<PAGE> 1
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
<TABLE>
<CAPTION>
<S> <C>
Check the appropriate box:
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the Commission Only
(as permitted by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
</TABLE>
SI DIAMOND TECHNOLOGY, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
- --------------------------------------------------------------------------------
(Name of Persons(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
----------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
----------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
----------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
----------------------------------------------------------------------
(5) Total fee paid:
[ ] Fee paid previously with preliminary materials:
--------------------------------------------------------------------------
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
---------------------------------------------------------------------
(3) Filing Party:
---------------------------------------------------------------------
(4) Date Filed:
---------------------------------------------------------------------
<PAGE> 2
SI DIAMOND TECHNOLOGY, INC.
3006 LONGHORN BOULEVARD
SUITE 107
AUSTIN, TEXAS 78758
June 11, 1999
To Our Shareholders:
On behalf of the Board of Directors and management of SI Diamond
Technology, Inc., I cordially invite you to attend the 1999 Annual Meeting of
Shareholders to be held at InnerStep, Inc., 14141 Highway 290 West, Suite 100,
in Austin, Texas, on Monday, July 26, 1999, at 10:00 a.m., Central Daylight
Time. The attached Notice of Annual Meeting of Shareholders and Proxy Statement
describe the formal business to be transacted at the Annual Meeting.
In addition to the specific matters to be acted upon, there also will
be a report on the operations of SI Diamond. Directors and officers of SI
Diamond will be present to respond to any questions of general interest that
shareholders may have.
It is important that your shares be represented at the Annual Meeting.
Regardless of whether you plan to attend, you are requested to mark, sign, date
and promptly return the enclosed proxy in the envelope provided. If you attend
the Annual Meeting, which we hope you will do, you may vote in person even if
you have previously mailed a proxy card.
Sincerely,
/s/ Marc W. Eller
Marc W. Eller
Chairman of the Board and
Chief Executive Officer
<PAGE> 3
SI DIAMOND TECHNOLOGY, INC.
3006 LONGHORN BOULEVARD
SUITE 107
AUSTIN, TEXAS 78758
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON JULY 26, 1999
To The Shareholders of
SI Diamond Technology, Inc.:
You are hereby notified that the 1999 Annual Meeting of Shareholders
(the "Annual Meeting") of SI Diamond Technology, Inc., a Texas corporation ("SI
Diamond"), will be held at InnerStep, Inc., 14141 Highway 290 West, Suite 100,
Austin, Texas 78737, on Monday, July 26, 1999 at 10:00 a.m. Central Daylight
Time, for the following purposes:
(1) To elect six Directors to hold office in accordance with
the Amended and Restated Bylaws of SI Diamond;
(2) To ratify the appointment of Wallace Sanders & Company as
independent auditors and accountants of SI Diamond for the fiscal year
ending December 31, 1999; and
(3) To transact such other business as properly may come
before the Annual Meeting or any adjournment thereof.
All shareholders are cordially invited to attend the Annual Meeting;
however, only shareholders of record at the close of business on June 8, 1999,
are entitled to notice of and to vote at the Annual Meeting. In accordance with
Texas law, a list of shareholders entitled to vote at the Annual Meeting shall
be open to the examination of any shareholder, for any purpose relating to the
Annual Meeting, during ordinary business hours at SI Diamond's principal
executive offices at 3006 Longhorn Boulevard, Suite 107, Austin, Texas, from
July 16, 1999, to July 25, 1999, and the list shall be available for inspection
at the Annual Meeting by any shareholder who is present.
By Order of the Board of Directors,
/s/ Olga Tikhonski
Olga Tikhonski
Corporate Secretary
DATED: June 11, 1999
IMPORTANT
Regardless of whether you expect to attend the meeting, please mark,
sign, date and return the enclosed proxy in the enclosed self-addressed envelope
as promptly as possible.
NO POSTAGE IS REQUIRED IF THE ENCLOSED ENVELOPE IS MAILED IN THE UNITED
STATES.
<PAGE> 4
PROXY STATEMENT
SI DIAMOND TECHNOLOGY, INC.
3006 LONGHORN BOULEVARD
SUITE 107
AUSTIN, TEXAS 78758
INTRODUCTION
This Proxy Statement is furnished in connection with the solicitation
of proxies to be used at the 1999 Annual Meeting of Shareholders (the "Annual
Meeting") of SI Diamond Technology, Inc., a Texas corporation ("SI Diamond"), to
be held on Monday, July 26, 1999, at 10:00 a.m. Central Daylight Time, at
InnerStep, Inc., 14141 Highway 290 West, Suite 100, Austin, Texas 78737, and at
any adjournments thereof. THE ACCOMPANYING PROXY IS SOLICITED BY THE BOARD OF
DIRECTORS OF SI DIAMOND. The principal executive offices of SI Diamond are
located at 3006 Longhorn Boulevard, Suite 107, Austin, Texas 78758. This Proxy
Statement and the accompanying proxy card are first being mailed to shareholders
on or about June 11, 1999.
SI DIAMOND WILL VOTE PROPERLY EXECUTED PROXIES ACCORDING TO THE
INSTRUCTIONS YOU PROVIDE ON THE PROXY CARD. IF YOU DO NOT SPECIFY A CHOICE AS TO
ANY OF THE MATTERS TO BE VOTED BY THE SHAREHOLDERS, THEN YOUR PROXY WILL BE
VOTED FOR ANY MATTER NOT CHOSEN OR SPECIFIED BY YOU AND, IN THE DISCRETION OF
THE PERSONS NAMED IN THE PROXY, ON ANY OTHER BUSINESS THAT MAY PROPERLY COME
BEFORE THE ANNUAL MEETING.
SOLICITATION
SI Diamond will bear all the costs of preparing, assembling and mailing
the proxy materials and of reimbursing brokers, nominees, and fiduciaries for
the out-of-pocket and clerical expenses of transmitting copies of the proxy
materials to the beneficial owners of shares held of record. Certain officers
and regular employees of SI Diamond or its subsidiaries, without additional
compensation, may use their personal efforts, by telephone or otherwise, to
obtain proxies in addition to this solicitation by mail. SI Diamond expects to
reimburse brokers, banks, custodians and other nominees for their reasonable
out-of-pocket expenses in handling proxy materials for beneficial owners of the
Common Stock. SI Diamond has engaged Morrow & Co., Inc., professional proxy
solicitors, to assist in the routine solicitation of proxies at a fee of
approximately $5,000 plus expenses.
VOTING AND REVOCABILITY OF PROXY APPOINTMENTS
Only shareholders of record at the close of business on June 8, 1999,
(the "Record Date") are entitled to receive notice of and to vote at the Annual
Meeting. As of the close of business on June 8, 1999, there were outstanding and
entitled to vote 50,991,976 shares of Common Stock and 1,550 shares of Series G
Preferred Stock (the "Series G Preferred"). The Common Stock holders of record
on the Record Date will be entitled to one vote per share. The Series G
Preferred is convertible into 1,846,479 shares of Common Stock at the option of
the holders thereof. Each share of Series G Preferred is convertible into that
number of shares of Common Stock as determined by dividing the original price of
the Series G Preferred (the "Issue Price"),
1
<PAGE> 5
plus an amount equal to 10% per annum of the Issue Price, by $1.00. The Series G
Preferred shareholders of record on the Record Date will be entitled to one vote
per share for every share of Common Stock into which the Series G Preferred is
convertible on the Record Date. Under the current Amended and Restated By-Laws
of SI Diamond, the presence, in person or by proxy, of a majority of all
outstanding Common Stock and Series G Preferred, on an as-converted basis, at
the Record Date will constitute a quorum. For purposes of determining the
presence of a quorum, shareholders on the Record Date who are present at the
meeting in person or by proxy and who abstain, including brokers holding
customers' shares of record who cause abstentions to be recorded at the meeting,
are considered shareholders who are present and entitled to vote and they count
toward the quorum. If there are not sufficient shares represented in person or
by proxy at the Annual Meeting to constitute a quorum, the meeting may be
postponed or adjourned in order to permit further solicitation of proxies by SI
Diamond. Proxies given pursuant to this solicitation and not revoked will be
voted at any postponement of the Annual Meeting.
Brokers holding shares of record for customers generally are not
entitled to vote on certain matters unless they receive voting instructions from
their customers. As used herein, "uninstructed shares" means shares held by a
broker who has not received instructions from its customers on such matters and
the broker has so notified SI Diamond on a proxy form in accordance with
industry practice or has otherwise advised SI Diamond that it lacks voting
authority. As used herein, "broker non-votes" means the votes that could have
been cast on the matter in questions by brokers with respect to uninstructed
shares if the brokers had received their customers' instructions.
Under Texas law, the vote of a plurality of the Common Stock and Series
G Preferred, on an as-converted basis, present at the Annual Meeting in person
or by proxy is necessary to elect Directors (Item 1). Abstention and broker
non-votes will not be taken into account in determining the outcome of the
election of Directors. The ratification of the selection of SI Diamond's
independent accountants and auditors (Item 2) requires the affirmative vote of a
majority of the shares of the Common Stock and Series G Preferred, on an
as-converted basis, entitled to vote and represented at the Annual Meeting in
person or by proxy. Therefore, abstentions and broker non-votes have the affect
of negative votes for Item 2.
As of the date of this Proxy Statement, SI Diamond's Board of Directors
has not been informed of any matters, other than those set forth in the
foregoing Notice of Annual Meeting of Shareholders, that may be brought before
the Annual Meeting. If other matters requiring a vote of the shareholders arise,
the persons designated as proxies will vote the shares of Common Stock and
Series G Preferred, on an as-converted basis, represented by the proxies in
accordance with their judgment on such matters.
Shareholders can ensure that their shares are voted at the Annual
Meeting by signing and returning the enclosed proxy card in the envelope
provided. Shares of Common Stock and Series G Preferred, on an as-converted
basis, represented by the accompanying proxy card will be voted if the proxy
card is properly executed and is received by SI Diamond prior to the time of
voting. Sending in a signed proxy card will not affect a shareholder's right to
attend the Annual Meeting and vote in person.
Presence at the Annual Meeting by a shareholder who has signed a proxy
card does not by itself revoke the proxy. Each proxy granted may be revoked (1)
by giving written notice of such revocation to the Corporate Secretary of SI
Diamond, (2) by execution and delivery of a subsequent proxy, or (3) by
attending the Annual Meeting, giving notice of such revocation and voting in
person at the Annual Meeting, except that any such revocation shall not be
effective as to any matter upon which, prior to such revocation, a vote shall
have already been cast pursuant to the authority conferred by such proxy.
2
<PAGE> 6
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The following table sets forth certain information with respect to the
beneficial ownership of shares of each class of the SI Diamond's voting stock as
of June 8, 1999, by each person known to be the beneficial owner of 5% or more
of the outstanding voting stock of each such class of SI Diamond. For the
purposes of this Proxy Statement, beneficial ownership of securities is defined
in accordance with the rules of the SEC to mean generally the power to vote or
dispose of securities, regardless of any economic interest therein.
<TABLE>
<CAPTION>
===================================================================================================================
Title of Class Name and Address Shares Owned Percent of
Beneficially Class
===================================================================================================================
<S> <C> <C> <C>
Common Stock None - -
- -------------------------------------------------------------------------------------------------------------------
Series G Preferred William W. Gow 100 6.45%
Stock 4747 Sunset Blvd.
Los Angeles, CA 90027
John Green Company 100 6.45%
220 Victor
Highland Park, MI 48203
Pinnacle Fund L.P. 200 12.90%
4965 Preston Park Blvd., Suite 240
Plano, TX 75093
J. Brad Carter, M.D. 100(1) 6.45%
9330 Park Crest Blvd., #300
Knoxville, TN 37923
George F. Valassis 200 12.90%
Franklin Enterprises
520 Lake Cook Road, Suite 380
Deerfield, IL 60015
Klaich Animal Hospital, Ltd. 100(2) 6.45%
Amended Profit Sharing
Retirement Plan & Trust
1990 South Virginia Street
Reno, NV 89502
Nicholas Martin Living Trust 200 12.90%
3113 South University Drive, Suite 600
Ft. Worth, TX 76109
Michael Scott Blechman Family Trust 200 12.90%
295 Shadowood Lane
Northfield, IL 60093
===================================================================================================================
</TABLE>
(1) Includes 50 shares issued in the name of J. Brad Carter, M.D., IRA.
(2) Shares are for a segregated account in the name of Nicholas L. Klaich.
3
<PAGE> 7
SECURITY OWNERSHIP OF MANAGEMENT
Set forth below is certain information with respect to financial
ownership of SI Diamond's Common Stock as of June 8, 1999, by each Director,
each nominee for Director, each Named Executive Officer and by the Directors and
executive officers as a group. Unless otherwise indicated, each person or member
of the group listed has sole voting and investment power with respect to the
shares of Common Stock listed.
<TABLE>
<CAPTION>
Common Stock
Beneficial Percentage
Name Ownership (1) of Class
---- ------------- ----------
<S> <C> <C>
Philip C. Shaffer 522,702 1.05%
David R. Sincox 437,213 *
Igor Leontiev (2) 536,520 1.06
Marc W. Eller 1,317,296 2.52
Ronald J. Berman 1,154,346 2.21
Dr. Zvi Yaniv 931,000 1.78
Douglas P. Baker 692,000 1.34
Nicholas Martin, Jr.(3) 724,411 1.36
Lee B. Arberg (4) 342,400 *
All Executive Officers and Directors 6,657,888 11.60
as a group (9 persons)
</TABLE>
- ------------------------
* Less than 1%
(1) Included in the amounts indicated are shares that are subject to
options exercisable within 60 days pursuant to Rule 13d-3(d)(1) of the
Exchange Act. The number of such shares are 430,000 for Mr. Shaffer;
316,000 for Mr. Sincox; 306,520 for Mr. Leontiev; 1,003,500 for Mr.
Eller; 343,506 for Mr. Berman; 920,000 for Mr. Yaniv; 670,000 for Mr.
Baker; 342,400 for Mr. Arberg and 4,331,926 for the Directors and
executive officers as a group.
(2) Mr. Leontiev serves as the President of DiaGasCrown, a subsidiary of
Gazcomplektimpex. Gazcomplektimpex owns 1,000,130 shares of SI Diamond
Common Stock. Mr. Leontiev disclaims any beneficial ownership of these
shares.
(3) These shares are held in trust by the Nicholas Martin Living Trust.
These shares include 238,795 shares of Common Stock on an as converted
basis from 200 shares of currently held Series G Preferred.
(4) Mr. Arberg resigned from the SI Diamond Board of Directors on May 3,
1999.
4
<PAGE> 8
PROPOSAL NUMBER ONE
ELECTION OF DIRECTORS
SI Diamond's Amended and Restated Bylaws (the "Bylaws") provide for a
Board of Directors divided into three classes having staggered terms with each
class as nearly equal in size as possible. Pursuant to SI Diamond's Bylaws, the
Board of Directors has set its size at six members as of the date of the Annual
Meeting. The current term of office of the Directors for all three classes
expire at the Annual Meeting. The terms of office of Directors in Class I, Class
II and Class III will expire at the annual meetings of shareholders to be held
in 2000, 2001 and 2002, respectively. At each annual meeting of shareholders,
Directors will be elected to succeed those whose terms then expire, with each
newly elected Director to serve for the term specified according to their class.
Mr. Sincox and Dr. Yaniv have been nominated as Class I Directors to
serve a one-year term ending at the SI Diamond annual meeting in 2000. Messrs.
Shaffer and Martin have been nominated as Class II Directors to serve a two-year
term ending at the SI Diamond annual meeting in 2001. Messrs. Eller and Berman
have been nominated as Class III Directors to serve a three-year term ending at
the SI Diamond annual meeting in 2002. All nominees with the exception of Mr.
Martin currently serve on the SI Diamond Board of Directors. It is intended that
the persons named in the accompanying proxy will vote shares represented by
properly executed proxies for the election of the six listed nominees as
Directors unless authority to vote is withheld. If any nominee should become
unavailable to serve on the Board of Directors, the persons named in the proxy
may act with discretionary authority to vote the proxy for such other person, if
any, as may be designated by the Board of Directors. However, the Board of
Directors is not aware of any circumstances likely to render any of the nominees
unavailable for election. The vote of a plurality of the shares of Common Stock
and Series G Preferred, on an as-converted basis, present at the Annual Meeting
in person or by proxy and entitled to vote therein, voting together as a single
class, will be necessary to elect the nominees. A "plurality" means that the
individuals who receive the largest number of votes cast are elected as
Directors up to the maximum number of Directors to be chosen at the meeting.
Consequently, any shares not voted (whether by abstention, broker non-vote, or
otherwise) have no impact on the election of Directors. For information about
restrictions on Director nominations, see "SI Diamond Board of Directors and
Committees."
For each nominee's beneficial ownership of Common Stock, see "Security
Ownership of Management."
The following sets forth certain additional information regarding each
nominee for Director as of June 8, 1999. Unless otherwise indicated, each person
has had the same principal occupation for at least five years.
CLASS I DIRECTORS--TERM EXPIRING 2000
DAVID R. SINCOX, age 59, has been a Director of the SI Diamond since
October 1994. Since 1987, Mr. Sincox has served as the Vice President of
Administration of Ref-Chem Construction Corporation, an engineering and
construction firm.
DR. ZVI YANIV, age 53, has served as SI Diamond's President and Chief
Operating Officer since May 1996. Dr. Yaniv has degrees in physics, mathematics,
and electro-optics as well as a Ph.D. in Physics. Prior to joining SI Diamond in
May 1996, Dr. Yaniv operated a consulting practice and previously was President
5
<PAGE> 9
and CEO of OIS Optical Imaging Systems, Inc., a supplier of flat panel color
liquid crystal displays to the avionics and defense industries.
CLASS II DIRECTORS-- TERM EXPIRING 2001
PHILIP C. SHAFFER, age 62, has been a Director of SI Diamond since
March 1992. Since 1977, Mr. Shaffer has worked as a self-employed consultant in
the field of aerospace technology and management, with an emphasis in business
acquisition. Mr. Shaffer also serves as the General Partner of an oil and gas
development partnership with a total capitalization of approximately $1.2
million. Prior to 1977, Mr. Shaffer worked for 12 years in the National
Aeronautics and Space Administration in a series of positions including Flight
Dynamics Officer, Apollo and Skylab Flight Director, Special Assistant to the
Director of the Johnson Space Center, and Manager of Space Shuttle Operations.
NICHOLAS MARTIN, JR., age 75, was President and owner of a North
American lumber wholesale and manufacturing company for approximately twenty
years. Mr. Martin has also owned companies manufacturing PVC pipe and vinyl
siding during the past thirty years. Mr. Martin currently is active in real
estate development in Kansas City, Detroit and Dallas/Ft. Worth.
CLASS III DIRECTORS--TERM EXPIRING 2002
MARC W. ELLER, age 43, has served as SI Diamond's Chief Executive
Officer since July 1996. Mr. Eller is Chairman of the Board of Directors and has
been a Director since November 1995. Mr. Eller co-founded BEG Enterprises, Inc.
in 1989 and has been its Vice President since that date. For the past five
years, Mr. Eller has also been involved in commercial real estate investment and
in investment banking activities for publicly traded companies. Mr. Eller has a
B.A. degree in Economics.
RONALD J. BERMAN, age 42, has been a Director since May 1996. Mr.
Berman co-founded BEG Enterprises, Inc. with Marc W. Eller and has been its
President since 1989. Mr. Berman also is President of R.J. Berman Enterprises,
Ltd., a real estate development company. Mr. Berman earned a Juris Doctor degree
in 1980 from the University of Detroit. Prior to 1989, Mr. Berman was an
attorney in private practice.
All of SI Diamond's Directors have retained the right to pursue
additional business activities that (1) are not competitive with the business of
SI Diamond, and (2) do not adversely affect their performance as Directors. If,
as and when conflicts of interests arise, the nature of the conflict must be
fully disclosed to the Board of Directors, and the person who is subject to the
conflict must abstain from participating in any decision that may impact on his
conflict of interest. Except for this disclosure and abstention policy, the
Directors will not be in breach of any fiduciary duties owed to SI Diamond or
the shareholders by virtue of their participation in such additional business
activities.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" ALL NOMINEES FOR
DIRECTOR.
6
<PAGE> 10
SI DIAMOND BOARD OF DIRECTORS AND COMMITTEES
The total number of meetings the Board held during 1998 was fourteen.
No incumbent Director who was a Director during 1998 attended fewer than 75
percent of the aggregate of (i) the total number of meetings of the Board of
Directors and (ii) the total number of meetings held by all committees of the
Board on which he served, with the exception of Mr. Leontiev who attended three
meetings. The Board of Directors has established the following standing
committees: Executive Committee, Compensation Committee and Audit Committee.
The Executive Committee of the Board has and may exercise, during the
intervals between meetings of the Board, all the powers of the Board in the
management of SI Diamond's business and affairs, subject to certain statutory
restrictions. The current members of the Executive Committee are Messrs. Eller,
Yaniv and Shaffer. The members of the Executive Committee consulted with one
another frequently between Board meetings but took no formal action during 1998.
The Audit Committee has primary responsibility for (i) recommending to
the Board the particular persons or firm to be employed by SI Diamond as its
independent auditors and accountants; (ii) consulting with the persons or firms
so chosen to be the independent auditors with regard to the plan of audit; (iii)
reviewing, in consultation with SI Diamond's independent auditors, their report
of audit, or proposed report of audit, and the accompanying management letter,
if any; and (iv) consulting with SI Diamond's independent auditors
(periodically, if appropriate, out of the presence of management) with regard to
the adequacy of internal controls. The members of the Audit Committee during
1998 were Mr. Sincox and Mr. Arberg, and this Committee met one time during
1998. Mr. Arberg resigned from the SI Diamond Board of Directors on May 3, 1999.
The Compensation Committee is responsible for recommending to the Board
the compensation arrangements for SI Diamond's senior management and
administering SI Diamond's employee stock option plans. The Members of the
Compensation Committee during 1998 were Messrs. Berman and Arberg. They
conferred with one another on a regular basis and consulted with the full Board
from time to time on matters within the Compensation Committee's purview.
The members of the Compensation Committee met three times during 1998.
The Board of Directors as a whole acts in place of a nominating
committee. SI Diamond's Amended and Restated Articles of Incorporation provide
that nominations for Directors may be made by shareholders only if written
notice of such proposed nominations are delivered to or mailed and received at
the principal executive offices of SI Diamond not less than 60 days nor more
than 90 days prior to the meeting; provided, however, that in the event that
less than 70 days' notice or prior public disclosure of the date of the meeting
is given or made to shareholders, then, notice by the shareholders, to be
timely, must be so delivered or mailed and received not later than the close of
business on the 10th day following the day on which such notice of the date of
the meeting was mailed or such public disclosure was made. Such shareholder's
notice shall set forth (a) as to each person the shareholder proposes to
nominate for election or re-election as Director (i) the person's name, age,
business address, and residence address, (ii) the person's principal occupation
or employment, (iii) the class and number of shares of SI Diamond that the
person beneficially owns and (iv) any other information relating to the person
that is required to be disclosed in solicitation for proxies for election of
Directors pursuant to Section 14 of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), and the rules and regulations promulgated
thereunder; and (b) as to the shareholder giving notice, (i) the name and
address of the shareholder and (ii) the class or series and number of shares of
capital stock of SI Diamond that are owned beneficially or of record by the
shareholder. SI Diamond may require a proposed nominee
7
<PAGE> 11
to furnish such other information as may be reasonably required by SI Diamond to
determine the eligibility of each proposed nominee to serve as Director of SI
Diamond. No person shall be eligible for election as a Director of SI Diamond
unless nominated in accordance with the procedures set forth above. The Chairman
of the annual meeting shall, if the facts warrant, determine and declare to the
annual meeting that the nomination was not made in accordance with the above
procedures, and if the Chairman should so determine, he shall so declare to the
meeting and the defective nomination shall be disregarded.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires SI
Diamond's officers and Directors and persons who beneficially own more than 10%
of a registered class of SI Diamond's equity securities, to file reports of
ownership and changes in ownership with the Securities and Exchange Commission.
Officers, Directors and beneficial owners of more than 10% of SI Diamond's
equity securities are required by SEC regulations to furnish SI Diamond with
copies of all Section 16(a) forms that they file. Based on a review of the
copies of the forms furnished to SI Diamond, SI Diamond believes that during
1998, all of its officers, Directors and more than 10% beneficial owners
complied with all applicable filing requirements, except that Mr. Leontiev and
Mr. Shaffer were late in filing one Form 4 each.
EXECUTIVE COMPENSATION AND OTHER INFORMATION
SUMMARY OF CASH AND CERTAIN OTHER COMPENSATION
The following table sets forth for the fiscal years ended December 31,
1996, 1997, and 1998, the cash compensation paid or accrued by SI Diamond, as
well as certain other compensation paid or accrued for those years, for services
in all capacities to the individual serving as SI Diamond's Chief Executive
Officer throughout 1998, and to SI Diamond's two most highly compensated
executive officers, other than the Chief Executive Officer, who were serving as
executive officers at the end of 1998.
8
<PAGE> 12
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Long-Term
Annual Compensation Compensation
---------------------------------------------------- -------------
Other Securities
Annual Underlying
Name and Position Year Salary($) Bonus($) Compensation($)(4) Options(#)(5)
- ----------------- ---- --------- -------- ------------------ -------------
<S> <C> <C> <C> <C> <C>
Marc W. Eller 1998 $150,000 $ -0- $ -0- 780,000
Chief Executive Officer (1) 1997 150,000 -0- -0- 47,500
1996 51,932 15,000 9,005 110,000 (6)
Zvi Yaniv, President and 1998 $150,000 $ -0- $ 6,839 1,170,000
Chief Operating Officer (2) 1997 150,000 -0- 24,170 270,000
1996 82,131 -0- 32,338 1,000,000
Doug Baker, Vice President 1998 $115,000 $ -0- $ -0- 520,000
and Chief Financial Officer (3) 1997 115,000 -0- -0- 45,000
1996 76,326 5,000 -0- 100,000
</TABLE>
- -------------------------
(1) Mr. Eller commenced employment with SI Diamond on July 25, 1996. Salary
in 1998 includes $135,000 paid during the year and $15,000 voluntarily
deferred by Mr. Eller to assist SI Diamond's cashflow. Salary in 1997
included $138,750 paid during 1997 and $11,250 deferred until 1998.
(2) Dr. Yaniv commenced employment with SI Diamond on May 8, 1996. Salary
in 1997 includes $141,250 paid during the year and $8,750 voluntarily
deferred by Dr. Yaniv to assist SI Diamond's cashflow.
(3) Mr. Baker commenced employment with SI Diamond on June 17, 1996. Salary
in 1997 includes $106,375 paid during the year and $8,625 voluntarily
deferred by Mr. Baker to assist SI Diamond's cashflow.
(4) The following Named Executive Officers received perquisites that
exceeded in value the lesser of $50,000 or 10% of such officers' salary
and bonus. Dr. Yaniv received reimbursement of living expenses totaling
$20,070 in 1997 and $29,541 in 1996. He was also provided use of a SI
Diamond owned automobile valued at $1,882 in 1998, $4,100 in 1997 and
$2,797 in 1996. In 1998, Dr. Yaniv was reimbursed $4,957 in connection
with the transportation of his household belongings in connection with
the relocation of his primary residence to Austin, Texas. Mr. Eller
received reimbursement of moving expenses totaling $9,005 in 1996.
(5) 1997 options include options issued in 1996 but repriced in 1997 in the
following amounts: Mr. Eller--27,500; Dr. Yaniv--250,000; and Mr.
Baker--25,000. 1998 options include options issued in 1996 and 1997
but repriced in 1998 in the following amounts: Mr. Eller--130,000; Dr.
Yaniv--1,020,000; and Mr. Baker--120,000. More information on this
repricing is identified in the "Options Repricing Table" below.
(6) 20,000 of these options were granted to Mr. Eller in 1996 under the
Amended and Restated 1992 Outside Directors Stock Option Plan prior to
Mr. Eller becoming an executive officer of SI Diamond.
9
<PAGE> 13
STOCK OPTION GRANTS IN 1998
SI Diamond has an Amended and Restated 1992 Employee Stock Option Plan,
which may be used to grant employees, including officers of SI Diamond,
incentive stock option designed to qualify under Section 422 of the Internal
Revenue Code of 1986, or non-qualified stock options. SI Diamond also
established the 1998 Directors and Officers Stock Option Plan, which may be used
to grant non-qualified stock options to officers and Directors of SI Diamond.
The following table sets forth information concerning stock option grants to the
Named Executive Officers in 1998.
<TABLE>
<CAPTION>
Number of Percent of Total
Securities Underlying Options Granted to
Options Employees in Exercise or Expiration
Name Granted (#)(1)(2) Fiscal Year 1998 Base Price ($/sh) Date
- ---- ----------------- ---------------- ----------------- ----
<S> <C> <C> <C> <C>
Marc W. Eller 500,000 (3) 15.89% $0.375 5/11/2008
150,000 (3) 4.77% $0.375 7/27/2008
20,000 (3)(4) 0.64% $0.375 7/28/2007
20,000 (4)(5) 0.64% $0.375 7/29/2006
90,000 (4)(6) 2.86% $0.375 11/1/2006
Dr. Zvi Yaniv 150,000 (3) 4.77% $0.375 5/11/2008
20,000 (3)(4) 0.64% $0.375 7/28/2007
1,000,000 (4)(7) 31.78% $0.375 5/31/2006
Douglas P. Baker 250,000 (3) 7.94% $0.375 5/11/2008
150,000 (3) 4.77% $0.375 7/27/2008
20,000 (3)(4) 0.64% $0.375 7/28/2007
100,000 (4)(8) 3.18% $0.375 6/17/2006
</TABLE>
- ------------------------
(1) Under the terms of SI Diamond's Amended and Restated 1992 Employee
Stock Option Plan and the 1998 Directors and Officers Stock Option
Plan, SI Diamond's Compensation Committee retains discretion, subject
to plan limits, to modify the terms of outstanding options and to
reprice the options.
(2) The options were granted for a term of ten (10) years, subject to
earlier termination in certain events related to termination of
employment.
(3) These options became exercisable in full on the date of the grant in
1998.
(4) These options were issued in 1996 and 1997, but as described in the
option repricing table, were repriced in 1998. The market price of SI
Diamond's Common Stock was $0.25 at the time the options were repriced
to $0.375. More information on this repricing is identified in the
"Options Repricing Table" below.
(5) These options were granted to Mr. Eller under SI Diamond's Amended and
Restated 1992 Outside Directors Stock Option Plan prior to Mr. Eller
becoming an executive officer of SI Diamond.
(6) One-fourth of these options vested on date of grant and an additional
one-fourth on June 1, 1998, 1999 and 2000.
(7) One-tenth of these options vested on the date of grant, one-tenth on
December 31, 1996 and one-fifth vest on each of December 31, 1997,
1998, 1999 and 2000.
(8) One-third of these options vested on the date of grant, one-third on
October 1, 1996 and one-third on January 1, 1997.
10
<PAGE> 14
AGGREGATED OPTION EXERCISES IN 1998
AND OPTION VALUES AT DECEMBER 31, 1998
The following table sets forth certain information concerning the
number and intrinsic value of the options held by the named executives at
December 31, 1998. There were no options exercised by Named Executive Officers
during the fiscal year ended December 31, 1998 and accordingly no value was
realized. Year-end values are based arbitrarily on the closing price of $0.40
per share of the Common Stock on December 31, 1998, on the Nasdaq OTC Bulletin
Board System. They do not reflect the actual amounts, if any, which may be
realized upon the future exercise of remaining stock options and should not be
considered indicative of future stock performance.
<TABLE>
<CAPTION>
Number of Securities
Underlying Unexercised Value of Unexercised In-the-Money
Options at December 31, 1998 Options at December 31, 1998
---------------------------- ----------------------------
Name Exercisable/Unexercisable Exercisable/Unexercisable
- ---- ------------------------- -------------------------
<S> <C> <C>
Marc W. Eller 727,00 / 53,000 $18,175 / $1,325
Dr. Zvi Yaniv 770,000 / 400,000 19,250 / 10,000
Douglas P. Baker 520,000 / 0 13,000 / 0
<CAPTION>
DIRECTOR COMPENSATION FOR 1998
Director Compensation Security Grants in 1998
--------------------- -----------------------
Number of Securities
Name (1) Meeting Fees ($)(2) Underlying Options (#)(3)
- -------- ------------------- -------------------------
<S> <C> <C>
Lee B. Arberg $ 500 170,000
David R. Sincox 650 170,000
Philip C. Shaffer 500 170,000
Igor Leontiev 250 170,000
Ronald J. Berman 950 170,000
</TABLE>
- ------------------
(1) Directors who are also executives of SI Diamond are not listed in the
above table. They do not receive compensation as Directors. Refer to
the "Summary Compensation Table" for information concerning their
compensation.
(2) All Directors receive $150 per board meeting or committee meeting
attended in person and $50 per telephonic meeting. No cash payments
were made to Directors in 1998. The amounts due, as reflected in this
table, were voluntarily deferred by the Directors to aid SI Diamond's
cash flow. Reasonable expenses incurred by each Director in connection
with his duties as a Director are also reimbursed by SI Diamond. This
amount is not reflected in the above table.
(3) All outside Directors of SI Diamond participate in SI Diamond's Amended
and Restated 1992 Outside Directors Stock Option Plan, under which SI
Diamond may grant stock options to any Director who is not a full time
11
<PAGE> 15
salaried employed of SI Diamond. Each Director was granted 20,000
options under this plan on July 27, 1998, at a price of $0.25 per
share. These option grants became exercisable in full on that date. The
Board of Directors also established the 1998 Directors and Officers
Stock Option Plan in 1998. Each outside Director was granted 150,000
fully vested options under this plan on May 11, 1998. These options are
exercisable at a price of $0.375 per share.
In May 1998, SI Diamond's Board of Directors passed a resolution that
changed the option exercise price of certain options previously granted under
the Amended and Restated 1992 Outside Directors Stock Option Plan. A total of
284,903 options were repriced. SI Diamond reduced the exercise price to $0.375
for all options for all persons who were Directors of SI Diamond at the time of
the repricing. The original exercise price of these options ranged from $1.125
to $5.50. The market price of SI Diamond's Common Stock at the time the exercise
price of these options was reduced was approximately $0.25 per share.
EMPLOYMENT AGREEMENTS
SI Diamond has an employment agreement with Dr. Zvi Yaniv, its
President and Chief Operating Officer, which was entered into on June 1, 1996.
Under the terms of this agreement, Dr. Yaniv was to be paid a base salary of
$125,000 per year. The contract was amended to adjust Dr. Yaniv's salary to
$150,000 per year effective November 1, 1998. All contingent compensation
related to bonuses or performance goals were eliminated.
SI Diamond also provides Dr. Yaniv with the use of an automobile owned
by SI Diamond and paid for his reasonable living expenses in Austin, Texas until
June 1, 1997. In May 1998, SI Diamond paid moving expenses for the
transportation of Dr. Yaniv's household goods in connection with the relocation
of Dr. Yaniv's primary resident to Austin, Texas. The employment agreement may
be terminated by either party, with or without cause, by giving 30 days notice
of termination to the other party.
12
<PAGE> 16
OPTION REPRICINGS
The Named Executive Officers listed in the table below had the
identified stock option grants repriced during SI Diamond's fiscal years ended
December 31, 1998, 1997, and 1996.
<TABLE>
<CAPTION>
Number of Length of
Securities Original Option
Underlying Market Price of Exercise Price term Remaining
Options Stock at Time at Time of New at Date of
Repriced or of Repricing or Repricing or Exercise Repricing or
Name Date Amended(#) Amendment($) Amendment($) Price($) Amendment(1)
- ---- ---- ----------- ---------------- ------------- --------- ----------------
<S> <C> <C> <C> <C> <C> <C>
Marc W. Eller, Chief 5/11/98 67,500 $ 0.25 $ 3.00 $0.375 8yr., 6 mnths
Executive Officer 5/11/98 22,500 $ 0.25 $ 2.00 $0.375 8yr., 6 mnths
5/11/98 20,000 $ 0.25 $1.125 $0.375 9yr., 3 mnths
7/28/97 22,500 $1.125 $ 3.00 $ 2.00 9yr., 3 mnths
Dr. Zvi Yaniv, 5/11/98 750,000 $ 0.25 $ 4.00 $0.375 8yr., 0 mnths
President and Chief 5/11/98 250,000 $ 0.25 $ 2.00 $0.375 8yr., 0 mnths
Operating Officer 5/11/98 20,000 $ 0.25 $1.125 $0.375 9yr., 3 mnths
7/28/97 250,000 $1.125 $ 4.00 $ 2.00 8yr., 9 mnths
10/17/96 1,000,000 $ 1.50 (2) $ 4.00 9yr., 7 mnths
Douglas P. Baker, 5/11/98 75,000 $ 0.25 $ 4.00 $0.375 8yr., 1 mnths
Vice President and 5/11/98 25,000 $ 0.25 $ 2.00 $0.375 8yr., 1 mnths
Chief Financial 5/11/98 20,000 $ 0.25 $1.125 $0.375 9yr., 3 mnths
Officer 7/28/97 25,000 $1.125 $ 4.00 $ 2.00 8yr., 9 mnths
</TABLE>
(1) The original ten-year terms and the vesting schedules of each grant repriced
were not changed with the repricing of the options listed in this table.
(2) Prior to repricing, the options in this grant were to be priced at the
market price on the vesting date of the options granted. The 100,000 options
of this grant that had vested at June 1, 1996 were priced at $5.00 per share
of Common Stock. No other options pursuant to this grant had vested as of
the repricing date.
The options for the above referenced Named Executive Officers that were
repriced in 1998 were part of a plan approved by the Board of Directors on May
11, 1998. On that date all options held by the above referenced Named Executive
Officers were repriced to reduce the exercise price to $0.375 per share. As of
that date SI Diamond's Common Stock was trading at $0.25 per share. The Board of
Directors, on March 27, 1998, had previously reduced the exercise price to
$0.375 for all other employees of the Company as of that date. The market price
of SI Diamond's Common Stock was $0.135 per share on March 27, 1998. The options
were repriced to provide greater motivation to the employees that had remained
with SI Diamond. The Board of Directors believed that the substantial decline in
the price of SI Diamond's Common Stock was the result of many factors that were
not related to the performance of the remaining employees.
13
<PAGE> 17
The options that were repriced in 1997 for the above referenced Named
Executive Officers were repriced as part of a plan approved by the Board of
Directors on July 28, 1997. On that date, 25% of all options held by employees
employed by SI Diamond on that date that had an exercise price in excess of
$2.00 per share were changed to reduce the exercise price to $2.00. As of that
date SI Diamond's Common Stock was trading at $1.125 per share. The options were
repriced to provide greater motivation to the employees that had remained with
SI Diamond. The Board of Directors believed that the substantial decline in the
price of SI Diamond's Common Stock was the result of many factors that were not
related to the performance of the remaining employees.
Lee B. Arberg
Marc W. Eller
Philip C. Shaffer
David R. Sincox Directors March 29, 1998
Ronald J. Berman
Igor Leontiev
Dr. Zvi Yaniv
CERTAIN TRANSACTIONS
In October 1998, Electronic Billboard Technology, Inc., ("EBT) a
subsidiary of the SI Diamond entered into a Patent Assignment and Royalty
Agreement with Advanced Technology Incubator, Inc., ("ATI") a corporation based
in Austin, Texas and owned by Dr. Zvi Yaniv, SI Diamond's President and Chief
Executive Officer. Under the terms of the agreement, ATI agreed to assign U.S.
Patent No. 5,469,187 related to certain LCD technology to EBT in exchange for an
initial payment of $200,000. In addition, ATI is entitled to receive a royalty
of 5% of gross revenue related to products using this patent. EBT intends to use
this technology in the development of its next generation electronic billboard
product. EBT may terminate this assignment at any time upon 30 days written
notice to ATI. The assignment may be terminated by ATI if, within two years of
the first sale or lease of a billboard using this technology, cumulative royalty
payments under the agreement have not totaled $500,000, or if payments do not
equal $500,000 in any one year period following this initial two year period. If
the assignment is terminated by ATI, EBT will be granted a non-exclusive
worldwide license to use the technology under terms similar to those contained
in this agreement. ATI had the right to terminate this agreement if the initial
payment was not received by February 15, 1999. The payment was not made by that
date, however, the parties agreed to extend the initial payment deadline to
April 15, 1999. In April 1999, the agreement was amended to allow additional
extensions, in three month increments, for a period of up to one year from April
15, 1999. In exchange for each three month extension, SI Diamond is obligated to
pay ATI $12,500. The $200,000 initial payment required for the actual assignment
of the Patent under the agreement will be reduced for any amounts paid for the
extension periods. In April 1999, SI Diamond paid ATI $12,500 and extended the
payment period for three months until July 15, 1999. At that time SI Diamond can
either complete the patent assignment in exchange for a payment of $187,500,
extend it for another three months for a payment of $12,500, or allow the
agreement to lapse.
At various times, SI Diamond had borrowed money from its Chief
Executive Officer. Mr. Eller made a $185,000 loan to SI Diamond in 1997 that was
repaid at the time of the DTO sale in May 1998. Additional advances totaling
$100,000 were made to SI Diamond at subsequent dates. At March 31, 1999, the
remaining $100,000 of short-term notes payable were payable to SI Diamond's
Chief Executive Officer and convertible into shares of SI Diamond's Common Stock
at a rate of $0.25 per share. These notes resulted from the CEO's personal
guarantee of a loan made by an investor. The loan was made to the CEO, who in
turn loaned the money to SI Diamond under the same terms. In April 1999, these
notes payable were assigned by the CEO to the holder of the underlying note
payable. The assignee of these notes payable converted the notes, including
accrued interest, into 442,904 shares of SI Diamond's Common Stock in April
1999. As of April 30, 1999, SI Diamond had no remaining notes payable.
14
<PAGE> 18
PROPOSAL NUMBER TWO
RATIFICATION OF APPOINTMENT
OF INDEPENDENT AUDITORS
Subject to ratification by the shareholders, SI Diamond's Board of
Directors has appointed Wallace Sanders & Company as independent auditors to
audit the financial statements of SI Diamond for the current fiscal year.
Representatives of the firm of Wallace Sanders & Company are expected
to be present at the Annual Meeting and will have an opportunity to make a
statement if they so desire and will be available to respond to appropriate
questions.
THE AUDIT COMMITTEE AND THE BOARD OF DIRECTORS RECOMMEND THAT THE
SHAREHOLDERS VOTE "FOR" SUCH RATIFICATION.
CHANGES IN SI DIAMOND'S CERTIFYING ACCOUNTANTS
On June 18, 1998, Coopers & Lybrand L.L.P. ("Coopers & Lybrand")
informed SI Diamond of its resignation as SI Diamond's independent accountants.
The reports of Coopers & Lybrand on SI Diamond's financial statements
for the years ended December 31, 1997 and 1996 did not contain an adverse
opinion or disclaimer of opinion, but the reports did contain explanatory
paragraphs in each of the two years concerning the ability of SI Diamond to
continue as a going concern since SI Diamond has not yet achieved profitability,
has a working capital deficit and must obtain additional capital to fund its
ongoing operations. There were no disagreements with Coopers & Lybrand on any
matters of accounting principles or practices, financial statement disclosures,
or auditing scope and procedures which, if not resolved to the satisfaction of
Coopers & Lybrand, would have caused Coopers & Lybrand to make reference to the
matter in their report.
On December 28, 1998, the Board of Directors of SI Diamond Technology,
Inc. appointed Wallace Sanders & Company as independent auditors of SI Diamond
for the fiscal year ending December 31, 1998. SI Diamond did not consult Wallace
Sanders & Company regarding the application of accounting principles to a
specific completed or contemplated transaction or the type of audit opinion that
might be rendered on SI Diamond's financial statements.
OTHER BUSINESS
The Board of Directors does not intend to present any other matter(s)
at the Annual Meeting and, at this date, has not been informed that any other
matters will be presented at the Annual Meeting by others. If, however, any
other matter does properly come before the Annual Meeting, the persons named in
the accompanying proxy will vote in accordance with their best judgment.
SHAREHOLDER PROPOSALS
In the event that a shareholder desires to have a proposal formally
considered at the 2000 annual meeting of shareholders and included in the proxy
statement for that meeting, the proposal must be received in writing by SI
Diamond, Technology, Inc., at its executive offices on or before February 11,
2000.
15
<PAGE> 19
SI DIAMOND WILL FURNISH, WITHOUT CHARGE, A COPY OF ITS ANNUAL REPORT ON
FORM 10-KSB, AS FILED WITH THE SECURITIES EXCHANGE COMMISSION, FOR THE FISCAL
YEAR ENDED DECEMBER 31, 1998, TO ANY SHAREHOLDER OF SI DIAMOND UPON WRITTEN
REQUEST. REQUESTS SHOULD BE SENT TO: SI DIAMOND TECHNOLOGY, INC., 3006 LONGHORN
BOULEVARD, SUITE 107, AUSTIN, TEXAS 78758, ATTENTION: CORPORATE SECRETARY.
By Order of the Board of Directors,
/s/ Marc W. Eller
Marc W. Eller
Chairman of the Board and
Chief Executive Officer
Austin, Texas
June 11, 1999
16
<PAGE> 20
PROXY SI DIAMOND TECHNOLOGY, INC. PROXY
1999 ANNUAL MEETING OF SHAREHOLDERS
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS
The undersigned hereby appoints Marc W. Eller and Douglas P. Baker, either one
of whom may act without joinder of the other, with full power of substitution
and ratification, attorneys-in-fact and Proxies of the undersigned to vote as
designated on the reverse side all shares of Common Stock and Series G Preferred
Stock of SI Diamond Technology, Inc. ("SI Diamond"), held by the undersigned, at
the 1999 Annual Meeting of Shareholders of SI Diamond to be held at 10:00 a.m.
on Monday, July 26, 1999 (CDT), at InnerStep, Inc. 14141 Highway 290 West, Suite
100, Austin, Texas 78737, and at any and all adjournments thereof, and with
discretionary authority to vote on all other matters that may properly come
before the meeting:
IF YOU WISH TO VOTE IN ACCORDANCE WITH THE RECOMMENDATIONS OF THE BOARD OF
DIRECTORS, YOU MAY JUST SIGN AND DATE BELOW AND MAIL IN THE POSTAGE PAID
ENVELOPE PROVIDED. SPECIFIC CHOICES MAY BE MADE ON THE REVERSE SIDE. IN THE
ABSENCE OF INSTRUCTIONS TO THE CONTRARY, THE SHARES REPRESENTED WILL BE VOTED IN
ACCORDANCE WITH THE BOARD'S RECOMMENDATIONS.
DATED: , 1999
------------------------
SIGNATURE:
-------------------------------------
SIGNATURE:
-------------------------------------
(NOTE: PLEASE SIGN EXACTLY AS NAME(S)
APPEARS HEREON. JOINT OWNERS SHOULD
EACH SIGN. WHEN SIGNING AS ATTORNEY,
EXECUTOR, ADMINISTRATOR, TRUSTEE OR
GUARDIAN, PLEASE GIVE FULL TITLE.)
DO YOU PLAN TO ATTEND THE ANNUAL
MEETING? ______
(See Reverse Side)
PROXY (CONTINUED)
This proxy will be voted as directed, or if no direction is indicated, will be
voted FOR Item 1 all nominees listed below for election as Directors; FOR Item 2
ratification of Wallace Sanders & Company, as independent accountants and
auditors; and in the discretion of the persons named as Proxies with respect to
any other business that may properly come before the meeting. The Board of
Directors recommends a vote FOR Items 1 and 2.
<TABLE>
<S> <C> <C>
(1) Election of Directors. FOR ALL [ ] WITHHOLD AUTHORITY TO VOTE FOR [ ]
(EXCEPT AS SPECIFIED BELOW)
</TABLE>
<TABLE>
<S> <C> <C>
TERM ENDING 2000: TERM ENDING 2001: TERM ENDING 2002:
David R. Sincox Nicholas Martin, Jr. Ronald J. Berman
Dr. Zvi Yaniv Philip C. Shaffer Marc W. Eller
</TABLE>
Instructions: To withhold vote for any individual(s) above write name(s) below:
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C> <C>
(2) Ratify the appointment of Wallace Sanders & Company as FOR AGAINST ABSTAIN
independent auditors for fiscal year 1999. [ ] [ ] [ ]
(Sign and date on reverse
side)
</TABLE>
