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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) 8/4/97
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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
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(Former name or former address, if changed since last report)
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Item 5. Other Events
On May 1, 1997, SI Diamond Technology, Inc. (the "Company") filed an
Amendment to its Amended and Restated Articles of Incorporation regarding the
Company's Series E Preferred Stock (the "Series E Amendment") with the Secretary
of State of the State of Texas. The Series E Amendment amended certain terms of
the Company's Series E Preferred Stock ("Series E Preferred"), which amendments
were approved by a vote of the Holders of the Series E Preferred. All defined
terms relating to the description of amendments to the Series E Preferred shall
have the same meanings as set forth in the amendment to the Series E Preferred,
which are contained in Exhibit 3(I)(1) to this Current Report on Form 8-K and
incorporated by reference herein.
The terms of the Series E Preferred were amended as follows:
1. (a) Each holder of Series E Preferred may convert up to 12% of the
aggregate shares of Series E Preferred held by such Holder as of April
21, 1997 at a Conversion Price of $ 0.6429.
(b) In addition to the 12% of shares which may be converted above,
each Holder may convert any and all remaining shares of Series E
Preferred held by such Holder at a Conversion Price equal to $1.50.
2. In addition, for each calendar month commencing with April 1997, if
the average of the Closing Bid Prices of the Company's Common Stock
for all of the trading days for such calendar month is less than
$1.00, then the Company shall redeem shares of Series E Preferred held
by each Holder in an amount equal to the lesser of (1) 7% of the
aggregate shares of Series E Preferred held by such Holder as of April
21, 1997, or (2) all shares of Series E Preferred then held by such
Holder. The redemption price for such shares of Series E Preferred
Stock to be redeemed with respect to any month pursuant to this
provision only shall be the Original Series E Issue Price plus the
accrued Premium. Payment for such redeemed shares of Series E
Preferred shall be made within ten (10) business days after the last
day of such calendar month, at the option of the Company, in cash or
in shares of the Common Stock (valued at the average of the Closing
Bid Prices of the Company's Common Stock for all trading days for such
calendar month). Any shares of Common Stock issued pursuant to this
section shall be included in the Registration Statement which covers
the shares of Common Stock into which the Series E Preferred are
convertible.
On August 4, 1997, the Company filed an Amendment to its Amended and
Restated Articles of Incorporation regarding the Company's Series F Preferred
Stock (the "Series F Amendment") with the Secretary of State of the State of
Texas. The Series F Amendment amended certain terms of the Company's Series F
Preferred Stock ("Series F Preferred"), which amendments were approved by a vote
of the Holders of the Series F Preferred. All defined terms relating to the
description of amendments to the Series F Preferred shall have the same meanings
as set forth in the amendment to the Series F Preferred, which are
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contained in Exhibit 3(I)(2) to this Current Report on Form 8-K and incorporated
by reference herein.
The terms of the Series F Preferred were amended as follows:
1. The Fixed Conversion Price was lowered from $1.75 to $1.50.
2. (a) Each Holder may convert up to 12.5% of the aggregate number of
shares of Series F Preferred held by such Holder as of July 14, 1997
during the month of July 1997 and an additional 12.5% of such amount
during August 1997. These shares shall be converted at the Conversion
Price as calculated pursuant to the Certificate of Designation, as
amended herein.
(b) In addition to the 12.5% that can be converted in July 1997 and the
12.5% that can be converted in August 1997 at the calculated Conversion
Price, each Holder of Series F Preferred may convert, at any time, any
and all remaining shares of Series F Preferred held by such Holder at a
Conversion Price equal to $1.50.
3. In addition, for each calendar month commencing with July 1997, if the
average of the Closing Bid Prices of the Company's Common Stock for all
the trading days for such calendar month is less than $1.00, then the
Holder may require the Company to convert shares of the Series F
Preferred held by such Holder in an amount equal to the lesser of (1)
7% of the aggregate shares of Series F Preferred held by such Holder as
of July 14, 1997 or (2) all shares of Series F Preferred Stock then
held by such Holder. For shares of Series F Preferred submitted to the
Company under the terms of this provision, the Company shall have the
option of redeeming the shares submitted upon notice to the Holders
within one (1) business day of the receipt of notice from the Holder
exercising the rights of this provision. If the Company does exercise
its option to redeem, the redemption price shall be the equivalent of
115% of the sum of the original Series F Issue Price plus any accrued
interest under the terms of the Certificate of Designation, as amended.
If the Company does not exercise its right to redeem under this
provision, then the shares of Series F Preferred shall be converted
into shares of the Company's Common Stock (valued at the average of the
Closing Bid Prices of the Company's Common Stock for all trading days
for such calendar month). The payment of such redemption price or the
shares of Common Stock to be received upon conversion pursuant to the
terms of this provision shall be delivered to the Holder of Series F
Preferred within ten (10) business days of the receipt by the Company
of notice from such Holder exercising his rights under the terms of
this provision. Any shares of Common Stock issued pursuant to these
provisions shall be included in the Registration Statement which covers
the shares of Common Stock into which the Series F Preferred are
convertible.
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4. If the Closing Bid Price of the Corporation's Common Stock does not
exceed $1.50 by October 12, 1997, the Company agrees to renegotiate the
conversion terms of the Series F Preferred with its Holders.
Item 7. Financial Statements and Exhibits
Exhibit (3)(I)(1) Amendment to Amended and Restated Articles of
Incorporation of SI Diamond Technology, Inc. as filed
with the Secretary of State of the State of Texas as of
May 1, 1997.
Exhibit (3)(I)(2) Amendment to Amended and Restated Articles of
Incorporation of SI Diamond Technology, Inc. as filed
with the Secretary of State of the State of Texas as of
August 4, 1997.
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Date: August 6, 1997
SI DIAMOND TECHNOLOGY, INC.
By: /s/ Douglas P. Baker
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Douglas P. Baker
Vice President and
Chief Financial Officer
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EXHIBIT (3)(I)(1)
AMENDMENT TO
AMENDED AND RESTATED
ARTICLES OF INCORPORATION
OF
SI DIAMOND TECHNOLOGY, INC.
Pursuant to the provisions of Article 4.04 of the Texas Business
Corporation Act (the "TBCA"), the undersigned company adopts the following
Amendment (the "Amendment") to its Amended and Restated Articles of
Incorporation (the "Articles of Incorporation").
ARTICLE I
The name of the corporation is SI Diamond Technology, Inc. (the
"Company").
ARTICLE II
The following Amendment to the Articles of Incorporation of the Company was
adopted by a vote of outstanding shares of holders of the Company's Series E
Preferred Stock at a properly called and convened meeting on May 1, 1997.
The description of the terms of the Company's Series E Preferred Stock, as
contained in Article Four, Division C-Series of Preferred Stock in the Company's
Articles of Incorporation is hereby deleted and replaced in its entirety as
follows:
"SERIES E PREFERRED STOCK
Section 1. Designation and Amount.
The shares of such series shall be designated as "Series E Preferred Stock"
(the "Series E Preferred Stock") and the number of shares constituting the
Series E Preferred Stock shall be 1,500. Such number of shares may be increased
or decreased by resolution of the Board of Directors; provided, that no decrease
shall reduce the number of shares of Series E Preferred Stock to a number less
than the number of shares then outstanding plus the number of shares reserved
for issuance upon the exercise of outstanding options, rights or warrants or
upon the conversion of any outstanding securities issued by the Company
convertible into Series E Preferred Stock.
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Section 2. Rank.
The Series E Preferred Stock shall rank: (a) prior to all of the Company's
Common Stock, par value $.001 per share ("Common Stock"); (b) prior to any class
or series of capital stock of the Company hereafter created specifically ranking
by its terms junior to any Series E Preferred Stock of whatever subdivision
(collectively, with the Common Stock "Junior Securities"); (c) on parity with
the Company's Series A, Series C and Series D Preferred Stock, and any class or
series of capital stock of the Company hereafter created specifically ranking by
its terms on parity with the Series E Preferred Stock ("Parity Securities") in
each case as to distributions of assets upon liquidation, dissolution or winding
up of the Company, whether voluntary or involuntary (all such distributions
being referred to collectively as "Distributions").
Section 3. Dividends.
The Series E Preferred Stock will bear no dividends, and the holders of the
Series E Preferred Stock shall not be entitled to receive dividends on the
Series E Preferred Stock.
Section 4. Liquidation Preference.
(a) In the event of any liquidation, dissolution or winding up of the
Company, either voluntary or involuntary, the holders of shares of Series E
Preferred Stock shall be entitled to receive, immediately after any
distributions to senior securities required by the Company's Amended and
Restated Articles of Incorporation (the "Articles of Incorporation") or any
statement of designation of preferences, and prior and in preference to any
distribution to Junior Securities but in parity with any distribution to Parity
Securities, an amount per share equal to the sum of (i) $10,000 for each
outstanding share of Series E Preferred Stock (the "Original Series E Issue
Price") and (ii) an amount equal to 8% of the Original Series E Issue Price per
annum for the period that has passed since the date of issuance of any Series E
Preferred Stock (such amount being referred to herein as the "Premium"). If upon
the occurrence of such event, the assets and funds thus distributed among the
holders of the Series E Preferred Stock and Parity Securities shall be
insufficient to permit the payment to such holders of the full preferential
amounts due to the holders of the Series E Preferred Stock and the Parity
Securities, respectively, then the entire assets and funds of the Company
legally available for distribution shall be distributed among the holders of the
Series E Preferred Stock and the Parity Securities, pro rata, based on the
respective liquidation amounts to which each such series of stock is entitled by
the Company's Articles of Incorporation and any statement(s) of designation of
preferences.
(b) Upon the completion of the distribution required by subsection 4(a), if
assets remain in this Company, they shall be distributed to holders of Parity
Securities (unless holders of Parity Securities have received distributions
pursuant to subsection 4(a) above) and
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Junior Securities in accordance with the Company's Articles of Incorporation
including any duly adopted statement(s) of designation of preferences.
(c) A consolidation or merger of the Company with or into any other
corporation or corporations, or a sale, conveyance or disposition of all or
substantially all of the assets of the Company or the effectuation by the
Company of a transaction or series of related transactions in which more than
50% of the voting power of the Company is disposed of, shall not be deemed to be
a liquidation, dissolution or winding up within the meaning of this Section 4,
but shall be treated pursuant to Section 7 hereof.
Section 5. Conversion.
The record Holders of this Series E Preferred Stock shall have conversion
rights as follows (the "Conversion Rights"):
(a) Right to Convert. The record Holder of the Series E Preferred Stock
shall be entitled, as set forth below, and, subject to the Company's right of
redemption set forth in Section 6(a) below and the restrictions on conversion
set forth in Section 5(b) below, at the offices of the Company or any transfer
agent for the Series E Preferred Stock, to convert the shares of Series E
Preferred Stock held by such Holder into that number of fully-paid and
nonassessable shares of the Company's Common Stock at the Conversion Rate as set
forth below; provided that, except as required by Section 5(e) below, in no
event shall any Holder be entitled to convert shares of Series E Preferred Stock
which, upon conversion, would cause the aggregate number of shares of Common
Stock beneficially owned by such Holder and its affiliates to exceed 4.9% of the
outstanding shares of the Company's Common Stock following such conversion. For
purposes of the foregoing proviso, the aggregate number of shares of Common
Stock beneficially owned by a Holder and its affiliates shall include the shares
of Common Stock issuable upon conversion of the shares of Series E Preferred
Stock with respect to which the determination of such proviso is being made, but
shall exclude the shares of Common Stock which would be issuable upon conversion
of the remaining unconverted portion of the Series E Preferred Stock
beneficially owned by such Holder and its affiliates. Except as set forth in the
preceding sentence, for purposes of this paragraph, "beneficial ownership" shall
be calculated in accordance with section 13(d) of the Securities Exchange Act of
1934, as amended.
The number of shares of Common Stock into which this Series E Preferred
Stock may be converted is hereinafter referred to as the "Conversion Rate" for
such Series E Preferred Stock, and is computed as follows:
Number of shares issued upon conversion of one share of Series E Preferred
Stock
= [(.08)(N/365)(Issue Price)] + Issue Price
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Conversion Price
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where
"N = the number of days between (i) the date that, in connection with the
consummation of the initial purchase of the Preferred Stock from the
Company, the escrow agent first had in its possession funds representing
full payment for the Preferred Stock for which conversion is being elected,
and (ii) the applicable date of conversion for the Preferred Stock for
which conversion is being elected.
"Issue Price = the Original Series E Issue Price, as defined in Section
4(a).
"Conversion Price = either (x) the lesser of $1.875 (the "Low Fixed
Conversion Price") or 85% of the average Closing Bid Price of the Company's
Common Stock for the five (5) trading days immediately preceding the Date
of Conversion, as defined below, for one-third (1/3) of the shares (the
"Low Fixed Preferred Shares") of Series E Preferred held by a Holder as of
January 16, 1997 or (y) the lesser of $2.75 (the "High Fixed Conversion
Price") or 85% of the average Closing Bid Price of the Company's Common
Stock for the five (5) trading days immediately preceding the Date of
Conversion for the remaining two-thirds (2/3) of the shares (the "High
Fixed Preferred Shares") of the Series E Preferred held by a Holder as of
January 16, 1997. For purposes hereof, the term "Closing Bid Price" shall
mean the closing bid price of the Company's Common Stock as reported by
NASDAQ (or, if not reported by NASDAQ, as reported by such other exchange
or market where traded).
Each Holder shall have the sole right to designate the shares of Series E
Preferred tendered for conversion pursuant to this Section 5(a) by such
Holder as Low Fixed Preferred Shares, High Fixed Preferred Shares or any
combination of Low Fixed Preferred Shares and High Fixed Preferred Shares
by providing the Company with notice thereof in the Notice of Conversion
delivered by such Holder to the Company in connection with such conversion.
In the event of an automatic conversion of Series E Preferred shares
pursuant to Section 5(e) below the Company shall convert Low Fixed
Preferred Shares and High Fixed Preferred Shares by applying the applicable
High or Low Fixed Conversion Price to such conversions.
Notwithstanding the foregoing definition of "Conversion Price", if
Section 5(b)(i) below is in effect and has not been terminated pursuant to
Section 5(b)(iii) below, the Conversion Price shall be as set forth in
Section 5(b)(i).
(b) Restrictions on Conversion.
(i) Notwithstanding Section 5(b)(iv) below and unless this Section
5(b)(i) is terminated pursuant to Section 5(b)(iii) below, the
conversion of
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Series E Preferred Stock by each Holder of Series E Preferred
Stock pursuant to Section 5(a) above shall be limited as
follows:
(1) Each Holder shall be entitled to convert up to 12% of the
aggregate shares of Series E Preferred Stock held by such
Holder as of April 21, 1997 at $0.6429, the Conversion
Price which was in effect as of April 14, 1997.
(2) In addition to the shares of Series E Preferred Stock a
Holder may convert pursuant to Section 5(b)(i)(1) above,
each Holder shall be entitled to convert any and all
remaining shares of Series E Preferred Stock held by such
Holder, in all such cases, at a Conversion Price equal to
$1.50.
(ii) Consideration for Limitation on Conversions Pursuant to
Section 5(b)(i). For each calendar month, commencing with
April 1997 and unless Section 5(b)(i) has been terminated
pursuant to Section 5(b)(iii) below, if the average of the
Closing Bid Prices of the Company's Common Stock for all of
the trading days for such calendar month is less than $1.00,
then the Company shall redeem shares of Series E Preferred
Stock held by each Holder in an amount equal to the lesser of
(1) 7% of the aggregate shares of Series E Preferred Stock
held by such Holder as of April 21, 1997, or (2) all shares of
Series E Preferred Stock then held by such Holder. The
redemption price for such shares of Series E Preferred Stock
to be redeemed with respect to any month, pursuant to the
provisions of this Section 5(b)(ii) only, shall be the
Original Series E Issue Price plus the accrued Premium.
Payment for such redeemed shares of Series E Preferred Stock
shall be made within ten (10) business days after the last day
of such calendar month, at the option of the Company, in cash
or in shares of the Common Stock (valued at the average of the
Closing Bid Prices of the Company's Common Stock for all
trading days for such calendar month). Any shares of Common
Stock issued pursuant to this Section 5(b)(ii) shall be
included in the Registration Statement (defined below).
(iii) Right of Recision and Termination by the Holders of the
Provisions of Section 5(b)(i). Notwithstanding anything to the
contrary, if:
(1) by the earlier of (a) the date the Securities and Exchange
Commission declares the Company's Registration Statement
on Form S-3 (the "Registration Statement"), which was
filed on April 8, 1997, to be effective under the
Securities Act of 1933, as amended, or (b) June 9, 1997,
the Company fails for any
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reason or for no reason to enter into an agreement binding
upon all of the Holders of the Company's Series F
Preferred Stock with respect to the modification of the
conversion rights of the Company's Series F Preferred
Stock which, in the good faith judgement of the Holders,
is not materially more adverse to the Company than the
provisions set forth in Sections 5(b)(i) and 5(b)(ii)
above; or
(2) by May 6, 1997, the Company fails for any reason or for no
reason to enter into an agreement binding upon all of the
Holders of the Company's 8% Convertible Debentures issued
pursuant to Regulation S (the "Convertible Debentures")
which are outstanding as of April 21, 1997 or are issued
prior to or on May 6, 1997, with respect to the
modification of the conversion rights of the Convertible
Debentures which, in the good faith judgement of the
Holders, is not materially more adverse to the Company
than the provisions set forth in Sections 5(b)(i) and
5(b)(ii) above;
then, upon written notice to the Company by the Holders representing 75%
or more of the outstanding shares of Series E Preferred Stock, the terms
set forth in Sections 5(b)(i) and 5(b)(ii) hereof shall be rescinded,
terminated and be void and of no legal effect and the Holder's rights
and obligations with respect to conversions of the Series E Preferred
Stock shall be governed by Section 5(b)(iv) below.
(iv) After February 14, 1997, and unless the provisions of Section 5(b)(i)
above are in effect, each Holder agrees to limit such Holder's
conversion of shares of Series E Preferred Stock as follows:
(1) after February 14, 1997, each Holder of Series E Preferred Stock
shall be entitled to convert up to one-third (1/3) of the shares
of Series E Preferred Stock held by such Holder as of January
16, 1997;
(2) in addition to the shares of Series E Preferred Stock a Holder
may convert pursuant to Section 5(b)(iv)(1) above, after March
15, 1997, each Holder shall be entitled to convert up to 12.5% of
the shares of Series E Preferred Stock held by such Holder as of
January 16, 1997;
(3) in addition to the shares of the Series E Preferred Stock a
Holder may convert pursuant to Sections 5(b)(iv)(1) and
5(b)(iv)(2)
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above, each Holder shall be entitled to convert on any date after
March 15, 1997, a cumulative number of shares of Series E
Preferred Stock equal to the product of (a) the number of days
from March 15, 1997 through and including such date, (b) .4067%
and (c) the number of shares of Series E Preferred Stock held by
such Holder as of January 16, 1997.
(v) Increase in the Number of Registered Shares. The Company shall take
any and all action as is necessary or advisable to increase the number
of shares of the Company's Common Stock registered and available for
resale by the holders pursuant to the Registration Statement to an
amount equal to or greater than the maximum number of shares of Common
Stock which would be issued to all of Holders upon a conversion of all
of the shares of the Series E Preferred Stock assuming a conversion at
a Conversion Price of $1.00.
Notwithstanding the provisions of this Section 5(b), each Holder may convert any
and all shares of the Series E Preferred Stock then held by such Holder at the
Conversion Price set forth in Section 5(a) at any time after either (x) the
average of the Closing Bid Prices of the Company's Common Stock for five
consecutive trading days exceeds $3.00 or (y) Marc W. Eller ceases to be
employed by the Company in substantially the same capacity as he occupied as of
January 16, 1997;
(c) Mechanics of Conversion. No fractional shares of Common Stock shall be
issued upon conversion of this Series E Preferred Stock. In lieu of any
fractional share to which the Holder would otherwise be entitled, the Company
shall pay cash to such Holder in an amount equal to such fraction multiplied by
the Conversion Price then in effect with regard to such shares. In the case of a
dispute as to the calculation of the Conversion Rate, the Company's calculation
shall be deemed conclusive absent manifest error. In order to convert Series E
Preferred Stock into full shares of Common Stock, the Holder shall surrender the
certificate or certificates therefor, duly endorsed, by either overnight courier
or 2-day courier, to the office of the Company or of any transfer agent for the
Series E Preferred Stock, and shall give written notice ("Notice of Conversion")
to the Company at such office that he elects to convert the same, the number of
shares of Series E Preferred Stock so converted and a calculation of the
Conversion Rate (with an advance copy of the certificate(s) and the notice by
facsimile); provided, however, that the Company shall not be obligated to issue
certificates evidencing the shares of Common Stock issuable upon such conversion
unless either the certificates evidencing such Series E Preferred Stock are
delivered to the Company or its transfer agent as provided above, or the Holder
notifies the Company or its transfer agent that such certificates have been
lost, stolen or destroyed and executes an agreement satisfactory to the Company
to indemnify the Company from any loss incurred by it in connection with such
certificates.
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The Company shall use its best efforts to issue and deliver within three
(3) business days after delivery to the Company of such certificates, or after
such agreement and indemnification, to such Holder of Series E Preferred Stock
at the address of the Holder on the books of the Company, a certificate or
certificates for the number of shares of Common Stock to which the Holder shall
be entitled as aforesaid. The date on which conversion occurs (the "Date of
Conversion") shall be deemed to be the date set forth in such Notice of
Conversion, provided (i) that the advance copy of the Notice of Conversion is
faxed to the Company before midnight, New York City time, on the Date of
Conversion and (ii) that the stock certificates (the "Preferred Stock
Certificates") representing the Series E Preferred Stock to be converted are
received by the transfer agent or the Company within five (5) business days
thereafter. 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 such date. If the original
Preferred Stock Certificates to be converted are not received by the transfer
agent or the Company within five (5) business days after the Date of Conversion,
the Notice of Conversion shall become null and void.
(d) Reservation of Stock Issuable Upon Conversion. The Company 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
Series E 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 Series E 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 Series E Preferred Stock, the
Company 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.
(e) Automatic Conversion. Each share of Series E Preferred Stock
outstanding on January 15, 1999 automatically shall be converted into Common
Stock on such date at the Conversion Price then in effect for such shares and
January 15, 1999 shall be deemed the Date of Conversion with respect to such
conversion.
(f) Adjustment to Fixed Conversion Prices.
In computing the Fixed Conversion Prices for purposes of Section 5(a) and the
Conversion Price pursuant to Section 5(b)(i)(2):
(i) If, prior to the conversion of all of the Series E Preferred
Stock, the number of outstanding shares of Common Stock is increased by a stock
split stock dividend, or other similar event, the High Fixed Conversion Price,
the Low Fixed Conversion Price and the Conversion Price as established in
Section 5(b)(i)(2) 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 High Fixed Conversion
Price, the Low
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Fixed Conversion Price and the Conversion Price as established in Section
5(b)(i)(2) shall be proportionately increased.
(ii) If, prior to the conversion of all Series E 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 Company 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
Company or another entity, then the Holders of Series E Preferred Stock shall
thereafter have the right to purchase and receive upon conversion of Series E
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 Series E 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 E Preferred Stock to the
end that the provisions hereof (including, without limitation, provisions for
adjustment of the Low Fixed Conversion Price, the High Fixed Conversion Price,
the Conversion Price pursuant to Section 5(b)(i)(2) and of the number of shares
issuable upon conversion of the Series E Preferred Stock) shall thereafter be
applicable, as nearly as may be practicable in relation to any shares of stock
or securities thereafter be deliverable upon the exercise hereof. The Company
shall not effect any transaction described in this subsection 5(f) unless the
resulting successor or acquiring entity (if not the Company) assumes by written
instrument the obligation to deliver to the Holders of the Series E Preferred
Stock such shares of stock and/or securities as, in accordance with the
foregoing provisions, the Holders of the Series E Preferred Stock may be
entitled to purchase.
(iii) If any adjustment under this Section 5(f) would create a
fractional share of Common Stock or a right to acquire a fractional share of
Common Stock, such fractional share (on an aggregate basis) shall be disregarded
and the number of shares of Common Stock issuable upon conversion shall be the
next lower number of shares with the balance paid in cash.
Section 6. Redemption by Company.
(a) Company's Right to Redeem in Case of Conversion.
(i) In the event the Conversion Price shall be $3.00 or less per
share, the Company shall have the right, in its sole discretion, upon receipt of
a Notice of Conversion pursuant to Section 5, to redeem in whole or in part any
Series E Preferred Stock submitted for conversion, immediately prior to
conversion. If the Company elects to redeem some, but not all, of the Series E
Preferred Stock submitted for conversion, the Company shall redeem from among
the Series E Preferred Stock submitted by the various shareholders for
conversion
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on the applicable date, a pro-rata amount from each shareholder so submitting
Series E Preferred Stock for conversion.
(ii) Mechanics of Redemption. Any shareholder considering submitting
Series E Preferred Stock for conversion at such time as the Company's right of
redemption under Section 6(a) is or may be in effect may provide notice to the
Company of his possible desire to convert within five (5) business days of the
date of the notice, and ask the Company to determine whether or not the Company
would exercise its right of redemption if the Series E Preferred Stock were
submitted for conversion. The Company shall respond within two (2) business days
of the date of that notice, and state whether it would redeem the shares, in
whole or in part, or allow conversion into shares without redemption, which
election will be applicable to conversion by such shareholder within the next
five (5) business days after the date of the Company's response. Failure of the
Company to respond within the two-day period shall be deemed an election by the
Company not to redeem the shares covered by that notice if submitted for
conversion within the next five (5) business days. If the shareholder does not
provide advance notice of intention to convert as contemplated in this section
(ii), the Company shall effect each such redemption of shares submitted for
conversion by giving notice of its election to redeem, by facsimile within two
(2) business days following receipt of a Notice of Conversion from a Holder,
with a copy by 2-day courier, to (A) the Holder of Series E Preferred Stock
submitted for conversion at the address and facsimile number of such Holder
appearing in the Company's register for the Series E Preferred Stock and (B) the
Company's Transfer Agent. Such redemption notice shall indicate whether the
Company will redeem all or part of the Series E Preferred Stock submitted for
conversion and the applicable redemption price. The Company shall not be
entitled to exercise its right to redeem shares submitted for conversion under
this Section 6(a) unless it has (x) the full amount of the redemption price, in
cash, available in a demand or other immediately available account in a bank or
similar financial institution or (y) immediately available credit facilities, in
the full amount of the redemption price, with a bank or similar financial
institution on the date the redemption notice is sent to shareholders.
(iii) Redemption Price. In the case of a redemption under this
Section 6(a), the redemption price shall equal:
= [[(.08)(N/365)(Issue Price)] + Issue Price] [Closing Bid Price]
-----------------------------------------------------------------
Conversion Price
where "N", "Issue Price," "Closing Bid Price" and "Conversion Price" have the
meanings set forth in Section 5 above.
The redemption price shall be paid to the Holder of Series E Preferred Stock
redeemed within ten (10) business days after the redemption; provided, however,
that the Company shall not be obligated to deliver any portion of such
redemption price unless either the certificates evidencing the Series E
Preferred Stock redeemed are delivered to the Company or its transfer
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agent as provided in Section 5(c), or the Holder notifies the Company or its
transfer agent that such certificates have been lost, stolen or destroyed and
executes an agreement satisfactory to the Company to indemnify the Company from
any loss incurred by it in connection with such certificates.
(b) Company's Right to Call Redemption. The Company shall have the right
to redeem the Series E Preferred Stock on the following terms and conditions:
(i) The Company may redeem the Series E Preferred Stock at any
time, in its discretion, at the redemption price listed in 6(b)(iii) below. The
Company may elect to redeem some, but not all, of the Series E Preferred Stock,
but in no event less than $5,000,000 per redemption. If the Company elects to
redeem some, but not all, of the Series E Preferred Stock, the Company shall
redeem a pro-rata amount from among all the Series E Preferred Stock holders.
The holders of the Series E Preferred Stock shall have the right to convert
their Series E Preferred Stock until the redemption date.
(ii) Mechanics of Redemption. The Company shall effect each such
redemption by giving notice of its election to redeem, by facsimile with a copy
by 2-day courier, no less than twenty (20) business days prior to the intended
redemption date. Such redemption notice shall indicate whether the Company will
redeem all or part of the Series E Preferred Stock and the applicable redemption
price. The Company shall not be entitled to send any notice of redemption and
begin the redemption procedure unless it has (x) the full amount of the
redemption price, in cash, available in a demand or other immediately available
account in a bank or similar financial institution or (y) immediately available
credit facilities, in the full amount of the redemption price, with a bank or
similar financial institution on the date the redemption notice is sent to
shareholders. If the Company has met the requirements of the preceding sentence,
and the Holder has not submitted his Series E Preferred Stock for redemption as
required by this Section 6(b) by the redemption date, the Company may pay the
redemption price described in Section 6(b) (iii) below and cancel the Series E
Preferred Stock subject to the redemption notice, and such redeemed Series E
Preferred Stock shall be of no further validity, force or effect. Nothing
contained in this Section 6(b) shall limit a Holder's right to receive Common
Stock upon a conversion of shares of Series E Preferred Stock if the Notice of
Conversion with respect to such conversion is given by such Holder to a courier
during business hours for immediate delivery to the Company after the date the
Company has delivered to such Holder a notice of redemption pursuant to this
Section 6(b)(ii) but prior to the date fixed in such notice as the date of
redemption.
(iii) Redemption Price. In the case of a redemption under this
Section 6(b), the redemption price per share of Series E Preferred Stock shall
be as follows:
Redemption Date Elapsed Time since Last Closing
--------------- -------------------------------
130% of Stated Value 90 days - 6 months
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125% of Stated Value 6 months and 1 day - 12 months
120% of Stated Value 12 months and 1 day - 18 months
115% of Stated Value 18 months and 1 day - 24 months
110% of Stated Value 24 months and 1 day - 30 months
105% of Stated Value 30 months and 1 day - 36 months
For purposes of this paragraph, the "Stated Value" shall equal the Original
Series E Issue Price. The redemption price shall be paid to the Holder of
Series E Preferred Stock redeemed within 10 days of the date of such redemption
to such Holder; provided, however, that the Company shall not be obligated to
deliver any portion of such redemption price unless either the certificates
evidencing the Series E Preferred Stock redeemed are delivered to the Company or
its transfer agent as provided in Section 5(c), or the Holder notifies the
Company or its transfer agent that such certificates have been lost, stolen or
destroyed and executes an agreement satisfactory to the Company to indemnify the
Company from any loss incurred by it in connection with such certificates.
Section 7. Corporate Change.
In the event of a merger, reorganization, recapitalization or similar event
of or with respect to the Company (a "Corporate Change") (other than a Corporate
Change in which all or substantially all of the consideration received by the
holders of the Company's equity securities upon such Corporate Change consists
of cash or assets other than securities issued by the acquiring entity or any
affiliate thereof), this Series E Preferred Stock shall be assumed by the
acquiring entity and thereafter this Series E Preferred Stock shall be
convertible into such class and type of securities as the Holder would have
received had the Holder converted this Series E Preferred Stock immediately
prior to such Corporate Change.
Section 8. Voting Rights.
Except as otherwise provided by the Texas Business Corporation Act and
Section 9 below, the holders of the Series E Preferred Stock shall be entitled
to a number of votes equal to the number of shares of Common Stock into which
their respective shares of Series E Preferred Stock are 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. Holders of the Series E Preferred
Stock 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 Company's by-laws and applicable statutes.
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<PAGE>
Section 9. Protective Provisions.
So long as shares of Series E Preferred Stock are outstanding, the Company
shall not without first obtaining the approval (by vote or written consent, as
provided by law) of the holders of at least a majority of the then outstanding
shares of Series E Preferred Stock:
(a) alter or change the rights, preferences or privileges of the shares of
Series E Preferred Stock or any senior securities so as to affect
adversely the Series E Preferred Stock;
(b) create any new class or series of stock having a preference over the
Series E Preferred Stock with respect to Distributions (as defined in
Section 2 above); or
(c) do any act or thing not authorized or contemplated by this Designation
which would result in taxation of the holders of shares of the Series
E 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).
Section 10. Status of Redeemed or Converted Stock.
In the event any shares of Series E Preferred Stock shall be redeemed or
converted pursuant to Section 5 or Section 6 hereof, the shares so converted or
redeemed shall be canceled, shall return to the status of authorized but
unissued Preferred Stock of no designated series, and shall not be issuable by
the Company as Series E Preferred Stock."
ARTICLE III
Pursuant to Article 4.03(C) of the TBCA, 542 shares of Series E Preferred
Stock of the Company were outstanding on the date referenced above and entitled
to vote on the amendment described in Article II.
ARTICLE IV
The number of shares voted for and against the Amendment described in
Article II above, by series, is as follows:
SERIES FOR AGAINST ABSTAIN
------ --- ------- -------
Series E Preferred Stock 427 115 ---
13
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ARTICLE V
This Amendment does not involve any reclassification or cancellation of any
issued shares of the Company.
ARTICLE VI
This Amendment does not effect a change in the amount of stated capital of
the Company.
IN WITNESS WHEREOF, the undersigned has executed this Amendment to Amended
and Restated Articles of Incorporation of SI Diamond Technology, Inc. as of May
1, 1997.
SI DIAMOND TECHNOLOGY, INC.
By: /s/ Douglas P. Baker
-----------------------------------------
Douglas P. Baker
Vice President and
Chief Financial Officer
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<PAGE>
EXHIBIT (3)(I)(2)
AMENDMENT TO
AMENDED AND RESTATED
ARTICLES OF INCORPORATION
OF
SI DIAMOND TECHNOLOGY, INC.
Pursuant to the provisions of Article 4.04 of the Texas Business
Corporation Act (the "TBCA"), the undersigned Corporation adopts the following
Amendment (the "Amendment") to its Amended and Restated Articles of
Incorporation (the"AArticles of Incorporation").
ARTICLE I
The name of the corporation is SI Diamond Technology, Inc. (the
"Corporation").
ARTICLE II
The following Amendment to the Articles of Incorporation of the Corporation
was adopted by unanimous written consent of the holders of the outstanding
shares of the Corporation's Series F Preferred Stock dated July 14, 1997.
The description of the terms of the Corporation's Series F Preferred Stock,
as contained in Article Four, Division C-Series of Preferred Stock in the
Corporation's Articles of Incorporation is hereby deleted and replaced in its
entirety as follows:
"SERIES F PREFERRED STOCK
Section 1. Designation, Amount, Par Value, Stated Value, Accretion Rate,
Purchase Price and Certificates.
(a) The shares of such series shall be designated as "Series F
Preferred Stock" (the "Series F Preferred Stock") and the number of shares
constituting the Series F Preferred Stock shall be 2,500. Such number of
shares may be increased or decreased by resolution of the Board of Directors;
provided, that no decrease shall reduce the number of shares of Series F
Preferred Stock to a number less than the number of shares then outstanding plus
the number of shares reserved for issuance upon the exercise of outstanding
options, rights or warrants or upon the conversion of any outstanding securities
issued by the Corporation convertible into Series F Preferred Stock.
(b) 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.
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<PAGE>
(c) The Series F Preferred Stock shall be offered at a purchase price
of One Thousand Dollars ($1,000) per share.
(d) 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.
Section 2. Dividends.
The Series F Preferred Stock will bear no dividends, and the holders of the
Series F Preferred Stock shall not be entitled to receive dividends on the
Series F Preferred Stock.
Section 3. Liquidation Preference.
(a) In the event of any liquidation, dissolution or winding-up of the
Corporation, either voluntary or involuntary (a"Liquidation"), the holders of
shares of 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) $1,000 and (ii) an amount
equal to four percent (4%) of $1,000 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 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 a Liquidation, the Series F Preferred Stock shall
be subordinate to Series A and Series E Preferred Stock.
(b) After payment shall have been made to the holders 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.
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<PAGE>
(c) 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 and the distribution of its assets to its
shareholders shall not be deemed to be a Liquidation (in whole or in part) of
the Corporation.
Section 4. Conversion.
The record Holders of this Series F Preferred Stock shall have conversion
rights as follows (the "Conversion Rights").
(a) Right to Convert.
The record Holders of each share of Series F Preferred Stock shall be
entitled, as set forth below, and subject to the restrictions on conversion set
forth in Section 4(e) below, to convert the shares of Series F Preferred Stock
held by such Holder into that number of fully-paid and nonassessable shares of
the Corporation's Common Stock (the "Conversion Shares") at the Conversion Rate
as set forth below.
(b) 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(s) 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
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<PAGE>
within three (3) business days after the receipt of the original Conversion
Notice and the person(s) entitled to receive the shares of Common Stock issuable
upon such conversion shall be treated for all purposes as the record holder(s)
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.
(c) Conversion Dates.
Subject to the restrictions on conversion set forth in Section 4(e) below,
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."
(d) 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"):
Number of shares of Common Stock issued upon conversion of one share of
Series F Preferred Stock
= [(.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) $1.50 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.
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<PAGE>
Notwithstanding the foregoing definition of "Conversion Price," the
Conversion Price shall be as set forth in Section 4(e)(i) for the shares of
Series F Preferred Stock subject to such provisions.
(e) Restrictions on Conversion.
(i) The conversion of Series F Preferred Stock by each Holder of Series F
Preferred Stock pursuant to Section 4(a) above shall be limited as
follows:
(1) Each Holder shall be entitled to convert up to 12.5% of the
aggregate shares of Series F Preferred Stock held by such Holder as of
July 14, 1997 during the month of July 1997 and an additional 12.5% of
such amount during August 1997. These shares shall be converted at
the Conversion Price as calculated pursuant to Section 4(d) of this
Certificate of Designation, as amended to date.
(2) In addition to the shares of Series F Preferred Stock a Holder may
convert pursuant to Section 4(e)(i)(1) above, each Holder shall be
entitled to convert, at any time, any and all remaining shares of
Series F Preferred Stock held by such holder at a Conversion Price
equal to $1.50.
(ii) Consideration for Restrictions on Conversion Pursuant to Section
4(e)(i).
For each calendar month, commencing with July 1997, if the average
of the Closing Bid Prices of the Corporation's Common Stock for all the
trading days for such calendar month is less than $1.00, then the Holder
may have the Corporation redeem shares of the Series F Preferred Stock
held by such Holder in an amount equal to the lesser of (1) 7% of the
aggregate shares of Series F Preferred Stock held by such holder as of
July 14, 1997, or (2) all shares of Series F Preferred Stock then held by
such holder. For shares of Series F Preferred Stock submitted to the
Corporation under the terms of this provision, the Corporation shall have
the option of redeeming the shares submitted upon notice to the holders
within one (1) business day of the receipt of notice from the holder
exercising the rights of this provision. If the Corporation does exercise
its option to redeem, the redemption price shall be the equivalent of
115% of the sum of the original Series F Issue Price plus any accrued
interest under the terms of the Certificate of Designation, as amended.
If the Corporation does not exercise its right to redeem under this
provision, then the shares of Series F Preferred Stock shall be converted
into shares of the Corporation's Common Stock (valued at the average of
the Closing Bid Prices of the Corporation's Common Stock for all trading
days for such calendar month). The payment of such redemption price or
the shares of Common Stock to be received upon conversion pursuant to the
terms of this provision shall be delivered to the holder of Series F
Preferred Stock within ten (10) business days of the receipt by the
Corporation of notice from such holder exercising his rights
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under the terms of this provision. Any shares of Common Stock issued
pursuant to these provisions shall be included in the Registration
Statement which covers the shares of Common Stock into which the Series F
Preferred Stock are convertible.
(iii) If the Closing Bid Price of the Corporation's Common Stock does not
exceed $1.50 within ninety (90) days from July 14, 1997, the Corporation
hereby agrees to renegotiate the conversion terms of the Series F
Preferred Stock with its holders.
(f) 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 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.
(g) Automatic Conversion.
Each share of Series F Preferred Stock outstanding on March 10, 1999 shall be
converted automatically into Common Stock on such date in 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.
(h) No Fractional Shares.
If any conversion of the Series F Preferred Stock would create a fractional
share of Common Stock, no fractional shares shall be issued, and an equivalent
of the fractional share shall be paid in cash.
(i) 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
6
<PAGE>
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.
(j) Adjustment to Conversion Price.
(1) 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.
(2) 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
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.
(3) 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
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<PAGE>
shares shall be issued upon conversion, and an equivalent of the fractional
share shall be paid in cash.
Section 5. Voting Rights.
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 the 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 shall also 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.
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Section 6. 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).
Section 7. Status of Converted Stock.
In the event that any shares of Series F Preferred Stock shall be converted
pursuant to Section 4 hereof, 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.
Section 8. 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 that such tax has
been paid or that no such tax is payable."
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ARTICLE III
Pursuant to Article 4.03(C) of the TBCA, 1500 shares of Series F Preferred
Stock of the Corporation were outstanding on the date referenced above and
entitled to vote on the amendment described in Article II.
ARTICLE IV
The number of shares voted for and against the Amendment described in
Article II above, by series, is as follows:
SERIES FOR AGAINST ABSTAIN
------ --- ------- -------
Series F Preferred Stock 1500 0 0
ARTICLE V
This Amendment does not involve any reclassification or cancellation of any
issued shares of the Corporation.
ARTICLE VI
This Amendment does not effect a change in the amount of stated capital of
the Corporation.
IN WITNESS WHEREOF, the undersigned has executed this Amendment to Amended
and Restated Articles of Incorporation of SI Diamond Technology, Inc. as of
August 1, 1997.
SI DIAMOND TECHNOLOGY, INC.
By: /s/ Trey Fecteau
-------------------------------------------
Trey Fecteau
Senior Vice President
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