SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[X]Preliminary Proxy Statement
[ ]Confidential, for Use of the Commission Only (as permitted
by Rule 14a-6(e)(2))
[ ]Definitive Proxy Statement
[ ]Definitive Additional Materials
[ ]Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
Diversifax,
Inc.
(Name of Registrant as Specified in Its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the
Registrant)
Payment of Filing Fee (Check the appropriate box):
[X]No fee required.
[ ]Fee computed on table below per Exchange Act Rules
14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction
applies:
(2) Aggregate number of securities to which transaction
applies:
(3)Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11 (Set forth
the amount on which the filing fee is calculated and state
how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[ ]Fee paid previously with preliminary materials.
[ ]Check box if any part of the fee is offset as provided by
Exchange Act Rule 0-11(a)(2) and identify the filing for
which the offsetting fee was paid previously. Identify
the previous filing by registration statement number, or
the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
<PAGE>
PRELIMINARY COPY
DIVERSIFAX, INC.
39 Stringham Avenue
Valley Stream, N.Y. 11580
___________________
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To be held on September 3, 1997
____________________
To the Stockholders of
DIVERSIFAX, INC.:
Notice is hereby given that the Annual Meeting of
Stockholders of Diversifax,, Inc. will be held at the offices of
Breslow & Walker, LLP, 100 Jericho Quadrangle, Jericho, New
York, on September 3, 1997, at 11:00 a.m., New York City
time, for the following purposes:
1.To elect the Board of Directors to serve until the next
Annual Meeting of Stockholders and until their suc-
cessors are duly elected and qualified;
2.To ratify and approve the Company's 1996 Stock Option
Plan, as amended;
3.To approve a proposed amendment to the Company's
Certificate of Incorporation to increase the number of
authorized shares of the Common Stock from
25,000,000 shares to 40,000,000 shares;
4.To ratify the selection by the Board of Directors of
Hoberman, Miller, Goldstein & Lesser, P.C. to serve as
independent auditors for the year ending November 30,
1997; and
5.To transact such other business as may properly be
presented for action at the Annual Meeting or any
adjournment thereof.
The Board of Directors has fixed the close of business on
July 31, 1997 as the record date for the determination of
stockholders entitled to notice of, and to vote at, the Annual
Meeting or any adjournments thereof.
Holders of a majority of the outstanding shares must be
present in person or by proxy in order for the Annual Meeting
to be held. WHETHER OR NOT YOU EXPECT TO ATTEND
THE ANNUAL MEETING, YOUR PROXY VOTE IS
IMPORTANT. ACCORDINGLY, YOU ARE REQUESTED
TO MARK, SIGN, AND DATE THE ENCLOSED PROXY
FORM AND RETURN IT IN THE ACCOMPANYING
STAMPED ENVELOPE. The giving of such proxy will not
affect your right to revoke such proxy before it is exercised or
to vote in person should you later decide to attend the Annual
Meeting.
All stockholders are cordially invited to attend the Annual
Meeting.
By Order of the Board of Directors
Kenneth Ross Wolfe, Secretary
Dated: August __, 1997
IT IS IMPORTANT THAT THE ENCLOSED PROXY
FORM BE
COMPLETED AND RETURNED PROMPTLY.<PAGE>
PRELIMINARY COPY
DIVERSIFAX, INC.
39 Stringham Avenue
Valley Stream, N.Y. 11580
_______________
PROXY STATEMENT
_______________
ANNUAL MEETING OF STOCKHOLDERS
September 3, 1997
SOLICITATION OF PROXIES
___________________
This Proxy Statement is furnished in connection with the
solicitation by the Board of Directors of Diversifax, Inc., a
Delaware corporation (the "Company"), of proxies to be voted
at the Annual Meeting of Stockholders of the Company (the
"Meeting") to be held at the offices of Breslow & Walker, LLP,
100 Jericho Quadrangle, Suite 230, Jericho, New York, on
September 3, 1997, at 11:00 a.m., New York City time, and any
adjournments thereof.
A form of proxy is enclosed for use at the Meeting. The
proxy may be revoked by a stockholder at any time before it is
voted by execution of a proxy bearing a later date or by written
notice to the Secretary of the Company before the Meeting, and
any stockholder present at the Meeting may revoke his or her
proxy thereat and vote in person if he or she so desires. When
such proxy is properly executed and returned, the shares it
represents will be voted at the Meeting in accordance with any
instructions noted thereon. If no direction is indicated, all shares
represented by valid proxies received pursuant to this solicitation
(and not revoked prior to exercise) will be voted FOR the
election of the nominees for directors herein, FOR the proposed
ratification and approval of the Company's 1996 Stock Option
Plan, as amended, FOR the proposed amendment to the
Company's Certificate of Incorporation to increase the number
of authorized shares, and FOR ratification of the appointment of
Hoberman, Miller, Goldstein & Lesser, P.C. as independent
auditors.
Only recordholders of the Company's common stock, par
value $0.001 per share (the "Common Stock"), on the close of
business on July 31, 1997 will be entitled to notice of, and to
vote at, the Meeting. At the close of business on such date, the
Company had issued and outstanding _________ shares of
Common Stock. Each share entitles the holder thereof to one
vote on each matter to be presented at the Meeting. Nominees
for directors shall be elected by stockholders holding a plurality
of the shares of Common Stock present, or represented, and
entitled to vote at the Meeting. Adoption of the proposed
amendment to the Company's Certificate of Incorporation
requires the affirmative vote of the holders of shares of Common
Stock representing a majority of the votes entitled to be cast at
the Meeting. Approval of each other proposal to be acted upon
at the Meeting requires a vote of a majority of the shares
present, or represented, and entitled to vote at the Meeting.
Abstentions will be counted towards the tabulation of votes cast
on each proposal and will have the same effect as negative votes.
Broker non-votes are counted towards a quorum, but are not
counted for any purpose in determining whether a proposal has
been approved.
The cost of soliciting proxies on behalf of the Board of
Directors will be borne by the Company. In addition to
solicitation by mail, proxies may be solicited by directors,
officers, or other personnel of the Company (who will receive no
extra compensation for these services) in person or by telephone,
telefax, or telegraph. The Company also will request brokerage
houses, custodians, nominees, fiduciaries, or other persons
holding shares of Common Stock in their names or in the names
of their nominees to forward these proxy materials to the
beneficial owners of the Common Stock and will reimburse such
persons for their reasonable expenses in connection therewith.
The approximate date of mailing of this Proxy Statement and
accompanying proxy is August __, 1997.
NOMINATION AND ELECTION OF DIRECTORS
Three directors, all of whom are members of the present
Board of Directors, are nominees for election to hold office until
the next annual meeting and until their respective successors are
elected and qualified. Unless authority to vote for the election
of directors shall have been withheld, it is intended that proxies
in the accompanying form will be voted at the Meeting for the
election of the nominees named below. If any nominee, for any
reason presently unknown to the Company, should refuse or be
unable to serve, the shares represented by proxy will be voted
for such person as shall be designated by the Board of Directors
to replace any such nominee.
The nominees for the Board of Directors of the Company are
as follows:
Irwin A. Horowitz
Eugene Bilotti
Kenneth Ross Wolfe
Information about the nominees named for election is set
forth below under "Management."
The Board of Directors recommends that the stockholders
vote for the election of all of the above-named nominees to
the Board of Directors.
BOARD OF DIRECTORS AND COMMITTEES
The Board of Directors held four meetings during the year
ended November 30, 1996, each of which were attended by all
of the directors standing for re-election, and the Board of
Directors acted by unanimous consent on three occasions.
The Company's audit committee and option committee are
each comprised of Messrs. Kenneth Wolfe and Eugene Bilotti.
Neither committee held any meetings during fiscal 1996. The
Company has no standing compensation or nominating
committee.
COMPENSATION OF DIRECTORS
The directors of the Company are not currently compensated,
nor were they during the last fiscal year, for their services as
such, except that in September 1995, the Company adopted the
1995 Outside Directors' Stock Option Plan (the "Directors'
Plan") pursuant to which all current non-employee directors and
non-employees who became directors of the Company received
an option to purchase 100,000 shares of the Common Stock at
the market value thereof at the time of grant. Said options vest
at the rate of 20,000 per year (the first 20,000 vested upon
grant) and terminate 90 days after the director ceases to serve as
a director. Pursuant to the Directors' Plan, in September 1995,
options to purchase 100,000 shares of Common Stock at an
exercise price of $4.125 were granted to each of Messrs. Bilotti
and Wolfe. In October 1996, the Company amended the
Directors' Plan so that no further options could be granted
thereunder. In December 1996, Messrs. Bilotti and Wolfe each
received additional options to purchase 100,000 shares of
Common Stock at an exercise price of $2.375 per share pursuant
to the Company's 1996 Stock Option Plan. In connection with
such grant, Messrs. Bilotti and Wolfe each agreed to cancel the
unvested portion (for 60,000 shares) of their original options.
BENEFICIAL OWNERSHIP OF THE COMPANY'S
SECURITIES
The following table sets forth, as of June 11, 1997, certain
information (based on publicly available filings) regarding
beneficial ownership of the Common Stock by (a) each
stockholder known by the Company to be the beneficial owner
of more than 5% of the outstanding shares of Common Stock,
(b) each director of the Company, (c) each named Executive
Officer (as defined below), and (d) all of the Company's
executive officers and directors as a group.
<TABLE>
<CAPTION>
<S>
Name and Address of
Beneficial Holder
<C>Number of Shares
Beneficially Owned(1)
<C>Percentage of Class<PAGE>
Dr. Irwin A. Horowitz
111 Ocean Place
Sarasota, Florida 24242<PAGE>
8,187,520(2) 51.1% Mario J. DiNatale
Atrium Executive Center
3000 Atrium Way -- Suite 200
Mt. Laurel, New Jersey
08054<PAGE>
263,427(3)(4) 1.8 Eugene Bilotti
111 Broadway
New York, New York 10006<PAGE>
80,000(4) * Kenneth Ross Wolfe
1325 Franklin Avenue
Garden City, New York
11530<PAGE>
80,000(4) * All officers and directors as a
group (4 persons)<PAGE>
8,610,947(5) 52.7
*less than 1%.
</TABLE>
(1)Unless otherwise indicated below, all shares are owned
beneficially and of record.
(2)Includes 1,000,000 shares of Common Stock underlying
options exercisable within 60 days and 877,520 shares of
Common Stock underlying warrants exercisable within
60 days.
(3)Includes 100,000 shares of Common Stock underlying
warrants exercisable within 60 days. Also includes
55,000 shares of Common Stock held of record by Faxit
Corporation, a company of which Mr. DiNatale is the
President and sole director.
(4)Includes 80,000 shares of Common Stock underlying
options exercisable within 60 days.
(5)Includes an aggregate of 1,240,000 shares of Common
Stock underlying options exercisable within 60 days and
an aggregate of 977,520 shares of Common Stock
underlying warrants exercisable within 60 days.
MANAGEMENT
The directors and executive officers of the Company, their
ages, and their positions and terms of office with the Company
are set forth below.
<TABLE>
<CAPTION>
<S>
Name
<C>Age
>C>Office<PAGE>
*Irwin A. Horowitz 61 Chairman of the Board,
President, and Chief Executive <PAGE>
Mario DiNatale 42 Director *Eugene Bilotti 48 Director *Kenneth Ross Wolfe 51 Secretary and Director
</TABLE>
*Nominee for election to the Board of Directors.
Irwin A. Horowitz has been the Chairman of the Board,
Chief Executive Officer, and President of the Company since
November 1, 1993. From July through October 1993, he served
as Chief Operating Officer of the Company. For more than the
past five years, Dr. Horowitz has been Chairman of the Board
and President of IMSG Systems, Inc. and certain affiliated
companies which were acquired by the Company effective
November 1, 1993. Dr. Horowitz is a director of Dynamics
Imaging, Inc., a private company which is primarily engaged in
the development of advanced medical technologies.
Mario J. DiNatale has been the President and Chief
Operating Officer of DiversiFax Information Services, Inc., a
subsidiary of the Company, since April 1995 and a director of
the Company since November 1995. Mr. DiNatale founded
Faxit Corporation in 1987 and has been its President and Chief
Executive Officer from inception. Prior thereto, he had over
fifteen years of marketing and management experience with
leading manufacturers of office automation equipment, such as
Ricoh and Toshiba.
Eugene Bilotti has been a director of the Company since
November 1, 1993. Since January 1986, Mr. Bilotti has been
the Chief Executive Officer and Director of Marketing of
Pegasus Asset Management, New York, New York, a registered
investment advisor. From 1971 to 1986, he was a Vice
President of Fiduciary Trust Company International in New
York.
Kenneth Ross Wolfe has been a director of the Company
since November 1, 1993 and was Secretary of the Company
from November 1994 to January 1996, and has served as
Secretary of the Company from May 1996 to present. Mr.
Wolfe is an attorney who has maintained a private law practice
since 1976. From 1969 to 1976, he was a prosecuting attorney
in New York, including two years as a Special Assistant
Attorney General in the Office of The Special State Prosecutor,
investigating corruption in the criminal justice system. Mr.
Wolfe received his JD degree from Brooklyn Law School in
1969, where he served as a member of the law review. He is
admitted to practice in New York, as well as various federal
courts, including the United States Supreme Court.
No family relationship exists between any director or
executive officer and any other director or executive officer.
EXECUTIVE COMPENSATION
The following table sets forth information with respect to the
compensation paid by the Company in the fiscal years ended
November 30, 1996, 1995, and 1994 to the Company's Chief
Executive Officer and to the executive officers (other than the
Chief Executive Officer) of the Company (or a subsidiary of the
Company) who received salary and bonus payments in excess of
$100,000 in the fiscal year ended November 30, 1996
(collectively, the "Named Executive Officers"). For the
purposes of this table, warrants are deemed to be equivalent to
stock options.
<TABLE>
<CAPTION>
Annual Compensation Long Term Compensation
<S>Name and Principal
Position <C>Year<C>Salary ($)<C>Bonus ($)<C>Other ($)(1)<C>Securities Underlying
Options (#) <PAGE>
Dr. Irwin A. Horowitz
Chairman of the Board
of Directors, Chief
Executive Officer,
and President<PAGE>
1996 126,142 -- 67,200 1,277,520 1995 201,923 -- 65,155 -- 1994 250,000 -- 64,200 --Mario J. DiNatale
President, DiversiFax
Information Services,
Inc.<PAGE>
1996 90,000 35,000(2) -- -- 1995 72,000 35,000 -- 100,000 1994 -- -- -- --
</TABLE>
(1)Represents the fair market value of benefits and
perquisites afforded by the Company to Dr. Horowitz.
(2)This bonus is anticipated to be paid in shares of
Common Stock.<PAGE>
Option Grants in Fiscal 1996
(Individual Grants)
The following table sets forth certain information for each of
the Named Executive Officers with respect to grants of options
(for the purposes of this table, warrants are deemed to be
equivalent to stock options) to purchase Common Stock made
during the fiscal year ended November 30, 1996.
<TABLE>
<CAPTION>
<S>Name
C
<PAGE>
No. of
Securities
Underlying
Options
Granted (#)
C
<PAGE>
% of Total
Options
Granted to
Employees
in Year
C
<PAGE>
Exercise
Price
($/Sh)
C
<PAGE>
Expiration
Date
C
<PAGE>
Potential
Realizable
Value at Assumed
Annual Rates of
Stock Price
Appreciation for
Option Term(1) <PAGE>
5% 10% Irwin A. Horowitz 427,520
850,000<PAGE>
32.7%
65.0%<PAGE>
2.375(2)
2.375 <PAGE>
8/16/01
10/29/01<PAGE>
$280,525
$557,743<PAGE>
$619,887
$1,557,589<PAGE>
Mario J. DiNatale -- -- -- -- -- --
</TABLE>
(1) In accordance with the rules of the Securities and Exchange
Commission (the "SEC"), shown are the gains or "option
spreads" that would exist for the respective options granted.
These gains are based on the assumed rates of annually
compounded stock price appreciation of 5% and 10% from
the date the option was granted over the full option term.
These assumed annually compounded rates of stock price
appreciation are set forth in the rules of the SEC and do not
represent the Company's estimates or projection of future
Common Stock prices.
(2) The exercise price of these options or warrants was lowered
from $3.25 to $2.375 on December 17, 1996, in
consideration of Dr. Horowitz's loans to the Company. See
"Certain Relationships and Related Transactions."
Aggregated Option Exercises During Fiscal 1996 and Year
End Option Values
The following table provides information related to options
exercised by each of the named executive officers during 1996
and the number and value of options held at November 30,
1996. The Company does not have any outstanding stock
appreciation rights (for the purposes of this table, warrants are
deemed to be equivalent to stock options).
<TABLE>
<CAPTION>
<S>Name
C
<PAGE>
Shares
Acquired on
Exercise(#)
C
<PAGE>
Value
Realized
($)
C
<PAGE>
Number of Unexercised
Options at Year End(#)
Exercisable Unexercisable<PAGE>
Value of Unexercised In-
the-Money Options at Year
End ($)
Exercisable Unexercisable<PAGE>
Irwin A. Horowitz -- -- 677,520 600,000 0 0 Mario J. DiNatale -- -- 40,000 60,000 0 0
</TABLE>
Employment Agreement
Dr. Horowitz divides his business time primarily between
New York (the location of the Company's principal office and
significant customers) and Florida (where the Company also has
significant business). On October 29, 1996, the Company
entered into a renewable one year Employment Agreement with
Dr. Horowitz, pursuant to which the Company agreed to pay Dr.
Horowitz a salary of $125,000, together with an annual incentive
bonus equal to a percentage of the Company's pre-tax profits.
Such incentive bonus ranges from 6% to 18% of the Company's
pre-tax profits, based on the level of such pre-tax profits. In
addition, upon execution of the agreement, Dr. Horowitz
received options to purchase 750,000 shares of Common Stock,
which options vest as to 150,000 shares on the date of grant and
upon each of the next four anniversary dates thereof. The
Company further agreed to grant Dr. Horowitz options to
purchase an additional 100,000 shares of Common Stock in
consideration of Dr. Horowitz' prior guaranty of the Company's
payments under a certain bank loan agreement. See "Certain
Transactions." The Company pays or reimburses Dr. Horowitz
for the travel expense between New York and Florida, the rental
of an apartment in New York and the rental of cars in both
locations. During fiscal years 1996, 1995, and 1994, these
expenses aggregated $67,200, $65,155, and $64,200,
respectively.
Stock Option Plans
In October 1996, the Company adopted the 1996 Stock
Option Plan (the "Stock Option Plan") pursuant to which
3,000,000 shares of Common Stock are reserved for issuance
upon exercise of options. The Stock Option Plan is designed to
serve as an incentive for retaining qualified and competent
employees, directors, advisors, and consultants. In addition, in
October 1996, the Company amended its two existing stock
option plans, the 1995 Outside Directors Stock Option Plan and
the 1995 Incentive Stock Option Plan, so that no further options
could be granted thereunder.
PROPOSAL TO APPROVE AND RATIFY THE 1996
STOCK OPTION PLAN, AS AMENDED
In September, 1996, the Company adopted its 1996 Stock
Option Plan for employees, including officers, and directors of,
and consultants and advisors to the Company or any subsidiary
corporation (aggregating _______ persons as at __________,
1997). A summary of the 1996 Stock Option Plan, as amended
(the "Plan"), is set forth below. The summary is qualified in its
entirety by reference to the full text of the Plan, a copy of which
is attached hereto as Exhibit A.
The Plan covers 3,000,000 shares of Common Stock (subject
to adjustment to cover stock splits, stock dividends,
recapitalizations and other capital adjustments). The options to
be granted under the Plan will be designated as incentive stock
options or non-incentive stock options by the Board of Directors
or a committee thereof, which also will have discretion as to the
persons to be granted options, the number of shares subject to
the options, and the terms of the option agreements. Only
employees (including officers) of the Company may be granted
incentive stock options. The options to be granted under the
Plan and designated as incentive stock options are intended to
receive incentive stock option tax treatment pursuant to Section
422 of the Internal Revenue Code, as amended (the "Code").
The Plan provides that all options thereunder shall be
exercisable during a period of no more than ten years from the
date of grant (five years for options granted to holders who own
more than 10% of the total combined voting power of all classes
of stock of the Company), depending upon the specific stock
option agreement, and that the option exercise price for incentive
stock options shall be at least equal to 100% of the fair market
value of the Common Stock at the time of grant (110% for
options granted to holders who own more than 10% of the total
combined voting power of all classes of stock of the Company).
In addition, the aggregate fair market value (determined on the
date of grant) of the Common Stock with respect to which
incentive stock options are exercisable for the first time by an
employee during any calendar year shall not exceed $100,000.
The Plan permits optionees whose employment is terminated
without cause and other than by reason of death, disability or
retirement at age 65, to exercise their options prior to the
expiration thereof or within three months from the date of
termination, whichever is earlier, but only to the extent the
holder had the right to exercise such options on the date of
termination. If the employment of an optionee is terminated for
cause and other than by reason of death, disability or retirement
at age 65, any options granted to the optionee will terminate
automatically. If employment is terminated by reason of
disability or retirement at age 65, the optionee may exercise his
options at any time prior to the expiration thereof or within one
year from the date of termination (three months from the date of
termination in the event of termination by reason of retirement
at age 65), whichever is earlier, but only to the extent the holder
had the right to exercise such options on the date of termination.
If employment is terminated by death, the person or persons to
whom the optionee's rights under the option are transferred by
will or the laws of descent and distribution have similar rights of
exercise within three months after such death (but not after the
expiration of the option). Options are not transferable otherwise
than by will or the laws of descent and distribution, or pursuant
to a qualified domestic relations order as defined under the Code
or Title I of the Employee Retirement Income Security Act or
the rules thereunder, and are exercisable during the optionee's
lifetime only by the optionee. Shares subject to options which
expire or terminate may be the subject of future options. The
Plan terminates on September 9, 2006.
If shares are issued to the holder of a non-incentive option
under the Plan; (a) no income will be recognized by the holder
at the time of grant of the option; (b) except as stated below,
upon exercise of the option, the holder will recognize taxable
ordinary income in an amount equal to the excess of the fair
market value of the shares over the option price; (c) if the holder
exercising the option is restricted from selling the shares so
acquired because the holder is an officer or director of the
Company and would be subject to liability under Section 16(b)
of the Exchange Act, then, unless the holder makes an election
to be taxed under the rule of clause (b) above, the holder will
recognize taxable ordinary income, at the time such Section
16(b) restriction terminates, equal to the excess of the fair
market value of the shares at that time over the option price, and
any dividends he or she receives on the shares before that time
will be taxable to him or her as compensation income; (d) the
Company will be entitled to a deduction at the same time and in
the same amount as the holder has income under clause (b) or
(c); and (e) upon a sale of shares so acquired, the holder may
have additional short-term or long-term capital gain or loss.
If shares are issued to the holder of an incentive stock option
under the Plan (a) no income will be recognized by such holder
at the time of the grant of the option or the transfer of shares to
the holder pursuant to his or her exercise of the option; (b) the
difference between the option price and the fair market value of
the shares at the time of exercise will be treated as an item of tax
preference to the holder; (c) no deduction will be allowed to the
Company for federal income tax purposes in connection with the
grant or exercise of the option; and (d) upon a sale or exchange
of the shares after the later of (i) one year from the date of
transfer of the shares to the original holder, or (ii) two years
from the date of grant of the option, any amount realized by the
holder in excess of the option price will be taxed to the holder
as a long-term capital gain, and any loss sustained by the holder
will be a long-term capital loss. If the shares are disposed of
before the holding period requirements described in the pre-
ceding sentence are satisfied, then (aa) the holder will recognize
taxable ordinary income in the year of disposition in an amount
determined under the rules of the Code; (bb) the Company will
be entitled to a deduction for such year in the amount of the
ordinary income so recognized; (cc) the holder may have
additional long-term or short-term capital gain or loss; and (dd)
the tax preference provision might not be applicable.
The Plan provides for the cashless payment of the exercise
price of options granted under the Plan by (a) delivery to the
Company of shares of Common Stock having a fair market value
equal to such purchase price, (b) irrevocable instructions to a
broker to sell shares of Common Stock to be issued upon
exercise of the option, provided such shares are registered and
transferrable, followed by delivery to the Company of the
amount of sale proceeds necessary to pay such purchase price,
and delivery of the remaining cash proceeds less commissions
and brokerage fees to the optionee or delivery of the remaining
shares of Common Stock to the optionee, or (c) by any
combination of the methods of payment described in (a) and (b)
above.
Approval of the proposal to ratify and approve the Plan
requires the affirmative vote of the holders of stock representing
a majority of the votes entitled to be cast at the Meeting.
The Board of Directors recommends that the stockholders
vote FOR ratification and approval of the Plan.<PAGE>
PROPOSAL TO AMEND THE COMPANY'S
CERTIFICATE OF INCORPORATION TO INCREASE
THE NUMBER OF AUTHORIZED SHARES OF
COMMON STOCK
On ___________, 1997, the Board of Directors of the
Company approved an amendment to the Company's Certificate
of Incorporation to increase the number of authorized shares of
Common Stock from 25,000,000 to 40,000,000, and directed
that such amendment (a copy of which is attached hereto as
Exhibit B) be submitted for ratification and approval by the
stockholders of the Company at the Meeting.
Reasons for Increasing the Number of Authorized Shares of
Common Stock
The proposed increase in authorized shares of Common Stock
will enhance the Company's flexibility in connection with
possible future actions, such as acquisitions, financing
transactions, employee benefit plan issuances, stock splits, stock
dividends, and such other corporate purposes that may arise.
Having such authorized Common Stock available for issuance in
the future would give the Company greater flexibility and would
allow additional shares of Common Stock to be issued without
the expense and delay of a special stockholders' meeting. Such
a delay might deny the Company the flexibility the Board views
as important in facilitating the effective use of the Common
Stock. The Company is not presently engaged in any
negotiations with respect to the use of any shares of the
additional authorized Capital Stock, nor are there currently any
commitments, arrangements, or understandings with respect to
the issuance of such shares.
Effect of the Increase
The increase of authorized shares of Common Stock will not
alter the par value of the Common Stock or the rights of
stockholders.
No Right of Appraisal
Under the Delaware General Corporation Law, the State in
which the Company is incorporated, dissenting stockholders are
not entitled to appraisal rights with respect to the Company's
proposed amendment to its Certificate of Incorporation to
increase the number of authorized shares of Common Stock, and
the Company will not provide stockholders with any such right.
Voting Requirement
Approval of the proposal to increase the number of
authorized shares of Common Stock requires the affirmative vote
of the holders of stock representing a majority of the votes
entitled to be cast at the Meeting.
The Board of Directors recommends that the stockholders
vote FOR the proposed amendment to the Company's
Certificate of Incorporation to increase the number of
authorized shares of Common Stock.
CERTAIN RELATIONSHIPS AND RELATED
TRANSACTIONS
Mr. Kenneth Ross Wolfe, a director of the Company,
provides legal services to the Company. Mr. Wolfe received
approximately $33,000 in legal fees in fiscal year 1996 and
approximately $69,000 in fiscal year 1995.
From June 1994 to November 1995, Dr. Irwin A. Horowitz,
the Chairman of the Board, Chief Executive Officer, and
President of the Company, guaranteed the Company's payments
under certain bank loan agreements. Such loans were in the
aggregate principal amount of $1,185,000, and as of December
1995, were paid in full, at which time the total balance was
$1,007,459. In consideration for such guaranty, in August 1996,
Dr. Horowitz received options to purchase 100,000 shares of
Common Stock at an exercise price of $3.25 per share.
During the fiscal year ended November 30, 1996, Dr.
Horowitz loaned the Company funds to cover its working capital
needs and to finance acquisitions on a number of occasions, in
the net aggregate principal amount of $887,000. In
consideration thereof, and for Dr. Horowitz's agreement that
such loans would not bear interest, on August 16, 1996, the
Company delivered to Dr. Horowitz a promissory note in the
amount of $668,000 (the principal balance on that date), payable
on demand after June 1, 1997, and a five-year warrant to
purchase 427,520 shares of Common Stock at an exercise price
of $3.125 per share. On December 17, 1996, Dr. Horowitz
agreed to extend to December 2, 1997 the due date of the loans
made on or before November 30, 1996, as well as all subsequent
loans, in the net aggregate principal amount of $887,000. In
consideration thereof and for Dr. Horowitz's agreement that such
loans would be interest free, the Company agreed that the per
share exercise price of the warrants granted in August 1996 as
well as of the options granted to him in October 1996 pursuant
to his Employment Agreement with the Company, would be
reduced to $2.375 per share, the then current fair market value
of the Common Stock. In addition, the Company granted to Dr.
Horowitz additional incentive and non-incentive options to
purchase an aggregate of 750,000 shares of Common Stock, of
which the incentive options (for 38,270 shares) are exercisable
at $2.613 per share and the non-incentive options (for 711,730
shares) are exercisable at $2.375 per share.
On May 6, 1997, in consideration for additional interest-free
loans aggregating approximately $555,000 (which amount
includes reduced salary payments), made by Dr. Horowitz from
December 1, 1996 through April 2, 1997, which loans shall not
become due upon demand until December 1, 1997, the Company
granted to Dr. Horowitz additional warrants to purchase 350,000
shares of Common Stock, at an exercise price of $1.9375 per
share, all of which warrants are immediately exercisable.
RATIFICATION OF APPOINTMENT OF INDEPENDENT
AUDITORS
The Board of Directors has selected the accounting firm of
Hoberman, Miller, Goldstein & Lesser, P.C. to serve as
independent auditors of the Company to perform the annual audit
for year ending November 30, 1997 and proposes the ratification
of such decision. A representative of Hoberman, Miller,
Goldstein & Lesser, P.C. is expected to be present at the
Meeting. He or she will have the opportunity to make a
statement if he or she so desires to do so and will be available to
respond to appropriate stockholder questions.
The Board of Directors recommends a vote FOR
ratification of the selection of Hoberman, Miller, Goldstein
& Lesser, P.C. as independent auditors for the Company for
the year ending November 30, 1997.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING
COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as
amended, requires the Company's officers and directors, and
persons who own more than 10% of a registered class of the
Company's equity securities, to file reports of ownership and
changes in ownership with the SEC and NASDAQ. Officers,
directors and greater than 10% beneficial owners are required by
SEC regulations to furnish the Company with copies of all
Section 16(a) forms they file.
Based solely on review of the copies of such forms furnished
to the Company, the Company believes that during the year
ended November 30, 1996, its officers, directors, and greater
than 10% beneficial owners complied with all applicable Section
16(a) filing requirement, except that on one occasion Dr. Irwin
A. Horowitz failed to timely file a Form 4.
STOCKHOLDERS PROPOSAL
Stockholders who wish to present proposals for action at the
1998 Annual Meeting of Stockholders should submit their
proposals in writing to the Secretary of the Company at the
address of the Company set forth on the first page of this Proxy
Statement. Proposals must be received by the Secretary of the
Company no later than April 15, 1998 for inclusion in next
year's proxy materials.
ANNUAL REPORT TO STOCKHOLDERS
The Annual Report to Stockholders of the Company for the
year ended November 30, 1996, including audited financial
statements, has been mailed to the stockholders concurrently
herewith, but such report is not incorporated in this Proxy
Statement and is not deemed to be a part of the proxy solicitation
material.
OTHER MATTERS
The Board of Directors of the Company does not know of
any other matters that are to be presented for action at the
Meeting. If any other matters are properly brought before the
Meeting or any adjournments thereof, the persons named in the
enclosed proxy will have the discretionary authority to vote all
proxies received with respect to such matters in accordance with
their best judgments.
By Order of the Board of Directors
Kenneth Ross Wolfe, Secretary
Valley Stream, New York
August __, 1997
STOCKHOLDERS ARE URGED TO SPECIFY THEIR
CHOICES, DATE, SIGN, AND RETURN
THE ENCLOSED PROXY IN THE ENCLOSED ENVELOPE.
PROMPT RESPONSE IS HELPFUL AND YOUR
COOPERATION WILL BE APPRECIATED.<PAGE>
EXHIBIT A
DIVERSIFAX, INC.
1996 STOCK OPTION PLAN
(as amended through December 17, 1996)
1. Purpose of Plan
The purpose of this 1996 Stock Option Plan (the "Plan") is
to further the growth and development of DIVERSIFAX, INC.
(the "Company") by encouraging and enabling employees,
including officers, and directors of, and consultants and advisors
to, the Company to obtain a proprietary interest in the Company
through the ownership of stock, thereby providing such persons
with an added incentive to continue in the employ or service of
the Company and to stimulate their efforts in promoting the
growth, efficiency and profitability of the Company, and
affording the Company a means of attracting to its service
persons of outstanding quality.
2. Shares of Stock Subject to the Plan
Subject to the provisions of Section 12 hereof, an aggregate
of 3,000,000 shares of the common stock, par value $.001 per
share, of the Company ("Common Stock") shall be reserved for
issuance upon the exercise of options which may be granted from
time to time in accordance with the Plan. Such shares may be,
in whole or in part, as the Board of Directors of the Company
("Board of Directors") shall from time to time determine,
authorized but unissued shares or issued shares which have been
reacquired by the Company. If, for any reason, an option shall
lapse, expire or terminate without having been exercised in full,
the unpurchased shares underlying these options shall (unless the
Plan shall have been terminated) again be available for the
purpose of the Plan.
3. Administration
(a) The Board of Directors shall administer the Plan and,
subject to the provisions of the Plan, shall have authority in its
discretion to determine and designate from time to time those
persons eligible for a grant of options under the Plan, those
persons to whom options are to be granted, the purchase price of
the shares covered by each option, the time or times at which
options shall be granted, and the manner in which said options
are exercisable. In making such determination, the Board of
Directors may take into account the nature of the services
rendered by the respective persons, their present and potential
contributions to the Company's success and such other factors as
the Board of Directors in its sole discretion shall deem relevant.
Subject to the express provisions of the Plan, the Board of
Directors shall also have authority to interpret the Plan, to
prescribe, amend and rescind rules and regulations relating to it,
to determine the terms and provisions of the instruments by
which options shall be evidenced, which shall not be inconsistent
with the terms of the Plan, and to make all other determinations
necessary or advisable for the administration of the Plan, all of
which determinations shall be final, binding and conclusive.
(b) The Board of Directors may, at its discretion, in
accordance with the provisions of Article II, Section 6 of the
Company's By-Laws, by resolution adopted by the affirmative
vote of a majority of the entire Board of Directors, appoint from
among its members a Stock Option Plan Committee (the
"Committee"). Such Committee shall be composed of two or
more directors and shall have and may exercise any and all of
the powers relating to the administration of the Plan and the
grant of options hereunder as are set forth above in Section 3(a),
as the Board of Directors shall confer and delegate. The Board
of Directors shall have the power at any time to fill vacancies in,
to change the membership of, or to discharge, such Committee.
The Committee shall select one of its members as its Chairman
and shall hold its meetings at such time and at such places as it
shall deem advisable. A majority of such Committee shall
constitute a quorum and such majority shall determine its action.
The Committee shall keep minutes of its proceedings and shall
report the same to the Board of Directors at the meeting next
succeeding. No director or member of the Committee shall be
liable for any action or determination made in good faith with
respect to the Plan or any option granted thereunder.
4. Persons To Whom Shares May Be Granted
Options may be granted to persons who are, at the time of
the grant, employees, including officers, and directors of, or
consultants or advisors to, the Company or any subsidiary
corporation (as defined in Section 425 of the Internal Revenue
Code of 1986, as amended (the "Code"), and herein referred to
as "Subsidiary"), including part-time employees, as the Board of
Directors (or Committee) shall select from time to time from
among those nominated by the Board of Directors (or
Committee). For the purposes of this Plan, options may only be
granted to those consultants and advisors who shall render bona
fide services to the Company and such services must not be in
connection with the offer or sale of securities in a capital raising
transaction. Subject to the provisions hereinafter set forth,
options granted under the Plan shall be designated either (i)
"Incentive Stock Options" (which term, as used herein, shall
mean options intended to be "incentive stock options" within the
meaning of Section 422 of the Code) or (ii) "Non-Incentive
Stock Options" (which term, as used herein, shall mean options
not intended to be incentive stock options" within the meaning
of Section 422 of the Code). Each option granted to a person
who is solely a director of, or consultant or advisor to, the
Company or a Subsidiary on the date of the grant shall be
designated a Non-Incentive Stock Option.
The Board of Directors (or Committee) may grant, at any
time, new options to a person who has previously received
options whether such prior options are still outstanding, have
previously been exercised in whole or in part, have expired, or
are cancelled in connection with the issuance of new options.
The purchase price of the new options may be established by the
Board of Directors (or Committee) without regard to the existing
option price.
5. Option Price
(a) The purchase price of the Common Stock underlying
each option shall be determined by the Board of Directors (or
Committee), which determination shall be final, binding and
conclusive; provided, however, that in no event shall the
purchase price of Incentive Stock Options be less than 100%
(110% in the case of optionees who own more than 10% of the
total combined voting power of all classes of stock of the
Company) of the fair market value of the Common Stock on the
date the option is granted. In determining such fair market value,
the Board of Directors (or Committee) shall consider (i) the
closing price of the Common Stock on the date on which the
option is granted (if such Common Stock is listed on a national
securities exchange); (ii) the closing bid prices as quoted by the
National Quotation Bureau or a recognized dealer in the
Common Stock on the date of grant (if such Common Stock is
not listed on such an exchange); and (iii) such other factors as
the Board of Directors (or Committee) shall deem appropriate or
which may be relevant under applicable federal tax laws and
Internal Revenue rules and regulations. For purposes of the Plan,
the date of grant of an option shall be the date on which the
Board of Directors (or Committee) shall by resolution duly
authorize such option.
(b) The aggregate fair market value (as defined above),
determined at the time the Incentive Stock Options are granted,
of the Common Stock with respect to which Incentive Stock
Options are exercisable for the first time by an employee during
any calendar year shall not exceed $100,000. Non-Incentive
Stock Options shall not be subject to the limitations of this
paragraph 5(b).
6. Exercise of Options
(a) Subject to the provisions set forth in Sections 9, 10 and
11 hereof, no option shall be exercisable unless the holder
thereof shall have been an employee, including an officer or
director of the Company and/or a Subsidiary, from the date of
the granting of the option until the date of exercise.
(b) The number of shares which are issued pursuant to the
exercise of an option shall be charged against the maximum limi-
tations on shares set forth in Section 2 hereof.
(c) The exercise of an option shall be made contingent upon
receipt by the Company from the holder thereof of (i) if deemed
necessary by the Company, a written representation and
acknowledgement that at the time of such exercise it is his then
present intention to acquire the option shares for investment and
not with a view to distribution or resale thereof, that he knows
that the Company is not obligated to register the option shares
and that the option shares may have to be held indefinitely unless
an exemption from the registration requirements of the Securities
Act of 1933, as amended, is available or the Company has
registered the shares underlying the options, that the Company
may place a legend on the certificate(s) evidencing the option
shares reflecting the fact that they were acquired for investment
and cannot be sold or transferred unless registered under the
Securities Act of 1933, as amended, or unless counsel for the
Company is satisfied that the circumstances of the proposed
transfer do not require such registration, and (ii) payment in full
of the purchase price of the shares being purchased. Payment
may be made (a) in cash, (b) by certified check payable to the
order of the Company in the amount of such purchase price, (c)
by delivery to the Company of shares of Common Stock having
a fair market value equal to such purchase price, (d) by
irrevocable instructions to a broker to sell shares of Common
Stock to be issued upon exercise of the option, provided such
shares are registered and transferable, and to deliver to the
Company the amount of sale proceeds necessary to pay such
purchase price and to deliver the remaining cash proceeds, less
commissions and brokerage fees, to the optionee, or (e) by any
combination of the methods of payment described in (a) through
(d) above.
7. Term of Options
The period during which each option granted hereunder shall
be exercisable shall be determined by the Board of Directors (or
Committee); provided, however, that no option shall be exercis-
able for a period exceeding ten (10) years (five (5) years in the
case of optionees who own more than 10% of the total combined
voting power of all classes of stock of the Company) from the
date the options are granted.
8. Non-Transferability of Options
No option granted pursuant to this Plan shall be subject to
anticipation, sale, assignment, pledge, encumbrance or charge or
otherwise transferable except by will or the laws of descent and
distribution, or pursuant to a qualified domestic relations order,
as defined by the Code or Title I of the Employee Retirement
Income Security Act or the rules thereunder, and an option shall
be exercisable during the lifetime of the holder thereof only by
such holder.
9. Termination of Services
In the event that an employee, including an officer, or
director to whom an option has been granted under the Plan shall
cease to be an employee, officer or director of the Company or
a Subsidiary, by reason of a termination of such relationship
without cause and other than by reason of death, disability or
retirement at age 65, such holder may exercise such option at
any time prior to the expiration date of the option or within three
months after the date of termination, whichever is earlier, but
only to the extent the holder had the right to exercise such option
on the date of termination. In the event that an employee,
officer or director to whom an option has been granted under the
Plan shall cease to be an employee, officer or director of the
Company or a Subsidiary, by reason of a termination of such
relationship for cause and other than by reason of death,
disability or retirement at age 65, such options shall forthwith
automatically terminate, lapse and expire. So long as the holder
of an option shall continue to be in the employ, or continue to be
a director, of the Company or one or more of its Subsidiaries,
such holder's option shall not be affected by any change of duties
or position. Absence on leave approved by the employing
corporation shall not be considered an interruption of
employment for any purpose under the Plan. The granting of an
option in any one year shall not give the holder of the option any
rights to similar grants in future years or any right to be retained
in the employ or service of the Company or any of its
Subsidiaries or interfere in any way with the right of the
Company or any such Subsidiary to terminate such holder's
employment or services at any time. Notwithstanding the
foregoing, no option may be exercised after ten years from the
date of its grant.
10. Retirement or Disability of Holder of Option
If any employee, including an officer or director to whom an
option has been granted under the Plan shall cease to be an
employee, officer or director of the Company or a Subsidiary,
by reason of disability or retirement at age 65, such holder may
exercise such option at any time prior to the expiration date of
the option or within three months (one year in the case of
termination by reason of disability) after the date of termination
for such reason, whichever is earlier, but only to the extent the
holder had the right to exercise such option on the date of
termination. Notwithstanding the foregoing, no option may be
exercised after ten years from the date of its grant.
11. Death of Holder of Option
If any employee, including an officer, or director to whom
an option has been granted under the Plan shall cease to be an
employee, officer or director of the Company or a Subsidiary by
reason of death, or such holder of an option shall die within
three months after termination by reason of retirement at age 65
or otherwise, or in the case of the death of an advisor or
consultant to whom an option has been granted under the Plan,
the option may be exercised by the person or persons to whom
the optionee's rights under the option are transferred by will or
by the laws of descent and distribution at any time prior to the
expiration date of the option or, in the case of an employee,
officer or director, within three months from the date of death,
whichever is earlier, but only to the extent the holder of the
option had the right to exercise such option on the date of such
termination. Notwithstanding the foregoing, no option may be
exercised after ten years from the date of its grant.
12. Adjustments Upon Changes in Capitalization
If the shares of Common Stock outstanding are changed in
number, kind or class by reason of a stock split, combination,
merger, consolidation, reorganization, reclassification, exchange
or any capital adjustment, including a stock dividend, or if any
distribution is made to shareholders other than a cash dividend
and the Board of Directors (or Committee) deems it appropriate
to make an adjustment, then (i) the aggregate number and
class of shares that may be issued or transferred pursuant to
Section 2, (ii) the number and class of shares which are issuable
under outstanding options, and (iii) the purchase price to be paid
per share under outstanding options, shall be adjusted as
hereinafter provided.
Adjustments under this Section 12 shall be made in a propor-
tionate and equitable manner by the Board of Directors (or
Committee), whose determination as to what adjustments shall be
made, and the extent thereof, shall be final, binding and
conclusive. In the event that a fraction of a share results from the
foregoing adjustment, said fraction shall be eliminated and the
price per share of the remaining shares subject to the option
adjusted accordingly.
In the event of a liquidation of the Company, or a merger,
reorganization or consolidation of the Company with any other
corporation in which the Company is not the surviving
corporation or the Company becomes a wholly owned subsidiary
of another corporation, any unexercised options theretofore
granted under the Plan shall be deemed cancelled unless the
surviving corporation in any such merger, reorganization or
consolidation elected to assume the options under the Plan or to
issue substitute options in place thereof; provided, however, that,
notwithstanding the foregoing, if such options would otherwise
be cancelled in accordance with the foregoing, the optionee shall
have the right, exercisable during a ten-day period immediately
prior to such liquidation, merger or consolidation, to exercise the
option in whole or in part. The granting of an option pursuant to
this Plan shall not affect in any way the right or power of the
Company to make adjustments, reorganizations, reclassifications
or changes of its capital or business structure or to merge,
consolidate, dissolve, liquidate or sell or transfer all or any part
of its business or assets.
13. Vesting of Rights Under Options
Nothing contained in this Plan or in any resolution adopted
or to be adopted by the Board of Directors (or Committee) or the
shareholders of the Company shall constitute the vesting of any
rights under any option. The vesting of such rights shall take
place only when a written agreement shall be duly executed and
delivered by and on behalf of the Company to the person to
whom the option shall be granted.
14. Rights as a Shareholder
A holder of an option shall have no rights of a shareholder
with respect to any shares covered by his option until the date of
issuance of a stock certificate to him for such shares.
15. Termination and Amendment
The Board of Directors may, at any time, terminate or sus-
pend this Plan or make such modifications or amendments
thereto as it shall deem advisable; provided, however, that no
termination, modification or amendment shall adversely affect
the rights of a holder of an option previously granted under the
Plan.
16. Modification, Extension and Renewal of Options
Subject to the terms and conditions and within the limitations
of the Plan, the Board of Directors (or Committee) may modify,
extend or renew outstanding options granted under the Plan, or
accept the surrender of outstanding options (to the extent not
theretofore exercised) and authorize the granting of new options
in substitution therefor. Notwithstanding the foregoing, no
modification of an option shall, without the consent of the holder
thereof, alter or impair any rights or obligations under any
option theretofore granted under the Plan.
17. Indemnification
In addition to such other rights of indemnification as they
may have as members of the Board of Directors (or Committee),
the members of the Board of Directors (or Committee)
administering the Plan shall be indemnified by the Company
against reasonable expenses, including attorneys' fees, actually
and necessarily incurred in connection with the defense of any
action, suit or proceeding, or in connection with any appeal
therein, to which they or any of them may be a party by reason
of any action taken or failure to act under or in connection with
the Plan or any option granted thereunder, and against all
amounts paid by them in settlement thereof (provided such
settlement is approved by independent legal counsel selected by
the Company) or paid by them in satisfaction of a judgment in
any action, suit or proceeding, except in relation to matters as to
which it shall be adjudged in such action, suit, or proceeding that
such member is liable for negligence or misconduct in the
performance of his duties, provided that within 60 days after
institution of any such action, suit or proceeding, the member
shall in writing offer the Company the opportunity, at its own
expense, to handle and defend the same.
18. Effective Date
The Plan shall become effective on September 9, 1996 and
shall terminate on the close of business on September 9, 2006
and no option may be granted under the Plan thereafter, but such
termination shall not affect any option theretofore granted.
<PAGE>
EXHIBIT B
CERTIFICATE OF AMENDMENT
OF THE
CERTIFICATE OF INCORPORATION
OF
DIVERSIFAX, INC.
(Pursuant to Section 242 of the General Corporation Law of
the State of Delaware)
Diversifax, Inc. (the "Corporation"), a corpo-
ration organized and existing under the General Corporation Law
of the State of Delaware (the "GCL"), certifies as follows:
A. The present name of the Corporation is
Diversifax, Inc. The name under which the Corporation was
originally incorporated was Berkeley Commodities Corp.
B. The date of filing of the Corporation's
certificate of incorporation (the "Certificate of Incorporation")
with the Secretary of State of the State of Delaware was
February 28, 1989.
C. Article 4 of the Certificate of
Incorporation is hereby amended and substituted in its entirety so
that it shall now read as follows:
"4. The aggregate number of shares of
all classes of the capital stock which the
Corporation shall have authority to issue its
forty-one million (41,000,000), of which forty
million (40,000,000) shares shall be Common
Stock, par value $.001 per share, and one
million (1,000,000) shares shall be Open Stock,
par value $.001 per share. Shares of Open
Stock may be issued from time to time in one or
more classes or one or more series within any
class thereof, in any manner permitted by law,
as determined from time to time by the board of
directors, and stated in the resolution or
resolutions providing for the issuance of such
shares adopted by the board of directors
pursuant to authority hereby vested in it, each
class or series to be appropriately designated,
prior to the issuance of any shares thereof, by
some distinguishing letter, number, designation
or title. All shares of stock in such classes or
series may be issued for such consideration and
have such voting powers, full or limited, or no
voting powers, and shall have such designations,
preferences and relative, participating, optional
or other special rights, and qualifications,
limitations or restrictions thereof, permitted by
law, as shall be stated and expressed in the
resolution or resolutions providing for the
issuance of such shares adopted by the board of
directors pursuant to authority hereby vested in
it. The number of shares of stock of any series,
so set forth in such resolution or resolutions may
be increased (but not below the total number of
authorized shares) by resolutions adopted by the
board of directors pursuant to authority hereby
vested in it."
D. This Certificate of Amendment to the
Certificate of Incorporation was authorized by affirmative vote
of the holders of a majority of the outstanding shares entitled to
vote thereon at a meeting of stockholders pursuant to Section 242
of the GCL.
E. This Certificate of Amendment shall
become effective on __________, 1997.
IN WITNESS WHEREOF, I hereunto sign my
name and affirm that the statements made herein are true under
penalties of perjury this ____ day of _________________, 1997.
DIVERSIFAX, INC.
By
Irwin A. Horowitz, President
PRELIMINARY COPY
PROXY
DIVERSIFAX, INC.
39 Stringham Avenue
Valley Stream, N.Y. 11580
This Proxy is solicited on behalf of the Board of Directors
The undersigned, acknowledging receipt of the proxy
statement dated August __, 1997 of Diversifax, Inc., hereby
constitutes and appoints Irwin A. Horowitz and Kenneth Ross
Wolfe, and each or any of them, attorney, agent, and proxy of
the undersigned, with full power of substitution to each of them,
for and in the name, place, and stead of the undersigned, to
appear and vote all the shares of stock of Diversifax, Inc.,
standing in the name of the undersigned on the books of said
corporation on July 31, 1997 at the Annual Meeting of
Stockholders of Diversifax, Inc., to be held at the offices of
Breslow & Walker, LLP, 100 Jericho Quadrangle, Jericho, New
York, on September 3, 1997, at 11:00 a.m., New York City
time, and all adjournments thereof.
When properly executed, this proxy will be voted as
designated by the undersigned.
If no choice is specified, this proxy will be voted (i)
FOR the election of the nominees for directors herein, (ii) FOR
the proposed ratification and approval of the Company's 1996
Stock Option Plan, as amended, (iii) FOR the proposed
amendment to the Company's Certificate of Incorporation to
increase the number of authorized shares, and (iv) FOR
ratification of the appointment of Hoberman, Miller, Goldstein
& Lesser, P.C. as independent auditors.
6. ELECTION OF DIRECTORS
( ) FOR all nominees listed below (except as written
in on the line below)
Irwin A. Horowitz, Eugene Bilotti, Kenneth Ross
Wolfe.
( ) WITHHOLD AUTHORITY
( ) For ALL Nominees
( ) For the individual(s) listed below
(Instruction: To withhold authority to vote for any
individual nominee, please write in name on line below)
( ) ABSTAIN
7. PROPOSAL TO RATIFY AND APPROVE THE
COMPANY'S 1996 STOCK OPTION PLAN, AS
AMENDED.
( ) FOR ( ) AGAINST ( ) ABSTAIN
8. PROPOSAL TO AMEND THE COMPANY'S
CERTIFICATE OF INCORPORATION TO INCREASE
THE NUMBER OF AUTHORIZED SHARES.
( ) FOR ( ) AGAINST ( ) ABSTAIN
9. PROPOSAL TO RATIFY THE APPOINTMENT OF
HOBERMAN, MILLER, GOLDSTEIN & LESSER,
P.C. AS INDEPENDENT AUDITORS.
( ) FOR ( ) AGAINST ( ) ABSTAIN
10. FOR SUCH OTHER MATTERS THAT MAY
PROPERLY COME BEFORE THE MEETING AND
ANY ADJOURNMENTS THEREOF.
Date
Print Name
Signature
Signature, if held jointly
When shares are held by joint tenants, both
should sign. When signing as attorney,
administrator, trustee, or guardian, please give
full title as such. If a corporation, please sign
in full corporate name by President or other
authorized officer. If a partnership, please sign
in partnership name by authorized person.
PLEASE MARK, SIGN, DATE, AND RETURN THIS PROXY
PROMPTLY IN THE ENCLOSED ENVELOPE.
