-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, S3y3fpL06LDQKuicr2fIld10rvdELmzCcSKmRsW6YfYw4NYH/lcyqXZLVChjdhDH IBgdC2Y1J/LZulIH9St+FQ== 0000950144-98-013638.txt : 19981209 0000950144-98-013638.hdr.sgml : 19981209 ACCESSION NUMBER: 0000950144-98-013638 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 19981207 ITEM INFORMATION: ITEM INFORMATION: FILED AS OF DATE: 19981208 FILER: COMPANY DATA: COMPANY CONFORMED NAME: SI DIAMOND TECHNOLOGY INC CENTRAL INDEX KEY: 0000891417 STANDARD INDUSTRIAL CLASSIFICATION: GENERAL INDUSTRIAL MACHINERY & EQUIPMENT [3560] IRS NUMBER: 760273345 STATE OF INCORPORATION: TX FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: SEC FILE NUMBER: 001-11602 FILM NUMBER: 98765439 BUSINESS ADDRESS: STREET 1: 3006 LONGHORN BOULEVARD STREET 2: SUITE 107 CITY: AUSTIN STATE: TX ZIP: 78758 BUSINESS PHONE: 5123395070 MAIL ADDRESS: STREET 1: 12100 TECHNOLOGY BOULEVARD CITY: AUSTIN STATE: TX ZIP: 78727 8-K 1 S.I. DIAMOND TECHNOLOGY 1 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 8-K CURRENT REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES AND EXCHANGE ACT OF 1934 Date of Report (Date of Earliest Event Reported): December 7, 1998 SI DIAMOND TECHNOLOGY, INC. (Exact Name of Registrant as Specified in its Charter) Texas (State or Other Jurisdiction of Incorporation) 1-11602 76-0273345 (Commission File No.) (I.R.S. Employer Identification No.) 3006 Longhorn Boulevard Suite 107 Austin, Texas 78758 (Address of Principal Executive Offices) (512) 339-5020 (Registrant's Telephone Number, Including Area Code) 2 Item 5. Other Events On November 11, 1998, Electronic Billboard Technology, Inc. ("EBT"), a wholly-owned subsidiary of SI Diamond Technology, Inc. ("SIDT") entered into a Marketing Agent Agreement (the "Marketing Agreement") with Vision Mark, L.L.C., a Texas limited liability company ("Vision Mark"). Pursuant to the Marketing Agreement, EBT appointed Vision Mark as a nonexclusive marketing representative. In connection with the Marketing Agreement, SIDT entered into a Consulting and Advisory Services Compensation Agreement ("Compensation Agreement") with C & A Services, L.L.C. ("C & A"). Pursuant to the Compensation Agreement, Billy Jeff Clement has the right to be added to the Board of Directors of SIDT. SIDT also agreed that at such time as EBT shall enter into a letter of intent for the installation of certain of its operating systems resulting from Vision Mark's representation of EBT, SIDT shall issue C & A 300,000 shares of its Common Stock. SIDT also issued warrants to purchase SIDT Common Stock to C & A, which shall be exercisable upon the achievement of certain goals as described below: (1) Once EBT has received revenue from arrangements pursuant to the Marketing Agreement in the aggregate of $10,000,000, and for each successive and cumulative $10,000,000 increment of revenue achieved pursuant to the Marketing Agreement, C & A may exercise warrants to purchase up to 250,000 shares of SIDT Common Stock at a purchase price equal to 50% of the average closing price of SIDT Common Stock on the five business days next preceding the date of the achievement of each $10,000,000 increment in revenue from the Marketing Agreement. 3 (2) Within 60 days following each annual anniversary of the Marketing Agreement, if the aggregate revenue from the Marketing Agreement is at least equal to $10,000,000 for each such annual period, C & A shall have the additional right thereafter to exercise warrants to purchase shares of SIDT Common Stock with respect to each such annual determination. If the amount of revenue received pursuant to the Marketing Agreement is equal to, but not less than 25% of, the aggregate revenue of SIDT for each such annual period, C & A may exercise warrants to purchase up to 100,000 shares of SIDT Common Stock at a purchase price equal to 75% of the average closing price of SIDT Common Stock on the five business days next preceding the last business day of each such annual period. For each additional 1% above 25% that the revenue received pursuant to the Marketing Agreement contributed to the aggregate SIDT annual revenue for such annual period, C & A may exercise warrants to purchase up to 100,000 such additional shares of SIDT Common Stock, in incremental amounts of 4,000 shares of SIDT Common Stock each for each such additional 1% of revenue that the Marketing Agreement contributed to the aggregate revenue of SIDT for such annual period. These warrants may be exercised at a purchase price equal to the average closing price of SIDT Common Stock on the five business days next preceding the last business day of such annual period, less a percentage equal to the sum of 25% plus an additional 1% for each additional 1% over and above 25% (not to exceed, in the aggregate, 50%) that the revenue achieved pursuant to the Marketing Agreement contributed to the aggregate SIDT revenue for such annual period. (3) SIDT has also issued warrants to C & A to purchase an additional 2.300,000 shares of SIDT's Common Stock upon the receipt by EBT of each of $100,000,000 and $200,000,000, respectively, of cumulative revenue from the Marketing Agreement (for a maximum of 4,600,000 shares). The purchase price for the shares subject to these warrants shall be equal to 50% of the 4 average closing price on the five business days next preceding the date on the achievement of each of $100,000,000 and $200,000,000 of such cumulative revenue by EBT. Notwithstanding anything contained in the Compensation Agreement, the number of shares of SIDT Common Stock received by C & A shall not exceed 10,000,000 shares, subject to adjustment in certain circumstances. The Company also announced that the proposed transaction in which EBT Acquisition Company was going to buy the assets of Electronic Billboard Technology, Inc. was terminated by mutual agreement of both parties. Item 7. Financial Statements and Exhibits. (c) Exhibits: 4.1 Regulation D Subscription Agreement dated as of November 11, 1998, by and between the Company and C & A Services, L.L.C., for the issuance of warrants to purchase shares of Common Stock of the Company. 10.1 Consulting and Advisory Services Compensation Agreement by and between the Company and C & A Services, L.L.C., dated as of November 11, 1998. 10.2 Marketing Agent Agreement by and between Electronic Billboard Technology, Inc. and Vision Mark, L.L.C., dated as of November 11, 1998. 5 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. SI DIAMOND TECHNOLOGY, INC. By: /s/Douglas P. Baker ---------------------------- Douglas P. Baker Vice President and Chief Financial Officer Dated: December 7, 1998 EX-4.1 2 REGULATION D SUBSCRIPTION AGREEMENT 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 Mark, 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 Exchange Act 1934, 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 Haskell Slaughter & Young, 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 (512) 250-2807, and its subscription funds by wire transfer, to the Company as follows: Bank: Chase Bank Texas P. O. Box 2558 Houston, Texas 77252-8063 Ph.: (713) 216-7000 Account Name: SI Diamond Technology, Inc. Account No.: 081-00053751 ABA Routing No.: 113000609 (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/ Gerry R. Hurst DELIVERY INSTRUCTIONS: - --------------------------------------------- --------------------------------------- Your Signature Please type or print address where your security is to be delivered Gerry R. Hurst - --------------------------------------------- ATTN: Gerry R. Hurst Your Name: Please Print ---------------------------------- Manager 1904 S. Akard Street - --------------------------------------------- --------------------------------------- Title/Representative Capacity (if applicable) Street Address Dallas, Texas Dallas, Texas, 75215 - --------------------------------------------- --------------------------------------- Place of Execution of this Agreement City, State or Province, Country, Offshore Postal Code (214) 428-0132 --------------------------------------- Telephone Number (214) 428-1851 --------------------------------------- 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 EX-10.1 3 CONSULTING AND ADVISORY SERVICES COMPENSATION 1 EXHIBIT 10.1 CONSULTING AND ADVISORY 11/11/98 SERVICES COMPENSATION AGREEMENT THIS CONSULTING AND ADVISORY SERVICES COMPENSATION AGREEMENT ("AGREEMENT") by and between S.I. Diamond Technology, Inc., a Texas corporation ("SID"), and C & A Services, L.L.C., a Texas limited liability company ("C & A"), is executed this 11th day of November 1998. W I T N E S S E T H WHEREAS, SID is engaged in the business, directly, or through SID subsidiaries and affiliates, of development, production, installation, operation, ownership, sale and/or lease of electronic display devices for display of advertising on such as electronic billboards, signs, marquees and other devices for installation in, or on, the facilities of third-parties ("SYSTEMS"); WHEREAS, SID desires to develop the market for the Products in, or on, the facilities of businesses ("CUSTOMERS"); WHEREAS, C & A has experience and relationships with Customers and has assisted SID in beginning a program for, and an organized effort to develop, a market for the Systems among Customers, and C & A has agreed to continue to consult with and assist SID in regard to the Systems and Customers; WHEREAS, 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, 2 1998, between EBT and Vision Mark, L.L.C., a Texas limited liability company ("VISION"), relating to the marketing of the Systems by Vision to certain Customers ("EBT AGREEMENT"); WHEREAS, SID has requested that C & A continue to consult with, and advise, SID with respect to Customers and marketing of the Systems and C & A has agreed to continue to consult with and advise SID with respect to Customers and marketing of the Systems (collectively "SERVICES"); WHEREAS, incident to the Services, SID has requested a Manager of C & A, Billy Jeff Clement, a resident of Dallas, Dallas County, Texas ("CLEMENT"), to serve on the Board of Directors of SID; WHEREAS, SID now has 120,000,000 shares of authorized $.001 par value voting common capital stock ("COMMON STOCK"), of which 44,000,000 shares of such Common Stock are now authorized, issued and outstanding; WHEREAS, SID has offered to compensate C & A for the Services with certain shares of Common Stock currently, and warrants to acquire certain additional shares of Common Stock in the future, and C & A has agreed to accept such compensation (collectively "COMPENSATION SHARES"); and, WHEREAS, SID and C & A have agreed to enter into this Agreement for the purpose of setting forth the terms and conditions of their agreement with respect to the Systems, Customers, Services and Compensation Shares. NOW THEREFORE, for and in consideration of the premises and other good and valuable consideration, the receipt and sufficiency of which SID and C & A do hereby acknowledge and confess, SID and C & A do hereby covenant and agree as follows: 2 3 1. Definitions 1.1 For purposes of this Agreement, the following terms shall have the defined meanings given those terms in the EBT Agreement and such terms definitions are, for simplicity and convenience, incorporated herein by reference for all purposes: (a) Advertising (d) Operating Systems (b) Distribution Revenue (e) Protected Customers (c) Distribution Schedule (f) Revenue Defined terms in this Agreement, other than those defined in the EBT Agreement listed above, shall have the meaning given such terms in this Agreement. 2. Appointment of C & A 2.1 Subject to the terms and conditions of this Agreement, SID hereby appoints C & A as non-exclusive consultant to SID for marketing and promotion of the Systems to Customers and C & A hereby accepts such appointment. 2.2 For purposes of this Agreement, a Customer shall be deemed to include all divisions, subsidiaries and controlled affiliates of a Customer. For purposes of this Agreement, Customers shall be businesses selling at retail, wholesale or discount, whether multi-location or single location, and facilities which contain such businesses. 3 4 3. Services of C & A 3.1 C & A shall use C & A's best efforts to reasonably provide the Services to SID from time to time at SID's request, subject to a reasonable scheduling balance and coordination with SID. 3.2 C & A shall pay C & A's expenses in the performance of this Agreement. 4. Compensation Shares 4.1 Subject to the limitation contained in Paragraph 4.2, the Compensation Shares shall be acquired, and available for acquisition, by C & A as follows: (a) Concurrently with, and at such time as, EBT shall first enter into a letter of intent with any one or more Protected Customers for, in the aggregate, installation of the first Operating System, SID shall immediately issue to C & A 300,000 of the Compensation Shares, and SID shall issue and deliver to C & A three (3) certificates for such Compensation Shares, each registered in the name of C & A, and each for 100,000 of the Compensation Shares; (b) In addition, concurrently with, and at such time as, EBT shall have received Protected Customer Distribution Revenue equal, in the aggregate, to Ten Million and No/100 Dollars ($10,000,000.00), and as each successive and cumulative such 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 such Ten Million and No/100 Dollars ($10,000,000.00) increment of Protected customer 4 5 Distribution Revenue, 250,000 additional Compensation Shares 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 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 and, concurrently with execution of this Agreement, SID shall complete, execute, issue and deliver to C & A, in evidence of such right, the warrant form attached hereto as Exhibit A ("WARRANT FORM"), for such additional Compensation Shares containing the aforesaid conditions precedent to exercise by C & A; (c) In addition, 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, and, concurrently with execution of this Agreement, SID shall complete, execute, issue and deliver to C & A, in evidence of such right, a 5 6 Warrant Form for such additional Compensation Shares, containing the following conditions precedent to exercise by C & A: (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 Compensation 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 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 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 each for each such additional one percent (1%) of EBT Protected Customer Distribution Revenue, at 6 7 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; (d) In addition, 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 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, in each instance, an additional 2,300,000 Compensation Shares, but not more than 4,600,000 Compensation 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 and, concurrently with execution of this Agreement, SID shall complete, execute, issue and deliver to C & A in evidence of such right a Warrant Form, for such additional 7 8 Compensation Shares, each of which shall contain the aforesaid conditions precedent to exercise by C & A. 4.2 Notwithstanding anything contained in this Agreement to the contrary, the Compensation Shares which C & A shall acquire, and have the right to acquire, in the aggregate, pursuant to the provisions of Paragraph 4.1 of this Agreement, shall be limited in number, in the aggregate, to 10,000,000 Compensation Shares, subject to adjustment, however, as provided in this Agreement, and the Warrant Forms shall contain such aggregate Compensation Share limitation. 5. Term 5.1 The term of this Agreement ("TERM"), shall commence upon execution of this Agreement by SID and C & A, and shall continue thereafter until the earlier to occur of twenty (20) years thereafter or, after the initial two (2) years of the Term, if no Operating System shall be operating on, or in, a Customer facility. 5.2 In the event of the termination of the EBT Agreement, this Agreement, and the rights and interests of C & A under the terms of this Agreement shall also terminate, unless the termination of the EBT Agreement occurs under the circumstances described in Section 6.3 of the EBT Agreement, in which event, this Agreement and the rights and interests of C & A under the terms of this Agreement shall survive and continue in full force and effect. 8 9 6. Status of Parties 6.1 The parties to this Agreement are, and shall remain, independent contractors, and nothing herein shall be construed to create a partnership, or joint venture, between the parties. Each of the parties shall be responsible for the wages, hours, and conditions of employment of such party's personnel during the Term of, and under, this Agreement. 6.2 Each of the parties shall perform and comply with all applicable laws, regulations and agreements which govern, regulate or affect the ability of such party to perform and comply with the terms and conditions of this Agreement. 6.3 For purposes of this Agreement, each of the parties shall be deemed to mean and include the party and all of its, and their, divisions and subsidiaries. 7. Special Conditions 7.1 At the request of C & A, SID will cause Billy Jeff Clement ("CLEMENT"), to be elected by the current SID Board of Directors (the "BOARD") to serve on the SID Board until the next annual meeting of the SID shareholders. SID shall increase the size of the Board as necessary to accommodate the addition of Clement. SID shall then cause Clement to be nominated for a full term on the Board at the next annual meeting of SID shareholders. SID shall continue to nominate Clement at the expiration of each term to which he is elected provided this Agreement remains in effect. Furthermore, as the sole shareholder of EBT, SID shall elect Clement to serve on the EBT Board of Directors and shall continue to so elect Clement for as long as this Agreement remains in effect. 9 10 7.2 Notwithstanding execution of this Agreement by the parties, this Agreement shall not become effective unless and until approved by the Board of Directors of SID, and SID shall obtain such approval not less than fourteen (14) business days execution by SID and EBT. 8. Covenants, Representations and Warranties 8.1 Each party represents and warrants to the other party as follows: (a) Such party has the requisite approvals, power and authority to enter into, and perform and comply with, the terms and conditions of this Agreement; (b) Such party's performance and compliance with the terms and conditions of this Agreement will not result in the violation or breach by such party of any agreement to which such party is a party; (c) Such party is validly organized and in good standing in such party's state of incorporation or organization and duly qualified to transact business in each jurisdiction in which the conduct of such party's business requires such qualification; and, (d) Subject to the provisions of Paragraph 7.2 of this Agreement, such party has obtained all necessary consents, approvals and authority to enter into, perform and comply with the terms and conditions of this Agreement. 8.2 SID covenants and agrees that all Compensation Shares acquired by C & A incident to this Agreement shall, upon issuance, be fully paid and non-assessable and free from all taxes, liens and charges with respect to the issue thereof; and, without limiting the generality of the foregoing, SID covenants and agrees that SID will, from time to time, take all such action as may be necessary to assure that the par value per share of the Common Stock is at all times equal to, 10 11 or less than, the then effective purchase price per share of the Compensation Shares. SID further covenants and agrees that during the period within which the Compensation Shares may be acquired by C & A, SID shall at all times have authorized but unissued Common Stock in a sufficient number of shares to provide the Compensation Shares to C & A. 9. Miscellaneous 9.1 Notice. For purposes of all notices required or permitted by this Agreement, such notices shall be given as follows: (a) All notices, requests, consents and other communications hereunder to a party shall be in writing and shall be personally delivered, or sent by registered or certified mail, return receipt requested, postage prepaid, with a copy by telefax, addressed to the person, or persons, to whom such notice is to be given as follows (i) if to SID, such notice shall be given at: Suite 107 3006 Longhorn Boulevard Austin, Texas 78758 Telephone: (512) 339-5020 Fax: (512) 339-5021 (ii) if to C & A, such notice shall be given at: 1904 South Akard Dallas, Texas 75215 Telephone: (214) 428-0132 Fax: (214) 428-1851 (b) All notices, requests, consents and other communications hereunder shall be deemed given upon the earlier to occur of (i) physical receipt by the party to whom such notice is directed, 11 12 or (ii) two (2) business days after deposit in the mail. Each party, by notice duly given in accordance herewith, may specify a different address for the giving of any notice hereunder. 9.2 Choice of Law. This Agreement shall be deemed to be made in the state of Texas and, in all respects, shall be interpreted, construed, and governed by, and in accordance with, the laws of the state of Texas. Venue for any action arising hereunder shall be exclusively in a court of competent jurisdiction, whether state or federal in Austin, Travis County, Texas. 9.3 Waiver of Rights. The waiver by any party of any term or provision of this Agreement shall not be deemed to constitute a continuing waiver thereof nor of any further or additional rights such party may hold under this Agreement. 9.4 No Assignment; Enforceability. This Agreement, with respect to the Services, shall not be assignable by any party without the prior written consent of the other party. Any attempt to assign, transfer, or subcontract any of the rights, duties or obligations of a party under this Agreement with respect to the Services without such consent shall be void. If any provision or provisions of this Agreement shall be held to be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby. 9.5 Complete Agreement. This Agreement, the Exhibits hereto and the Warrant Forms set forth the entire agreement and understanding between the parties as to the subject matter hereof and thereof, and merge all prior discussions between them, and none of the parties shall be bound by any conditions, definitions, warranties, understandings or representations with respect to said subject matter other than as expressly provided herein, or in any prior existing written agreement between the parties, or as duly set forth on, or subsequent to, the effective date hereof in writing 12 13 and signed by a proper and duly authorized representative of the party to be bound thereby. No provision appearing on any form originated by a party shall be applicable unless such provision is accepted in writing by the other party. This Agreement may not be modified or altered except by a written instrument duly executed by the parties hereto. 9.6 Binding Agreement. Subject to the transfer restrictions set forth herein, this Agreement shall inure to the benefit of, and be binding upon, the parties hereto and their respective successors and assigns. 9.7 Headings. The clause headings appearing in this Agreement have been inserted for the purpose of convenience and ready reference. They do not purport to, and shall not be deemed to define, limit or extend the scope or intent of the clauses to which they appertain. 9.8 Confidentiality. The terms and conditions of this Agreement are confidential and not subject to third-party disclosure by SID or C & A, except as required by law, or for regulatory compliance, of either SID or C & A. 9.9 Warrant Subscription Agreement. Concurrently with execution of this Agreement, C & A shall execute and deliver to SID the form of Warrant Subscription Agreement attached hereto as Exhibit B. 13 14 IN WITNESS WHEREOF, the parties have caused this Agreement to be executed as set forth below. C & A: C & A SERVICES, L.L.C. By: /s/ Gerry R. Hurst -------------------------- Name: Gerry R. Hurst ------------------------ Title: Manager ----------------------- Date: November 11, 1998 SID: S.I. DIAMOND TECHNOLOGY, INC. By: /s/ Marc W. Eller -------------------------- Name: Marc W. Eller ------------------------ Title: Chief Executive Officer ----------------------- Date: November 11, 1998 14 EX-10.2 4 MARKETING AGENT AGREEMENT/ELECTRONIC BILLBOARD 1 EXHIBIT 10.2 MARKETING AGENT AGREEMENT This MARKETING AGENT AGREEMENT ("AGREEMENT"), by and between ELECTRONIC BILLBOARD TECHNOLOGY, INC., a Delaware corporation ("EBT"), having its principal offices at 3006 Longhorn Boulevard, Suite 107, Austin, Texas 78758, and VISION MARK, LLC, a Texas limited liability company, having its principal offices at 1904 South Akard, Dallas, Texas 75215 ("AGENT") (collectively, the "PARTIES" or "PARTIES"). W I T N E S S E T H WHEREAS, EBT is desirous of marketing to third-party customers ("CUSTOMERS") EBT's electronic billboards for display of advertising ("SYSTEMS") both within and outside the United States (collectively "TERRITORY"); WHEREAS, it is proposed that EBT obtain the agreement of Customers for placement of Systems on, or in, Customer facilities, manufacture, have installed and maintain such Systems, and contract with third-parties who will operate and sell advertising through such Systems ("ADVERTISING MARKETERS"), on, or in, facilities of Customers within the Territory ("OPERATING SYSTEMS"); WHEREAS, EBT desires to appoint Agent as EBT's marketing representative to Customers in the Territory for placement of the Systems and Agent desires to accept such appointment and to undertake and provide such services under the terms and conditions of this Agreement; and, WHEREAS, all advertising revenue derived from the Operating Systems ("REVENUE") is to be collected by the Advertising Marketers and distributed to the Advertising Marketers, EBT, Agent and the Customers by the Advertising Marketers in accordance with the terms of this Agreement. NOW THEREFORE, for and in consideration of the premises, the receipt and sufficiency of which EBT and Agent hereby acknowledge and confess, EBT and Agent do hereby covenant and agree as follows: 1. APPOINTMENT OF AGENT 1.1 Subject to the terms and conditions of this Agreement, EBT hereby designates and appoints Agent as EBT's representative for marketing the Systems to Customers in the Territory and Agent hereby accepts such appointment. 1.2 Agent shall be the exclusive representative of EBT within the Territory for marketing the Systems to the Customers identified in Exhibit A hereto ("PROTECTED CUSTOMERS"), but Agent shall not be the exclusive representative of EBT with respect to Customers not identified in Exhibit A hereto ("UNPROTECTED CUSTOMERS"), provided, however, that an Unprotected Customer to which Agent markets the Systems with the result that such Unprotected Customer agrees to accept an Operating System on, or in, such Unprotected Customer's facilities, shall be deemed to be a Protected Customer as of the date when Agent (1) first marketed the System to such Unprotected Customer 1 2 by actual in-person presentation, and (2) Agent had given EBT reasonable notice of the presentation date, regardless of whether EBT accepts or declines to attend the presentation. 1.3 For purposes of this Agreement, a Customer shall be deemed to include all divisions, subsidiaries and controlled affiliates of a Customer, including all of its, and their, physical facilities within the Territory. 1.4 A Customer which is, or becomes, a Protected Customer shall not cease to be a Protected Customer for any reason except mutual consent of EBT and Agent. 2. DUTIES OF AGENT 2.1 Agent shall use Agent's best efforts to promote and market the Systems to Customers during the Term of this Agreement. Such promotion and marketing efforts shall be conducted by Agent as follows: (a) Identifying Unprotected Customers, and promptly disclosing these to EBT; (b) Contacting Customers and arranging for and coordinating the presentation of the Systems to the Customers; (c) Providing to EBT all results of Agent's marketing efforts on behalf of EBT on a monthly basis; (d) Performing Agent's duties under this Agreement in a manner which will benefit and enhance the perception and desirability of the Systems to Customers and increase the goodwill and reputation of EBT; and, (e) Complying with applicable laws and regulations in the performance of Agent's duties under this Agreement. 2.2 Agent shall pay Agent's expenses in the performance of this Agreement. 2.3 Agent shall use only technical and promotional materials with respect to the Systems either approved, or provided, by EBT for purposes of marketing the Systems and services of EBT. With respect to any technical and promotion materials in regard to the Systems provided to Agent by EBT, the accuracy and content of such technical and promotional materials as are so provided and approved, shall be at the sole risk and responsibility of EBT, and EBT shall indemnify, defend and hold Agent harmless with respect thereto. 2.4 Agent shall, during the term of this Agreement, immediately notify EBT if Agent elects to represent, or offer to represent, or market, sell or distribute products that compete directly with the Systems. 2 3 3. LIMITATIONS OF AGENT'S AUTHORITY 3.1 Agent has, and may exercise, no authority to make statements or representations concerning the Systems that exceed, or are inconsistent with, the promotional and technical materials provided, or approved, by EBT. Agent has and may exercise no authority to bind EBT to any undertaking or performance with respect to the Systems. 3.2 Agent shall not, without prior written approval from an authorized representative of EBT, incur any expense or obligation in the name of EBT, or, except as shall be inherent in the use of the technical and promotional materials provided to Agent or approved by EBT incident to this Agreement, use EBT's name, trade names, trademarks or logos in connection with Agent's business other than in the manner expressly authorized by EBT and this Agreement. 4. DUTIES OF EBT 4.1 At the request of Agent, EBT shall promptly evaluate the qualifications for the Systems of prospective Customers identified by Agent. EBT reserves the right, in EBT's discretion, to reject any prospective Customer identified by Agent, but only for a material reason related to (1) the Customer's financial credibility, or (2) an inability of EBT to meet the production and installation requirements set forth by the Customer, or (3) an inability of EBT to agree to economical terms with the Customer, or by mutual agreement between EBT and Agent, provided that the basis for any such rejection shall be given to Agent, in detail, by notice in writing to Agent within forty-five (45) days of Agent's identification of a prospective Customer to EBT. In addition, if EBT shall, within a period of thirty-six (36) months following any such notice of rejection of a Customer to Agent enter into any arrangement with the rejected Customer for the placement or use of an Operating System with such Customer, such Customer shall automatically become, and thereafter remain, a Protected Customer for purposes of this Agreement. 4.2 EBT shall use commercially reasonable efforts to enter into agreements with Advertising Marketers for the sale of advertising to be displayed on the Operating Systems ("ADVERTISING"). Such Advertising Marketers shall be required to conform all such Advertising to the requirements set forth in any agreements between EBT and a Customer through whose Operating System such Advertising is displayed unless such conformance would violate any antitrust laws. Such Advertising Marketers shall be required to maintain separate records for, and shall invoice and collect into a separate account, and separately account to EBT and Agent for, all Revenues generated by the Operating Systems and distribute and account to EBT, Agent and the Customers for those Revenues in accordance with the provisions of this Agreement. 4.3 EBT shall timely manufacture, or cause to be manufactured, install, or cause to be installed, make operable and maintain the Operating Systems. Agent shall not be responsible for any expenses incurred by EBT in its duties under this paragraph. 3 4 4.4 EBT shall process orders to manufacture Systems on a first-in-first-out basis, based on the dates purchase orders are received by EBT. 5. REVENUE 5.1 All Revenue shall be collected for the joint account of EBT, Agent, Customer and the Advertising Marketer providing the Advertising which generates such Revenue. Such Revenue, less the amount thereof distributable to the Advertising Marketer, shall be distributed to EBT for the account of EBT, Customers and Agent, on or before the 15th day of the calendar month following the month during which such Revenue was collected ("DISTRIBUTION REVENUE"). Distribution Revenue of Agent and Protected Customers shall then be disbursed by EBT to Agent for the account of Agent and the Protected Customers within fifteen (15) days in accordance with the schedule provided in Exhibit B hereto ("DISTRIBUTION SCHEDULE"). Upon receipt thereof from EBT, Agent shall distribute to the Protected Customers their Distribution Revenue. Agent indemnifies and releases EBT of all liability for non-payment of Distribution Revenue to the Protected Customers by Agent. 5.2 With each disbursement of Distribution Revenue, there shall be provided to Agent the following: (a) A description of the sources of the Distribution Revenue by Advertising Marketer, Advertising purchaser, Customer and Customer Operating System facility; (b) A description of the unpaid, but accrued Advertising balance owed by each Advertising purchaser by Customer and Customer Operating System facility; and, (c) A description of the deductions from Revenue permitted herein, or otherwise by written agreement between EBT and Agent, if any, for the payment period in reduction of Distribution Revenue. 5.3 For purposes of this Agreement, Revenue shall be, and include, the gross purchase price of the purchased Advertising, which gross purchase price shall be the sum of the aggregate consideration therefor paid in cash, plus the retail value, before discount, offset or credit, of any and all payments for Advertising by barter or trade in goods, services or other thing of value, if any, in lieu of cash, paid or given in exchange for purchased Advertising by a purchaser ("Noncash Compensation"), less the sum of any applicable sales taxes, levies, customs and duties. The party receiving such Noncash Compensation shall contribute, in cash, to each Distribution Revenue payment, the Noncash Compensation component of such Distribution Revenue payment and shall retain such Noncash Compensation. 5.4 In no event shall either Revenue or Distribution Revenue, be reduced by any payment, direct or indirect, to EBT, Agent, or any other party, with respect to this Agreement, or otherwise, for lease, rental, maintenance, or operation of the Systems or any Operating System except by specific 4 5 prior written agreement. In no event shall either Revenue or Distribution Revenue be reduced or increased by the unrealized value of any free Advertising in the Operating Systems provided to a Customer, a purchaser of Advertising, or for a public service purpose. Such free Advertising, if any, shall have no effect in the calculation of either Revenue or Distribution Revenue. 5.5 All agreements between EBT and Advertising Marketers shall require, in the absence of waiver by both Agent and EBT, annual audit of the books and records of the respective Advertising Marketers with respect to the Revenues. Such audit shall be at the sole cost and expense of Agent, EBT and the respective Advertising Marketers in proportion to the Distribution Revenue received among them unless such audit shall determine that the Revenues, as reported by an Advertising Marketer to EBT, are determined by such audit to be understated by two percent (2%), or more, in which event, the Advertising Marketer shall bear the entire expense of such audit, and shall remit to EBT for the account of EBT, Customers, and Agent and distribution among them in accordance with the terms of this Agreement the amount of Distribution Revenues which the Advertising Marketer failed to distribute to EBT for their account, plus interest thereon at an annual rate of eighteen percent (18%), calculated from the date such disbursement should have occurred through the date such disbursement is made by the Advertising Marketer, and such unpaid Distribution Revenue, together with interest thereon, shall be due and payable from, and by, the Advertising Marketer upon demand by EBT. 6. TERM 6.1 The term of this Agreement ("TERM") shall commence upon execution of this Agreement by EBT and Agent and shall continue thereafter until the earlier to occur of twenty (20) years thereafter or, after the initial two (2) years of the Term, if no Operating System shall be operating on, or in, a Customer facility within the Territory, otherwise than by reason of default by EBT of this Agreement or an agreement between EBT and a Customer, unless earlier terminated in accordance with this Agreement. 6.2 This Agreement shall not, in any event, be terminable without cause by any party. This Agreement shall be terminable for cause, or otherwise, only as follows: (a) If a material breach of a duty, obligation, representation or warranty of a party to this Agreement shall occur and, after prior written notice thereof to the defaulting party by the non-defaulting party, the defaulting party shall fail to cure a monetary default within ten (10) days, or a non-monetary default within thirty (30) days of the date of such notice; or, (b) By mutual agreement of all parties; or, (c) By EBT, upon ten (10) days prior written notice if Agent shall represent, sell, market or distribute technology, products or services, other than the Systems, that directly compete with the Systems; or, 5 6 (d) By Agent if EBT shall either place, or attempt to place, or consent to placement of, the Systems with a Protected Customer, directly, or indirectly through a third-party, or otherwise, to the exclusion of participation by Agent in such placement. (e) By EBT, if for any consecutive two (2) year period during the Term, EBT receives Distribution Revenue for the account of EBT, in the aggregate, exclusive of Distribution Revenue to be disbursed to Agent or Customers, less than EBT's direct out-of-pocket expenses for operating and maintaining all Operating Systems ("OPERATING EXPENSES") during such two (2) year period, provided that Operating Expenses shall not include (i) EBT general and administrative expenses; (ii) Operating Expenses of any Operating Systems installed within the last twelve (12) month period of such two (2) year period; or (iii) Operating Expenses for which EBT was, or is, to be reimbursed by a third party. 6.3 In the event of the termination of this Agreement by Agent under either Paragraph 6.2(a) or (d), Agent shall continue to receive Distribution Revenue in accordance with Paragraph 5.1 derived from Operating Systems installed previous to the termination. 6.4 Upon termination of this Agreement for any reason, Agent shall, within ten (10) days of such termination, return to EBT all copies of technical and promotional materials provided to Agent by EBT. 7. INDEMNITIES 7.1 Agent shall defend, indemnify and hold harmless EBT from and against all claims, demands, or causes of action arising out of untrue representations or warranties of Agent herein as well as Agent acts in breach of this Agreement, in the absence of permissible cure, if any. 7.2 EBT shall defend, indemnify and hold harmless Agent from and against all claims, demands or causes of action arising out of (i) untrue representations or warranties of EBT herein, and (ii) EBT's acts, or omission to act, in breach of this Agreement. 7.3 In no event shall any party hereto be entitled to special, indirect, or consequential damages including lost profits, for breach of this Agreement. Remedies shall be limited to claims for amounts due hereunder or for indemnification as provided for herein. However, the foregoing limitation of remedies shall not apply to any action by EBT for infringement by Agent; any action based on or with respect to unauthorized publication, disclosure, or use of confidential information or trade secrets of EBT; or any action based on EBT's rights in copyrights, trademarks, or trade names or other proprietary rights in the electronic billboards. 8. STATUS OF PARTIES 8.1 The parties to this Agreement are, and shall remain, independent contractors, and nothing herein shall be construed to create a partnership, or joint venture, between the parties. Each 6 7 of the parties shall be responsible for the wages, hours, and conditions of employment of such party's personnel during the Term of, and under, this Agreement. 8.2 Each of the parties shall perform and comply with all applicable laws, regulations and agreements which govern, regulate or affect the ability of such party to perform and comply with the terms and conditions of this Agreement. 8.3 For purposes of this Agreement, each of the parties shall be deemed to mean and include the party and all of its, and their, divisions, subsidiaries and controlled affiliates. 9. CONFIDENTIALITY 9.1 It may become necessary during the course of this Agreement for a party (the "DISCLOSING PARTY") to disclose to another party (the "RECEIVING PARTY") information which the disclosing party considers confidential or proprietary (e.g., inventions, confidential know-how, trade secrets, future product plans) regardless of whether the confidential information is in written or tangible form. 9.2 The Receiving Party shall not use or disclose confidential information to any third party individual, corporation, or other entity without the prior written consent of the Disclosing Party and shall limit its disclosure to its employees or agents having a need to know such information. The Receiving Party shall protect the disclosed confidential information by using the same degree of care (but no less than a reasonable degree of care) to prevent the unauthorized dissemination or publication of the confidential information as the Receiving Party uses to protect its own confidential information of a like nature. Such non-disclosure obligations will terminate five (5) years after receipt of such information. 9.3 The obligations herein will not apply to any information which is: (a) Available to the public other than by a breach of this Agreement by the Receiving Party; (b) Received by the Receiving Party from a third party without confidential limitations; (c) Independently developed by the Receiving Party's employees or agents; or, (d) Known to the Receiving Party prior to first receipt of same from the Disclosing Party. 7 8 10. FREEDOM TO COMPETE 10.1 Subject to the obligations and limitations set forth under this Agreement, neither party hereto shall be restricted or prohibited from lawfully competing with the other party in any other aspects of its business. 11. SPECIAL CONDITIONS 11.1 At the request of Agent, EBT shall cause Billy Jeff Clement ("CLEMENT"), to be elected to the Board of Directors of EBT, and to remain a Director of EBT until the earlier to occur of Clement election to resign or termination of this Agreement. If Clement shall elect to resign, then Agent shall have the right to request that a person designated by Agent be elected to the Board of Directors of EBT as a replacement for Clement and EBT shall cause such person to be so elected. 11.2 Agent shall, at all times, be provided with a copy of each agreement relating to the Operating Systems between EBT and a Protected Customer and EBT and an Advertising Marketer with respect to the Systems. Additionally, upon receipt by EBT, Agent shall be provided with a copy of any third-party notice to EBT alleging a breach or actionable wrongful act, or omission to act, by either EBT or an Advertising Marketer, of any agreement or other matter with respect to, or affecting, the Systems or the Advertising. 11.3 For purposes of this Agreement, Systems shall be deemed to include not only the Systems, as existent at the inception of this Agreement, but any subsequent improvements, advances or modifications thereof, whether developed by, or licensed to, EBT. 11.4 In the event that EBT shall sell an Operating System to a Protected Customer, Agent shall be paid a cash commission based on the sales price of the Operating System ("Commission"). The Commission shall be calculated in accordance with the terms described in Exhibit C to this Agreement, which shall be incorporated herein for all purposes. 11.5 Notwithstanding execution of this Agreement by the parties, this Agreement shall not become effective unless and until approved by the Board of Directors of EBT and EBT shall obtain such approval not less than fourteen (14) business days following EBT's execution. 12. REPRESENTATIONS AND WARRANTIES 12.1 Each party represents and warrants to the other party as follows: (a) Such party has the requisite approvals, power and authority to enter into, and perform and comply with, the terms and conditions of this Agreement; 8 9 (b) Such party's performance and compliance with the terms and conditions of this Agreement will not result in the violation or breach by such party of any agreement or license to which such party is a party; (c) Such party is validly organized and in good standing in such party's state of incorporation or organization and duly qualified to transact business in each jurisdiction in which the conduct of such party's business requires such qualification; and, (d) Such party has obtained all necessary consents, approvals and authority to enter into, perform and comply with the terms of this Agreement. 12.2 EBT represents and warrants to Agent that all purported patents, copyrights and trademarks with respect to any component of the Systems necessary for performance and compliance by EBT with the terms of this Agreement are either validly held by, or licensed to, EBT. EBT further represents and warrants to Agent that EBT has the experience, technical knowledge, capacity to manufacture, or cause to be manufactured, and will install and make operable, the Operating Systems on, or in, Customer facilities, as contemplated by this Agreement. 12.3 Agent represents and warrants to EBT that Agent and/or Agent's members have the experience, knowledge and ability to perform Agent's duties under, and comply with and perform, the terms and conditions of this Agreement. 13. MISCELLANEOUS 13.1 Notice. For purposes of all notices required or permitted by this Agreement, such notices shall be given as follows: (a) All notices, requests, consents and other communications hereunder to a party shall be in writing and shall be personally delivered, or sent by registered or certified mail, return receipt requested, postage prepaid, with a copy by telefax addressed to the person or persons to whom such notice is to be given as follows (or at such other address as shall be stated in a notice similarly given): (i) if to EBT, such notice shall be given at: Suite 107 3006 Longhorn Boulevard Austin, Texas 78758 Telephone: (512) 339-5020 Fax: (512) 339-5021 9 10 (ii) if the Agent, such notice shall be given at: 1904 South Akard Dallas, Texas 75215 Telephone: (214) 428-0132 Fax: (214) 428-1851 (b) All notices, requests, consents and other communications hereunder shall be deemed given upon the earlier to occur of (i) receipt by the party to whom such notice is directed, or (ii) two (2) business days after deposit in the mail. Each party, by notice duly given in accordance herewith, may specify a different address for the giving of any notice hereunder. 13.2 Choice of Law. This Agreement shall be deemed to be made in the state of Texas and, in all respects, shall be interpreted, construed, and governed by, and in accordance with, the laws of the state of Texas. Venue for any action arising hereunder shall be exclusively in a court of competent jurisdiction, whether state or federal in Austin, Travis County, Texas. 13.3 Waiver of Rights. The waiver by any party of any term or provision of this Agreement shall not be deemed to constitute a continuing waiver thereof nor of any further or additional rights such party may hold under this Agreement. 13.4 No Assignment: Unenforceability. This Agreement is personal to Agent and is not assignable without the prior written consent of EBT. Agent may assign its rights under this Agreement to an affiliated Company or organization managed by one or more of the principals of Agent; all of the provisions of this Agreement apply fully to each such affiliate of Agent, and the terms and obligations of this Agreement are fully enforceable against all successors and assigns of Agent, and EBT has the right to directly enforce the rights and obligations of this Agreement against any successors or assigns of Agent. Any attempt to assign, transfer, or subcontract any of the rights, duties or obligations of this Agreement without such consent shall be void. If any provision or provisions of this Agreement shall be held to be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby. 13.5 Complete Agreement. This Agreement and the Exhibits hereto set forth the entire agreement and understanding between the parties as to the subject matter hereof and merges all prior discussions between them, and none of the parties shall be bound by any conditions, definitions, warranties, understandings or representations with respect to said subject matter other than as expressly provided herein, or in any prior existing written agreement between the parties, or as duly set forth on or subsequent to the effective date hereof in writing and signed by a proper and duly authorized representative of the party to be bound thereby. No provision appearing on any form originated by a party shall be applicable unless such provision is accepted in writing by the other party. This Agreement may not be modified or altered except by a written instrument duly executed by the parties hereto. 10 11 13.6 Binding Agreement. Subject to the restrictions on transfers and encumbrances set forth herein, this Agreement shall inure to the benefit of and be binding upon the parties hereto and their respective successors and assigns. 13.7 Headings. The clause headings appearing in this Agreement have been inserted for the purpose of convenience and ready reference. They do not purport to, and shall not be deemed to define, limit or extend the scope or intent of the clauses to which they appertain. 13.8 Confidentiality. The terms and conditions of this Agreement are confidential and not subject to third-party disclosure by EBT or Agent, except as required by law or for regulatory compliance by either EBT or Agent. 14. JOINDER OF S.I. DIAMOND TECHNOLOGY, INC. 14.1 S.I. Diamond Technology, Inc., a Texas corporation ("SID"), the parent of EBT, joins in this Agreement with EBT, SID's subsidiary, for the purpose of acknowledging and consenting to the terms and conditions of this Agreement and, as a material inducement to Agent to enter into this Agreement, expressing the agreement of SID, for the sole benefit of Agent, to do all such acts and deeds as shall be necessary to permit EBT to perform and comply with the terms and conditions of this Agreement during the Term and not to do any act or deed which would limit or preclude such performance and compliance by EBT. IN WITNESS WHEREOF, the parties have caused this Agreement to be executed as set forth below. AGENT: VISION MARK, LLC By: /s/ Gerry R. Hurst ------------------------------ Name: Gerry R. Hurst ---------------------------- Title: Manager --------------------------- Date: 11/11/98 ---------------------------- 11 12 EBT: ELECTRONIC BILLBOARD TECHNOLOGY, INC. By: /s/ Marc W. Eller ------------------------------ Name: Marc W. Eller ---------------------------- Title: CEO --------------------------- Date: 11/11/98 ---------------------------- SID: (For purposes of Paragraph 14) S.I. DIAMOND TECHNOLOGY, INC. By: /s/ Marc W. Eller ------------------------------ Name: Marc W. Eller ---------------------------- Title: CEO --------------------------- Date: 11/11/98 ---------------------------- 12 -----END PRIVACY-ENHANCED MESSAGE-----