<PAGE> 1
As filed with the Securities and Exchange Commission on June 9, 1998
Registration No. 333-______
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
------------------------
FORM S-8
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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SI DIAMOND TECHNOLOGY, INC.
(Exact Name of Registrant as Specified in its Charter)
TEXAS 76-0273345
(State or Other Jurisdiction (I.R.S. Employer
of Incorporation or Organization) Identification Number)
3006 Longhorn Boulevard
Suite 107
Austin, Texas
78758
(Address of Principal Executive Offices)
Amended & Restated 1992
Stock Option Plan
Amended and Restated
1992 Outside Directors'
Stock Option Plan
1998 Directors and Officers Stock Option Plan
(Full Title of the Plans)
DOUGLAS P. BAKER
Vice President and
Chief Financial Officer
3006 Longhorn Boulevard
Suite 107
Austin, Texas 78758
(Name and Address of Agent for Service)
(512) 331-6200
(Telephone Number, including Area Code, of Agent for Service)
The Commission is requested to send copies of all notices and other
communications to:
Donald T. Locke, Esq.
Haskell Slaughter & Young, L.L.C.
1200 AmSouth/Harbert Plaza
1901 Sixth Avenue North
Birmingham, Alabama 35203
Tel: (205) 251-1000
Fax: (205) 324-1133
----------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
===================================================================================================================================
Proposed Maximum Proposed Maximum
Title of Securities Amount to be Offering Price Aggregate Offering Amount of
to be Registered Registered Per Share(1) Price(1) Registration Fee
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, par value $.001 per 4,035,000 shares (2) $ 0.38 $ 1,020,000 $ 301.00(2)
share
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</TABLE>
(1) Estimated solely for the purposes of calculating the registration fee, as
determined in accordance with Rules 457(c) and 457(h), using the average
of the high and low sale prices per share of the Company's Common Stock
reported on the OTC Bulletin Board for June 5, 1998.
(2) Amount represents the total number of shares of Common Stock issuable
pursuant to the above referenced plans, as amended, of which 1,350,000
shares were previously registered on Registration Statement No. 33-82666
for which registration fees have previously been paid.
<PAGE> 2
Explanatory Note
-----------------
This Registration Statement has been prepared in accordance with the
requirements of Form S-8 under the Securities Act of 1933, as amended (the
"Securities Act") to register shares of common stock, $.001 par value (the
"Common Stock") of SI Diamond Technology, Inc. (the "Registrant") issuable
pursuant to the Registrants 1998 Outside Directors' Stock Option Plan, the
Registrant's Amended and Restated 1992 Stock Option Plan and its Amended and
Restated 1992 Outside Directors' Stock Option Plan (collectively, the "Plans").
PART I
INFORMATION REQUIRED IN THE SECTION 10(a) PROSPECTUS
NOTE: THE DOCUMENT(S) CONTAINING THE EMPLOYEE BENEFIT PLAN INFORMATION
REQUIRED BY ITEM 1 OF FORM S-8 AND THE STATEMENT OF AVAILABILITY OF REGISTRANT
INFORMATION AND ANY OTHER INFORMATION REQUIRED BY ITEM 2 OF FORM S-8 WILL BE
SENT OR GIVEN TO EMPLOYEES AS SPECIFIED BY RULE 428 UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "SECURITIES ACT"). IN ACCORDANCE WITH RULE 428 AND THE
REQUIREMENTS OF PART I OF FORM S-8, SUCH DOCUMENTS ARE NOT BEING FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION (THE "COMMISSION") EITHER AS PART OF THIS
REGISTRATION STATEMENT OR AS PROSPECTUSES OR PROSPECTUS SUPPLEMENTS PURSUANT TO
RULE 424 UNDER THE SECURITIES ACT. THE REGISTRANT SHALL MAINTAIN A FILE OF SUCH
DOCUMENTS IN ACCORDANCE WITH THE PROVISIONS OF RULE 428. UPON REQUEST, THE
REGISTRANT SHALL FURNISH TO THE COMMISSION OR ITS STAFF A COPY OR COPIES OF ALL
OF THE DOCUMENTS INCLUDED IN SUCH FILE.
Under cover of this Form S-8 is a reoffer prospectus prepared in
accordance with Part I of Form S-3 under the Securities Act (the "Reoffer
Prospectus"). The Reoffer Prospectus may be utilized for reofferings and resales
of up to 3,034,903 shares of Common Stock acquired by selling shareholders
through participation in the Plans.
<PAGE> 3
REOFFER
PROSPECTUS
SI DIAMOND TECHNOLOGY, INC.
3,034,903 Shares of Common Stock
(par value $.001 per share)
This Prospectus relates to the offer and sale of shares of common
stock, par value $.001 per share (the "Common Stock"), of SI Diamond Technology,
Inc. (the "Company"), which may be offered hereby from time to time by any or
all of the selling Shareholders named herein ("Selling Shareholders") for their
own benefit. All proceeds from any sales of such shares of Common Stock will
inure to the benefit of the Selling Shareholders. The Company will receive no
part of the proceeds from the sale of the shares which may be offered hereby but
may receive funds upon the exercise of the options pursuant to which the Selling
Shareholders will acquire the shares covered by this Prospectus, which funds, if
any, will be used for working capital. All expenses of registration incurred in
connection herewith are being borne by the Company, but all selling and other
expenses incurred by the Selling Shareholders will be borne by such Selling
Shareholders.
All or a portion of the shares of Common Stock offered hereby may be
offered for sale, from time to time, on the OTC Bulletin Board, or otherwise, at
prices and terms then obtainable. All brokers' commissions, concessions or
discounts will be paid by the Selling Shareholders. See "Plan of Distribution."
The Selling Shareholders and any broker executing selling orders on
behalf of the Selling Shareholders may be deemed to be an "underwriter" within
the meaning of the Securities Act of 1933, as amended, (the "Securities Act"),
in which event commissions received by such broker may be deemed to be
underwriting commissions under the Securities Act.
The Common Stock of the Company is listed and traded on the OTC
Bulletin Board under the symbol "SIDT". On June 5, 1998, the last reported
sale price of the Company's Common Stock on the OTC Bulletin Board was $0.38.
THESE SECURITIES ARE SUBJECT TO A HIGH DEGREE OF RISK. SEE
"INVESTMENT CONSIDERATIONS."
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED
BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE
SECURITIES COMMISSION NOR HAS THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
------------------------------
The date of this Prospectus is June 9, 1998.
<PAGE> 4
NO DEALER, SALESMAN OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE
RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR THE SELLING
SHAREHOLDERS. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE
HEREUNDER SHALL UNDER ANY CIRCUMSTANCES CREATE AN IMPLICATION THAT THERE HAS
BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF. THIS
PROSPECTUS IS NOT AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY OF
THE SHARES OFFERED HEREBY IN ANY JURISDICTION WHERE SUCH OFFER OR SOLICITATION
WOULD BE UNLAWFUL.
AVAILABLE INFORMATION
The Company has filed with the Securities and Exchange Commission (the
"Commission") a Registration Statement on Form S-3 (the "Registration
Statement") under the Securities Act with respect to the securities offered
hereby. This Prospectus does not contain all the information set forth in the
Registration Statement and the exhibits and schedules thereto, to which
reference is hereby made. Statements made in this Prospectus as to the contents
of any contract, agreement or other document referred to are not necessarily
complete; with respect to each such contract, agreement or other document filed
as an exhibit to the Registration Statement, reference is made to the exhibit
for a more complete description of the matter involved, and each such statement
shall be deemed qualified in its entirety by such reference.
The Company is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in
accordance therewith files reports, proxy statements and other information with
the Commission. Materials filed with the Commission by the Company can be
inspected and copied at the public reference facilities maintained by the
Commission at 450 Fifth Street, N.W., Judiciary Plaza, Washington, D.C. 20549;
and at the Regional Offices of the Commission at the Northwestern Atrium Center,
500 West Madison Street, Suite 1400, Chicago, Illinois 60606-2511; and Seven
World Trade Center, New York, New York 10048. Copies of such material can also
be obtained at prescribed rates from the Public Reference Section of the
Commission at 450 Fifth Street, N.W., Judiciary Plaza, Washington, D.C. 20549.
The Commission also maintains a Web site that contains reports, proxy statements
and other information regarding registrants that file electronically with the
Commission. The address of such site is http://www.sec.gov.
The Common Stock is included in the OTC Bulletin Board under the symbol
"SIDT." Reports, proxy and information statements and other information
concerning the Company can be inspected at the National Association of
Securities Dealers, Inc., 1735 K Street, N.W., 3rd Floor, Washington, D.C. 20006
or obtained by calling the Nasdaq Public Reference Room Disclosure Group at
(800) 638-8241.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents, which have been filed by the Company with the
Commission pursuant to the Exchange Act (File No. 1-11602), are incorporated by
reference in this Prospectus and shall be deemed to be a part hereof:
(1) The Company's Annual Report on Form 10-KSB for the fiscal
year ended December 31, 1997.
(2) The Company's Quarterly Report on Form 10-QSB for the
fiscal quarter ended March 31, 1998.
(3) The Company's Current Report on Form 8-K dated as of
January 20, 1998.
(4) The Company's Current Report on Form 8-K dated as of
February 11, 1998.
(5) The Company's Current Report on Form 8-K dated as of
May 8, 1998.
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All documents subsequently filed by the Company with the Commission
pursuant to Section 13(a), 13(c), 14 or 15(d) of the Exchange Act prior to the
termination of the offering made by this Prospectus shall be deemed to be
incorporated herein by reference and to be a part hereof from the date of filing
such documents. Any statement contained in a document incorporated or deemed to
be incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this Prospectus to the extent that a statement contained herein
or in any other subsequently filed document that also is or is deemed to be
incorporated by reference herein modifies or supersedes such statement. Any such
statement so modified or superseded shall not be deemed, except as so modified
or superseded, to constitute a part of this Prospectus.
The Company hereby undertakes to provide without charge to each person
to whom a copy of this Prospectus has been delivered, upon written or oral
request of any such person, a copy of any or all of the documents referred to
above that have been incorporated by reference in this Prospectus (not including
exhibits to the documents that are incorporated by reference unless such
exhibits are specifically incorporated by reference into such documents).
Requests for such copies should be directed in writing or by telephone to SI
Diamond Technology, Inc., 3006 Longhorn Boulevard, Suite 107, Austin, Texas
78758, Attention: Corporate Secretary (Telephone: (512) 339-5020).
THE COMPANY
SI Diamond Technology, Inc., a Texas corporation (the "Company"), is
engaged in the development of products and services based principally on novel
applications of thin films and microelectronic fabrication and assembly. The
Company believes that microelectronic and other applications of diamond thin
film technology will play an important role in the electronics industry. The
Company's research is focused on identifying key applications of such
technology. Based on this research, the Company provides microelectronic
fabrication and assembly services and is currently engaged in the development
of products based on Diamond Field Emission ("DFE") technology and the
development of an electronic billboard and related electronic display products
based on existing technology. Electronic billboards and related electronic
display products would provide a market for the Company's Diamond Field
Emission Lamp ("DEFEL") product when completed. Management believes that the
Company's greatest growth opportunity lies in DFE products and the development
of an electronic billboard and related electronic display products.
Consequently, each of the Company's operations comprises a product, technology
or service useful in the development and production of such items. The Company
was incorporated in Texas in 1987.
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RECENT DEVELOPMENTS
On May 8, 1998, the Company closed a transaction to sell the majority
of the operating assets of its Diamond Tech One, Inc. ("DTO") subsidiary for a
total purchase price of $2.2 million, of which $1.8 million was payable at the
closing and the remaining $400,000 was deposited into escrow. A portion of the
escrowed amount will be released upon the settlement, by the Company, of certain
litigation between DTO and Alpine Microsystems, Inc. The balance will be
released in 120 days. The litigation involves a breach of contract claim by
Alpine Microsystems, Inc. The Company believes settlement negotiations will be
completed within the next two or three months. The purchaser of these assets
will also assume the building lease on the DTO facility. The Company will retain
the remaining assets, including all cash, accounts receivable, certain equipment
identified as excess, certain intangibles, and all liabilities. The Company
expects to record a gain on the sale of these assets of approximately $700,000
in the quarter ended June 30, 1998. The remaining assets of DTO that have been
retained by the Company are insignificant, with the exception of the intangible
assets. While these intangible assets have no book value, they may have
significant market value. The Company intends to seek buyers or licensees for
these intangible assets.
RISK FACTORS
The Common Stock being offered hereby involves a high degree of risk.
Prospective investors should carefully consider the following risk factors in
addition to other information contained in this Prospectus in evaluating an
investment in the shares of Common Stock offered hereby.
EARLY STAGE OF DFE PRODUCT DEVELOPMENT; NO DFE PRODUCT REVENUES; DFE PRODUCT
UNCERTAINTY
The Company's Diamond Field Emission ("DFE") technology and products
resulting therefrom will require significant additional development,
engineering, testing and investment prior to commercialization. These costs are
currently unquantifiable but are expected to be in excess of $5,000,000. Prior
to incurring these costs the Company intends to locate a strategic partner to
fund the majority of these costs. There is no guarantee, however, that these
estimates will reflect the actual costs incurred. The Company's leading
potential DFE product is the Diamond Field Emission Lamp ("DFEL"). If the DFEL
is successful, the Diamond Field Emission Display ("DFED") is also a
possibility. There can be no assurance that either the DFEL or DFED will be
successfully developed, be capable of being produced in commercial quantities on
a cost-effective basis or be successfully marketed. Failure of the DFE and
related products to generate significant revenue for the Company would
constitute a material adverse effect on the Company's future financial viability
and existence.
HISTORY OF OPERATING LOSSES; GOING CONCERN
For the year ended December 31, 1997, the Company suffered a net loss
of $6,320,901. For the years ended December 31, 1992, 1993, 1994, 1995, and
1996, the Company suffered net losses of $1,630,978, $7,527,677, $7,255,420,
$14,389,856 and $13,709,006, respectively. The Company expects to continue to
incur additional operating losses for an extended period of time as it continues
to develop products for commercialization, although it expects the magnitude of
those losses to decrease. There can be no assurance that the Company will be
profitable in the future. The Company's independent auditors have included an
explanatory paragraph in their report on the Company's financial statements
stating that as of March 3, 1998, the Company has not yet achieved
profitability, has a working capital deficit and must obtain additional
financing to fund its ongoing operations. As a result, there is substantial
doubt about the Company's ability to continue as a going concern. The Company's
operations to date have been primarily financed by the proceeds from the sale of
equity securities of the Company and from revenues generated from research and
development conducted for third parties; although since the second quarter of
1994, revenues from commercial services and product sales have exceeded those
earned through such research and development ("R&D") activities. In order to
continue its transition from a contract research and development organization
into a company with viable operations, the Company anticipates substantial
product development expenditures for the foreseeable future.
FUTURE CAPITAL NEEDS AND UNCERTAINTY OF ADDITIONAL FUNDING
The Company expects to incur substantial expenses for R&D, product
testing, product marketing and administrative overhead. The Company expects
these expenses to exceed $2.4 million annually. There is no guarantee, however,
that these estimates will reflect the actual costs incurred. The majority of R&D
expenditures are for development of the Company's DFE technology. Further, the
Company believes that certain proposed products may not be available for
commercial sale or routine use for a period of one to two years. Therefore, it
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is anticipated that the commercialization of the Company's existing and proposed
products will require additional capital in excess of the Company's other
current sources of funding. The combined effect of the foregoing may prevent the
Company from achieving profitability for an extended period of time. Because the
timing and receipt of revenues from the sale of products will be tied to the
achievement of certain product development, testing, manufacturing and marketing
objectives which cannot be predicted with certainty, there may be substantial
fluctuations in the Company's results of operations. If revenues do not increase
as rapidly as anticipated, or if product development and testing and marketing
require more funding than anticipated, the Company may be required to curtail
its expansion and/or seek additional financing from other sources. The Company
may seek such additional financing through the offer of debt or equity, joint
venture financing, or any combination thereof at any time.
It is anticipated that losses will continue throughout 1998 as the
Company continues to fund the development of its DFE technology and its
electronic billboard and related electronic display products. Significant sales
from the DFE products are not anticipated in 1998. The Company expects revenue
from its electronic billboard in the fourth quarter of 1998 and revenues from
other display products in the second quarter of 1999. Full commercial
development of the Company's DFE technology and electronic billboard and related
electronic display will require additional funds that may not be available at
terms acceptable to the Company.
The Company has developed a plan to allow it to maintain operations
until the Company is able to sustain itself on its own revenue. In order to have
time to implement this plan, the Company is dependent upon the continued
cooperation of its creditors. Upon completion of the DTO transaction, the
Company will have existing resources to enable it to maintain its planned
operations for a period of approximately 30 to 45 days from the date of this
filing. The Company expects to be able to obtain additional resources during
this time period to enable it to complete the implementation of its plan.
The Company's plan is primarily dependent on raising funds through
strategic partners and debt offerings as well as raising revenues and reducing
expenses. The Company expects to sell certain of DTO's intangible assets that
are not being sold in the present transaction as well as to possibly sell some
of the excess equipment not included in the present transaction. As a result of
the reduction in operating activity related to the disposition of the DTO
operating assets, the Company plans to significantly reduce other costs
including selling, general, administrative, and interest cost. This reduction in
costs would mean that the Company would require significantly reduced amounts of
capital to fund its ongoing operations.
On May 8, 1998, the Company closed a transaction to sell the majority
of the operating assets of DTO for a total purchase price of $2.2 million, of
which $1.8 million was payable at closing and the remaining $400,000 was
deposited into escrow. The purchaser of the assets will also assume the building
lease on the DTO facility. The Company will retain all cash, accounts
receivable, certain equipment identified as excess, certain intangibles and all
liabilities. See "Recent Developments."
In addition, the Company is seeking additional strategic partners to
invest in both its Electronic Billboard Technology, Inc. ("EBT") and Field
Emission Picture Element Technology, Inc. ("FEPET") subsidiaries to allow these
subsidiaries to continue development of commercial products. It is anticipated
that any such strategic partners would receive a minority interest in the
subsidiaries of not more than 20% as a result of their investment. It is
anticipated that the Company would remain a majority interest of at least 80% in
each of these subsidiaries. It is the Company's plan that these investments
would allow each of these subsidiaries to continue to develop their products and
bring them to the level whereby each subsidiary is operating at break-even or
better.
This plan is based on current development plans, current operating
plans, the current regulatory environment, historical experience in the
development of electronic products and general economic conditions. Changes
could occur which would cause certain assumptions on which this plan is based to
be no longer valid. The Company's plan is primarily dependent on increasing
revenues and raising additional funds through strategic partners and additional
debt offerings. If adequate funds are not available from operations or
additional sources of financing, the Company may
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have to reduce substantially or eliminate expenditures for R&D, testing and
production of its products or obtain funds through arrangements with other
entities that may require the Company to relinquish rights to certain of its
technologies or products. Such results would materially and adversely affect the
Company.
DEPENDENCE ON PRINCIPAL PRODUCTS
The Company's DFE technology is an emerging technology. The financial
condition and prospects of the Company are dependent upon market acceptance and
sales of the Company's DFE products and its Electronic Billboard. Additional R&D
needs to be conducted with respect to the DFE products and the Electronic
Billboard before marketing and sales efforts can be commenced. Market acceptance
of the Company's products will be dependent upon the perception within the
electronics and instrumentation industries of the quality, reliability,
performance, efficiency, breadth of application and cost-effectiveness of the
products. There can be no assurance that the Company will be able to gain
commercial market acceptance for its products or develop other products for
commercial use.
COMPETITION; POSSIBLE TECHNOLOGICAL OBSOLESCENCE
The display industry is highly competitive and is characterized by
rapid technological change. The Company's existing and proposed products will
compete with other existing products and may compete against other developing
technologies. Development by others of new or improved products, processes or
technologies may reduce the size of potential markets for the Company's
products. There can be no assurance that such products, processes or
technologies will not render the Company's proposed products obsolete or less
competitive. Many of the Company's competitors have greater financial,
managerial and technical resources than the Company. The Company will be
required to devote substantial financial resources and effort to further R&D.
There can be no assurance that the Company will successfully differentiate its
products from its competitors' products or that the Company will be able to
adapt to evolving markets and technologies, develop new products or achieve and
maintain technological advantages.
TECHNOLOGIES SUBJECT TO LICENSES
As a licensee of certain research technologies, the Company has various
license agreements with Microelectronics and Computer Technology Corporation
("MCC") and Diagascrown, Inc., wherein the Company has acquired rights to
develop and commercialize certain research technologies. In certain cases,
agreements require the Company to pay royalties on sale of products developed
from the licensed technologies and fees on revenues from sublicensees, where
applicable, and to pay for the costs of filing and prosecuting patent
applications. The Company's principal license agreement with MCC requires the
Company to pay exclusivity fees under certain circumstances in order to maintain
the Company's exclusive rights under the MCC Agreement. Each agreement is
subject to termination by either party, upon notice, in the event of certain
defaults by the other party. The payment of such royalties may adversely affect
the future profitability of the Company.
NO ASSURANCE OF MARKET ACCEPTANCE
Since its inception, the Company has focused its product development
efforts on R&D of technologies that the Company believes will be a significant
advance over currently available technologies. The Company has limited
experience in manufacturing and marketing. The new management team that was put
in place in 1996 has experience in manufacturing and marketing; however, with
any new technology there is a risk that the market may not appreciate the
benefits or recognize the potential applications of the technology. Market
acceptance of the Company's products will depend, in part, on the Company's
ability to convince potential customers of the advantages of such products as
compared to competitive products, and will also depend upon the Company's
ability to train manufacturers and others to use the Company's products. There
can be no assurance that the Company will be able to successfully market its
proposed products even if such products perform as anticipated.
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LIMITED MANUFACTURING CAPACITY AND EXPERIENCE
The Company has no established commercial manufacturing facilities in
the areas in which it is conducting its principal research. Its existing
manufacturing, while related, would not directly support manufacturing of the
proposed new products. The new management team that was put in place has
commercial manufacturing and marketing experience; however, the Company will be
required to either employ additional qualified personnel to establish
manufacturing facilities or enter into appropriate manufacturing agreements with
others. There is no assurance that the Company will be successful in attracting
experienced personnel or financing the cost of establishing commercial
manufacturing facilities, if required, or be capable of producing a high quality
product in quantity for sale at competitive prices.
MARKETING AND SALES UNCERTAINTIES
There can be no assurance that the DFE related products or the
Electronic Billboard will be successfully developed or that such products will
be commercially successful. The Company intends to establish a sales
organization to promote, market, and sell its products. To develop a sales
organization will require significant additional expenditures, management
resources and training time. There can be no assurance that the Company will be
able to establish such a sales organization.
UNPROVEN TECHNOLOGY; NEED FOR SYSTEM INTEGRATION
In order to prove that the Company's technologies work and can produce
a complete product, the Company must ordinarily integrate a number of highly
technical and complicated subsystems into a fully-integrated prototype. There
can be no assurance that the Company will be able to successfully complete the
development work on any of its proposed products or ultimately develop any
marketable products.
DEPENDENCE UPON GOVERNMENT CONTRACTS
A significant portion of the Company's revenues has been derived from
contracts with agencies of the United States government. In the years ended
December 31, 1992, 1993, 1994, 1995, 1996, and 1997, such contracts accounted
for approximately $930,000, $1,147,000, $820,000, $1,009,000, $2,869,000 and
$854,000, respectively, or approximately 99%, 89%, 41%, 33%, 50% and 24% of the
Company's total revenues for each of those periods. The Company's contracts
involving the United States government are or may be subject to various risks,
including unilateral termination for the convenience of the government,
reduction or modification in the event of changes in the government's
requirements or budgetary constraints, increased or unexpected costs causing
losses or reduced profits under fixed-price contracts or unallowable costs under
cost reimbursement contracts, risks of potential disclosure of the Company's
confidential information to third parties, the failure or inability of the prime
contractor to perform its prime contract in circumstances where the Company is a
subcontractor, the failure of the government to exercise options provided for in
the contracts and the exercise of "march-in" rights by the government. March-in
rights refer to the right of the government or government agency to exercise a
non-exclusive, royalty-free, irrevocable, worldwide license to any technology
developed under contracts funded by the government if the contractor fails to
continue to develop the technology. The programs in which the Company
participates may extend for several years but are normally funded on an annual
basis. The Company currently, however, has no significant commitment for any
government funding beyond December 31, 1997, and intends to seek only government
funding that directly relates to projects associated with achievement of its
strategic objectives. To the extent that the Company is unable to obtain funding
from alternate sources, this will adversely affect the Company's ability to
continue to perform R&D on its existing and proposed products.
PATENTS AND OTHER INTELLECTUAL PROPERTY
The Company's ability to compete effectively with other companies will
depend, in part, on the ability of the Company to maintain the proprietary
nature of its technology. Although the Company has been awarded, has filed
applications for or has been licensed technology under numerous patents, there
can be no assurance as to the degree
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<PAGE> 10
of protection offered by these patents or as to the likelihood that pending
patents will be issued. There can be no assurance that competitors in both the
United States and foreign countries, many of which have substantially greater
resources and have made substantial investments in competing technologies, have
not or will not apply for and obtain patents that will prevent, limit or
interfere with the Company's ability to make and sell its products. There can
also be no assurance that competitors will not intentionally or unintentionally
infringe the Company's patents. The defense and prosecution of patent suits are
both costly and time-consuming, even if the outcome is favorable to the Company.
In foreign countries, the expenses associated with such proceedings can be
prohibitive. In addition, there is an inherent unpredictability in obtaining and
enforcing patents in foreign countries. An adverse outcome in the defense of a
patent suit could subject the Company to significant liabilities to third
parties, require disputed rights to be licensed from third parties or require
the Company to cease selling its products. Although third parties have not
asserted infringement claims against the Company, there can be no assurance that
third parties will not assert such claims in the future. Claims that the
Company's products infringe on the proprietary rights of others are more likely
to be asserted after commencement of commercial sales incorporating the
Company's technology. The Company also relies on unpatented proprietary
technology, and there can be no assurance that others may not independently
develop the same or similar technology or otherwise obtain access to the
Company's proprietary technology. To protect its rights in these areas, the
Company requires all employees and most consultants, advisors and collaborators
to enter into confidentiality agreements. There can be no assurance that these
agreements will provide meaningful protection for the Company's trade secrets,
know-how or other proprietary information in the event of any unauthorized use,
misappropriation or disclosure of such trade secrets, know-how or other
proprietary information. While the Company has attempted to protect proprietary
technology it may develop or acquire and will attempt to protect future
developed proprietary technology through patents, copyrights and trade secrets,
it believes that its success will depend more upon further innovation and
technological expertise.
AVAILABILITY OF MATERIALS AND DEPENDENCE ON SUPPLIERS
It is anticipated that materials to be used by the Company in producing
its future products will be purchased by the Company from outside vendors and,
in certain circumstances, the Company may be required to bear the risk of
material price fluctuations. It is anticipated by the Company's management that
the majority of raw materials to be used in products to be manufactured by the
Company will be readily available. However, there can be no assurance that such
materials will be available in the future or if available will be procurable at
prices which will be favorable to the Company.
DEPENDENCE ON KEY PERSONNEL
The future success of the Company will depend in large part on its
ability to attract and retain highly qualified scientific, technical and
managerial personnel. Other than the executive officers of the Company these key
personnel include Drs. Richard Fink, Ronald Robinder and Zhidan Tolt.
Competition for such personnel is intense and there can be no assurance that the
Company will be able to attract and retain all personnel necessary for the
development of its business. In addition, much of the know-how and processes
developed by the Company reside in its key scientific and technical personnel
and such know-how and processes are not readily transferable to other scientific
and technical personnel. The Company does not maintain key man insurance on any
of its executive officers or other key technical personnel. The loss of the
services of key scientific, technical and managerial personnel could have a
material adverse effect on the Company.
CONCENTRATION OF OWNERSHIP
Officers, directors and principal shareholders of the Company own, or
have the power to vote, in the aggregate, approximately 22% of the voting stock
of the Company on an "as converted" basis. Due to the relatively large number of
shares owned by these shareholders and certain provisions of the Company's
Amended and Restated Articles of Incorporation ("the Restated Articles") and
Bylaws, it may be difficult for other shareholders to cause a change in control
of the Company or effect other fundamental corporate transactions if officers,
directors and principal shareholders were to act as a group.
-8-
<PAGE> 11
VOLATILITY OF MARKET FOR SHARES
The market price of the Shares, like that of the common stock of many
emerging technology companies has fluctuated significantly in recent years and
will likely continue to fluctuate in the future. The price of such securities
currently rises and is expected to continue to rise rapidly in response to
certain events, such as announcements concerning product developments, licenses
and patents, although the outcome of such events may not be fully determined.
Similarly, prices of such securities may fall rapidly if unfavorable results are
encountered in product development or market acceptance. In the event that the
Company achieves earnings from the sale of products, securities analysts may
begin predicting quarterly earnings. The failure of the Company's earnings to
meet analysts' expectations could result in a significant rapid decline in the
market price of the Company's Common Stock. In addition, the stock market has
experienced and continues to experience extreme price and volume fluctuations
which have affected the market price of the equity securities of many technology
companies and which have often been unrelated to the operating performance of
those companies. Such broad market fluctuations, as well as general economic and
political conditions, may adversely affect the market price of the Common Stock.
SHARES CONVERTED AT DISCOUNT
Shares of the Company's Series E Preferred Stock, Series F Preferred
Stock and Series G Preferred Stock are convertible into the Company's Common
Stock at prices which are at a discount to prevailing market prices at the time
of conversion into the Company's Common Stock as described in the appropriate
subsections of "Plan of Distribution and Selling Shareholders." Sales or offers
to sell shares of Common Stock converted from these Series of the Company's
Preferred Stock could adversely affect the price of and market for the Common
Stock.
SHARES ELIGIBLE FOR FUTURE SALE
As of June 4, 1998, there were 38,660,657 shares of Common Stock
outstanding, of which 27,982,498 shares of Common Stock were freely tradeable
without restriction or further registration under the Securities Act by persons
other than "affiliates" of the Company. As of that date, the remaining shares of
Common Stock were deemed "restricted securities," as defined in Rule 144 under
the Securities Act, and may not be resold in the absence of registration under
the Securities Act or pursuant to an exemption from such registration, including
exemptions provided by Rule 144 under the Securities Act. Under Rule 144,
persons who have held securities for a period of at least one year may sell a
limited amount of such securities without registration under the Act. Rule 144
also permits, under certain circumstances, persons who are not affiliates of the
Company, to sell their restricted securities without quantity limitations once
they have completed a two-year holding period.
No prediction can be made as to the effect, if any, that future sales,
or the availability of shares of Common Stock for future sales, will have on the
market price prevailing from time to time. Sales of substantial amounts of
Common Stock by the Company or by shareholders who hold "restricted securities,"
or the perception that such sales may occur, could adversely affect prevailing
market prices for the Common Stock.
POSSIBLE ADVERSE EFFECT OF SALES BY SELLING SHAREHOLDERS ON THE MARKET FOR AND
THE PRICE OF THE COMMON STOCK
Upon registration the Selling Shareholders will be permitted to sell up
to 3,034,903 shares of Common Stock obtained through the exercise of certain
stock options The Company will not receive any proceeds from sales of Shares
held by such Selling Shareholders. The Company will receive the proceeds from
the exercise of any options to purchase shares of Common Stock. It is unlikely
that the options will be exercised until the trading price of the Common Stock
exceeds the exercise price of the options, if at all.
PRIOR AND SUPERIOR RIGHTS OF OTHER CLASSES OF CAPITAL STOCK
The rights of holders of the Common Stock to receive dividends or other
payments with respect thereto are subject to any prior and superior rights of
holders of the Company's Preferred Stock. As of May 11, 1998, the Company had
issued and outstanding 100 shares of its Series A Preferred Stock, 47 shares of
its Series E Preferred Stock, 365 shares of its Series F Preferred Stock and
1700 shares of its Series G Preferred Stock. Additionally, the Company has
authorized 75,000 shares of Series C Preferred Stock and 90,000 shares of Series
D Preferred Stock. No shares of Series C Preferred Stock or Series D Preferred
Stock are currently outstanding. No current series of the Company's Preferred
Stock has rights that are prior and superior to the Common Stock with respect to
dividends. Additionally, only the holders of the Series A Preferred Stock,
Series E Preferred Stock, Series F Preferred Stock and Series G Preferred Stock
are entitled to a liquidation preference over the holders of the Common Stock.
The Board of Directors, however, has the authority to provide for the issuance
of additional shares of Preferred Stock in one or more additional series and
such shares may, in the Board's discretion, have prior and superior rights to
receive
-9-
<PAGE> 12
dividends or other payments with respect thereto. In light of its future capital
requirements, the Company could issue shares of Preferred Stock at any time
having such prior and superior rights. See "Description of Capital Stock".
LACK OF DIVIDENDS
The Company has never paid cash dividends on its equity securities and
does not intend to pay cash dividends in the foreseeable future. To the extent
the Company has earnings in the future, the Company intends to reinvest such
earnings in the business operations of the Company.
ANTITAKEOVER EFFECTS
The Company's Restated Articles and Bylaws contain a number of
provisions which could make the acquisition of the Company, by means of an
unsolicited tender offer, a proxy contest or otherwise, more difficult. Among
other things, (i) the Board is authorized to issue series of Preferred Stock
that could, depending on the terms of such series, impede the completion of a
merger, tender offer or other takeover attempt; (ii) the Board of Directors is
divided into three classes of directors, with the result that approximately
one-third of the Board of Directors are elected each year; (iii) except in
limited circumstances, no shares of the Company's Preferred Stock may be issued
or sold to any officer or director of the Company or any shareholder owning more
than five percent (5%) of the Company's Common Stock without the affirmative
vote of a majority of the disinterested shareholders of the Company; and (iv)
holders of Series C and Series D Preferred Stock have the right to acquire
additional shares in certain circumstances where the voting power of such
holders would be diluted. See "Description of Capital Stock-- Certain Provisions
of the Articles of Incorporation, Bylaws and Texas Law."
LIMITATION OF REMEDIES; INDEMNIFICATION
The Company's Restated Articles provide that a director of the Company
will only be liable to the Company for (i) breaches of his duty of loyalty to
the Company and its shareholders, (ii) acts or omissions not in good faith or
which constitute a breach of duty of a director of the Company or involves
intentional misconduct or a knowing violation of law, (iii) transactions from
which a director receives an improper benefit, whether or not the benefit
resulted from an action taken within the scope of the director's office, (iv)
acts or omissions for which liability is specifically provided by statute, and
(v) acts relating to unlawful stock purchases or payments of dividends. Thus,
the Company may be prevented from recovering damages for certain alleged errors
or omissions by its directors. The Bylaws also provide that, under certain
circumstances, the Company will indemnify its officers and directors for
liabilities incurred in connection with their good faith acts for the Company.
Such an indemnification payment might deplete the Company's assets. While Texas
law permits a shareholder to bring a derivative action on behalf of a
corporation, the law relating to the remedies available to corporate
shareholders is constantly changing. Shareholders who have questions concerning
the fiduciary obligations of the officers and directors of the Company should
consult with independent legal counsel. Insofar as indemnification for
liabilities arising under the Securities Act of 1933 (the "Securities Act") may
be permitted to directors, officers and controlling persons of the Company
pursuant to the foregoing provisions, or otherwise, the Company has been advised
that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Securities Act and
is, therefore, unenforceable.
COMPUTER SYSTEMS/SOFTWARE -- YEAR 2000 ISSUES
The Year 2000 Issue is the result of computer programs being written
using two digits rather than four to define the applicable year. Any of the
Company's computer programs that have date sensitive software may recognize a
date using "00" as the year 1900 rather than the year 2000. This could result in
a system failure or miscalculation causing disruptions of operations, including,
among other things, a temporary inability to process transactions, send
invoices, or engage in similar normal business activities.
-10-
<PAGE> 13
Based on a recent assessment, the Company determined that it will be
required to modify or replace portions of its software so that its computer
systems will properly utilize dates beyond December 31, 1999. All of this
software is prepackaged software that was purchased from outside vendors. These
vendors all have upgrades available which correct the Year 2000 Issue. It is the
Company's plan to purchase the upgraded software, where required, prior to
December 31, 1998 to insure adequate time for implementation. The cost of these
upgrades will be negligible and is not expected to have a material effect on the
operations of the Company. If such upgrades were not installed on a timely
basis, the Year 2000 Issue could have a material impact on the operations of the
Company.
The Company has determined that it is not vulnerable to a third party's
failure to remediate its own Year 2000 Issues at either significant suppliers or
large customers. The Company has also determined that it has no exposure or
contingencies related to the Year 2000 Issue for the products it has sold.
RISKS ASSOCIATED WITH FORWARD LOOKING STATEMENTS
This Prospectus contains certain forward-looking statements within the
meaning of Section 27A of the Securities Act , and Section 21E of the Securities
Exchange Act of 1934, as amended, which are intended to be covered by the safe
harbors created thereby. Investors are cautioned that all forward-looking
statements involve risks and uncertainty, including without limitation, the
uncertainty of additional funding, the development of other technologies, the
ability of the Company to acquire manufacturing facilities and marketing and
sales expertise, the ability of the Company to attract and retain highly
qualified personnel, as well as general market conditions and the degree and
nature of competition. Where any such forward-looking statement includes a
statement of the assumptions or basis underlying such forward-looking statement,
the Company cautions that, while it believes such assumptions or basis to be
reasonable and makes them in good faith, assumed facts or basis almost always
vary from actual results, and the differences between assumed facts or basis and
actual results can be material, depending upon the circumstances. Where in any
forward-looking statement, the Company or its management expresses an
expectation or belief as to future results, such expectation or belief is
expressed in good faith and believed to have a reasonable basis, but there can
be no assurance that the statement or expectation or belief will result or be
achieved or accomplished.
USE OF PROCEEDS
All of the shares of Common Stock are being offered by the Selling
Shareholders. The Company will not receive any proceeds from sales of Common
Stock by the Selling Shareholders.
SELLING SHAREHOLDERS
The shares of Common Stock offered by this Prospectus are being
registered for re-offers and re-sales by Selling Shareholders of the Company who
may acquire such shares pursuant to the exercise of options granted or to be
granted under the Amended and Restated 1992 Stock Option Plan of SI Diamond
Technology, Inc. (the "Employee Plan") or pursuant to the exercise of options
granted or to be granted under the Amended and Restated SI Diamond Technology,
Inc. 1992 Outside Directors' Stock Option Plan (the "Director Plan" and,
together with the Employee Plan and the 1998 Plan, the "Plans") to be granted
under the 1998 Directors and Officers Stock Option Plan (the "1998 Plan"). The
Selling Shareholders named below may resell all, a portion, or none of the
shares that they acquire or may acquire pursuant to the exercise of options
under the Plans or other Option.
Key employees deemed to be "affiliates" of the Company who acquired
registered Common Stock under the Plans may be added to the Selling Shareholders
listed below from time to time, either by means of a post-effective amendment
hereto or by use of a prospectus filed pursuant to Rule 424(c) under the
Securities Act. An "affiliate" is defined in Rule 405 under the Securities Act
as a "person who directly, or indirectly, through one or more intermediaries,
controls or is controlled by, or is under common control with," the Company.
-11-
<PAGE> 14
The following table sets forth the name of each Selling Shareholder,
the nature of his position, office, or other material relationship with the
Company within the past three years, the number of shares of Common Stock known
by the Company to be beneficially owned by each Selling Shareholder as of June
9, 1998, the number of shares covered by this Prospectus and the number of
shares and (if one percent or more) the percentage of the class to be owned by
each Selling Shareholder if such Selling Shareholder were to sell all of the
shares of Common Stock covered by this Prospectus:
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------
Selling Number of Shares Number of Shares Number of Shares Percentage
Shareholder Beneficially Owned Covered by this to be Owned After (1)
Prior to Offering Prospectus Offering
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------------
Brad Arberg 482,752 174,000 308,752 *
Director
- ---------------------------------------------------------------------------------------------------------------
Zui Yaniv 1,033,000 1,020,000 11,000 *
Director and
Chief Adjusting
Officer
- ---------------------------------------------------------------------------------------------------------------
Marc Eller 943,796 630,000 313,796 *
Chairman and
Chief Executive
Officer
- ---------------------------------------------------------------------------------------------------------------
Doug Baker 392,000 370,000 22,000 *
Chief Financial
Officer and
Vice President
- ---------------------------------------------------------------------------------------------------------------
Ron Berman 782,430 174,383 608,047 1.57%
Director
- ---------------------------------------------------------------------------------------------------------------
Igor Leontiev 156,520 156,520 -0- *
Director
- ---------------------------------------------------------------------------------------------------------------
Phil Shaffer 372,702 300,000 72,702 *
Director
- ---------------------------------------------------------------------------------------------------------------
Dave Sincox 271,213 210,000 61,213 *
Director
- ---------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
- ---------------------------
*Amount Represents Less than 1%
(1) Assuming all shares that may be offered hereby are sold and based on
38,660,657 shares outstanding at June 5, 1998.
PLAN OF DISTRIBUTION
Any shares of Common Stock sold pursuant to this Prospectus will be
sold by the Selling Shareholders for their own account and they will receive all
proceeds from any such sales. The Company will receive none of the proceeds from
the sale of shares which may be offered hereby but may receive funds upon the
exercise of the options pursuant to which the Selling Shareholders will acquire
the shares covered by this Prospectus, which funds, if any, will be used for
working capital. The Selling Shareholders may sell shares of Common Stock in any
of the following ways: (i) through dealers; (ii) through agents; or (iii)
directly to one or more purchasers. The distribution of the shares of Common
Stock may be effected from time to time in one or more transactions (which may
include block transactions) on the OTC Bulletin Board (whether pursuant to Rule
144 under the Securities Act or otherwise). Any such transaction may be effected
at market prices prevailing at the time of sale, at prices related to such
prevailing market prices, at negotiated prices or at fixed prices. If shares of
Common Stock are sold through brokers, the Selling Shareholders may pay
customary brokerage commission and charges. The Selling Shareholders may effect
such transactions by selling share to or through broker-dealers, and such
broker-dealers may receive compensation in the form of discounts, concessions or
commissions from the Selling Shareholders and/or the purchasers of shares for
whom such broker-dealers may act as agent or to whom they may sell as principal,
or both (which compensation as to a particular broker-dealer might be in excess
of customary commissions). The Selling Shareholders and any broker-dealers or
agents that act in connection with the sale of the shares hereunder might be
deemed to be "underwriters"
-12-
<PAGE> 15
within the meaning of Section 2(11) of the Securities Act, and any discounts,
commissions or concessions received by any such broker-dealer or agent and any
profit on the resale of shares as principals might be deemed to be underwriting
discounts and commissions, under the Securities Act.
LEGAL MATTERS
The validity of the Common Stock offered hereby will be passed upon for
the Company to Haskell Slaughter & Young, L.L.C., 1200 AmSouth/Harbert Plaza,
1901 Sixth Avenue North, Birmingham, Alabama 35203.
EXPERTS
The consolidated balance sheets as of December 31, 1997 and 1996 and
the consolidated statements of operations, shareholders' equity <deficit> and
cash flows for the years then ended, incorporated by reference in this
prospectus, have been incorporated herein in reliance on the report, which
includes an explanatory paragraph regarding the Company's ability to continue as
a going concern, of Coopers & Lybrand L.L.P., independent accountants, given on
the authority of that firm as experts in accounting and auditing.
INDEMNIFICATION OF DIRECTORS AND OFFICERS
Article 2.02A(16) and Article 2.01-1 of the Texas Business Corporation
Act and Article VIII of the Company's Bylaws provide the Company with broad
powers and authority to indemnify its directors and officers and to purchase and
maintain insurance for such purposes. Pursuant to such statutory and Bylaw
provisions, the Company has purchased insurance against certain costs of
indemnification that may be incurred by it and its officers and directors. See
"Item 17. Undertakings" for a description of the Securities and Exchange
Commission's position regarding such indemnification provisions.
Additionally, Article Seven(C) of the Company's Restated Articles,
provides that a director of the Company is not liable to the Company or its
shareholders for monetary damages for any act or omission in the director's
capacity as director except that Article Seven(C) does not eliminate or limit
the liability of a director for (i) breaches of his duty of loyalty to the
Company and its shareholders, (ii) acts or omissions not in good faith or which
constitute a breach of duty of a director of the Company or involves intentional
misconduct or a knowing violation of law; (iii) transactions from which a
director receives an improper benefit, whether or not the benefit resulted from
an action taken within the scope of the director's office, (iv) acts or
omissions for which liability is specifically provided by statute, and (v) acts
relating to unlawful stock purchases or payments of dividends.
Article Seven(C) also provides that any subsequent amendments to Texas
statutes that further limit the liability of directors will inure to the benefit
of the directors, without any further action by shareholders. Any repeal or
modification of Article Seven(C) shall not adversely affect any right of
protection of a director of the Company existing at the time of the repeal or
modification.
The foregoing discussion is not intended to be exhaustive and is
qualified in its entirety by each of such documents and such statutes.
-13-
<PAGE> 16
PART II
INFORMATION REQUIRED IN THE REGISTRATION STATEMENT
ITEM 3. INCORPORATION OF DOCUMENTS BY REFERENCE
SI Diamond Technology, Inc., a Texas Corporation ("SI Diamond" or the
"Company"), hereby incorporates by reference into this registration statement on
Form S-8 (the "Registration Statement") the following documents which have
heretofore been filed by the Company with the Securities and Exchange Commission
(the "Commission"):
(a) The Company's Annual Report on Form 10-KSB for the fiscal year ended
December 31, 1998.
(b) The Company's Quarterly Report on Form 10-QSB for the fiscal quarter ended
March 31, 1998.
(c) The Company's Current Reprot on Form 8-K, dated January 20, 1998.
(d) The Company's Current Report on Form 8-K dated February 11, 1998.
(e) The Company's Current Report on Form 8-K dated May 8, 1998.
(f) The description of the Company's Common Stock which is contained in the
Company's Registration Statement on Form 8-A filed on November 19, 1992
pursuant to Section 12 of the Securities Exchange Act of 1934, including
any amendment or report filed for the purpose of updating such
description.
All documents subsequently filed by the Company pursuant to Section 13(a),
13(c), 14 and 15(d) of the Exchange Act prior to the filing of a post-effective
amendment which indicates that all securities offered have been sold or which
deregisters all securities then remaining unsold, shall be deemed to be
incorporated by reference into this Registration Statement and to be a part
hereof from the date of filing of such documents.
Any statements contained in a document incorporated by reference herein
shall be deemed to be modified or superseded for purposes hereof to the extent
that a statement contained herein (or in any other subsequently filed document
which is also incorporated by reference herein) modifies or supersedes such
statement. Any statement so modified or superseded shall not be deemed to
constitute a part of this Registration Statement except as so modified or
superseded.
The Company hereby undertakes to provide without charge to each person
to whom a copy of this Prospectus has been delivered, upon written or oral
request of any such person, a copy of any or all of the documents referred to
above that have been incorporated by reference in this Prospectus (not including
exhibits to the documents that are incorporated by reference unless such
exhibits are specifically incorporated by reference into such documents).
Requests for such copies should be directed in writing or by telephone to SI
Diamond Technology, Inc., 3006 Longhorn Boulevard, Suite 107, Austin, Texas
78758, Attention: Corporate Secretary (Telephone: (512) 339-5020).
ITEM 4. DESCRIPTION OF SECURITIES.
Not applicable.
II-1
<PAGE> 17
ITEM 5. INTERESTS OF NAMED EXPERTS & COUNSEL
Not applicable.
ITEM 6. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Article 2.02A(16) and Article 2.02-1 of the Texas Business Corporation
Act and Article VIII of the Company's Bylaws provide the Company with broad
powers and authority to indemnify its directors and officers and to purchase
and maintain insurance for such purposes. Pursuant to such statutory and Bylaw
provisions, the Company has purchased insurance against certain costs of
indemnification that may be incurred by it and its officers and directors. See
"Item 9. Undertakings" for a description of the Securities and Exchange
Commission's position regarding such indemnification provisions.
Additionally, Article Seven(C) of the Company's Restated Articles,
provides that a director of the Company is not liable to the Company or its
shareholders for monetary damages for any act or omission in the director's
capacity as director except that Article Seven(C) does not eliminate or limit
the liability of a director for (i) breaches of his duty of loyalty to the
Company and its shareholders, (ii) acts or omissions not in good faith or which
constitute a breach of duty of a director of the Company or involves
intentional misconduct or a knowing violation of law, (iii) transactions from
which a director receives an improper benefit, whether or not the benefit
resulted from an action taken within the scope of the director's office, (iv)
acts or omissions for which liability is specifically provided by statute, and
(v) acts relating to unlawful stock purchases or payments or dividends.
Article Seven(C) also provides that any subsequent amendments to Texas
statutes that further limit the liability of directors will inure to the
benefit of the directors, without any further action by shareholders. Any
repeal or modification of Article Seven(C) shall not adversely affect any right
of protection of a director of the Company existing at the time of the repeal
or modification.
The foregoing discussion is not intended to be exhaustive and is
qualified in its entirety by each of such documents and such statutes.
ITEM 7. EXEMPTION FROM REGISTRATION CLAIMED.
Not applicable.
II-2
<PAGE> 18
ITEM 8. EXHIBITS
<TABLE>
<CAPTION>
Exhibit Number Description of Exhibit
- -------------- ----------------------
<S> <C>
4.1 Amended and Restated 1992 Stock Option Plan of the Company.
4.2 Amended and Restated 1992 Outside Directors' Stock Option Plan.
4.3 1998 Directors and Officers Stock Option Plan.
5.1 Opinion of Haskell Slaughter & Young, L.L.C. as to legality of the shares of
SI Diamond Technology, Inc. being registered.
23.1 Consent of Coopers & Lybrand L.L.P.
23.2 Consent of Haskell Slaughter & Young, L.L.C. (contained in the opinion of
counsel filed on Exhibit 5.1 to this Registration Statement).
</TABLE>
ITEM 9. UNDERTAKINGS
The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are
being made, a post-effective amendment to this Registration Statement:
(i) To include any prospectus required by Section 10(a)(3)
of the Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events
arising after the effective date of the Registration Statement (or
the most recent post-effective amendment thereof) which,
individually or in the aggregate, represent a fundamental change in
the information set forth in the Registration Statement.
Notwithstanding the foregoing, any increase or decrease in the
amount of securities offered (if the total dollar value of the
securities offered would not exceed that which was registered) and
any deviation from the low or high end of the estimated maximum
offering range may be reflected in the form of prospectus filed
with the Commission pursuant to Rule 424(b) under the Securities
Act if, in the aggregate, the changes in amount and price represent
no more than a 20%
II-3
<PAGE> 19
change in the maximum aggregate offering price set forth in the
"Calculation of Registration Fee" table in the effective
Registration Statement.
(iii) To include any material information with
respect to the plan of distribution not previously disclosed in
the Registration Statement or any material change to such
information in the Registration Statement.
provided, however, that paragraphs (a)(1)(i) and (ii) do not apply if
the registration statement is on Form S-3, S-8, F-3, and the
information required to be included in a post-effective amendment by
those paragraphs is contained in period reports filed with or furnished
to the Commission by the Registrant pursuant to Section 13 or 15(d) of
the Exchange Act that are incorporated by reference in the registration
statement.
(2) That, for the purpose of determining any liability
under the Act, each such post-effective amendment shall be deemed to be
a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
(3) To remove from registration by means of a
post-effective amendment any of the securities being registered which
remain unsold at the termination of the offering.
The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Act, each filing of the Registrant's annual
report pursuant to Section 13(a) or Section 15(d) of the Exchange Act (and,
where applicable, each filing of an employee benefit plan's annual report
pursuant to Section 15(d) of the Exchange Act) that is incorporated by reference
in the Registration Statement shall be deemed to be a new Registration
Statement relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide offering
thereof.
Insofar as indemnification for liabilities arising under the Act may be
permitted to directors, officers and controlling persons of the registrant
pursuant to the foregoing provisions or, otherwise, the Registrant has been
advised that in the opinion of the Commission such indemnification is against
public policy as expressed in the Act and is, therefore, unenforceable. In the
event that a claim for indemnification against such liabilities (other than
payment by the registrant of expenses incurred or paid by a director, officer or
controlling person of the registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling person
in connection with the securities being registered, the Registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue.
II-4
<PAGE> 20
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant certifies that it has reasonable grounds to believe that it meets
all of the requirements for filing on Form S-8 and has duly caused this
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized in the City of Austin, State of Texas, on June 9, 1998.
SI Diamond Technology, Inc.
By/s/ Marc W. Eller
----------------------------
Marc W. Eller
Chairman of the Board
and
Chief Executive Officer
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints Marc W. Eller and Douglas P. Baker
and each or either of them, his true and lawful attorney-in-fact and agent,
with full power of substitution and resubstitution, for him and in his name,
place and stead, in any and all capacities, to sign any and all amendments
(including post-effective amendments) to this Registration Statement and any
subsequent registration statements relating to the offering to which this
Registration Statement relates, and to file the same, with all exhibits thereto
and other documents in connection therewith, with the Securities and Exchange
Commission, granting unto said attorneys-in-fact and agents, and each of them,
full power and authority to do and perform each and every act and thing
requisite and necessary to be done in and about the premises, as fully and
to all intents and purposes as he might or could do in person, hereby ratifying
and confirming all that said attorneys-in-fact and agents or either of them, or
their or his substitutes or substitute, may lawfully do or cause to be done by
virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ Marc W. Eller Chairman of the Board of June 9, 1998
- ---------------------------- Directors and Chief Executive Officer
Marc W. Eller (Principal Executive Officer)
/s/ Zvi Yaniv President and Chief Operating June 9, 1998
- ---------------------------- Officer and Director
Dr. Zvi Yaniv
/s/ Douglas P. Baker Vice President, Chief Financial June 9, 1998
- ---------------------------- Officer (Principal Financial
Douglas P. Baker Officer and Principal Accounting
Officer)
/s/ Lee B. Arberg Director June 9, 1998
- ----------------------------
Lee B. Arberg
/S/ Ronald J. Berman Director June 9, 1998
- ----------------------------
Ronald J. Berman
/S/ Philip C. Shaffer Director June 9, 1998
- ----------------------------
Philip C. Shaffer
/S/ David R. Sincox Director June 9, 1998
- ----------------------------
David R. Sincox
Director June __, 1998
- ----------------------------
Dr. Igor Leontiev
</TABLE>
II-5
<PAGE> 21
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit Sequential
Number Description of Exhibit Page Number
- ------ ---------------------- -----------
<S> <C> <C>
ITEM 8. EXHIBITS
4.1 Amended and Restated 1992 Stock Option Plan of the Company
4.2 Amended and Restated 1992 Outside Directors' Stock Option Plan
4.3 1998 Directors and Officers Stock Option Plan
5.1 Opinion of Haskell Slaughter & Young, L.L.C. as to legality of the shares of
SI Diamond Technology, Inc. being registered.
23.1 Consent of Coopers & Lybrand L.L.P
23.2 Consent of Haskell Slaughter & Young, L.L.C. (contained in the opinion of
counsel filed as Exhibit 5.1 to this Registration Statement).
</TABLE>
<PAGE> 1
Exhibit 4.1
AMENDED AND RESTATED
1992 STOCK OPTION PLAN OF
SI DIAMOND TECHNOLOGY, INC.
1. Purpose
SI Diamond Technology, Inc. (the "Corporation") desires to attract and
retain the best available talent and encourage the highest level of performance
in order to continue to serve the best interests of the Corporation and its
shareholders. By affording key personnel the opportunity to acquire proprietary
interests in the Corporation and by providing them incentive to put forth
maximum efforts for the success of the business, the Amended and Restated 1992
Stock Option Plan of SI Diamond Technology, Inc. (the "1992 Plan") is expected
to contribute to the attainment of those objectives.
2. Scope and Duration
Options under the 1992 Plan may be granted in the form of Awards ("Awards")
of incentive stock options ("Incentive Options") as provided in Section 422 of
the Internal Revenue Code of 1986, as amended (the "Code"), or in the form of
nonqualified stock options ("Nonqualified Options"). (Unless otherwise
indicated, references in the 1992 Plan to "options" include Incentive Options
and Nonqualified Options.) The maximum aggregate number of shares as to which
options may be granted from time to time under the 1992 Plan is 3,000,000 shares
of the Common Stock of the Corporation ("Common Stock"), which shares may be, in
whole or in part, authorized but unissued shares or shares reacquired by the
Corporation. If an option shall expire, terminate or be surrendered for
cancellation for any reason without having been exercised in full, the shares
represented by the option or portion thereof not so exercised shall (unless the
1992 Plan shall have been terminated) become available for subsequent option
grant under the 1992 Plan. The 1992 Plan became effective on March 16, 1992, and
unless terminated sooner pursuant to paragraph 14, the 1992 Plan shall terminate
on March 15, 2002, and no option shall be granted hereunder after that date.
3. Administration
The 1992 Plan shall be administered by the Compensation Committee of the
Board of Directors or by any other committee appointed by the Board of Directors
(the "Committee"), which Committee shall consist solely of two or more
Non-Employee Directors ("Non-Employee Directors") as such are defined in Rule
16b-3, promulgated pursuant to the Securities Exchange Act of 1934, as amended
(the "Exchange Act") , or any successor provision.
The Committee shall have plenary authority in its discretion, subject to
and not inconsistent with the express provisions of the 1992 Plan, to grant
options, to determine the purchase price of the Common Stock covered by each
option, the term of each option, the persons to whom, and the time
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<PAGE> 2
or times at which, options shall be granted and the number of shares to be
covered by each option; to designate options as Incentive Options or
Nonqualified Options; to interpret the 1992 Plan; to prescribe, amend, and
rescind regulations relating to the 1992 Plan; to determine the terms and
provisions of the option agreements (which need not be identical) entered into
in connection with options under the 1992 Plan; and to make all other
determinations deemed necessary or advisable for the administration of the 1992
Plan. The Committee may also, in its discretion, provide for the extension of
the exercisability of an Award, accelerate the vesting or exercisability of an
Award, eliminate or make less restrictive any restrictions contained in an
Award, waive any restriction or other provision of this 1992 Plan or an Award or
otherwise amend and modify an Award in any manner that is either (i) not adverse
to the participant holding such Award or (ii) consented to by such participant.
The Committee may correct any defect or supply any omission or reconcile any
inconsistency in this Plan or in any Award in the manner and to the extent the
Committee deems necessary or desirable to carry it into effect. The Committee
may delegate to one or more of its members, or to one or more agents, such
administrative duties as it may deem advisable, and the Committee, or any person
to whom it has delegated duties as aforesaid, may employ one or more persons to
render advice with respect to any responsibility the Committee, or such person,
may have under the 1992 Plan.
4. Eligibility; Factors to be Considered in Granting Options
Incentive Options shall be limited to persons who have been regular
full-time employees of the Corporation or its present and future subsidiaries
for more than one year, and, at the grant of any options, are in the employ of
the Corporation or its present and future subsidiaries. In determining the
employees to whom Incentive Options shall be granted and the number of shares to
be covered by each Incentive Option, the Committee shall take into account the
nature of employees' duties, their present and potential contributions to the
success of the Corporation, and such other factors as it shall deem relevant in
connection with accomplishing the purposes of the 1992 Plan. An employee who had
been granted an option or options under the 1992 Plan may be granted an
additional option or options, subject, in the case of Incentive Options, to such
limitations as may be imposed by the Code on such options. Except as provided
below, a Nonqualified Option may be granted to any person, including, but not
limited to, employees, directors, independent agents, consultants and attorneys,
who the Committee believes has contributed, or will contribute, to the success
of the Corporation.
5. Option Price
The purchase price of the Common Stock covered by each option shall be
determined by the Committee and, in the case of Incentive Options, shall not be
less than 100% of the Fair Market Value (as defined in paragraph 15 below) of a
share of the Common Stock on the date on which the option is granted. In the
case of Nonqualified Options, the purchase price of an option shall generally be
Fair Market Value, although the Committee may grant options with option prices
of less than Fair Market Value. Such price shall be subject to adjustment as
provided in paragraph 12 below. The
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<PAGE> 3
Committee shall determine the date on which an option is granted; in the absence
of such a determination, the date on which the Committee adopts a resolution
granting an option shall be considered the date on which such option is granted.
6. Term of Option
The term of each option shall be not more than ten (10) years from the date
of grant, as the Committee shall determine, subject to earlier termination as
provided in paragraphs 10 and 11 below.
7. Exercise of Options
(a) Except as provided below, no option granted under the 1992 Plan shall
be exercisable prior to the expiration of the first year of its term.
Thereafter, subject to the provisions of the 1992 Plan and unless otherwise
provided in the option agreement, an option granted under the 1992 Plan shall
become exercisable in full at the earlier of the holder's death or the fourth
anniversary of the date of grant. Prior thereto, each option shall become
exercisable in cumulative installments as follows: to the extent of 25% of the
number of shares originally covered thereby on the first anniversary of the date
of grant of the option; and to the extent of an additional 25% of the number of
shares originally covered thereby on the second, third and fourth anniversary,
respectively, of the date of grant of the option. In its discretion, the
Committee may, in any case, prescribe different installments or provide that an
option may be exercisable in full immediately upon the date of its grant.
Notwithstanding the installments set forth above, the Committee may in its sole
discretion, provide that an option shall immediately become exercisable in full
upon the happening of any of the following events: (i) the first purchase of
shares of Common Stock pursuant to a tender offer or exchange offer (other than
an offer by the Corporation) for all, or any part of, the Common Stock; (ii) the
approval by the shareholders of the Corporation of an agreement for a merger in
which the Corporation will not survive as an independent, publicly owned
corporation, a consolidation, or a sale, exchange or other disposition of all or
substantially all of the Corporation's assets; (iii) with respect to an
employee, on his 65th birthday; or (iv) with respect to an employee, on the
employee's involuntary termination from employment. In the event of a question
or controversy as to whether any of the events hereinafter described has taken
place, a determination by the Committee that such event has or has not occurred
shall be conclusive and binding upon the Corporation and participants in the
1992 Plan.
(b) An option may be exercised, at any time or from time to time (subject,
in the case of Incentive Options, to such restrictions as may be imposed by the
Code), as to any or all full shares as to which the option has become
exercisable until the expiration of the period set forth in Section 6 hereof, by
the delivery to the Corporation, at its principal executive offices, of (i)
written notice of exercise in the form specified by the Committee specifying the
number of shares of Common Stock with respect to which the option is being
exercised and signed by the person exercising the option as provided herein;
(ii) payment of the purchase price; and (iii) in the case of Nonqualified
Options, payment in cash of all withholding tax obligations imposed on the
Corporation by reason of the exercise of the option. Upon acceptance of such
notice, receipt of payment in full, and receipt
3
<PAGE> 4
of payment of all withholding tax obligations, the Corporation shall cause to be
issued a certificate representing the shares of Common Stock purchased. In the
event the person exercising the option delivers the items specified in (i) and
(ii) of this Subsection 7 (b), but not the item specified in (iii) hereof, if
applicable, the option shall still be considered exercised upon acceptance by
the Corporation for the full number of shares of Common Stock specified in the
notice of exercise but the actual number of shares issued shall be reduced by
the smallest number of whole shares of Common Stock which, when multiplied by
the Fair Market Value of the Common Stock as of the date the option is
exercised, is sufficient to satisfy the required amount of withholding tax.
(c) The purchase price of the shares as to which an option is exercised
shall be paid in full at the time of exercise. Payment shall be made in cash,
which may be paid by check or other instrument acceptable to the Corporation; in
addition, subject to compliance with applicable laws and regulations and such
conditions as the Committee may impose, the Committee, in its sole discretion,
may on a case-by-case basis elect to accept payment in shares of Common Stock of
the Corporation which are already owned by the option holder, valued at the Fair
Market Value thereof (as defined in paragraph 15 below) on the date of exercise;
provided, however, that with respect to Incentive Options, no such discretion
may be exercised unless the option agreement permits the payment of the purchase
price in that manner. The Committee may also allow an Optionee to exercise an
option by use of the proceeds to be received from the sale of Common Stock
issuable pursuant to the option.
(d) An Option shall become fully exercisable upon a Change in Control (as
hereinafter defined) of the Corporation. For purposes of this Plan, a "Change of
Control" shall be conclusively deemed to have occurred if (and only if) any of
the following events shall have occurred: (a) there shall have occurred an event
required to be reported in response to Item 6(e) of Schedule 14A of Regulation
14A (or in response to any similar item on any similar schedule or form)
promulgated under the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), whether or not the Corporation is then subject to such reporting
requirement; (b) any "person" (as such term is used in Section 13(d) and 14(d)
of the Exchange Act) shall have become the "beneficial owner" (as defined in
Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the
Corporation representing 20% or more of the combined voting power of the
Corporation's then outstanding voting securities without prior approval of at
least two-thirds of the members of the Board of Directors in office immediately
prior to such person's attaining such percentage interest; (c) the Corporation
is a party to a merger, consolidation, sale of assets or other reorganization,
or a proxy contest, as a consequence of which members of the Board of Directors
in office immediately prior to such transaction or event constitute less than a
majority of the Board of Directors thereafter or (d) during any period of two
consecutive years, individuals who at the beginning of such period constituted
the Board of Directors (including for this purpose any new Director whose
election or nomination for election by the Corporation's shareholders was
approved by a vote of at least two-thirds of the Directors then still in office
who were Directors at the beginning of such period) cease for any reason to
constitute at least a majority of the Board of Directors.
4
<PAGE> 5
(e) Except as provided in paragraphs 10 and 11 below, no option granted to
an employee may be exercised at any time by such employee unless such employee
is then a regular full-time employee of the Corporation or a subsidiary and
unless the employee has remained in the continuous employ of the Corporation,
any of its subsidiaries or any combination thereof for one year from the date of
its grant.
8. Incentive Options
(a) With respect to Incentive Options granted, the aggregate Fair Market
Value (determined in accordance with the provisions of paragraph 15 at the time
the Incentive Option is granted) of the Common Stock or any other stock of the
Corporation, its parent or subsidiary corporations with respect to which
incentive stock options, as defined in Section 422 of the Code, are exercisable
for the first time by any employee during the calendar year (under all incentive
stock option plans of the Corporation and its parent and subsidiary
corporations, as those terms are defined in Section 425 of the Code) shall not
exceed $100,000.
(b) No Incentive Option may be awarded to any employee who immediately
prior to the date of the granting of such Incentive Option owns more than 10% of
the combined voting power of all classes of stock of the Corporation or any of
its subsidiaries unless the exercise price under the Incentive Option is at
least 110% of the Fair Market Value and the option expires within five (5) years
from the date of the grant.
(c) In the event of amendments to the Code or applicable regulations
relating to the Incentive Options subsequent to the date hereof, the Corporation
may amend the provisions of the 1992 Plan, and the Corporation and the employees
holding options may agree to amend outstanding option agreements, to conform to
such amendments.
9. Non-Transferability of Options
Incentive Options granted under the 1992 Plan shall not be transferable
otherwise than by will or the laws of descent and distribution, and Incentive
Options may be exercised during the lifetime of the employee only by the
employee.
The Committee may, in its discretion, authorize all or a portion of
Nonqualified Options granted to an optionee to be on terms which permit transfer
by such optionee to (i) the spouse, children or grandchildren of the optionee
("Immediate Family Members"), (ii) a trust or trusts for the exclusive benefit
of such Immediate Family Members, or (iii) a partnership in which such Immediate
Family Members are the only partners, provided that (x) there may be no
consideration for any such transfer, (y) the option agreement pursuant to which
such Nonqualified Options are granted must be approved by the Committee, and
must expressly provide for transferability in a manner consistent with this
Section, and (z) subsequent transfers of transferred Nonqualified Options shall
be prohibited except those by will or the laws of descent and distribution.
Following transfer, any such Nonqualified
5
<PAGE> 6
Options shall continue to be subject to the same terms and conditions as were
applicable immediately prior to transfer, provided that for purposes of this
Plan, the term "optionee" shall be deemed to refer to the transferee. The events
of termination of employment shall continue to be applied with respect to the
original optionee, following which the Nonqualified Options shall be exercisable
by the transferee only to the extent, and for the periods specified in
paragraphs 10 and 11 below. Notwithstanding the foregoing, should the Committee
provide that Nonqualified Options granted be transferable, the Company by such
action incurs no obligation to notify or otherwise provide notice to a
transferee of early termination of the Nonqualified Options. In the event of a
transfer, as set forth above, the original optionee is and will remain subject
to and responsible for any applicable withholding taxes upon the exercise of
such Nonqualified Options.
10. Termination of Employment
In the event that the employment of an employee to whom an option has been
granted under the 1992 Plan shall be terminated (except as set forth in
paragraph 11 below), such option may be, subject to the provisions of the 1992
Plan, exercised (to the extent that the employee was entitled to do so at the
termination of his employment) at any time within 30 days after such
termination, but not later than the date on which the option terminates;
provided, however, that any option which is held by an employee whose employment
is terminated for Cause shall, to the extent not theretofore exercised,
automatically terminate as of the date of termination of employment. As used
herein, "Cause" shall mean conduct amounting to fraud, dishonesty, or
negligence, or engaging in competition or solicitations in contradiction and
breach of any applicable employment agreement between the Corporation and
Holder. In the event of such termination not for Cause, the Committee may, in
its discretion, provide for the extension of the exercisability of an Award,
accelerate the vesting of exercisability of an Award, eliminate or make less
restrictive any restrictions contained in an Award, waive any restriction or
other provision of this Plan or an Award or otherwise amend or modify the Award
in any manner that is either (i) not adverse to the participant or (ii)
consented to by such participant. Options granted to employees under the 1992
Plan shall not be affected by any change of duties or position so long as the
holder continues to be a regular full-time employee of the Corporation or any of
its subsidiaries. Any option agreement or any rules and regulations relating to
the 1992 Plan may contain such provisions as the Committee shall approve with
reference to the determination of the date employment terminates and the effect
of leaves of absence. Nothing in the 1992 Plan or in any option granted pursuant
to the 1992 Plan shall confer upon any employee any right to continue in the
employ of the Corporation or any of its subsidiaries or interfere in any way
with the right of the Corporation or any such subsidiary to terminate such
employment at any time.
11. Death of Employee
If an employee to whom an option has been granted under the 1992 Plan shall
die while employed by the Corporation or a subsidiary, or within 30 days after
the termination of such employment (other than termination for Cause), such
option may be exercised, to the extent
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<PAGE> 7
exercisable by the employee on the date of death, by a legatee or legatees of
the employee under the employee's last will, or by the employee's personal
representatives or distributees, at any time within six (6) months after the
date of the employee's death, but not later than the date on which the option
terminates.
12. Adjustment Upon Changes in Capitalization, etc.
Notwithstanding any of the provisions of the 1992 Plan, the Committee may,
at any time, make or provide for such adjustments to the 1992 Plan, to the
number and class of shares issuable thereunder or to any outstanding options as
it shall deem appropriate to prevent dilution or enlargement of rights,
including adjustments in the event of changes in the outstanding Common Stock by
reason of stock dividends, split-ups, recapitalizations, mergers,
consolidations, combinations or exchanges of shares, separations,
reorganizations, liquidations and the like. In the event of any offer to holders
of Common Stock generally relating to the acquisition of their shares, the
Committee may make such adjustment as it deems equitable in respect to
outstanding options and rights, including, in its discretion, revision of
outstanding options and rights so that they may be exercisable for the
consideration payable in the acquisition transaction. Any such determination by
the Committee shall be conclusive. Any fractional shares resulting from such
adjustments shall be eliminated.
13. Withholding and Employment Taxes
At the time of exercise of an option, the optionee shall remit to the
Company in cash all applicable federal and state withholding and employment
taxes. If and to the extent authorized and approved by the Committee in its sole
discretion, an optionee may elect, by means of a form of election to be
prescribed by the Committee, to have shares which are acquired upon exercise of
an option withheld by the Company or tender other shares of Common Stock or
other securities of the Company owned by the optionee to the Company at the time
the amount of such taxes is determined in order to pay the amount of such tax
obligations, subject to the following limitations:
(1) such election shall be irrevocable; and
(2) such election shall be subject to the disapproval of the Committee at
any time.
Any Common Stock or other securities so withheld or tendered will be valued by
the Company as of the date they are withheld or tendered. Unless the Committee
otherwise determines, the optionee shall pay to the Company in cash, promptly
when the amount of such obligations become determinable, all applicable federal
and state withholding taxes resulting from the lapse of restrictions imposed on
exercise of an option, from a transfer or other disposition of shares acquired
upon exercise of an option or otherwise related to the option or the shares
acquired upon exercise of the option.
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<PAGE> 8
14. Termination and Amendment
The Committee of the Corporation may suspend, terminate, modify or amend
the 1992 Plan, provided that any amendment that would increase the aggregate
number of shares which may be issued under the 1992 Plan, materially increase
the benefits accruing to participants under the 1992 Plan, or materially modify
the requirements as to eligibility for participation in the 1992 Plan, shall be
subject to the approval of the Corporation's shareholders, except that any such
increase or modification that may result from adjustments authorized by
paragraph 12 does not require such approval. No suspension, termination,
modification or amendment of the 1992 Plan may, without the consent of the
employee to whom an option shall theretofore have been granted, affect the
rights of such employee under such option.
15. Miscellaneous
As said term is used in the 1992 Plan, the "Fair Market Value" of a share
of Common Stock on any day shall be deemed to mean:
(a) if the shares of Common Stock are listed on a national securities
exchange, the average of the highest and lowest sales price per share of the
Common Stock on the principal such national securities exchange on that date, or
if there shall have been no such sale so reported on that date, on the last
preceding date on which such a sale was so reported;
(b) if the shares of Common Stock are not so listed but are quoted on the
NASDAQ National Market System, the average of the highest and lowest sales price
per share of Common Stock on the NASDAQ National Market System on that date, or,
if there shall have been no such sale so reported on that date, on the last
preceding date on which such a sale was so reported;
(c) if the Common Stock is not so listed or quoted, the average of the
closing bid and asked price on that date, or, if there are no quotations
available for such date, on the last preceding date on which such quotations
shall be available, as reported by NASDAQ; or
(d) in all other events, "Fair Market Value" shall be determined by the
Board of Directors in good faith.
The Committee may require, as a condition to the exercise of any options
granted under the 1992 Plan, that to the extent required at the time of
exercise, (i) the shares of Common Stock reserved for purposes of the 1992 Plan
shall be duly listed, upon official notice of issuance, upon the stock
exchange(s) on which the Common Stock is listed, (ii) a Registration Statement
under the Securities Act of 1933, as amended, with respect to such shares shall
be effective, and/or (iii) the person exercising such option deliver to the
Corporation such documents, agreements and investment and other representations
as the Committee shall determine to be in the best interests of the Corporation.
8
<PAGE> 1
Exhibit 4.2
SI DIAMOND TECHNOLOGY, INC.
AMENDED AND RESTATED
1992 OUTSIDE DIRECTORS' STOCK OPTION PLAN
1. DEFINITIONS. As used herein, the following terms have the meanings
hereinafter set forth unless the context clearly indicates to the contrary:
(a) "Board" shall mean the Board of Directors of the Company.
(b) "Company" shall mean SI Diamond Technology, Inc.
(c) "Common Stock" shall mean the common stock, par value $.001 per
share, of the Company or, in the event that the outstanding shares of Common
Stock are hereafter changed into or exchanged for different stock or securities
of the Company or some other corporation, such other stock or securities.
(d) "Date of Grant" shall mean the last Monday of each July.
(e) "Fair Market Value" of a share of Common Stock on a particular date
shall be deemed to mean:
(i) if the shares of Common Stock are listed on a national
securities exchange, the average of the highest and lowest sales price
per share of the Common Stock on the principal such national securities
exchange on that date, or if there shall have been no such sale so
reported on that date, on the last preceding date on which such a sale
was so reported;
(ii) if the shares of Common Stock are not so listed but are
quoted on the NASDAQ National Market System, the average of the highest
and lowest sales price per share of Common Stock on the NASDAQ National
Market System on that date, or, if there shall have been no such sale
so reported on that date, on the last preceding date on which such a
sale was so reported;
(iii) if the Common Stock is not so listed or quoted, the
average of the closing bid and asked price on that date, or, if there
are no quotations available for such date, on the last preceding date
on which such quotations shall be available, as reported by NASDAQ, or
(iv) in all other events, "Fair Market Value" shall be
determined by the Board in good faith.
1
<PAGE> 2
(f) "Effective Date of the Plan" shall mean March 16, 1992.
(g) "Eligible Director" shall mean any Director of the Company who is
not a salaried employee of or exclusive, full-time consultant to the Company or
its subsidiaries.
(h) "Option" shall mean an Eligible Director's stock option to purchase
stock granted pursuant to the provisions of Article 5 hereof.
(i) "Optionee" shall mean an Eligible Director to whom an Option has
been granted hereunder.
(j) "Option Price" shall mean the price at which an Optionee may
purchase a share of Common Stock under a Stock Option Agreement.
(k) "Plan" shall mean the SI Diamond Technology, Inc. Amended and
Restated 1992 Outside Directors' Stock Option Plan, as hereby amended, the terms
of which are set forth herein.
(l) "Stock Option Agreement" shall mean an agreement between the
Company and the Optionee under which the Optionee may purchase Common Stock in
accordance with the Plan.
(m) "Subsidiary" of the Company shall mean any corporation of which the
Company directly or indirectly owns shares representing more than 50% of the
voting power of all classes or series of capital stock of such corporation which
have the right to vote generally on matters submitted to a vote of the
stockholders of such corporation.
2. THE PLAN.
(a) Name. This Plan shall be known as the "SI Diamond Technology, Inc.
Amended and Restated 1992 Outside Directors' Stock Option Plan."
(b) Purpose. This Plan is intended as an incentive to retain and
attract Eligible Directors of training, experience and ability to serve as
independent directors of the Board and to afford Eligible Directors of the
Company an opportunity to acquire or increase their proprietary interests in the
Company, and thereby to encourage their continued service as Directors and to
provide them additional incentives to achieve the growth objectives of the
Company.
(c) Termination Date. The Plan shall terminate and no further Options
shall be granted hereunder upon the tenth anniversary, of the Effective Date of
the Plan.
3. ADMINISTRATION. The Plan shall be administered by the Compensation
Committee of the Board or by any other Committee appointed by the Board (the
"Committee"), which Committee shall consist solely of two or more Non-Employee
Directors ("Non-Employee Directors") as such are defined in Rule 16b-3,
promulgated pursuant to the Securities Exchange
2
<PAGE> 3
Act of 1934, as amended (the "Exchange Act"), or any successor provision. The
Committee shall, subject to the provisions of the Plan, have the power to
construe the Plan, to determine all questions thereunder, and to adopt and amend
such rules and regulations for the administration of the Plan as it may deem
desirable.
4. DESIGNATION OF PARTICIPANTS; AUTOMATIC GRANT OF OPTIONS. On the last
Monday of each July, each Eligible Director shall receive Options to purchase
20,000 shares of the Company's Common Stock pursuant to the provisions of the
Plan.
5. STOCK OPTION AGREEMENT, OPTION GRANT AND NUMBER OF SHARES. Each
Option granted hereunder shall be embodied in a Stock Option Agreement, which
shall be subject to the terms and conditions set forth herein and shall be
signed by the Optionee and by the Chief Executive Officer, the Chief Operating
Officer, or any Vice President of the Company for and on behalf of the Company.
Each Option Agreement shall state the Options' number, duration, time of
exercise, vesting schedule and exercise price. The terms and conditions of the
Option shall be consistent with the Plan.
6. COMMON STOCK RESERVED FOR THE PLAN. Subject to adjustment as
provided in Sec tion 11 hereof, a total of 500,000 Shares of Common Stock shall
be reserved for issuance upon the exercise of Options granted pursuant to this
Plan. The shares subject to the Plan shall consist of unissued shares or
previously issued shares reacquired and held by the Company, or any parent or
Subsidiary of the Company, in its treasury. The Committee and the appropriate
officers of the Company shall from time to time take whatever actions are
necessary to execute, acknowledge, file and deliver any documents required to be
filed with or delivered to any governmental authority or any stock exchange or
transaction reporting system on which shares of Common Stock are listed or
quoted in order to make shares of Common Stock available for issuance to an
Optionee; provided, however, that shares of Common Stock with respect to which
an Option has been exercised shall not again be available for any grant of
options hereunder, pursuant to this Plan. Common Stock subject to Options that
are forfeited or terminated or expire unexercised in such a manner that all or
some of the shares subject thereto are not issued to an Optionee shall
immediately become available for the granting of Options.
7. OPTION PRICE. The purchase price of each share of Common Stock that
is subject to an Option granted pursuant to this Plan shall be 100% of the Fair
Market Value of such share of Common Stock on the Date of Grant.
8. OPTION PERIOD. Each Option granted pursuant to this Plan shall
terminate and be of no force and effect with respect to any shares of Common
Stock not purchased by the Optionee upon the expiration of the tenth anniversary
of the Date of Grant.
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<PAGE> 4
9. EXERCISE OF OPTIONS.
(a) Unless otherwise determined by the Committee, Options granted
pursuant to this Plan shall be exercisable in full upon the Date of Grant.
(b) An Option may be exercised solely by the Optionee during his
lifetime or after his death by the person or persons entitled thereto under his
will or the laws of descent and distribution.
(c) In the event that an Optionee ceases to serve as an Eligible
Director for any reason other than death, disability or mandatory retirement, an
Option granted to such Optionee may be exercised only to the extent such Option
was exercisable at the time he ceased to serve in such capacity.
(d) An Option may be exercised at any time or from time to time during
the term of the Option as to any or all full shares which have become
exercisable in accordance with this Section, but not as to less than 25 shares
of Common Stock unless the remaining shares of Common Stock that are so
exercisable are less than 25 shares of Common Stock.
(e) An Option shall be exercised by written notice of exercise of the
Option, with respect to a specified number of shares of Stock, delivered to the
Corporate Secretary of the Company at its principal offices.
(f) In the event that an Optionee ceases to serve as an Eligible
Director by reason of death, disability or mandatory retirement at a time when
an Option granted hereunder is still in force and unexpired under the terms of
Section 9 hereof, each such unmatured Option shall be accelerated. Such
acceleration shall be effective as of the date of death, disability or
retirement, as appropriate, and each Option so accelerated shall be exercisable
in full for so long as it is still in force and unexpired under the terms of
Section 9 hereof.
(g) The purchase price of the shares as to which an Option is exercised
shall be paid in full at the time of the exercise before any shares of Common
Stock are issued. Such purchase price shall be payable in cash, which may be
paid by check or other instrument acceptable to the Company. The Board may also
provide for procedures to permit the exercise of Options by the use of the
proceeds to be received from the sale of Common Stock issuable pursuant to an
Option, or by means of tendering theretofore owned Common Stock, valued at Fair
Market Value on the date of exercise. No holder of an Option shall be, or have
any of the rights or privileges of, a stockholder of the Company in respect of
any shares to any Option unless and until certificates evidencing such shares
shall have been issued by the Company to such holder.
10. TRANSFERABILITY OF OPTIONS. The Committee may, in its discretion,
authorize all or a portion of non-qualified stock options to be on terms which
permit transfer by such Eligible Director to (i) immediate family members, (ii)
a trust or trusts for the exclusive benefit of such
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<PAGE> 5
immediate family members, or (iii) a partnership in which such immediate family
members are the only partners, provided that (A) there may be no consideration
for any such transfer, (B) the Stock Option Agreement pursuant to which such
Options are granted must be approved by the Committee, and must expressly
provide for transferability in a manner consistent with this Section, and (C)
subsequent transfers of transferred Options shall be prohibited except those by
will or the laws of descent and distribution. Following transfer, any such
Options shall continue to be subject to the same terms and conditions as were
applicable immediately prior to transfer. Notwithstanding the foregoing, should
the Committee provide that Options granted be transferable, the Company by such
action incurs no obligation to notify or otherwise provide notice to a
transferee of early termination of the Option. In the event of a transfer, as
set forth above, the original Eligible Director is and will remain subject to
and response for any applicable withholding taxes upon the exercise of such
Options.
11. ADJUSTMENTS.
(a) The existence of outstanding Options shall not affect in any manner
the right or power of the Company or its shareholders to make or authorize any
or all adjustments, recapitalization, reorganizations or other changes in the
capital stock of the Company or its business or any merger or consolidation of
the Company, or any issue of bonds, debentures, preferred or prior preference
stock (whether or not such issue is prior to, on a parity with or junior to the
Common Stock) or the dissolution or liquidation of the Company, or any sale or
transfer of all or any part of its assets or business, or any other corporate
act or proceeding of any kind, whether or not of a character similar to that of
the acts or proceedings enumerated above.
(b) In the event of any subdivision or consolidation of outstanding
shares of Common Stock or declaration of a dividend payable in shares of Common
Stock or capital reorganization or reclassification or other transaction
involving an increase or reduction in the number of outstanding shares of Common
Stock, the Board may adjust proportionally (i) the number of shares of Common
Stock reserved under these Options; and (ii) the exercise price of such Options.
In the event of any consolidation or merger of the Company with another
corporation or entity or the adoption by the Company of a plan of exchange
affecting the Common Stock or any distribution to holders of Common Stock of
securities or property (other than normal cash dividends or dividends payable in
Common Stock), the Board shall make such adjustments or other provisions as it
may deem equitable, including adjustments to avoid fractional shares, to give
proper effect to such event. In the event of a corporate merger, consolidation,
acquisition of property or stock, separation, reorganization or liquidation, the
Board shall be authorized to issue or assume stock options by means of
substitution of new options for previously issued options or an assumption of
previously issued options, or to make provision for the acceleration of the
exercisability of, or lapse of restrictions with respect to, the termination of
unexercised options in connection with such transaction.
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<PAGE> 6
(c) An Option granted under the Plan shall be accelerated and become
fully exercisable upon a Change in Control (as hereinafter defined) of the
Company. For purposes of this Plan, a "Change of Control" shall be conclusively
deemed to have occurred if (and only if) any of the following events shall have
occurred: (a) there shall have occurred an event required to be reported in
response to Item 6(e) of Schedule 14A of Regulation 14A (or in response to any
similar item on any similar schedule or form) promulgated under the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), whether or not the
Company is then subject to such reporting requirement; (b) any "person" (as such
term is used in Section 13(d) and 14(d) of the Exchange Act) shall have become
the "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act),
directly or indirectly, of securities of the Company representing 20% or more of
the combined voting power of the Company's then outstanding voting securities
without prior approval of at least two-thirds of the members of the Board in
office immediately prior to such person's attaining such percentage interest;
(c) the Company is a party to a merger, consolidation, sale of assets or other
reorganization, or a proxy contest as a consequence of which members of the
Board in office immediately prior to such transaction or event constitute less
than a majority of the Board thereafter or (d) during any period of two
consecutive years, individuals who at the beginning of such period constituted
the Board (including for this purpose any new Director whose election or
nomination for election by the Company's stockholders was approved by a vote of
at least two-thirds of the Directors then still in office who were Directors at
the beginning of such period) cease for any reason to constitute at least a
majority of the Board.
The foregoing adjustments and the manner of applications thereof shall
be determined solely by the Board. The adjustments required under this Article
shall apply to any successor or successors of the Company and shall be made
regardless of the number or type of successive events requiring adjustments
hereunder.
12. PURCHASE FOR INVESTMENT. Unless the Options and shares of Common
Stock cov ered by this Plan have been registered under the Securities Act of
1933, as amended, each person exercising an Option under this Plan may be
required by the Company to give a representation in writing in form and
substance satisfactory to the Company to the effect that he is acquiring such
shares for his own account for investment and not with a view to, or for sale in
connection with, the distribution of such shares or any part thereof.
13. WITHHOLDING AND EMPLOYMENT TAXES. At the time of exercise of an
Option, the optionee shall remit to the Company in cash all applicable federal
and state withholding and employment taxes. If and to the extent authorized and
approved by the Committee in its sole discretion, an optionee may elect, by
means of a form of election to be prescribed by the Committee, to have shares
which are acquired upon exercise of an option withheld by the Company or tender
other shares of Common Stock or other securities of the Company owned by the
optionee to the Company at the time the amount of such taxes is determined in
order to pay the amount of such tax obligations, subject to the following
limitations:
(1) such election shall be irrevocable; and
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<PAGE> 7
(2) such election shall be subject to the disapproval of the Committee
at any time.
Any Common Stock or other securities so withheld or tendered will be valued by
the Company as of the date they are withheld or tendered. Unless the Committee
otherwise determines, the optionee shall pay to the Company in cash, promptly
when the amount of such obligations become determinable, all applicable federal
and state withholding taxes resulting from the lapse of restrictions imposed on
exercise of an option, from a transfer or other disposition of shares acquired
upon exercise of an option or otherwise related to the Option or the shares
acquired upon exercise of the option.
14. TERMINATION, AMENDMENT AND MODIFICATION OF PLAN. The Compensation
Committee may at any time terminate the Plan, and may at any time and from time
to time, and in any respect, amend or modify the Plan, except that (a) no
amendment or alteration that would impair the rights of any Optionee under any
Option that he has been granted shall be made without his consent or (b) no
amendment or alteration shall be effective prior to approval by the Company's
shareholders to the extent such approval is otherwise required by applicable
legal requirements.
15. STOCK CERTIFICATES. The Company shall not be required to issue or
deliver any certificate for shares of Common Stock purchased upon the exercise
of any Option granted hereunder or any portion thereof unless, in the opinion of
counsel to the Company, there has been compliance with all applicable legal
requirements. An Option granted under the Plan may provide that the Company's
obligation to deliver shares of Stock upon the exercise thereof may be
conditioned upon the receipt by the Company of a representation as to the
investment intention of the holder thereof in such form as the Company shall
determine to be necessary or advisable solely to comply with the provisions of
the Securities Act of 1933, as amended, or any other federal, state or local
securities laws.
16. GOVERNMENT REGULATIONS. This Plan, and the granting and exercise of
Options hereunder, and the obligation of the Company to sell and deliver shares
of Common Stock under such Options, shall be subject to all applicable laws,
rules and regulations, and to such approvals on the part of any governmental
agencies or national securities exchanges or transaction reporting, systems as
may be required.
17. GOVERNING LAW. This Plan and all determinations made and actions
taken pursuant hereto, to the extent not otherwise governed by mandatory
provisions of the Code or the securities laws of the United States, shall be
governed by and construed in accordance with the laws of the State of Texas.
18. EFFECTIVE DATE OF PLAN. This Plan, as hereby amended, shall be
effective as of March 16, 1992.
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<PAGE> 8
19. MISCELLANEOUS. The granting of any Option shall not impose upon the
Company or Board any obligation to nominate any Optionee for election as a
director, and the right of the stockholders of the Company to remove any person
as a director of the Company shall not be diminished or affected by reason of
the fact that an Option has been granted to such person.
20. RELATIONSHIP TO OTHER COMPENSATION PLANS. The adoption of the Plan
shall neither affect any other stock option, incentive or other compensation
plans in effect for the Company or any of its Subsidiaries, nor shall the
adoption of the Plan preclude the Company from establishing any other forms of
incentive or other compensation plan for directors of the Company.
21. MISCELLANEOUS.
(a) Plan Binding on Successors. The Plan shall be binding upon the
successors and assigns of the Company.
(b) Singular, Plural; Gender. Whenever used herein, nouns in the
singular shall include the plural, and the masculine pronoun shall include the
feminine gender.
(c) Headings, etc., No Part of Plan. Headings of articles and
paragraphs hereof are inserted for convenience and reference, and do not
constitute a part of the Plan.
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<PAGE> 1
Exhibit 4.3
SI DIAMOND TECHNOLOGY, INC.
1998 DIRECTORS AND OFFICERS STOCK OPTION PLAN
1. DEFINITIONS. As used herein, the following terms have the meanings
hereinafter set forth unless the context clearly indicates to the contrary:
(a) "Board" shall mean the Board of Directors of the Company.
(b) "Company" shall mean SI Diamond Technology, Inc.
(c) "Common Stock" shall mean the common stock, par value $.001 per
share, of the Company or, in the event that the outstanding shares of Common
Stock are hereafter changed into or exchanged for different stock or securities
of the Company or some other corporation, such other stock or securities.
(d) "Date of Grant" shall mean May 11, 1998.
(e) "Fair Market Value" of a share of Common Stock on a particular date
shall be deemed to mean:
(i) if the shares of Common Stock are listed on a national
securities exchange, the average of the highest and lowest sales price
per share of the Common Stock on the principal such national securities
exchange on that date, or if there shall have been no such sale so
reported on that date, on the last preceding date on which such a sale
was so reported;
(ii) if the shares of Common Stock are not so listed but are
quoted on the NASDAQ National Market System, the average of the highest
and lowest sales price per share of Common Stock on the NASDAQ National
Market System on that date, or, if there shall have been no such sale
so reported on that date, on the last preceding date on which such a
sale was so reported;
(iii) if the Common Stock is not so listed or quoted, the
average of the closing bid and asked price on that date, or, if there
are no quotations available for such date, on the last preceding date
on which such quotations shall be available, as reported by NASDAQ, or
(iv) in all other events, "Fair Market Value" shall be
determined by the Board in good faith.
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<PAGE> 2
(f) "Effective Date of the Plan" shall mean May 11, 1998.
(g) "Director" shall mean any Director of the Company who is
not a salaried employee of or exclusive, full-time consultant to the Company or
its subsidiaries.
(h) "Officer" shall mean any Officer of the Company or its
subsidiaries.
(i) "Option" shall mean a Directors and Officer stock option to
purchase stock granted pursuant to the provisions of Article 5 hereof.
(j) "Optionee" shall mean an Director and Officer to whom an Option has
been granted hereunder.
(k) "Option Price" shall mean the price at which an Optionee may
purchase a share of Common Stock under a Stock Option Agreement.
(l) "Plan" shall mean the SI Diamond Technology, Inc. 1998 Outside
Directors' Stock Option Plan, the terms of which are set forth herein.
(m) "Stock Option Agreement" shall mean an agreement between the
Company and the Optionee under which the Optionee may purchase Common Stock in
accordance with the Plan.
(n) "Subsidiary" of the Company shall mean any corporation of which the
Company directly or indirectly owns shares representing more than 50% of the
voting power of all classes or series of capital stock of such corporation which
have the right to vote generally on matters submitted to a vote of the
stockholders of such corporation.
2. THE PLAN.
(a) Name. This Plan shall be known as the "SI Diamond Technology, Inc.
1998 Outside Directors' Stock Option Plan."
(b) Purpose. This Plan is intended as an incentive to retain and
attract Eligible Directors of training, experience and ability to serve as
independent directors of the Board and to afford Eligible Directors of the
Company an opportunity to acquire or increase their proprietary interests in the
Company, and thereby to encourage their continued service as Directors and to
provide them additional incentives to achieve the growth objectives of the
Company.
(c) Termination Date. The Plan shall terminate and no further Options
shall be granted hereunder upon the tenth anniversary, of the Effective Date of
the Plan.
3. ADMINISTRATION. The Plan shall be administered by the Compensation
Committee of the Board or by any other Committee appointed by the Board (the
"Committee"), which Committee shall consist solely of two or more Non-Employee
Directors ("Non-Employee Directors") as such are defined in Rule 16b-3,
promulgated pursuant to the Securities Exchange
2
<PAGE> 3
Act of 1934, as amended (the "Exchange Act"), or any successor provision. The
Committee shall, subject to the provisions of the Plan, have the power to
construe the Plan, to determine all questions thereunder, and to adopt and amend
such rules and regulations for the administration of the Plan as it may deem
desirable.
4. DESIGNATION OF PARTICIPANTS; AUTOMATIC GRANT OF OPTIONS. Each
Director and Executive Officer of the Company shall receive options to purchase
shares of the Company's Common Stock pursuant to the provisions of the Plan.
5. STOCK OPTION AGREEMENT, OPTION GRANT AND NUMBER OF SHARES. Each
Option granted hereunder shall be embodied in a Stock Option Agreement, which
shall be subject to the terms and conditions set forth herein and shall be
signed by the Optionee and by the Chief Executive Officer, the Chief Operating
Officer, or any Vice President of the Company for and on behalf of the Company.
Each Option Agreement shall state the Options' number, duration, time of
exercise, vesting schedule and exercise price. The terms and conditions of the
Option shall be consistent with the Plan.
6. COMMON STOCK RESERVED FOR THE PLAN. Subject to adjustment as
provided in Sec tion 11 hereof, a total of 1,200,000 Shares of Common Stock
shall be reserved for issuance upon the exercise of Options granted pursuant to
this Plan. The shares subject to the Plan shall consist of unissued shares or
previously issued shares reacquired and held by the Company, or any parent or
Subsidiary of the Company, in its treasury. The Committee and the appropriate
officers of the Company shall from time to time take whatever actions are
necessary to execute, acknowledge, file and deliver any documents required to be
filed with or delivered to any governmental authority or any stock exchange or
transaction reporting system on which shares of Common Stock are listed or
quoted in order to make shares of Common Stock available for issuance to an
Optionee; provided, however, that shares of Common Stock with respect to which
an Option has been exercised shall not again be available for any grant of
options hereunder, pursuant to this Plan. Common Stock subject to Options that
are forfeited or terminated or expire unexercised in such a manner that all or
some of the shares subject thereto are not issued to an Optionee shall
immediately become available for the granting of Options.
7. OPTION PRICE. The purchase price of each share of Common Stock that
is subject to an Option granted pursuant to this Plan shall be 100% of the Fair
Market Value of such share of Common Stock on the Date of Grant.
8. OPTION PERIOD. Each Option granted pursuant to this Plan shall
terminate and be of no force and effect with respect to any shares of Common
Stock not purchased by the Optionee upon the expiration of the tenth anniversary
of the Date of Grant.
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<PAGE> 4
9. EXERCISE OF OPTIONS.
(a) Unless otherwise determined by the Committee, Options granted
pursuant to this Plan shall be exercisable, in full, upon the Date of Grant.
(b) An Option may be exercised solely by the Optionee during his
lifetime or after his death by the person or persons entitled thereto under his
will or the laws of descent and distribution.
(c) In the event that an Optionee ceases to serve as an Eligible
Director for any reason other than death, disability or mandatory retirement, an
Option granted to such Optionee may be exercised only to the extent such Option
was exercisable at the time he ceased to serve in such capacity.
(d) An Option may be exercised at any time or from time to time during
the term of the Option as to any or all full shares which have become
exercisable in accordance with this Section, but not as to less than 25 shares
of Common Stock unless the remaining shares of Common Stock that are so
exercisable are less than 25 shares of Common Stock.
(e) An Option shall be exercised by written notice of exercise of the
Option, with respect to a specified number of shares of Stock, delivered to the
Corporate Secretary of the Company at its principal offices.
(f) In the event that an Optionee ceases to serve as an Eligible
Director by reason of death, disability or mandatory retirement at a time when
an Option granted hereunder is still in force and unexpired under the terms of
Section 9 hereof, each such unmatured Option shall be accelerated. Such
acceleration shall be effective as of the date of death, disability or
retirement, as appropriate, and each Option so accelerated shall be exercisable
in full for so long as it is still in force and unexpired under the terms of
Section 9 hereof.
(g) The purchase price of the shares as to which an Option is exercised
shall be paid in full at the time of the exercise before any shares of Common
Stock are issued. Such purchase price shall be payable in cash, which may be
paid by check or other instrument acceptable to the Company. The Board may also
provide for procedures to permit the exercise of Options by the use of the
proceeds to be received from the sale of Common Stock issuable pursuant to an
Option, or by means of tendering theretofore owned Common Stock, valued at Fair
Market Value on the date of exercise. No holder of an Option shall be, or have
any of the rights or privileges of, a stockholder of the Company in respect of
any shares to any Option unless and until certificates evidencing such shares
shall have been issued by the Company to such holder.
10. TRANSFERABILITY OF OPTIONS. The Committee may, in its discretion,
authorize all or a portion of non-qualified stock options to be on terms which
permit transfer by such Directors and Officers to (i) immediate family members,
(ii) a trust or trusts for the exclusive benefit of such
4
<PAGE> 5
immediate family members, or (iii) a partnership in which such immediate family
members are the only partners, provided that (A) there may be no consideration
for any such transfer, (B) the Stock Option Agreement pursuant to which such
Options are granted must be approved by the Committee, and must expressly
provide for transferability in a manner consistent with this Section, and (C)
subsequent transfers of transferred Options shall be prohibited except those by
will or the laws of descent and distribution. Following transfer, any such
Options shall continue to be subject to the same terms and conditions as were
applicable immediately prior to transfer. Notwithstanding the foregoing, should
the Committee provide that Options granted be transferable, the Company by such
action incurs no obligation to notify or otherwise provide notice to a
transferee of early termination of the Option. In the event of a transfer, as
set forth above, the original Eligible Director is and will remain subject to
and response for any applicable withholding taxes upon the exercise of such
Options.
11. ADJUSTMENTS.
(a) The existence of outstanding Options shall not affect in any manner
the right or power of the Company or its shareholders to make or authorize any
or all adjustments, recapitalization, reorganizations or other changes in the
capital stock of the Company or its business or any merger or consolidation of
the Company, or any issue of bonds, debentures, preferred or prior preference
stock (whether or not such issue is prior to, on a parity with or junior to the
Common Stock) or the dissolution or liquidation of the Company, or any sale or
transfer of all or any part of its assets or business, or any other corporate
act or proceeding of any kind, whether or not of a character similar to that of
the acts or proceedings enumerated above.
(b) In the event of any subdivision or consolidation of outstanding
shares of Common Stock or declaration of a dividend payable in shares of Common
Stock or capital reorganization or reclassification or other transaction
involving an increase or reduction in the number of outstanding shares of Common
Stock, the Board may adjust proportionally (i) the number of shares of Common
Stock reserved under these Options; and (ii) the exercise price of such Options.
In the event of any consolidation or merger of the Company with another
corporation or entity or the adoption by the Company of a plan of exchange
affecting the Common Stock or any distribution to holders of Common Stock of
securities or property (other than normal cash dividends or dividends payable in
Common Stock), the Board shall make such adjustments or other provisions as it
may deem equitable, including adjustments to avoid fractional shares, to give
proper effect to such event. In the event of a corporate merger, consolidation,
acquisition of property or stock, separation, reorganization or liquidation, the
Board shall be authorized to issue or assume stock options by means of
substitution of new options for previously issued options or an assumption of
previously issued options, or to make provision for the acceleration of the
exercisability of, or lapse of restrictions with respect to, the termination of
unexercised options in connection with such transaction.
5
<PAGE> 6
(c) An Option granted under the Plan shall be accelerated and become
fully exercisable upon a Change in Control (as hereinafter defined) of the
Company. For purposes of this Plan, a "Change of Control" shall be conclusively
deemed to have occurred if (and only if) any of the following events shall have
occurred: (a) there shall have occurred an event required to be reported in
response to Item 6(e) of Schedule 14A of Regulation 14A (or in response to any
similar item on any similar schedule or form) promulgated under the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), whether or not the
Company is then subject to such reporting requirement; (b) any "person" (as such
term is used in Section 13(d) and 14(d) of the Exchange Act) shall have become
the "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act),
directly or indirectly, of securities of the Company representing 20% or more of
the combined voting power of the Company's then outstanding voting securities
without prior approval of at least two-thirds of the members of the Board in
office immediately prior to such person's attaining such percentage interest;
(c) the Company is a party to a merger, consolidation, sale of assets or other
reorganization, or a proxy contest as a consequence of which members of the
Board in office immediately prior to such transaction or event constitute less
than a majority of the Board thereafter or (d) during any period of two
consecutive years, individuals who at the beginning of such period constituted
the Board (including for this purpose any new Director whose election or
nomination for election by the Company's stockholders was approved by a vote of
at least two-thirds of the Directors then still in office who were Directors at
the beginning of such period) cease for any reason to constitute at least a
majority of the Board.
The foregoing adjustments and the manner of applications thereof shall
be determined solely by the Board. The adjustments required under this Article
shall apply to any successor or successors of the Company and shall be made
regardless of the number or type of successive events requiring adjustments
hereunder.
12. PURCHASE FOR INVESTMENT. Unless the Options and shares of Common
Stock cov ered by this Plan have been registered under the Securities Act of
1933, as amended, each person exercising an Option under this Plan may be
required by the Company to give a representation in writing in form and
substance satisfactory to the Company to the effect that he is acquiring such
shares for his own account for investment and not with a view to, or for sale in
connection with, the distribution of such shares or any part thereof.
13. WITHHOLDING AND EMPLOYMENT TAXES. At the time of exercise of an
Option, the optionee shall remit to the Company in cash all applicable federal
and state withholding and employment taxes. If and to the extent authorized and
approved by the Committee in its sole discretion, an optionee may elect, by
means of a form of election to be prescribed by the Committee, to have shares
which are acquired upon exercise of an option withheld by the Company or tender
other shares of Common Stock or other securities of the Company owned by the
optionee to the Company at the time the amount of such taxes is determined in
order to pay the amount of such tax obligations, subject to the following
limitations:
(1) such election shall be irrevocable; and
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<PAGE> 7
(2) such election shall be subject to the disapproval of the Committee
at any time.
Any Common Stock or other securities so withheld or tendered will be valued by
the Company as of the date they are withheld or tendered. Unless the Committee
otherwise determines, the optionee shall pay to the Company in cash, promptly
when the amount of such obligations become determinable, all applicable federal
and state withholding taxes resulting from the lapse of restrictions imposed on
exercise of an option, from a transfer or other disposition of shares acquired
upon exercise of an option or otherwise related to the Option or the shares
acquired upon exercise of the option.
14. TERMINATION, AMENDMENT AND MODIFICATION OF PLAN. The Compensation
Committee may at any time terminate the Plan, and may at any time and from time
to time, and in any respect, amend or modify the Plan, except that (a) no
amendment or alteration that would impair the rights of any Optionee under any
Option that he has been granted shall be made without his consent or (b) no
amendment or alteration shall be effective prior to approval by the Company's
shareholders to the extent such approval is otherwise required by applicable
legal requirements.
15. STOCK CERTIFICATES. The Company shall not be required to issue or
deliver any certificate for shares of Common Stock purchased upon the exercise
of any Option granted hereunder or any portion thereof unless, in the opinion of
counsel to the Company, there has been compliance with all applicable legal
requirements. An Option granted under the Plan may provide that the Company's
obligation to deliver shares of Stock upon the exercise thereof may be
conditioned upon the receipt by the Company of a representation as to the
investment intention of the holder thereof in such form as the Company shall
determine to be necessary or advisable solely to comply with the provisions of
the Securities Act of 1933, as amended, or any other federal, state or local
securities laws.
16. GOVERNMENT REGULATIONS. This Plan, and the granting and exercise of
Options hereunder, and the obligation of the Company to sell and deliver shares
of Common Stock under such Options, shall be subject to all applicable laws,
rules and regulations, and to such approvals on the part of any governmental
agencies or national securities exchanges or transaction reporting, systems as
may be required.
17. GOVERNING LAW. This Plan and all determinations made and actions
taken pursuant hereto, to the extent not otherwise governed by mandatory
provisions of the Code or the securities laws of the United States, shall be
governed by and construed in accordance with the laws of the State of Texas.
18. EFFECTIVE DATE OF PLAN. This Plan, as hereby amended, shall be
effective as of May 11, 1998.
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<PAGE> 8
19. MISCELLANEOUS. The granting of any Option shall not impose upon the
Company or Board any obligation to nominate any Optionee for election as a
director, and the right of the stockholders of the Company to remove any person
as a director of the Company shall not be diminished or affected by reason of
the fact that an Option has been granted to such person.
20. RELATIONSHIP TO OTHER COMPENSATION PLANS. The adoption of the Plan
shall neither affect any other stock option, incentive or other compensation
plans in effect for the Company or any of its Subsidiaries, nor shall the
adoption of the Plan preclude the Company from establishing any other forms of
incentive or other compensation plan for directors of the Company.
21. MISCELLANEOUS.
(a) Plan Binding on Successors. The Plan shall be binding upon the
successors and assigns of the Company.
(b) Singular, Plural; Gender. Whenever used herein, nouns in the
singular shall include the plural, and the masculine pronoun shall include the
feminine gender.
(c) Headings, etc., No Part of Plan. Headings of articles and
paragraphs hereof are inserted for convenience and reference, and do not
constitute a part of the Plan.
8
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<TABLE>
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LAW OFFICES
HASKELL SLAUGHTER & YOUNG, L.L.C.
1200 AMSOUTH/HARBERT PLAZA WYATT RUSHTON HASKELL MICHAEL K.K. CHOY
1901 SIXTH AVENUE NORTH WILLIAM M. SLAUGHTER CARTER H. DUKES
BIRMINGHAM, ALABAMA 35203-2618 FRANK M. YOUNG, III F. HAMPTON McFADDEN, JR.
ROBERT E. LEE GARNER JOHN W. SCOTT
FACSIMILE (205) 324-1133 BENJAMIN B. SPRATLING III ------------
TELEPHONE (205) 251-1000 THOMAS T. GALLION, III R. SCOTT WILLIAMS
ROBERT D. SHATTUCK, JR. GEORGIA S. ROBERSON
MONTGOMERY OFFICE E. ALSTON RAY SUSAN E. KENNEDY
305 SOUTH LAWRENCE STREET JAMES C. HUCKABY, JR. GORDON O. JESPERSON
MONTGOMERY, ALABAMA 36104 MARK EDWARD EZELL LYNN REYNOLDS
POST OFFICE BOX 4660 STEPHEN L. POER JOSEPH N. HARDEN
MONTGOMERY, ALABAMA 36103-4660 THOMAS E. REYNOLDS KIMBERLY L. HAGER
FACSIMILE (334) 264-7945 BEVERLY POOLE BAKER ------------
TELEPHONE (334) 265-8573 ROSS N. COHEN DONALD T. LOCKE*
CONSTANCE C. WALKER Of Counsel
GWEN L. WINDLE *Admitted only in South Carolina and Texas
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PLEASE REPLY TO: BIRMINGHAM
Exhibit 5.1
June 9, 1998
SI Diamond Technology, Inc.
3006 Longhorn Boulevard
Suite 107
Austin, Texas 78758
Re: REGISTRATION STATEMENT ON FORM S-8
Gentlemen:
We have served as counsel for SI Diamond Technology, Inc., a Texas
corporation (the "Company"), in connection with the registration under the
Securities Act of 1933, as amended, of an aggregate of 3,034,903 shares (the
"Shares") of the Company's authorized Common Stock, par value $.001 per share,
to be issued to participants in the Company's Amended and Restated 1992 Stock
Option Plan, the Company's Amended and Restated 1992 Outside Directors' Stock
Option Plan and the Company's 1998 Directors and Officers' Stock Option Plan,
pursuant to the Company's Registration Statement on Form S-8 (the "Registration
Statement"). This opinion is rendered to you pursuant to the requirements of
Form S-8.
In connection with this opinion, we have examined and are familiar with
the original or copies (certified or otherwise identified to our satisfaction)
of such documents, corporate records and other instruments relating to the
incorporation of the Company and to the authorization and issuance of the Shares
and the authorization and adoption of the Plan as we have deemed necessary and
appropriate.
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SI Diamond Technology, Inc.
June 9, 1998
Page 2
Based upon the foregoing, and having regard for such legal
considerations as we have deemed relevant, it is our opinion that:
1. The Shares have been duly authorized.
2. Upon issuance, sale and delivery of the Shares as contemplated in
the Registration Statement and the Plan, the Shares will be legally issued,
fully paid and nonassessable.
We do hereby consent to the reference to our firm under the heading
"Legal Matters" in the Registration Statement and to the filing of this opinion
as as Exhibit thereto.
Very truly yours,
By: /s/ Donald T. Locke
-----------------------------
Donald T. Locke
DTL/gcc/193220.1
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Exhibit 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in this registration
statement on Form S-8 of our report, which includes an explanatory paragraph
regarding the Company's ability to continue as a going concern, dated March 3,
1998, on our audits of the consolidated financial statements of SI Diamond
Technology, Inc. and Subsidiaries. We also consent to the reference to our firm
under the caption "Experts."
COOPERS & LYBRAND L.L.P.
Austin, Texas
June 8, 1998.
