred Stock
(the "Preferred Stock") pursuant to the Regulation D Securities Subscription
Agreements between the Company and the Subscribers (the "Subscription
Agreements").
1. Definitions. For purposes of this Agreement:
(a) The term "register", "registered," and "registration" refer to a
registration effected by preparing and filing a registration statement or
similar document in compliance with the Securities Act of 1933 (the "Act") and
pursuant to Rule 415 under the Act or any successor rule, and the declaration or
ordering of effectiveness of such registration statement or document;
(b) The term "Registrable Securities" means the shares of the
Company's Common Stock, together with any capital stock issued in replacement
of, in exchange for or otherwise in respect of such Common Stock (the "Common
Stock"), issuable or issued upon conversion of the Preferred Stock (the
"Preferred Stock") issued to Subscribers in the Offering (as defined in the
Subscription Agreement);
(c) The number of shares of "Registrable Securities then outstanding"
shall be determined by the number of shares of Common Stock which have been
issued or are issuable upon conversion of the Preferred Stock at the time of
such determination;
(d) The term "Holder" means any person owning or having the right to
acquire Registrable Securities or any permitted assignee thereof;
(e) The term "Initiating Holders" means (i) any holders of Registrable
Securities obtained or obtainable upon conversion of shares of Preferred Stock;
and
(f) The term "Due Date" means the date which is ninety (90) days after
the Closing (as defined in the Subscription Agreement) of the Offering.
(g) The terms "Offering" and "Closing" shall have the meanings
ascribed to them in the Subscription Agreement.
2. REQUIRED REGISTRATION.
(a) Within thirty (30) days after the Closing of the Offering, the
Company shall file a registration statement ("Registration Statement") on Form
S-3 (or other suitable form, at the
<PAGE>
Company's discretion but subject to the reasonable approval of the Investors),
covering the resale of all shares of Registrable Securities then outstanding.
(b) The Registration Statement shall be done as a "shelf" registration
statement under Rule 415, and shall be maintained effective until the
distribution described in the Registration Statement is completed or as
otherwise provided in Section 4(c). The Company shall use its best efforts to
have the Registration Statement declared effective within ninety (90) days after
the Closing of the Offering.
(c) If the Registration Statement is not declared effective by the Due
Date as a result of the Company's failure to file such Registration Statement
timely or failure to diligently strive to have such Registration Statement
declared effective by the Due Date, the Company shall pay the Investors an
amount equal to one and one-half percent (1.5%) per month of the aggregate
amount of Preferred Stock sold in the Offering, compounded monthly and accruing
daily, until the Registration Statement or a registration statement filed
pursuant to Section 2 is declared effective, payable in common stock, which
common stock shall also be deemed "Registrable Securities" for the purpose of
this Agreement.
(d) If the Registration Statement is not declared effective by the Due
Date, but all the Registrable Securities held by an Investor are available for
sale by the Investor, in the opinion of counsel to the Investor (reasonably
acceptable to the Company to permit such sale) (the "Opinion"), without
compliance with the registration and prospectus delivery requirements of the
Act, so that all transfer restrictions and restrictive legends pertaining to the
Registrable Securities may be removed prior to and upon the consummation of such
sale, then registration contemplated hereby shall no longer be required with
respect to such Investor's Registrable Securities upon the furnishing to the
Company of the Opinion, and the Company will cooperate fully with the Investor
and use its best efforts to facilitate removal of restrictive legends and
transfer restrictions pertaining to the Registrable Securities. Such efforts
shall include, but not be limited to, undertaking to furnish such opinions of
counsel to the Company as the Company's transfer agent may reasonably require.
3. OBLIGATIONS TO INCREASE THE NUMBER OF AVAILABLE SHARES. In the
event that the number of shares available under a registration statement filed
pursuant to Section 2 is insufficient to cover all of the Registrable Securities
then outstanding, the Company shall amend that registration statement, or file a
new registration statement, or both, so as to cover all shares of Registrable
Securities then outstanding. The Company shall file such amendment or new
registration within thirty (30) days of the date the registration statement
filed under Section 2 is insufficient to cover all the shares of Registrable
Securities then outstanding. Any Registration Statement filed hereunder shall,
to the extent permissible by the Rules of the Securities and Exchange Commission
("SEC"), state that, in accordance with Rule 416 under the Act, such
Registration Statement also covers such indeterminate numbers of additional
shares of Common Stock as may become issuable upon conversion of the Preferred
Stock to prevent dilution resulting from stock changes or by reason of changes
in the conversion price in accordance with the terms thereof. Unless and until
such amendment or new
2
<PAGE>
registration statement is effective after 90 days, Investors shall have the
rights described in Section 2(c) above.
4. OBLIGATIONS OF THE COMPANY. Whenever required under this
Agreement to effect the registration of any Registrable Securities, the Company
shall, as expeditiously as reasonably possible:
(a) Prepare and file with the SEC a registration statement with
respect to such Registrable Securities and use its best efforts to cause such
registration statement to become effective.
(b) Prepare and file with the SEC such amendments and supplements to
such registration statement and the prospectus used in connection with such
registration statement as may be necessary to comply with the provisions of the
Act with respect to the disposition of all securities covered by such
registration statement.
(c) With respect to any Registration Statement filed pursuant to this
Agreement, keep such registration statement effective until the earlier of (i)
the date upon which the Holders of Registrable Securities covered by such
registration statement shall have sold such Registrable Securities; or (ii) one
(1) year after the date of the Closing of the Offering.
(d) Furnish to the Holders such numbers of copies of a prospectus,
including a preliminary prospectus, in conformity with the requirements of the
Act, and such other documents as they may reasonably request in order to
facilitate the disposition of Registrable Securities owned by them.
(e) Use its best efforts to register and qualify the securities
covered by such registration statement under such other securities or Blue Sky
laws of such jurisdictions as shall be reasonably requested by the Holders of
the Registrable Securities covered by such registration statement, provided that
the Company shall not be required in connection therewith or as a condition
thereto to qualify to do business or to file a general consent to service of
process in any such states or jurisdictions.
(f) As promptly as practicable after becoming aware of such event,
notify each Investor of the happening of any event of which the Company has
knowledge, as a result of which the prospectus included in the Registration
Statement, as then in effect, includes an untrue statement of a material fact or
omits to state a material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which they were
made, not misleading, and use its best efforts promptly to prepare a supplement
or amendment to the Registration Statement to correct such untrue statement or
omission, and deliver a number of copies of such supplement or amendment to each
Investor as such Investor may reasonably request.
3
<PAGE>
(g) Provide Holders with written notice of the date that a
registration statement registering the resale of the Registrable Securities is
declared effective by the SEC.
(h) Provide Holders and their representatives the opportunity to
conduct a reasonable due diligence inquiry of Company's pertinent financial and
other records and make available its officers, directors and employees for
questions regarding such information as it relates to information contained in
the registration statement, subject to all information received by the Holders
and their representatives being kept confidential.
(i) Provide Holders and their representatives the opportunity to
review the registration statement and all amendments thereto a reasonable period
of time prior to their filing with the SEC.
5. FURNISH INFORMATION. It shall be a condition precedent to the
obligations of the Company to take any action pursuant to this Agreement with
regard to each selling Holder that such selling Holders shall furnish to the
Company such information regarding themselves, the Registrable Securities held
by them, and the intended method of disposition of such securities as shall be
required to effect the registration of their Registrable Securities or to
determine that registration is not required pursuant to Rule 144 or other
applicable provision of the Act.
6. EXPENSES OF REGISTRATION. All expenses, other than underwriting
discounts and commissions and fees and expenses of counsel to the selling
Holders, incurred in connection with the registrations pursuant to Section 2,
including (without limitation) all registration, filing and qualification fees,
printers' and accounting fees, fees and disbursements of counsel for the
Company, shall be borne by the Company.
7. INDEMNIFICATION. In the event any Registrable Securities are
included in a registration statement under this Agreement:
(a) To the extent permitted by law, the Company will indemnify and
hold harmless each Holder, the officers and directors of each Holder, any
underwriter (as defined in the Act) for such Holder and each person, if any, who
controls such Holder or underwriter within the meaning of the Act or the
Securities Exchange Act of 1934, as amended (the "1934 Act"), against any
losses, claims, damages, or liabilities (joint or several) to which they may
become subject under the Act, the 1934 Act or other federal or state law,
insofar as such losses, claims, damages, or liabilities (or actions in respect
thereof) arise out of or are based upon any of the following statements,
omissions or violations (collectively a "Violation"): (i) any untrue statement
or alleged untrue statement of a material fact contained in such registration
statement, including any preliminary prospectus or final prospectus contained
therein or any amendments or supplements thereto, (ii) the omission or alleged
omission to state therein a material fact required to be stated therein, or
necessary to make the statements therein not misleading, or (iii) any violation
by the Company of the Act, the 1934 Act, any state securities law or any rule or
regulation promulgated under the Act, the 1934 Act or any state securities law;
and the Company will reimburse each such Holder, officer or director,
underwriter or
4
<PAGE>
controlling person for any legal or other expenses reasonably incurred by them
in connection with investigating or defending any such loss, claim, damage,
liability, or action; provided, however, that the indemnity agreement contained
in this subsection 7(a) shall not apply to amounts paid in settlement of any
such loss, claim, damage, liability, or action if such settlement is effected
without the consent of the Company (which consent shall not be unreasonably
withheld), nor shall the Company be liable in any such case for any such loss,
claim, damage, liability, or action to the extent that it arises out of or is
based upon a Violation which occurs in reliance upon and in conformity with
written information furnished expressly for use in connection with such
registration by any such Holder, officer, director, underwriter or controlling
person.
(b) To the extent permitted by law, each selling Holder, severally and
not jointly, will indemnify and hold harmless the Company, each of its
directors, each of its officers who have signed the registration statement, each
person, if any, who controls the Company within the meaning of the Act, any
underwriter and any other Holder selling securities in such registration
statement or any of its directors or officers or any person who controls such
Holder, against any losses, claims, damages, or liabilities (joint or several)
to which the Company or any such director, officer, controlling person, or
underwriter or controlling person, or other such Holder or director, officer or
controlling person may become subject, under the Act, the 1934 Act or other
federal or state law, insofar as such losses, claims, damages, or liabilities
(or actions in respect thereto) arise out of or are based upon any Violation, in
each case to the extent (and only to the extent) that such Violation occurs in
reliance upon and in conformity with written information furnished by such
Holder expressly for use in connection with such registration; and each such
Holder will reimburse any legal or other expenses reasonably incurred by the
Company and any such director, officer, controlling person, underwriter or
controlling person, other Holder, officer, director, or controlling person in
connection with investigating or defending any such loss, claim, damage,
liability, or action; provided, however, that the indemnity agreement contained
in this subsection 7(b) shall not apply to amounts paid in settlement of any
such loss, claim, damage, liability or action if such settlement is effected
without the consent of the Holder, which consent shall not be unreasonably
withheld; provided, that, in no event shall any indemnity under this subsection
7(b) exceed the net purchase price of securities sold by such Holder under the
registration statement.
(c) Promptly after receipt by an indemnified party under this
Section 7 of notice of the commencement of any action (including any
governmental action), such indemnified party will, if a claim in respect thereof
is to be made against any indemnifying party under this Section 7, deliver to
the indemnifying party a written notice of the commencement thereof and the
indemnifying party shall have the right to participate in, and, to the extent
the indemnifying party so desires, jointly with any other indemnifying party
similarly noticed, to assume the defense thereof with counsel mutually
satisfactory to the parties; provided, however, that an indemnified party shall
have the right to retain its own counsel, with the reasonably incurred fees and
expenses of one such counsel to be paid by the indemnifying party, if
representation of such indemnified party by the counsel retained by the
indemnifying party would be inappropriate due to actual or potential conflicting
interests between such indemnified party and any other party represented by such
counsel in such proceeding. The failure to deliver written notice to the
indemnifying party within a reasonable time
5
<PAGE>
of the commencement of any such action, if prejudicial to its ability to defend
such action, shall relieve such indemnifying party of any liability to the
indemnified party under this Section 7, but the omission so to deliver written
notice to the indemnifying party will not relieve it of any liability that it
may have to any indemnified party otherwise than under this Section 7.
(d) In the event that the indemnity provided in paragraph (a) or (b)
of this Section 7 is unavailable to or insufficient to hold harmless an
indemnified party for any reason, the Company and each holder of Registrable
Securities agree to contribute to the aggregate claims, losses, damages and
liabilities (including legal or other expenses reasonably incurred in connection
with investigating or defending same) (collectively "Losses") to which the
Company and one or more of the holders of Registrable Securities may be subject
in such proportion as is appropriate to reflect the relative fault of the
Company and the holders in connection with the statements or omissions which
resulted in such Losses; provided, however, that in no case shall any holder be
responsible for any amount in excess of the net purchase price of securities
sold by it under the registration statement. Relative fault shall be determined
by reference to whether any alleged untrue statement or omission relates to
information provided by the Company or by the holders. The Company and the
holders agree that it would not be just and equitable if contribution were
determined by pro rata allocation or any other method of allocation which does
not take account of the equitable considerations referred to above.
Notwithstanding the provisions of this paragraph (d), no person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation. For purposes of this Section 7, each person who
controls a holder of Registrable Securities within the meaning of either the Act
or the 1934 Act and each director, officer, partner, employee and agent of a
holder shall have the same rights to contribution as such holder, and each
person who controls the Company within the meaning of either the Act or the 1934
Act and each director of the Company, and each officer of the Company who has
signed the registration statement, shall have the same rights to contribution as
the Company, subject in each case to the applicable terms and conditions of this
paragraph (d).
(e) The obligations of the Company and Holders under this Section 7
shall survive the redemption and conversion, if any, of the Preferred Stock, the
completion of any offering of Registrable Securities in a registration statement
under this Agreement, and otherwise.
8. REPORTS UNDER SECURITIES EXCHANGE ACT OF 1934. With a view to
making available to the Holders the benefits of Rule 144 promulgated under the
Act and any other rule or regulation of the SEC that may at any time permit a
Holder to sell securities of the Company to the public without registration, the
Company agrees to:
(a) make and keep public information available, as those terms are
understood and defined in SEC Rule 144;
(b) file with the SEC in a timely manner all reports and other
documents required of the Company under the Act and the 1934 Act; and
6
<PAGE>
(c) furnish to any Holder, so long as the Holder owns any Registrable
Securities, forthwith upon request (i) a written statement by the Company, if
true, that it has complied with the reporting requirements of SEC Rule 144, the
Act and the 1934 Act, (ii) a copy of the most recent annual or quarterly report
of the Company and such other reports and documents so filed by the Company, and
(iii) such other information as may be reasonably requested in availing any
Holder of any rule or regulation of the SEC which permits the selling of any
such securities without registration.
9. AMENDMENT OF REGISTRATION RIGHTS. Any provision of this Agreement
may be amended and the observance thereof may be waived (either generally or in
a particular instance and either retroactively or prospectively), only with the
written consent of the Company and the holders of seventy-five percent (75%) of
the Registrable Securities provided that the amendment treats all Holders
equally. Any amendment or waiver effected in accordance with this paragraph
shall be binding upon each Holder, each future Holder, and the Company.
10. NOTICES. All notices required or permitted under this Agreement
shall be made in writing signed by the party making the same, shall specify the
section under this Agreement pursuant to which it is given, and shall be
addressed if to (i) the Company at: 12100 Technology Blvd., Austin, Texas 78727,
Telephone No. (512) 250-2709, Facsimile No. (512) 250-2807, and (ii) the Holders
at their respective last address as the party shall have furnished in writing as
a new address to be entered on such register. Any notice, except as otherwise
provided in this Agreement, shall be made by fax and shall be deemed given at
the time of transmission of the fax.
11. TERMINATION. This Agreement shall terminate on the earlier to
occur of (a) the date that is one (1) year from the date of the Closing or (b)
the date the resale by Holders of all Registrable Securities described in any
registration statement filed pursuant to this Agreement is completed; but
without prejudice to (i) the parties' rights and obligations arising from
breaches of this Agreement occurring prior to such termination or (ii) other
indemnification obligations under this Agreement.
12. ASSIGNMENT. No assignment, transfer or delegation, whether by
operation of law or otherwise, of any rights or obligations under this Agreement
by the Company or any Holder, respectively, shall be made without the prior
written consent of the majority in interest of the Holders or the Company,
respectively; provided that the rights of a Holder may be transferred to a
subsequent holder of the Holder's Registrable Securities (provided such
transferee shall provide to the Company, a writing executed by such transferee
agreeing to be bound as a Holder by the terms of this Agreement); and provided
further that the Company may transfer its rights and obligations under this
Agreement to a purchaser of all or a substantial portion of its business if the
obligations of the Company under this Agreement are assumed in connection with
such transfer, either by merger or other operation of law (which may include
without limitation a transaction whereby the Registrable Shares are converted
into securities of the successor in interest) or by specific assumption executed
by the transferee.
13. MISCELLANEOUS.
7
<PAGE>
(a) Governing Law. This Agreement shall be governed by and construed
in accordance with the laws of the State of Texas without giving effect to
conflict of laws.
(b) Successors and Assigns. Except as otherwise provided herein, the
provisions hereof shall inure to the benefit of, and be binding upon, the
successors, assigns, heirs, executors and administrators of the parties hereto.
(c) Delays or Omissions. No delay or omission to exercise any right,
power or remedy accruing to any holder of any Registrable Shares, upon any
breach or default of the Company under this Agreement, shall impair any such
right, power or remedy of such holder nor shall it be construed to be a waiver
of any such breach or default, or an acquiescence therein, or of or in any
similar breach or default thereunder occurring, nor shall any waiver of any
single breach or default be deemed a waiver of any other breach or default
thereafter occurring. Any waiver, permit, consent or approval of any kind or
character on the part of any holder of any breach or default under this
Agreement, or any waiver on the part of any party of any provisions of
conditions of this Agreement, must be in writing and shall be effective only to
the extent specifically set forth in such writing. All remedies, either under
this Agreement, or by law or otherwise afforded to any holder, shall be
cumulative and not alternative.
(d) Counterparts. This Agreement may be executed in any number of
counterparts, each of which may be executed by less than all of the Investors,
each of which shall be enforceable against the parties actually executing such
counterparts, and all of which together shall constitute one instrument.
(e) Severability. In the case any provision of this Agreement shall
be invalid, illegal or unenforceable, the validity, legality and enforceability
of the remaining provisions shall not in any way be affected or impaired
thereby.
8
<PAGE>
The foregoing Registration Rights Agreement is hereby executed as of
the date first above written.
SI DIAMOND TECHNOLOGY, INC.
By: ________________________________
Name: ______________________________
Title: _____________________________
Title: _____________________________
9
<PAGE>
INVESTOR(S)
____________________________________
Investor's Name
By: ________________________________
(Signature)
Name: ______________________________
Title: _____________________________
Address:
____________________________________
____________________________________
____________________________________
____________________________________
10
