EXHIBIT 4.1
REGULATION D SUBSCRIPTION AGREEMENT
THE SECURITIES OFFERED HEREBY HAVE NOT BEEN REGISTERED WITH THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE OR OTHER SECURITIES AUTHORITIES. THEY
MAY NOT BE SOLD OR TRANSFERRED EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT OR AN EXEMPTION TO THE REGISTRATION REQUIREMENTS OF THOSE
SECURITIES LAWS.
THIS SUBSCRIPTION AGREEMENT DOES NOT CONSTITUTE AN OFFER TO SELL, OR A
SOLICITATION OF AN OFFER TO PURCHASE, ANY OF THE SECURITIES DESCRIBED
HEREIN BY OR TO ANY PERSON IN ANY JURISDICTION IN WHICH SUCH OFFER OR
SOLICITATION WOULD BE UNLAWFUL. THESE SECURITIES HAVE NOT BEEN RECOMMENDED
BY ANY FEDERAL, STATE OR FOREIGN SECURITIES AUTHORITIES, NOR HAVE ANY SUCH
AUTHORITIES REVIEWED OR DETERMINED THE ACCURACY OF THIS DOCUMENT. ANY
REPRESENTATION TO THE CONTRARY IS UNLAWFUL.
INVESTMENT IN THESE SECURITIES INVOLVES A HIGH DEGREE OF RISK, INCLUDING
BUT NOT LIMITED TO THOSE RISK FACTORS IDENTIFIED IN THE COMPANY'S FORMS S-3
FILED DURING 1997. INVESTORS MUST RELY ON THEIR OWN ANALYSIS OF THE
INVESTMENT TERMS AND CONDITIONS OF THE PROPOSED INVESTMENT AND THEIR OWN
ASSESSMENT OF THE RISKS INVOLVED.
This Regulation D Securities Subscription Agreement (the "Agreement") is
executed by the undersigned (the "Subscriber") in connection with the offer to
the Subscriber of, and the subscription by the Subscriber for, shares of Series
G Preferred Stock, $1.00 par value per share (the "Preferred Stock"), of SI
DIAMOND TECHNOLOGY, INC., a Texas corporation (the "Company"). Each share of
Preferred Stock has a stated value (i.e., as in the face amount) of One Thousand
Dollars ($1,000), and the purchase price for each share of Preferred Stock is
One Thousand Dollars ($1,000), which represents One Hundred percent (100%) of
the stated value. The Company is offering to qualified investors (the
"Offering") a minimum aggregate stated value (face amount) of Preferred Stock of
Two Million Dollars ($2,000,000) (representing 2,000 shares) for an aggregate
purchase price of Two Million Dollars ($2,000,000) (the "Minimum") and an
aggregate maximum stated value (face amount) of Preferred Stock of Three Million
Dollars ($3,000,000) (representing 3,000 shares) for an aggregate purchase price
of Three Million Dollars ($3,000,000) (the "Maximum"). The minimum subscription
per investor is one hundred (100) shares of Preferred Stock, representing a
stated value (face amount) of One Hundred Thousand Dollars ($100,000), and
representing a purchase price of One Hundred Thousand Dollars ($100,000).
Subject to approval by the Company, an investor may be eligible to subscribe for
a specific number of shares less than the minimum subscription per investor as
set forth herein. Each investor in the Company's Series G Preferred Stock shall
also receive warrants to purchase
that number of shares of the Company's Common Stock, exercisable at a price of
$1.00 per share of Common Stock, that is equivalent to one-half of the number of
shares of Common Stock into which the Preferred Stock purchased by an investor
is convertible. A form of warrant is attached to this Agreement as Exhibit "F."
The terms of the Preferred Stock, including the terms on which the
Preferred Stock may be converted into common stock, $.001 par value, of the
Company (the "Common Stock"), are set forth in the Statement of Resolutions of
Series G Preferred Stock (the "Statement of Resolutions"), substantially in the
form attached hereto as Exhibit A. The solicitation of this Subscription by the
Company, and, if accepted by the Company, the sale of the shares of Preferred
Stock subscribed for, are being made in reliance upon the provisions of
Regulation D ("Regulation D") promulgated under the Securities Act of 1933, as
amended (the "Securities Act"). The Preferred Stock and the Common Stock
issuable upon conversion thereof (the "Conversion Shares") are sometimes
referred to herein collectively as the "Securities."
The undersigned Subscriber and the Company, upon acceptance of this
Agreement, hereby agree as follows:
1. Offering
1.1 Offer to Subscribe; Purchase Price and Closing; and Placement
Fees.
Subject to satisfaction of the conditions to the closing of a purchase and
sale of Preferred Stock as to each purchaser of Preferred Stock (the "Closing")
set forth in Section 1.2 below, the Subscriber hereby offers to subscribe for
and purchase shares of Preferred Stock, for the aggregate purchase price set
forth in Section 8 of this Agreement, all in accordance with the terms and
conditions of this Agreement. Assuming that funds representing the Offering,
together with corresponding subscription agreements are delivered to the
Company, the Closing shall be deemed to occur when this Agreement has been
executed by both the Subscriber and the Company, and full payment for the shares
of Preferred Stock subscribed for shall have been made by the Subscriber, by
wire transfer in United States Dollars, to the Company's Account as set forth in
Section 7.1(a) in consideration for the Company's delivery of certificates
representing the shares of Preferred Stock so subscribed for.
1.2 Conditions to Subscriber's Obligations. The Subscriber's
obligations hereunder are conditioned upon the occurrence of all of the
following:
(a) the Statement of Resolution shall have been filed with the
Secretary of State of Texas;
(b) the Company's Common Stock is currently traded on the Nasdaq
SmallCap Stock Market;
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(c) other than as described on Schedule 1.2 attached hereto, there
have been no material adverse changes in the Company's business
prospects or financial condition since the date of the last balance
sheet included in the Disclosure Documents (as defined below in
Section 4.2);
(d) the representations and warranties of the Company shall be true
and correct in all material respects on the date of Closing, as if
made on such date;
(e) the Subscription Agreement has been accepted by the Company; and
(f) the Company shall have reserved for issuance upon conversion of
the Preferred Stock a sufficient number of Conversion Shares, which
number of shares shall initially be equal to Three Million (3,000,000)
shares.
2. Representations and Warranties of the Subscriber. The Subscriber
hereby represents and warrants to the Company as follows (which representations
and warranties shall be true as of the date of Closing):
2.1 Accredited Investor. The Subscriber hereby represents and
warrants to the Company that it is an "accredited investor," as defined in Rule
501 of Regulation D, and has marked the applicable box set forth in Section 9 of
this Agreement signifying such status.
2.2 Investment Experience; Access to Information; Independent
Investigation.
2.2.1 Access to Information. The Subscriber or its professional
advisor has been granted the opportunity to ask questions of and receive answers
from representatives of the Company, and its officers, directors, employees and
agents concerning the terms and conditions of the Offering, and the Company and
its business and prospects, and to obtain any additional information which the
Subscriber or its professional advisor deems necessary to verify the accuracy of
the information received. The foregoing, however, does not limit or modify the
Subscriber's right to rely upon representations and warranties of the Company in
Section 4 of this Agreement.
2.2.2 Ability to Evaluate. The Subscriber has such knowledge and
experience in financial and business matters that it is fully capable of
evaluating the merits and risks of an investment in the Company, including
without limitation those set forth in the Disclosure Documents (as defined below
in Section 4.2).
2.2.3 Disclosure Documents. The Subscriber has received and
reviewed the Disclosure Documents (as defined below in Section 4.2). The
foregoing, however, does not limit or modify the Subscriber's right to rely upon
the representations and warranties of the Company in Section 4 of this
Agreement.
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2.2.4 Investment Experience; Fend for Self. The Subscriber has
substantial experience in investing in securities and has made investments in
securities other than those of the Company. The Subscriber acknowledges that it
is able to fend for itself in the transaction contemplated by this Agreement and
that it has the ability to bear the economic risk of its investment in the
Company. The Subscriber has not been organized for the purpose of investing in
securities of the Company.
2.2.5 Not an Affiliate. The Subscriber is not an officer,
director or "affiliate" (as that term is defined in Rule 415 of the Securities
Act) of the Company.
2.3 Exempt Offering Under Regulation D
2.3.1 Investment; No Distribution. The Subscriber is acquiring
the shares of Preferred Stock subscribed for (the "Preferred Shares") solely for
investment purposes for the Subscriber's own account (or for beneficiaries'
accounts over which the Subscriber has investment discretion but no
discretionary authority as to voting or disposition) and not with a view to a
distribution of all or any part thereof. The Subscriber is aware that there are
legal and practical limits on its ability to sell or dispose of the Preferred
Shares and the Conversion Shares (collectively, the "Securities"), and
therefore, that the Subscriber must bear the economic risk of its investment for
an indefinite period of time. The Subscriber has adequate means of providing
for its current needs and anticipated contingencies and has no need for
liquidity of this investment. The Subscriber's commitment to illiquid
investments is reasonable in relation to its net worth.
2.3.2 No General Solicitation. The Preferred Shares were not
offered to the Subscriber through, and the Subscriber is not aware of, any form
of general solicitation or general advertising, including, without limitation,
(i) any advertisement, articles, notice or other communication published in any
newspaper, magazine or similar media or broadcast over television or radio, and
(ii) any seminar or meeting whose attendees have been invited by any general
solicitation or general advertising.
2.3.3 No Registration of Preferred Shares and Conversion Shares.
The Subscriber understands that the Preferred Shares are not registered and
therefore are "restricted securities" under the federal securities laws inasmuch
as they are being acquired from the Company in a transaction not involving a
public offering, and that, under such laws and applicable regulations, such
securities may not be transferred or resold without registration under the
Securities Act or pursuant to an exemption therefrom. In this connection, the
Subscriber represents that it is familiar with Rule 144 under the Securities
Act, as presently in effect, and understands the resale limitations imposed
thereby and by the Securities Act. The Subscriber further understands, however,
that the Company is obligated to register the Conversion Shares within thirty
(30) days from the date of the Closing (the "Closing") of a purchase and sale of
Preferred Stock.
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2.3.4 Disposition. Without in any way limiting the
representations set forth above, the Subscriber further agrees not to make any
disposition of all or any portion of the Securities unless and until:
(a) There is then in effect a registration statement under the
Securities Act covering such proposed disposition and such
disposition is made in accordance with such Registration
Statement; or
(b) (i) The Subscriber shall have notified the Company of the
proposed disposition and shall have furnished the Company with a
detailed statement of the circumstances surrounding the proposed
disposition, and (ii) if reasonably requested by the Company, the
Subscriber shall have furnished the Company with an opinion of
counsel, reasonably satisfactory to the Company, that such
disposition will not require registration of the Securities under
the Securities Act.
2.4 Due Authorization.
2.4.1 Authority. The Subscriber, if executing this Subscription
Agreement in a representative or fiduciary capacity, has full power and
authority to execute and deliver this Subscription Agreement and each other
document referred to herein for which a signature is required in such capacity
and on behalf of the subscribing individual, partnership, trust, estate,
corporation or other entity for whom or which the Subscriber is executing this
Subscription Agreement.
2.4.2 Due Authorization. The Subscriber is duly and validly
organized, validly existing and in good standing as such entity under the laws
of the jurisdiction of its organization, with full power and authority to
purchase the Preferred Shares subscribed for and to execute and deliver this
Agreement.
3. Acknowledgements. The Subscriber is aware of the following:
3.1 Risks of Investment. The Subscriber recognizes that investment
in the Company involves certain risks, including the potential loss of the
Subscriber's investment herein. The Subscriber recognizes that this Agreement
and the exhibits hereto do not purport to contain all the information which
would be contained in a registration statement under the Securities Act;
3.2 No Government Approval. The Subscriber acknowledges that no
federal, state or foreign agency has passed upon or reviewed the terms and
conditions of the Offering or made any finding or determination as to the
fairness of the Offering;
3.3 Restrictions on Transfer. The Subscriber may not sell, transfer,
assign, pledge or otherwise dispose of all or any portion of the Securities in
the absence of either an
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effective registration statement or an exemption from the registration
requirements of the Securities Act and applicable state securities law;
3.4 Exempt Transaction. The Preferred Shares are being offered and
sold in reliance on specific exemptions from the registration requirements of
federal and state law and the Subscriber's representations, warranties,
agreements, acknowledgements and applicability of such exemptions and the
suitability of the Subscriber to acquire Preferred Shares.
3.5 Legends. It is understood that any certificates evidencing the
Preferred Shares and the Conversion Shares shall bear the following legend:
"The securities represented hereby have not been registered under the
Securities Act of 1933, as amended, or applicable state securities laws,
nor the securities laws of any other jurisdiction. They may not be sold or
transferred in the absence of an effective registration statement under
those securities laws or an opinion of counsel, reasonable satisfactory to
the Company, that the sale or transfer is pursuant to an exemption to the
registration requirements of those securities laws."
4. Representations and Warranties of the Company. The Company hereby
makes the following representations and warranties to the Subscriber, except as
disclosed in the Disclosure Documents or otherwise disclosed to Subscriber,
which representations and warranties shall be true as of the date of acceptance
of this Agreement by the Company and as of Closing:
4.1 Organization, Good Standing, and Qualification. The Company is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Texas, USA and has all requisite corporate power and authority
to carry on its business as now conducted and as currently proposed to be
conducted. The Company is duly qualified to transact business and is in good
standing in each jurisdiction in which the failure to so qualify would have a
material adverse effect on the business or properties of the Company and its
subsidiaries taken as a whole. The Company is not the subject of any pending
or, to its knowledge, threatened or contemplated investigation or administrative
or legal proceeding by the Internal Revenue Service, the taxing authorities of
any state or local jurisdiction, or the Securities and Exchange Commission, or
any state securities commission, or any other governmental entity, which are
required to be disclosed in the Disclosure Documents and have not been
disclosed.
4.2 Corporate Condition. The Company has timely filed all forms, and
reports and documents with the Securities and Exchange Commission required to be
filed by it under the Securities Xxxxxxxx Xxx 0000, as amended (the "Exchange
Act") through the date hereof (collectively,the "SEC Reports"). Each of the SEC
Reports, at the time filed, complied in all material respects with the
requirements of the Exchange Act. The Company has made available to the
Subscriber a copy of the Company's Form 10-KSB/A for the fiscal year ended
December 31, 1996, and a copy of the Company's Forms 10-QSB, 8-K and S-3 filed
by the Company since January 1, 1997 (the "Most Recent Filings Report"). Other
than as set forth in
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Schedule 4.2 attached hereto and made a part hereof, there have been no material
adverse changes in the Company's business, prospects, operations or financial
condition since the date of the Most Recent Filings Report. The SEC Reports,
together with Schedule 4.2 and any other documents listed on Schedule 4.2(a)
attached hereto and made a part hereof and furnished herewith by the Company to
the Subscriber are referred to collectively as the "Disclosure Documents." The
financial statements contained in the Disclosure Documents have been prepared in
accordance with generally accepted accounting principles, consistently applied,
and fairly present in all material respects the consolidated financial condition
of the Company as of the dates of the balance sheets included therein and the
consolidated results of its operations and cash flows for the periods then
ended. Without limiting the foregoing, there are no material liabilities,
contingent or actual that are not disclosed in the Disclosure Documents (other
than liabilities incurred by the Company in the ordinary course of its business,
consistent with its past practice, after the periods covered by the Disclosure
Documents). The Company has paid all material taxes which are due, except for
taxes which it reasonably disputes. There is no material claim, litigation, or
administrative proceeding pending, or, to the best of the Company's knowledge,
threatened or contemplated against the Company, except as disclosed in the
Disclosure Documents. This Agreement and the Disclosure Documents do not contain
any untrue statement of material fact and do not omit to state any material fact
required to be stated therein or herein necessary to make the statements
contained therein or herein not misleading in the light of the circumstances
under which they were made.
4.3 Authorization. All corporate action on the part of the Company
by its officers, directors and shareholders necessary for the authorization,
execution and delivery of this Agreement, the performance of all obligations of
the Company hereunder and the authorization, issuance and delivery of the
Preferred Shares and reservation for issuance of the Conversion Shares
obtainable on conversion of the Preferred Shares have been taken, and this
Agreement, the Statement of Resolutions and the Registration Rights Agreement
constitute valid and legally binding obligations of the Company, enforceable in
accordance with their terms; provided, however that enforceability is subject
to: (i) applicable bankruptcy, reorganization, insolvency, moratorium,
fraudulent conveyance, and similar federal and state laws affecting the rights
and remedies of creditors generally, and (ii) general principles of equity
limiting the availability of equitable remedies (including but not limited to
the remedy of specific performance), whether considered in a proceeding at law
or in equity. The Company has obtained all consents and approvals required for
it to execute, deliver and perform this Agreement and the Registration Rights
Agreement.
4.4 Valid Issuance of Preferred Shares and Conversion Shares. The
Preferred Shares, when issued, sold and delivered in accordance with the terms
hereof, for the consideration expressed herein, will be validly issued, fully
paid and nonassessable and, based in part upon the representations of the
Subscriber in this Agreement, will be issued in compliance with all applicable
federal and state securities laws. The Conversion Shares when issued in
accordance with the terms of the Statement of Resolutions shall be duly and
validly issued and outstanding, fully paid and nonassessable, and based in part
on the representations and warranties of the
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Subscriber, will be issued in compliance with all applicable U.S. federal and
state securities laws. The Securities will be issued free of any preemptive
rights.
4.5 Compliance with Other Instruments. The Company is not in
violation or default of any provisions of its Amended and Restated Articles of
Incorporation or Bylaws as amended and in effect on and as of the date of this
Agreement or of any material provision of any material instrument or contract to
which it is a party or by which it is bound or, to its knowledge, of any
provision of any federal or state judgment, writ, decree, order, statute, rule
or governmental regulation applicable to the Company, which would have a
material adverse effect on the Company's business or prospects, except as
described in the Disclosure Documents. The execution, delivery and performance
of this Agreement and the consummation of the transactions contemplated hereby
will not result in any such violation or be in conflict with or constitute, with
or without the passage of time and giving of notice, either a default under any
such provision, instrument or contract or an event which results in the creation
of any lien, charge or encumbrance upon any assets of the Company.
4.6 Reporting Company. The Company is subject to the reporting
requirements of the Exchange Act, and has a class of securities registered under
Section 12 or Section 15 of the Exchange Act. When requested by the Subscriber,
the Company shall furnish copies of reports filed by the Company with the
Securities and Exchange Commission.
4.7 Authorized and Issued Shares. The authorized and issued shares
of Preferred Stock, Common Stock and warrants, options, instruments convertible
into Common Stock and rights to acquire Preferred or Common Stock, as of June 9,
1997, are as set forth on Exhibit D.
4.8 Use of Proceeds. As of the date hereof, the Company expects to
use the proceeds from the Offering (less fees and expenses) for the purposes set
forth on Exhibit E hereto. These purposes are estimates and are subject to
change, but represent the Company's good faith best estimate of anticipated
uses.
4.9 Compliance with Laws. As of the date hereof, the conduct of the
business of the Company complies in all material respects with all material
statutes, laws, regulations, ordinances, rules, judgments, orders or decrees
applicable thereto. The Company has not received notice of any alleged
violation of any statute, law, regulations, ordinance, rule, judgement, order or
decree from any governmental authority. The Company shall comply with all
applicable securities laws with respect to the Offering.
4.10 No Rights of Participation. No person or entity, including, but
not limited to, current or former shareholders of the Company, underwriters,
brokers, agents or other third parties, has any right of first refusal,
preemptive right, right of participation, or any similar right to participate in
the Offering which has not been waived.
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4.11 Disclosures. There is no fact known to the Company (other than
general economic conditions known to the public generally) that has not been
disclosed in the Disclosure Documents that (a) could reasonably be expected to
have a material adverse effect on the business, financial condition or results
of operations of the Company, or which could reasonably be expected to
materially and adversely affect the properties or assets of the Company or (b)
could reasonably be expected to materially and adversely affect the ability of
the Company to perform its obligations pursuant to this Agreement and the
issuance of the Securities.
4.12 Representations True and Correct. The foregoing representations,
warranties and agreements are true, correct and complete in all material
respects, and shall survive the Closing and the issuance of the Preferred
Shares.
4.13 Termination Date of Offering. In no event shall the Closing
occur later than August 10, 1997, with any extension based upon an agreement
between the Company and the Subscriber.
5. Covenants of the Company
5.1 Independent Auditors. The Company shall, until at least three
(3) years after the date of the Closing, maintain as its independent auditors an
accounting firm authorized to practice before the Securities and Exchange
Commission.
5.2 Corporate Existence and Taxes. The Company shall, until at least
three (3) years after the date of the Closing, maintain its corporate existence
in good standing (provided, however, that the foregoing covenant shall not
prevent the Company from entering into any merger or corporate reorganization so
long as the surviving entity in such transaction, if not the Company, assumes
all of the Company's obligations with respect to the Securities) and shall pay
all its taxes when due, except for taxes which the Company disputes.
5.3 Registration of Conversion Shares. The Company will register the
Conversion Shares on the terms of the Registration Rights Agreement
(substantially in the form attached as Exhibit B).
5.4 Filings with Securities and Exchange Commission. The Company
shall provide the Subscriber with copies of its annual reports on Form 10-KSB,
quarterly reports on Form 10-QSB and current reports on Form 8-K for as long as
the Preferred Shares remain outstanding.
5.5 Opinion of Counsel. Purchasers of the Preferred Stock shall,
upon purchase, receive an opinion letter from Xxxxxxx Xxxxxxxxx & Xxxxx, L.L.C.,
counsel to the Company, substantially in the form Legal Opinion attached hereto
as Exhibit C.
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5.6 Payments for Late Conversion or Failure to Reserve Authorized but
Unissued Common.
5.6.1 Payments for Late Conversion. As set forth in the
Statement of Resolutions, the Company shall use all reasonable efforts to issue
and deliver to the Subscriber or any party receiving Preferred Shares by
transfer from the Subscriber (together with the Subscriber, sometimes referred
to herein as the "Holder"), within three (3) business days (the "Deadline")
after the Holder has fulfilled all conditions and delivered all necessary
documents duly executed and in proper form, required for conversion pursuant to
the Statement of Resolutions, including the original certificate(s) representing
the Shares to be converted, all in accordance with the subscription documents
(or, in the case of lost or stolen certificates, after provision of security or
indemnification), a certificate or certificates for the number of shares of
Common Stock to which the Holder shall be entitled upon submission of a notice
of conversion. The Company understands that a delay in the issuance of the
Conversion Shares beyond the Deadline could result in economic loss to the
Holder. As compensation to the Holder for such loss, the Company agrees to pay
the Holder for late issuance of Conversion Shares upon Conversion one-fifth of
one percent (.002%) of the stated value of Preferred Shares submitted for
conversion for each business day beyond four business days after the Deadline
until the Conversion Shares are issued to Holder (up to a maximum of six percent
(6%) of such stated value).
The Company shall pay any late payments to Holder incurred under this
Section in cash, or at the Company's option, in Company Common Stock in
accordance with the Conversion Formula set forth in the Statement of
Resolutions, upon the earlier to occur of: (i) issuance of Conversion Shares to
the Holder or (ii) each monthly anniversary of the receipt by the Company of
such Holder's Notice of Conversion. Nothing herein shall limit the Holder's
right to pursue actual damages for the Company's failure to issue and delivery
Conversion Shares to the Subscriber in accordance with the terms of the
Statement of Resolutions.
5.6.2 Payments for Failure to Reserve Authorized but Unissued
Common Stock. If, at any time a Holder or Holders of Shares submit a Notice of
Conversion (as defined in the Statement of Resolutions) and the Company does not
have sufficient authorized but unissued Conversion Shares available to effect,
in full, a conversion of the Series G Preferred Stock under Section 5 of the
Statement of Resolutions (a "Conversion Default", the date of such default being
referred to herein as the "Conversion Default Date"), the Company shall issue to
such Holder(s), pro rata, all of the Conversion Shares of Common Stock which are
available, and the Notice of Conversion as to any Conversion Shares of Series G
Preferred Stock requested to be converted but not converted (the "Unconverted
Preferred Conversion Shares") shall become null and void. The Company shall
provide notice of such Conversion Default ("Notice of Conversion Default") to
all Holders of outstanding Preferred Stock, by facsimile, within one (1)
business day of such default (with the original delivered by overnight or two
(2) day courier). No Holder may submit a Notice of Conversion after receipt of a
Notice of Conversion Default until the date additional Conversion Shares are
authorized by the Company. The Company will use best efforts to authorize an
appropriate number of additional shares as soon as practicable. If the Company
is
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unable to cure the Conversion Default within forty-five (45) days, then the
Company agrees to make to all Holders of outstanding Preferred Shares a payment
(the "Conversion Default Payments") for a Conversion Default in the amount of
(N/365) X .10 X the stated value of the outstanding Preferred Stock held by each
Holder, where N=the number of days from the Conversion Default Date to the date
(the "Authorization Date") that the Company authorizes a sufficient number of
Conversion Shares to effect conversion of all remaining shares of Preferred
Stock. The Company shall send notice ("Authorization Notice") via facsimile,
with a copy by overnight or two (2) day courier, to all Holders of outstanding
Preferred Shares that additional Conversion Shares have been authorized, the
Authorization Date and the amount of Holder's accrued Conversion Default
Payments. The accrued Conversion Default Payments for each calendar month shall
be paid in cash or shall be convertible into Common Stock in accordance with the
Conversion Formula, at the Company's option, payable as follows: (i) in the
event Company elects to make such payment in cash, cash payments shall be made
to each Holder of outstanding Preferred Shares by the fifth (5th) day of the
following calendar month after the Authorization Notice was received or (ii) in
the event the Company elects to make such payment in stock, such payment amount
will be converted into Common Stock in accordance with the Conversion Formula at
any time after the fifth (5th) day of the calendar month following the month the
Authorization Notice was received, until the automatic conversion date set forth
in the Statement of Resolutions. Nothing herein shall limit the Holder's right
to seek actual damages for the Company's failure to maintain a sufficient number
of authorized Conversion Shares of Common Stock.
5.7 Removal of Legend Upon Registration. The restrictive legend
described in Section 3.5 above will be removed from the Common Stock after the
Registration Statement is effective and when the stock is to be sold.
5.8 Listing. The Company shall use its best efforts to maintain the
listing of its Conversion Shares and its Common Stock on the Nasdaq SmallCap
Stock Market or another national securities exchange or national quotation
system.
6. Miscellaneous
6.1 Representations and Warranties Survive the Closing; Severability.
The Subscriber's and the Company's representations and warranties shall survive
the Closing of the transaction provided for hereby notwithstanding any due
diligence investigation made by or on behalf of the party seeking to rely
thereon. In the event that any provision of this Agreement becomes or is
declared by a court of competent jurisdiction to be illegal, unenforceable or
void, this Agreement shall continue in full force and effect without said
provision.
6.2 Successors and Assigns. The terms and conditions of this
Agreement shall inure to the benefit of and be binding upon the respective
successors and assigns of the parties. Nothing in this Agreement, express or
implied, is intended to confer upon any party other than the parties hereto or
their respective successors and assigns any rights, remedies, obligations, or
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liabilities under or by reason of this Agreement, except as expressly provided
in this Agreement. Neither party may assign its rights hereunder without the
prior written consent of the other parties.
6.3 Governing Law. This Agreement shall be governed by and construed
under the laws of the State of Texas without respect to conflict of laws.
6.4 Execution in Counterparts Permitted. This Agreement may be
executed in any number of counterparts, each of which shall be enforceable
against the parties actually executing such counterparts, and all of which
together shall constitute one (1) instrument.
6.5 Titles and Subtitles; Gender. The titles and subtitles used in
this Agreement are used for convenience only and are not to be considered in
construing or interpreting this Agreement. The use in this Agreement of a
masculine, feminine or neither pronoun shall be deemed to include a reference to
the others.
6.6 Written Notices, Etc. Any notice, demand or request required or
permitted to be given by the Company or the Subscriber pursuant to the terms of
this Agreement shall be in writing and shall be deemed given when delivered
personally, or by facsimile (with a hard copy to follow by overnight or two (2)
day courier), addressed to the parties at the addresses and/or facsimile
telephone number of the parties set forth at the end of this Agreement or such
other address as a party may request by notifying the other in writing.
6.7 Expenses. Each of the Company and the Subscriber shall pay all
costs and expenses that it respectively incurs, with respect to the negotiation,
execution, delivery and performance of this Agreement.
6.8 Entire Agreement; Written Amendments Required. This Agreement,
the Statement of Resolutions, the Preferred Stock certificates, the Registration
Rights Agreement and the other documents delivered pursuant hereto constitute
the full and entire understanding and agreement between the parties with regard
to the subjects hereof and thereof, and no party shall be liable or bound to any
other party in any manner by any warranties, representations or covenants except
as specifically set forth herein. Neither this Agreement nor any terms hereof
may be amended, waived, discharged or terminated other than by a written
instrument signed by the party against whom enforcement of any such amendment,
waiver, discharge or termination is sought.
7. Subscription and Wiring Instructions; Irrevocability.
7.1 Subscription
(a) Wire transfer of Subscription Funds. Subscriber shall send a
signed Subscription Agreement by facsimile to the Company at (512) 250-
2807, and its subscription funds by wire transfer, to the Company as
follows:
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Bank: Texas Commerce Bank
P. O. Xxx 0000
Xxxxxxx, Xxxxx 00000-0000
Ph. (000) 000-0000
Account Name: SI Diamond Technology, Inc.
Account No.: 081-00000000
ABA Routing No.: 000000000
(b) Irrevocable Subscription. The Subscriber hereby acknowledges and
agrees, subject to the provisions of any applicable laws providing
for the refund of subscription amounts submitted by the
Subscriber, that this Agreement is irrevocable and that the
Subscriber is not entitled to cancel, terminate or revoke this
Agreement; provided, however, that if the conditions to Closing
are not satisfied or if the Disclosure Documents are discovered
prior to Closing to contain statements which are materially
inaccurate, or omit statements of material facts, the Subscriber
may revoke or cancel this Agreement.
(c) Company's Right to Reject Subscription. This Agreement shall be
accepted by the Company when the Company countersigns this
Agreement. The Subscriber hereby confirms that the Company has
full right in its sole discretion to accept or reject the
subscription of the Subscriber, in whole or in part, provided
that, if the Company decides to reject such subscription, the
Company must do so promptly and in writing. In the case of
rejection, the Company will promptly return any rejected payments
and (if rejected in whole) copies of all executed subscription
documents (including without limitation this Agreement) to
Subscriber.
7.2 Acceptance of Subscription. In the case of acceptance of this
subscription, ownership of the number of securities being purchased hereby will
pass to the Subscriber upon the Closing.
7.3 Subscriber to Forward Original Signed Subscription Agreement to
Company. The Subscriber agrees to courier to the Company its original inked
signed Subscription Agreement within three (3) days after faxing said signed
Agreement to the Company.
8. Number of Shares and Purchase Price. The undersigned Subscriber
hereby subscribes for and agrees to purchase _________________ shares of Series
G Preferred Stock with a stated value of $1,000 per share and a per share
purchase price of $1,000, for a total purchase price (to be paid by wire
transfer) in the amount of ______________________________ Dollars
($____________) (the "Purchase Price").
9. Accredited Investor. The Subscriber is (please check applicable box):
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(a) [ ] a corporation, business trust, or partnership not formed for
the specific purpose of acquiring the securities offered,
with total assets in excess of $5,000,000.
(b) [ ] any trust, with total assets in excess of $5,000,000, not
formed for the specific purpose of acquiring the securities
offered, whose purchase is directed by a sophisticated
person who has such knowledge and experience in financial
and business matters that he is capable of evaluating the
merits and risks of the prospective investment.
(c) [ ] an individual, who
[ ] is a director, executive officer or general partner of the
issuer of the securities being offered or sold or a
director, executive officer or general partner of a general
partner of that issuer.
[ ] has an individual net worth, or joint net worth with that
person's spouse, at the time of his purchase exceeding
$1,000,000.
[ ] had an individual income in excess of $200,000 in each of
the two most recent years or joint income with that person's
spouse in excess of $300,000 in each of those years and has
a reasonable expectation of reaching the same income level
in the current year.
(d) [ ] an entity, each owner of which is an entity described in (a)
or (b) above or is an individual described in (c) above.
The undersigned acknowledges that this Agreement and the subscription
represented hereby shall not be effective unless accepted by the Company as
indicated below.
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IN WITNESS WHEREOF, the undersigned Subscriber does hereby execute this
Agreement this _______ day of ________________, 1997.
______________________________ __________________________________
Name of Company You Represent EXACT NAME IN WHICH YOU WANT
(if applicable) THE SECURITIES TO BE REGISTERED
DELIVERY INSTRUCTIONS:
____________________________________ ---------------------
Your Signature Please type or print address where your
security is to be delivered
____________________________________ ATTN:_____________________________
Your Name: Please Print
____________________________________ __________________________________
Title/Representative Capacity Street Address
(if applicable)
____________________________________ __________________________________
Place of Execution of this Agreement City, State or Province, Country,
Offshore Postal Code
__________________________________
Telephone Number
__________________________________
Facsimile Number
15
ACCEPTANCE BY COMPANY:
THIS SUBSCRIPTION IS ACCEPTED BY THE COMPANY AND THE COMPANY AGREES TO BE
BOUND BY THE TERMS AND CONDITIONS THEREOF THIS _____ DAY OF
_______________________, 1997.
By:_______________________________
Name:_____________________________
Title:____________________________
Attest:___________________________
Name:_____________________________
Title:____________________________
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NOTICE OF CONVERSION
(To be Executed by the Registered Holder in order to Convert the Preferred
Stock)
The undersigned Holder hereby irrevocably elects to convert ___________
shares of Series G Preferred Stock, represented by stock certificate No(s).
______________ (the "Preferred Stock Certificates") into shares of common stock
("Common Stock") of SI Diamond Technology, Inc. (the "Company") according to the
conditions of the Statement of Resolutions of Series G Preferred Stock, as of
the date written below. If shares are to be issued in the name of a person
other than the undersigned, the undersigned will pay all transfer taxes payable
with respect thereto and is delivering herewith such Certificates. With respect
to those shares to be issued in the name of a person other than the Holder, the
Holder should execute a Notice of Transfer or Assignment Form with the signature
of the Holder and the signature of each other person in whose name the shares
are to be issued guaranteed by a commercial bank or trust company in the United
States or a member firm of the New york Stock Exchange. No fee will be charged
to the Holder for any conversion, except for transfer taxes, if any. A copy of
each of the Preferred Stock Certificates being converted its attached hereto.
Date of Conversion:_________________________
Applicable Conversion Price:___________________________
Number of Shares of
Common Stock to be Issued:_____________________________
Name of Holder:___________________________
By:_______________________________________
Title:____________________________________
Address:__________________________________
__________________________________
__________________________________
*Conversion shall be processed in accordance hereto and with the Statement of
Resolutions governing the Series G Preferred Stock.
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EXHIBIT "A"
-----------
FORM STATEMENT OF RESOLUTIONS
FOLLOWS DIRECTLY BEHIND THIS PAGE
18
EXHIBIT "B"
-----------
FORM REGISTRATION RIGHTS AGREEMENT
FOLLOWS DIRECTLY BEHIND THIS PAGE
19
EXHIBIT "C"
-----------
FORM OPINION OF COUNSEL
FOLLOWS DIRECTLY BEHIND THIS PAGE
20
EXHIBIT "D"
-----------
CAPITALIZATION
SI DIAMOND TECHNOLOGY, INC.
As of February 14, 1997
-- 14,975,255 Shares of Common Stock
-- 100 Shares of Series A Preferred Stock
-- 502 Shares of Series E Preferred Stock - -
-- 1700 Shares of Series F Preferred Stock - -
-- 2,812,494 Options
-- 2,217,249 Warrants (of which 1,432,283 warrants are registered)
-- $555,555 Principal Amount 8% Convertible Debentures
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EXHIBIT "E"
-----------
USE OF PROCEEDS
Working Capital and Debt Reduction
22
EXHIBIT "F"
-----------
FORM OF WARRANT
FOLLOWS DIRECTLY BEHIND THIS PAGE
23
