1
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 FORM
S-3S FILED DURING 1998. 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" as defined below) in connection
with the offer to the Subscriber of, and the subscription by the Subscriber for,
warrants to purchase shares of Common Stock, $.001 par value per share (the
"Warrants"), of SI DIAMOND TECHNOLOGY, INC., a Texas corporation (the "Company"
or "SID"). The Subscriber entered into that certain Consulting and Advisory
Agreement by and between SID and C & A Services, L.L.C., a Texas limited
liability company (the "Subscriber" or "C&A"), whereby C&A has assisted SID in
beginning a program for the marketing of its products (the "C&A Agreement") to
certain customers (the "Protected Customers"). At the request and direction of
SID, C&A has been instrumental in assisting Electronic Billboard Technology,
Inc., a Delaware corporation ("EBT"), a wholly-owned subsidiary of SID, in
entering into that certain Marketing Agent Agreement, dated November 11, 1998,
by and between EBT and Vision Xxxx, L.L.C., a Texas limited liability company
("Vision"), relating to the marketing of specific products by Vision to
customers (the "EBT Agreement"). In the event that EBT and SID reach certain
cumulative revenue thresholds and annual revenue goals (outlined herein), the
Subscriber shall receive the right to purchase Warrants convertible into the
Company's Common Stock as follows:
a. At such time as EBT shall have received Protected Customer
Distribution Revenue (as defined in the C & A Agreement) equal, in
the aggregate, to Ten Million and No/100 Dollars ($10,000,000.00),
and as each successive and cumulative such
2
increment of Protected Customer Distribution Revenue, shall be
received by EBT, C&A shall have the right, exercisable at will by
C&A, to purchase from SID, successively, for each Ten Million and
No/100 Dollars ($10,000,000.00) increment of Protected Customer
Distribution Revenue, 250,000 additional Compensation Shares (as
defined in the C&A Agreement) at a purchase price per share equal to
one-half (1/2) of the average closing public market price of the
publicly traded Common Stock of SID on the five (5) business days
next preceding the first day each such Ten Million and No/100
Dollars ($10,000,000.00) in Protected Customer Distribution Revenue,
in the aggregate, is received by EBT. Concurrently with the
execution of the C&A Agreement, SID shall complete, execute, issue
and deliver to C&A, in evidence of such right, a Warrant for such
additional shares containing the aforesaid conditions precedent to
exercise by C&A in the form of the Warrant attached hereto as
Exhibit C-1.
b. Annually, and within sixty (60) days following each annual
anniversary of the EBT Agreement, C&A and SID shall jointly
determine the sources of the components of the aggregate revenue
(including, but not limited to, revenue from the sale of product,
services, licensing fees, royalties and similar items, in the
ordinary course of business, but excluding all extraordinary
non-reoccurring items such as the sale of a division, subsidiary
financing or similar such events) realized by SID for such annual
period ("SID Revenue"), and the percentage of such aggregate SID
Revenue that was Protected Customer Distribution Revenue, and if the
Protected Customer Distribution Revenue was at least equal to Ten
Million and No/100 Dollars ($10,000,000.00) for such annual period,
C&A shall have the additional right thereafter, exercisable at will
by C&A, to purchase from SID up to 200,000 additional Compensation
Shares with respect to each such annual determination. Concurrently,
with the execution of the EBT Agreement, SID shall complete,
execute, issue and deliver to C&A, in evidence of such right, a
Warrant for such additional shares, containing the following
conditions precedent to exercise by C&A in the form of the Warrant
attached hereto as Exhibit C-2:
i. If the EBT Protected Customer Distribution Revenue percentage
for such annual period was equal to, but not less than,
twenty-five percent (25%), of aggregate SID Revenue for such
annual period, C&A may, from time to time, and at anytime
thereafter purchase all, or any part of, 100,000 of such
additional shares at a purchase price per share equal to
seventy-five percent (75%) of the average closing public
market price of the publicly traded Common Stock of the
Company on the five (5) business days next preceding the last
business day of such annual period; and, in addition,
ii. If the EBT Protected Customer Distribution Revenue percentage
for such annual period was equal to, but not less than,
twenty-five percent (25%), of aggregate SID Revenue for such
annual period, for each additional one
2
3
percent (1%) above twenty-five percent (25%) that the EBT
Protected Customer Distribution Revenue contributed to
aggregate SID Revenue for such annual period, C&A may, from
time to time, or at anytime thereafter, purchase all, or any
part of, up to, but not in excess of, 100,000 of such
additional Compensation Shares in incremental amounts of 4,000
Compensation Shares for each such additional one percent (1%)
of EBT Protected Customer Distribution Revenue, at a purchase
price per share equal to the average closing public market
price of the publicly traded Common Stock on the five (5)
business days next preceding the last business day of such
annual period, less a percentage thereof equal to the sum of
twenty-five percent (25%), plus an additional one percent (1%)
for each additional one percent (1%) above twenty-five percent
(25%) (not to exceed, in the aggregate, fifty percent [50%])
that the EBT Protected Customer Distribution Revenue
contributed to aggregate SID Revenue for such annual period.
c. C&A shall have the right, with the receipt by EBT of the first One
Hundred Million and No/100 Dollars ($100,000,000.00) of Protected
Customer Distribution Revenue and with the receipt by EBT of the
second such One Hundred Million and No/100 Dollars ($100,000,000.00)
of Protected Customer Distribution Revenue, exercisable at will by
C&A, to purchase from SID an additional 2,300,000 shares, but not
more than 4,600,000 shares, in the aggregate, at a purchase price
per share equal to fifty percent (50%) of the average closing public
market price of the publicly traded Common Stock on the five (5)
business days next preceding the first day each such One Hundred
Million and No/100 Dollars ($100,000,000.00) of Protected Customer
Distribution Revenue is received by EBT. Concurrently with the
execution of the EBT Agreement, SID shall complete, execute, issue
and deliver to C&A in evidence of such right a Warrant for such
additional shares in the form of Exhibit C-3, which shall contain
the aforesaid conditions precedent to exercise by C&A.
The terms of the underlying Common Stock are set forth in the Company's
Amended and Restated Articles of Incorporation attached hereto as Exhibit A. The
solicitation of this Subscription by the Company, and, if accepted by the
Company, the issuance of the Warrants 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 undersigned Subscriber and the Company, upon acceptance of this
Agreement, hereby agree as follows:
3
4
1. Offering
1.1 Offer to Subscribe; Purchase Price and Closing; and Placement
Fees.
Subject to satisfaction of the conditions to the closing of the Warrants
for the purchase of Common Stock as to each holder of Warrants (the "Closing")
set forth in Section 1.2 below, the Subscriber hereby offers to subscribe for
and accept Warrants for the purchase of Common Stock pursuant to the terms and
conditions of this Agreement.
1.2 Conditions to Subscriber's Obligations. The Subscriber's obligations
hereunder are conditioned upon the occurrence of all of the following:
(a) 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);
(b) the representations and warranties of the Company shall be true and
correct in all material respects on the date of Closing, as if made
on such date; and
(c) the Subscription Agreement has been accepted by the Company.
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
4
5
risks of an investment in the Company, including without limitation those set
forth in the Disclosure Documents (as defined below in Section 4.2).
2.2.3 Disclosure Documents. The Subscriber has received and
reviewed the Disclosure Documents (as defined below in Section 4.2). The
foregoing, however, does not limit or modify the Subscriber's right to rely upon
the representations and warranties of the Company in Section 4 of this
Agreement.
2.2.4 Investment Experience; Fend for Self. The Subscriber has
substantial experience in investing in securities and has made investments in
securities other than those of the Company. The Subscriber acknowledges that it
is able to fend for itself in the transaction contemplated by this Agreement and
that it has the ability to bear the economic risk of its investment in the
Company. The Subscriber has not been organized for the purpose of investing in
securities of the Company.
2.2.5 Not an Affiliate. The Subscriber is not an officer,
director or "affiliate" (as that term is defined in Rule 415 of the Securities
Act) of the Company.
2.3 Exempt Offering Under Regulation D
2.3.1 Investment; No Distribution. The Subscriber is acquiring
the Warrants to purchase shares of Common Stock subscribed for (the "Warrants")
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 Warrants and
the shares of Common Stock underlying the Warrants (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. Neither the Warrants nor the
underlying shares of Common Stock were 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 Common Stock. The Subscriber
understands that the Warrants 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
5
6
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.
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 Common Stock 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;
6
7
3.2 No Government Approval. The Subscriber acknowledges that no
federal, state or foreign agency has passed upon or reviewed the terms and
conditions of the Offering or made any finding or determination as to the
fairness of the Offering;
3.3 Restrictions on Transfer. The Subscriber may not sell, transfer,
assign, pledge or otherwise dispose of all or any portion of the Securities in
the absence of either an effective registration statement or an exemption from
the registration requirements of the Securities Act and applicable state
securities law;
3.4 Exempt Transaction. The Warrants are being offered 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 such Warrants and the underlying shares of Common Stock.
3.5 Legends. It is understood that any certificates evidencing the
Common Stock of the Company issued upon the exercise of the Warrants 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, 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.
7
8
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 for the fiscal year ended
December 31, 1997, and a copy of the Company's Forms 10-QSB, all 8-K's and S-3's
filed by the Company since January 1, 1998 (the "Most Recent Filings Report").
Other than as set forth in Schedule 4.2 attached hereto and made a part hereof,
there have been no material adverse changes in the Company's business,
prospects, operations or financial condition since the date of the Most Recent
Filings Report. The SEC Reports, together with Schedule 4.2 and any other
documents listed on Schedule 4.2(a) attached hereto and made a part hereof and
furnished herewith by the Company to the Subscriber are referred to collectively
as the "Disclosure Documents." The financial statements contained in the
Disclosure Documents have been prepared in accordance with generally accepted
accounting principles, consistently applied, and fairly present in all material
respects the consolidated financial condition of the Company as of the dates of
the balance sheets included therein and the consolidated results of its
operations and cash flows for the periods then ended. Without limiting the
foregoing, there are no material liabilities, contingent or actual that are not
disclosed in the Disclosure Documents (other than liabilities incurred by the
Company in the ordinary course of its business, consistent with its past
practice, after the periods covered by the Disclosure Documents). The Company
has paid all material taxes which are due, except for taxes which it reasonably
disputes. There is no material claim, litigation, or administrative proceeding
pending, or, to the best of the Company's knowledge, threatened or contemplated
against the Company, except as disclosed in the Disclosure Documents. This
Agreement and the Disclosure Documents do not contain any untrue statement of
material fact and do not omit to state any material fact required to be stated
therein or herein necessary to make the statements contained therein or herein
not misleading in the light of the circumstances under which they were made.
4.3 Authorization. All corporate action on the part of the Company
by its officers, directors and shareholders necessary for the authorization,
execution and delivery of this Agreement, the performance of all obligations of
the Company hereunder and the authorization, and issuance of the Warrants and
reservation for issuance of the Common Stock obtainable on exercise of the
Warrants have been taken, and this 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.
8
9
4.4 Valid Issuance of Common Stock. The shares of Common Stock
underlying the Warrants when issued upon exercise shall be duly and validly
issued and outstanding, fully paid and nonassessable, and based in part on the
representations and warranties of the Subscriber, will be issued in compliance
with all applicable U.S. federal and state securities laws. The Securities will
be issued free of any preemptive rights.
4.5 Compliance with Other Instruments. The Company is not in
violation or default of any provisions of its Amended and Restated Articles of
Incorporation or Bylaws as amended and in effect on and as of the date of this
Agreement or of any material provision of any material instrument or contract to
which it is a party or by which it is bound or, to its knowledge, of any
provision of any federal or state judgment, writ, decree, order, statute, rule
or governmental regulation applicable to the Company, which would have a
material adverse effect on the Company's business or prospects, except as
described in the Disclosure Documents. The execution, delivery and performance
of this Agreement and the consummation of the transactions contemplated hereby
will not result in any such violation or be in conflict with or constitute, with
or without the passage of time and giving of notice, either a default under any
such provision, instrument or contract or an event which results in the creation
of any lien, charge or encumbrance upon any assets of the Company.
4.6 Reporting Company. The Company is subject to the reporting
requirements of the Exchange Act, and has a class of securities registered under
Section 12 or Section 15 of the Exchange Act. When requested by the Subscriber,
the Company shall furnish copies of reports filed by the Company with the
Securities and Exchange Commission.
4.7 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.
4.8 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.
4.9 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.
9
10
4.10 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
Warrants and underlying Common Stock.
4.11 Termination Date of Offering. In no event shall the Closing
occur later than November 13, 1998, with any extension based upon an agreement
between the Company and the Subscriber.
5. Covenants of the Company
5.1 Corporate Existence and Taxes. The Company shall, until at least
two (2) 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.
5.2 Registration of Shares.
(a) Voluntary Registration. If the Company at any time elects, or
proposes, to register any of its authorized capital stock (the "Registration
Shares") under the Act (a "Registration Statement") with the Securities and
Exchange Commission (the "SEC") pursuant to which common stock shares owned by
any shareholder of the Company may be registered, the Company shall give prompt
written notice (the "Registration Notice") to C&A (the "Holder") of its
intentions to register the Registration Shares. Within fifteen (15) days after
the Registration Notice shall have been given to the Holder, the Holder shall
give written notice to the Company (the "Holder Notice") stating the number of
Compensation Shares underlying the Warrants Holder desires the Company to
register (the "Holder Shares"). The Company shall use its best efforts to
register the Holder Shares under the Act and the State Acts. Anything contained
herein to the contrary notwithstanding, the Company has the right to withdraw
and discontinue registration of the Holder Shares at any time prior to the
effective date of such Registration Statement if the registration of the
Registration Shares is withdrawn or discontinued. The Holder whose Holder Shares
are to be included in the Registration Statement (the "Seller") shall furnish
the Company with such appropriate information as the Company shall reasonably
request in writing concerning the Seller as is necessary for the Company to
comply with the disclosure requirements of the Act, and the rules and
regulations promulgated thereunder. Following the effective date of such
Registration Statement, the Company shall, upon the reasonably request of the
Seller, supply such number of prospectuses meeting the requirements of the Act,
as shall be requested by such Seller to permit such Seller to make a public
offering of all the Holder Shares of such Seller included therein. The Company
shall exercise good faith efforts to qualify the Holder Shares for sale in such
states as the Seller shall reasonably designate.
10
11
(b) Mandatory Registration. Upon the written request of Holder to
register, at the Company's expense, the Compensation Shares underlying the
Warrants, the Company shall, subject to the conditions and in accordance with
the procedures set forth herein, have six (6) months from the date of such
notice to file a Registration Statement with the SEC covering the Compensation
Shares issuable pursuant to the Warrants (and use its best efforts to cause such
Registration Statement to become effective as soon as possible thereafter). The
Company shall be required to keep the Registration Statement pursuant to which
the Compensation Shares underlying the Warrants are registered effective for a
period of one (1) year. The filing of any Registration Statement upon the
request of the Holder is contingent upon the Company being able to receive at a
reasonable cost, which shall be in the sole discretion of the Company, the
consent of any auditors necessary to include any and all financial statements
prepared by such auditors for any time periods required by the rules and
regulations of the Securities and Exchange Commission or other regulatory
entities governing such financial statements. The Holder whose Compensation
Shares underlying the Warrants are to be included in the Registration Statement
shall furnish the Company with such appropriate information as the Company shall
reasonably request in writing concerning the Holder as is necessary for the
Company to comply with the disclosure requirements of the Act, and the rules and
regulations promulgated thereunder. Following the effective date of such
Registration Statement, the Company shall, upon the reasonable request of the
Seller, supply such number of prospectuses meeting the requirements of the Act,
as shall be requested by such Seller to permit such Seller to make a public
offering of all the Common Shares of such Seller included therein. The Company
shall exercise good faith efforts to qualify the Compensation Shares underlying
the Warrants for sale in such states as the Seller shall reasonably designate.
5.3 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 Common Stock underlying the Warrants remain outstanding.
5.4 Opinion of Counsel. Purchasers of the Warrants 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 B.
5.5 Removal of Legend Upon Registration. Notwithstanding the
foregoing provisions of Section 5.2 of this Agreement, the restrictions imposed
upon the transferability of any Compensation Shares shall cease and terminate
when any such Compensation Shares are sold or otherwise disposed of in
accordance with the intended method of disposition by the seller or sellers
thereof set forth in a Registration Statement which has become effective under
the Securities Act of 1933. Whenever the restrictions imposed shall terminate,
as herein provided, the holder of any Compensation Shares as to which such
restrictions have terminated shall be entitled to receive from the corporation
issuing such securities, without expense, a new certificate not bearing the
restrictive legends set forth in Section 3.5.
11
12
6. Miscellaneous
6.1 Representations and Warranties Survive the Closing;
Severability. The Subscriber's and the Company's representations and warranties
shall survive the Closing of the transaction provided for hereby notwithstanding
any due diligence investigation made by or on behalf of the party seeking to
rely thereon. In the event that any provision of this Agreement becomes or is
declared by a court of competent jurisdiction to be illegal, unenforceable or
void, this Agreement shall continue in full force and effect without said
provision.
6.2 Successors and Assigns. The terms and conditions of this
Agreement shall inure to the benefit of and be binding upon the respective
successors and assigns of the parties. Nothing in this Agreement, express or
implied, is intended to confer upon any party other than the parties hereto or
their respective successors and assigns any rights, remedies, obligations, or
liabilities under or by reason of this Agreement, except as expressly provided
in this Agreement. Neither party may assign its rights hereunder without the
prior written consent of the other parties.
6.3 Governing Law. This Agreement shall be governed by and construed
under the laws of the State of Texas without respect to conflict of laws.
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 Warrants, the underlying Common Stock 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
12
13
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
(000) 000-0000, and its subscription funds by wire transfer,
to the Company as follows:
Bank: Chase Bank Texas
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.
13
14
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 the Company's Warrants in accordance with
the conditions precedent stated above.
9. Accredited Investor. The Subscriber is (please check applicable box):
(a) [ ] a corporation, business trust, or partnership not
formed for the specific purpose of acquiring the
securities offered, with total assets in excess of
$5,000,000.
(b) [ ] any trust, with total assets in excess of
$5,000,000, not formed for the specific purpose of
acquiring the securities offered, whose purchase is
directed by a sophisticated person who has such
knowledge and experience in financial and business
matters that he is capable of evaluating the merits and
risks of the prospective investment.
(c) [ ] an individual, who
[ ] is a director, executive officer or general partner of
the issuer of the securities being offered or sold or a
director, executive officer or general partner of a
general partner of that issuer.
[ ] 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.
14
15
The undersigned acknowledges that this Agreement and the subscription
represented hereby shall not be effective unless accepted by the Company as
indicated below.
15
16
IN WITNESS WHEREOF, the undersigned Subscriber does hereby execute this
Agreement this 11th day of November, 1998.
C & A Services, L.L.C. C & A Services, L.L.C.
--------------------------------------------- ---------------------------------------
Name of Company You Represent EXACT NAME IN WHICH YOU WANT
(if applicable) THE SECURITIES TO BE REGISTERED
/s/ Xxxxx X. Xxxxx DELIVERY INSTRUCTIONS:
--------------------------------------------- ---------------------------------------
Your Signature Please type or print address where
your security is to be delivered
Xxxxx X. Xxxxx
--------------------------------------------- ATTN: Xxxxx X. Xxxxx
Your Name: Please Print ----------------------------------
Manager 0000 X. Xxxxx Xxxxxx
--------------------------------------------- ---------------------------------------
Title/Representative Capacity (if applicable) Xxxxxx Xxxxxxx
Xxxxxx, Xxxxx Xxxxxx, Xxxxx, 00000
--------------------------------------------- ---------------------------------------
Place of Execution of this Agreement City, State or Province, Country,
Offshore Postal Code
(000) 000-0000
---------------------------------------
Telephone Number
(000) 000-0000
---------------------------------------
Facsimile Number
16
17
ACCEPTANCE BY COMPANY:
THIS SUBSCRIPTION IS ACCEPTED BY THE COMPANY AND THE COMPANY
AGREES TO BE BOUND BY THE TERMS AND CONDITIONS THEREOF THIS 11TH DAY
OF NOVEMBER, 1998.
By: __________________________________________
Name: ________________________________________
Title: _______________________________________
Attest: ______________________________________
Name: ________________________________________
Title: _______________________________________
17
