EXHIBIT 4.1
Dated 24 February 1997
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(1) INCOME PARTNERSHIP OF AMERICA, LTD.
(2) SI DIAMOND TECHNOLOGY, INC.
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SUBSCRIPTION AGREEMENT
relating to the purchase of a Convertible Debenture
issued by SI Diamond Technology, Inc.
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AGREEMENT dated 24 February 1997
PARTIES:
(1) INCOME PARTNERSHIP OF AMERICA, LTD., a Belize Corporation whose registered
office is located at 35 Barrack Road, Belize City, Belize (the "Purchaser")
(2) S I DIAMOND TECHNOLOGY, INC., a Texas corporation, whose registered office
is located at 12100 Technology Blvd., Austin, TX 78727 (the "Issuer")
RECITALS:
(A) The Issuer, a corporation whose common stock is publicly traded on the
NASDAQ Small Cap Market, has agreed to sell an 8% Convertible Debenture in
the principal amount of US$555,555.00, the agreed form of which is attached
as Schedule 1 (the "Debenture").
(B) The Purchaser, a non-US Person, as defined in Rule 902(o) of Regulation S,
promulgated under the US Securities Act of 1933, as amended (the "33
Act"), has agreed to subscribe for the Debenture on the terms set out
herein.
IT IS AGREED as follows:
1. Agreement to Subscribe; Purchase Price
The Purchaser hereby agrees to purchase the Debenture in the principal
amount of US$555,555.00 to be issued by the Issuer in the agreed form
attached hereto as Schedule 1. The Debenture and any securities obtainable
on the conversion thereof or as payment of interest thereon are collectively
hereinafter referred to as the "Securities."
2. Completion
The Purchaser shall pay the purchase price by delivering immediately
available funds in United States Dollars to the Escrow Agent for delivery of
the Debenture to the Purchaser, pursuant to the instructions contained in
the Escrow Agreement, the agreed form of which is attached hereto as
Schedule 2. Payment in the amount of US$555,555.00, less withheld commission
of 10%, shall be made by wire transfer of immediately available funds to the
issuer's bank account, by the Escrow Agent, pursuant to instructions to be
furnished by the Issuer.
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3. Representations (Offshore Transaction); Access to Information; Independent
Investigation.
3.1 Purchaser represents and warrants to, and covenants with, Issuer as
follows:
3.1.1 Purchaser is a Belize corporation and does not do business in the
United States;
3.1.2 At the time the decision to buy the Securities was made and this
Agreement was executed, Purchaser (and Purchaser's agents
involved in the decision making process) was outside the United
States;
3.1.3 Purchaser is purchasing the Securities for its own account and
not on behalf of or for the account or benefit of any US person,
and a sale of any of the Securities has not been prearranged with
a purchaser in the United States;
3.1.4 All offering documents and information received by Purchaser
include statements to the effect that the Securities have not
been registered under the 33 Act and may not be offered or sold
in the United States or to US Persons unless the Securities are
registered under the 33 Act or unless an exemption from the
registration requirements of the 33 Act is available.
3.1.5 Purchaser acknowledges that the purchase of the Securities
involves a high degree of risk, including those disclosed in the
SEC Filings (as subsequently defined), and further acknowledges
that it can bear the economic risk of the purchase of the
Securities, including the total loss of its investment.
3.1.6 Purchaser understands that the Securities are being offered and
sold to it in reliance on specific exemptions from the
registration requirements of Federal and State securities laws
and that the Issuer is relying upon the truth and accuracy of the
representations, warranties, agreements, acknowledgments and
understandings of Purchaser set forth herein in order to
determine the applicability of such exemptions and the
suitability of Purchaser to acquire the Securities.
3.1.7 The purchase of the Securities by Purchaser is not a transaction
(or any element of a series of transactions) that is
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part of any plan or scheme to evade the registration provision of the
33 Act.
3.2 Purchaser acknowledges that the Purchaser has been furnished with or has
acquired copies of the Issuer's most recent Annual Report on Form 10-KSB
filed with the Securities and Exchange Commission, and all Forms 10-QSB,
8-K, and S-3, and all amendments thereof filed in 1996 and thereafter;
through the date of this agreement (collectively "SEC Filings").
3.3 Purchaser acknowledges that Purchaser, in making the decision to purchase
the Securities, has relied upon independent investigations made by it and
its purchaser representatives, has, prior to any sale to it, been given
access and the opportunity to examine all material books and records of the
Issuer, all material contracts and documents and an opportunity to ask
questions of, and to receive answers from Issuer or any persons acting on
its behalf concerning the terms and conditions of the issuance of the
Securities or the Issuer. Purchaser and its advisors have been furnished
with access to all publicly available materials relating to the business,
finances, and operation of the Issuer and its subsidiaries and materials
relating to the Issuance of the Securities which have been requested.
Purchaser and its advisors have received complete and satisfactory answers
to any such inquiries.
3.4 Purchaser is highly knowledgeable and sophisticated in investing and
analyzing proposed investments and financial opportunities such as those
involved in this transaction; and Purchaser has the ability to determine
and require the disclosure of any of Issuer's Information needed for
Purchaser to make an informed investment decision.
3.5 Purchaser understands that no federal or state agency, or any other
governmental body has passed on or made any recommendation or endorsement
of the Securities.
3.6 Purchaser has retained independent securities counsel, admitted to practice
in the United States, to advise it in connection with this transaction.
Further, Purchaser shall cooperate with the Issuer, and shall provide the
Issuer in a timely manner with all the information concerning the Purchaser
requested by the Issuer in connection with the Issuer's reporting
requirements under the Securities Exchange Act of 1934, as amended, (the
"Exchange Act"), all other applicable securities laws and all listing
requirements of securities exchanges and the NASDAQ Stock Market, Inc.
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3.7 Purchaser agrees that so long as any part of the Debenture remains
outstanding, the Purchaser will not directly or indirectly, or through
one or more intermediaries, maintain or cause to be maintained by
others, any short position in the securities of the Company.
3.8 Purchaser agrees that it will not sell, assign, pledge, hypothecate, or
otherwise transfer the Debenture.
4. Issuer Representations.
4.1 Issuer is in full compliance, to the extent applicable, with all
reporting obligations under either Section 12(b), or 15(d) of the
Exchange Act. Issuer has registered its common stock pursuant to
Section 12 of the Exchange Act and the common stock is traded on the
NASDAQ Small Cap Market. Issuer shall make all filings required under
securities laws while the Debenture is outstanding.
4.2 In regard to this transaction, Issuer has not conducted any "directed
selling efforts" as that term is defined in Rule 902 of Regulation S,
nor has Issuer conducted any general solicitation relating to the offer
and sale of the Securities to persons resident within the United
States, or any US person.
4.3 The Issuer has full power and authority to enter into the transactions
contemplated by this agreement.
5. Legend on Debenture
The following legend shall be placed upon the Debenture:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED ("ACT"), OR THE SECURITIES LAWS
OF ANY OTHER JURISDICTION AND MAY NOT BE OFFERED, SOLD, TRANSFERRED,
PLEDGED, HYPOTHECATED OR OTHERWISE DISPOSED OF IN ANY MANNER IN THE UNITED
STATES OR TO US PERSONS, UNLESS THEY ARE REGISTERED UNDER SUCH ACT AND THE
SECURITIES LAWS OF ANY APPLICABLE JURISDICTION, OR UNLESS PURSUANT TO AN
EXEMPTION THEREFROM.
6. Exemption; Reliance on Representations.
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Purchaser understands that the Securities are not being registered under
the 33 Act and is purchasing the Securities in reliance on the exemption
from registration provided in Regulation S, promulgated under the 33 Act.
Purchaser agrees that it will not effect an offer and sale of the
Securities unless it has first obtained and provided to the Issuer and its
transfer agent an opinion of US counsel, reasonably acceptable to the
Issuer, to the effect that the offer and sale are being made in accordance
with the registration requirements of the 33 Act, or an applicable
exemption from registration thereunder.
7. Completion Date.
The date of issuance of the Debenture (the "Completion Date") shall be the
date of receipt of the Proceeds by the Issuer.
8. Conditions Precedent.
8.1 The Issuer's obligation to issue the Debenture is conditioned upon
delivery to the Escrow Agent by Purchaser of immediately available
funds, as aforesaid, and receipt by the Issuer of the Proceeds.
8.2 The Purchaser's obligation to purchase the Debenture is conditioned
upon delivery of the Debenture to the Purchaser by the Escrow Agent
and fulfillment by the Issuer of all conditions required of it prior
to closing which are contained in this Agreement.
9. Registration Rights.
The Purchaser shall be entitled to demand registration of the securities
into which the Debenture is convertible under the 33 Act in the event that
there is an amendment or change to Regulation S, or any other event, other
than those within the control of the Purchaser, which would result in the
Purchaser being denied an exemption from registration under the 33 Act for
the resale of such securities.
10. Due Diligence.
Prior to closing, the Issuer shall deliver to Purchaser its constitutional
documents, including Articles of Incorporation and By-laws, and all SEC
Filings, all press releases issued, and all documentation sent to
shareholders since 1 January 1996. Purchaser, in its sole discretion, may
decide not to close this transaction based upon the results of its due
diligence.
11. Board Approval.
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At Completion, the Issuer shall deliver a resolution of its Board of
Directors approving this transaction, satisfactory to Issuer, together with
a certificate executed by the Issuer's Secretary as to the validity of such
resolution.
12. Additional Transaction.
The Purchaser, or its affiliates, agrees to purchase and the Issuer agrees
to sell an additional Debenture, for the same principal amount and under
identical terms and conditions as this Agreement (excluding this Section)
within 60 days from the date of issuance of the original Debenture. Each
party shall be obligated to comply with this Section provided that the
other party is not in breach of the terms, conditions, and continuing
obligations of this Agreement.
13. Facsimile Signatures.
This Agreement may be executed in several counterparts, in person or by
facsimile, each of which may be deemed an original, but all of which
together shall be deemed one instrument.
EXECUTED on the day and year first above written
EXECUTED by INCOME PARTNERSHIP )
OF AMERICA, LTD. and signed by an )
officer duly authorised on its behalf )
EXECUTED by S I DIAMOND )
TECHNOLOGY, INC. and signed by an )
officer duly authorised on its behalf )