<PAGE>
As filed with the Securities and Exchange Commission on December 5, 1997
Registration No. 333-
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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DIVERSIFAX, INC.
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(Exact name of Registrant as Specified in Its Charter)
DELAWARE
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(State or other jurisdiction of incorporation or organization)
13-3637458
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(I.R.S. Employer Identification Number)
39 Stringham Avenue
Valley Stream, New York 11580
(516) 872-0650
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(Address, Including Zip Code, and Telephone Number, Including
Area Code, of Registrant's Principal Executive Offices)
IRWIN A. HOROWITZ, PRESIDENT
DiversiFax, Inc.
39 Stringham Avenue
Valley Stream, New York 11580
(516) 872-0650
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(Name, Address, Including Zip Code, and Telephone Number,
Including Area Code, of Agent For Service)
----------------------------
Copies of all communications, including all communications sent to the agent
for service, should be sent to:
GARY T. MOOMJIAN, ESQ.
Breslow & Walker, LLP
767 Third Avenue
New York, New York 10017
(212) 832-1930
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Approximate date of commencement of proposed sale to the public:
From time to time after this Registration Statement becomes effective.
If the only securities being registered on this form are being offered
pursuant to dividend or interest reinvestment plans, please check the
following box. / /
If any of the securities being registered on this form are to be offered
on a delayed or continuous basis pursuant to Rule 415 under the Securities
Act of 1933, other than securities offered only in connection with dividend
or interest reinvestment plans, check the following box. /X/
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. / /___________
If this form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /___________
If delivery of the prospectus is expected to be made pursuant to Rule
434, please check the following box. / /
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<PAGE>
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
Proposed
Maximum Proposed
Amount Offering Maximum Amount of
Title of Each Class of Securities to be Price Per Aggregate Registration
to be Registered Registered Share Offering Price Fee
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<S> <C> <C> <C> <C>
Common Stock, par value $.001 per share(1) 100,000 $.375(2) $375,000.00 $110.63
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Common Stock, par value $.001 per share(3) 29,362 $.375(2) $14,760.75 $4.35
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Common Stock, par value $.001 per share(4) 29,362 $.375(2) $14,760.75 $4.35
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Common Stock, par value $.001 per share(5) 40,000 $.375(2) $15,000.00 $4.43
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Common Stock, par value $.001 per share(6) 50,000 $.375(2) $18,750.00 $5.53
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Common Stock, par value $.001 per share(7) 247,500 $.375(2) $92,812.50 $27.38
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Common Stock, par value $.001 per share(8) 1,375,000 $.375(2) $515,625.00 *
- ----------------------------------------------------------------------------------------------------------------
Common Stock, par value $.001 per share(9) 66,666 $.375(2) $24,999.75 *
- ----------------------------------------------------------------------------------------------------------------
Common Stock, par value $.001 per share(10) 331,540 $.375(2) $124,327.50 $36.68
- ----------------------------------------------------------------------------------------------------------------
Common Stock, par value $.001 per share(11) 61,600 $.375(2) $23,100.00 $6.81
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Total............................................................................................... $201.00
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- ----------------------------------------------------------------------------------------------------------------
</TABLE>
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* Filing Fee not required. Previously registered and included herein
pursuant to Rule 429.
(1) Represents shares of Common Stock underlying three-year warrants,
expiring January 26, 1998, to purchase shares of Common Stock at $1.50
per share. The resale of such shares is covered hereby.
(2) Represents the average of the bid and asked prices as quoted by NASDAQ
on December 2, 1997. Estimated solely for purposes of calculating the
registration fee pursuant to Rule 457(c) under the Securities Act of
1933, as amended.
(3) Represents shares of Common Stock which may be sold by Selling
Stockholders who acquired these shares in a private placement
consummated in 1997 (the "1997 Private Placement").
(4) Represents shares of Common Stock underlying three-year warrants,
expiring from November 14, 1999 to January 5, 2000, to purchase shares
of Common Stock at $2.00 per share issued in connection with the 1997
Private Placement. The resale of such shares is covered hereby.
(5) Represents shares of Common Stock underlying three-year Warrants,
expiring November 15, 1999, to purchase shares of Common Stock at $3.00
per share (the "$3.00 Warrants"). The resale of such shares is covered
hereby.
(6) Represents shares of Common Stock underlying five-year Warrants,
expiring November 22, 2001, to purchase shares of Common Stock at $3.50
per share. The resale of such shares is covered hereby.
(7) Represents shares of Common Stock which may be issued by the Company as
dividends on its Series D Convertible Preferred Stock. The resale of
such shares is covered hereby.
(8) Represents shares of Common Stock issuable upon conversion of the
Series D Convertible Preferred Stock.
(9) Represents shares of Common Stock which may be sold by Selling
Stockholders who acquired these shares, upon conversion of shares of
the Series D Convertible Preferred Stock.
(10) Represents shares of Common Stock underlying three-year Warrants,
expiring September 15, 2000, to purchase shares of Common Stock at
$.78125 per share (the "$.78125 Warrants"). The resale of such shares
is covered hereby.
(11) Represents shares of Common Stock underlying three-year Warrants,
expiring September 29, 2000, to purchase shares of Common Stock at
$.8125 per share (the "$.8125 Warrants"). The resale of such shares is
covered hereby.
Pursuant to Rule 416 of the Securities Act of 1933, this Registration
Statement also relates to such additional indeterminate number of shares of
Common Stock as may become issuable by reason of stock splits, dividends and
similar adjustments.
<PAGE>
-------------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE
OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS
REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH
SECTION 8(a) OF THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION
STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE
COMMISSION, ACTING PURSUANT TO SECTION 8(a), MAY DETERMINE.
<PAGE>
Subject to Completion, dated December 5, 1997
DIVERSIFAX, INC.
2,331,030 Shares of Common Stock
This Prospectus covers the resale of (i) 100,000 shares of common stock,
par value $.001 per share ("Common Stock"), of DiversiFax, Inc. (the
"Company") underlying three-year warrants, expiring January 26, 1998, to
purchase Common Stock at $1.50 per share (the "$1.50 Warrants") currently
owned by Selling Stockholders, (ii) up to 29,362 shares of Common Stock,
currently owned by Selling Stockholders who acquired such shares in a private
placement completed in January 1997 (the "1997 Private Placement"), (iii)
29,362 shares of Common Stock underlying three-year warrants, expiring from
November 14, 1999 to January 5, 2000, to purchase Common Stock at $2.00 per
share issued in connection with the 1997 Private Placement (the "Private
Placement Warrants") currently owned by Selling Stockholders, (iv) 40,000
shares of Common Stock underlying three-year warrants, expiring November 15,
1999, to purchase Common Stock at $3.00 per share (the "$3.00 Warrants")
currently owned by Selling Stockholders, (v) 50,000 shares of Common Stock
underlying five-year warrants, expiring November 22, 2001, to purchase Common
Stock at $3.50 per share (the "$3.50 Warrants") currently owned by a Selling
Stockholder, (vi) 331,540 shares of Common Stock underlying three year
warrants, expiring September 15, 2000, to purchase Common Stock at $.78125
per share (the "$.78125 Warrants"), currently owned by a Selling Stockholder,
(vii) 61,600 shares of Common Stock underlying three year warrants, expiring
September 29, 2000, to purchase Common Stock at $.8125 per shares (the
"$.8125 Warrants") currently owned by a Selling Stockholder (all of the above
listed warrants are collectively referred to herein as the "Warrants"),
(viii) 247,500 shares of Common Stock which may be issued by the Company as
dividends on the Series D Convertible Preferred Stock, (ix) 66,666 shares of
Common Stock issued upon conversion of shares of the Series D Convertible
Preferred Stock, currently owned by Selling Stockholders and (x) 1,375,000
shares of Common Stock issuable upon conversion of the Series D Convertible
Preferred Stock. All of the Warrants are subject to antidilution provisions
described in the Warrants. All of the shares of Common Stock registered
hereunder, from time to time, may be sold by the Selling Stockholders named
herein. See "Selling Stockholders."
The Common Stock is traded on the NASDAQ Small Cap Market ("Nasdaq")
under the symbol "DFAX." On December 2, 1997, the last reported sale price
of the Common Stock was $.375 per share.
-------------------------------
THESE ARE SPECULATIVE SECURITIES. THIS OFFERING INVOLVES A HIGH DEGREE
OF RISK AND SHOULD NOT BE PURCHASED BY INVESTORS WHO CANNOT AFFORD THE LOSS
OF THEIR ENTIRE INVESTMENT. SEE "RISK FACTORS" COMMENCING ON PAGE 5 OF THIS
PROSPECTUS.
-------------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR BY ANY STATE SECURITIES COMMISSION NOR
HAS THE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
The date of this Prospectus is _______, 1997
<PAGE>
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in
accordance therewith files reports, proxy statements and other information
with the Securities and Exchange Commission (the "Commission"). Reports,
proxy statements and other information filed by the Company can be inspected
and copied at the public reference facilities maintained by the Commission at
450 Fifth Street, N.W., Washington, D.C. 20549 and at the following Regional
Offices of the Commission: Chicago Regional Office, Citicorp Center, 500
West Madison Street, Suite 1400, Chicago, Illinois 60661-2511 and New York
Regional Office, Seven World Trade Center, Suite 1300, New York, New York
10048. Copies of such materials can be obtained from the Public Reference
Section of the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549,
at prescribed rates, or from the Commission's Website at http://www.sec.gov.
In addition the Common Stock is quoted on the Nasdaq Small Cap Market under
the symbol DFAX. Reports and other information concerning the Company may be
inspected at the offices of the NASDAQ Stock Market, Inc., 1735 K Street,
N.W., Washington, D.C. 20006.
DOCUMENTS INCORPORATED BY REFERENCE
The following documents are incorporated by reference herein:
1. Annual Report on Form 10-KSB for the fiscal year ended
November 30, 1996.
2. Quarterly Reports on Form 10-QSB for the quarters ended
February 28, 1997, May 31, 1997 and August 31, 1997.
3. The description of the Company's Common Stock, as set forth
in the Company's Registration Statement of Securities on
Form 8-A, dated December 8, 1992, registered under Section
12(g) of the Exchange Act.
Each document filed by the Company subsequent to the date of this
Prospectus pursuant to Section 13(a), 13(c), 14 or 15(d) of the Exchange Act
prior to the termination of this offering shall be deemed to be incorporated
by reference in this Prospectus and shall be a part hereof from the date of
filing for such document.
The Company hereby undertakes to provide without charge to each person,
including any beneficial owner, to whom a prospectus is delivered, upon
written or oral request of such person, a copy of any and all of the
information that has been incorporated by reference in the Prospectus (not
including exhibits to the information that is incorporated by reference into
the information that the Prospectus incorporates). Request may be made to
DiversiFax, Inc., 39 Stringham Avenue, Valley Stream, New York 11580, Attn:
Dr. Irwin A. Horowitz (516) 872-0650.
2
<PAGE>
THE COMPANY
Since November 1, 1993, the Company, through its wholly-owned subsidiary
IMSG Systems, Inc. ("IMSG") and IMSG's affiliated companies, National Copy
Corp., Capital Copy Corp. and Advanced Business Systems, Inc., has been
engaged in the business of owning, leasing, operating and servicing coin and
debit card pay-per-copy photocopiers and microfilm reader-printers and
accessory equipment. The Company operates its copiers in various states
throughout the Eastern United States, as well as Wisconsin and Illinois, in
differing sites including libraries, courthouses, colleges, drug stores,
office supply stores and similar high traffic outlets. The Company has over
2,500 copiers and accessories at various locations. Generally, the Company
is responsible for the collection of payments from each site and, at most
locations, the site operators share in the revenues derived from the copy
sales at their site. The Company has the ability to service and repair its
copiers seven days a week. Users can pay per copy by inserting coins in the
copier or by using a debit access card, which the user may purchase at the
site of the copier.
The Company commenced its Smart Switch-TM- operations in April 1995 upon
the acquisition of the Smart Switch from Faxit Corporation. The Smart Switch
is a computerized switching device which has an automated switching system to
permit the use of any "off the shelf" fax machine as a public fax machine.
Billing of a public fax message is effected without the need for human
intervention or the incorporation of a high cost credit card reading device
into the fax machine. The Smart Switch gives the Company the capacity to
offer a variety of fax and voice services for hotels, libraries and airline
lounges, and domestic and international fax transmission services. The Smart
Switch permits hotels to offer in-room fax machines for guests' confidential
use, thereby converting each room into a "Smart Suite." The Smart Switch has
been upgraded by the Company to permit billing of the user not only through
the user's credit card but also by billing to the user's hotel bill, either
by a transfer of the billing information to the hotel's computer or by an
electronic scanning of calls to listen for a fax tone.
Since October 1996, the Company, through a supply and distribution
agreement, has been engaged in the marketing and sale of scanner units
capable of screening microfilm, microfiche and microcard images and (1)
printing the scanned images onto a printer without the aid of a computer
and/or (2) transferring the images to CD Rom and maintaining the information
on the users' computers.
The Company currently intends to pursue a strategy of growth by
acquisition of companies involved in the copier business, fax business or
other businesses which the Company may determine to pursue. There can be no
assurance, however, that any acquisitions shall be consummated.
The executive offices of the Company are located at 39 Stringham Avenue,
Valley Stream, New York 11580. The telephone number is (516) 872-0650.
3
<PAGE>
THE OFFERING
Securities Offered:..............The resale by Selling Stockholders
of up to (i) 100,000 shares of Common Stock
underlying the $1.50 Warrants, (ii) 29,362
shares of Common Stock acquired in the
Private Placement, (iii) 29,362 shares of
Common Stock underlying the Private
Placement Warrants, (iv) 40,000 shares of
Common Stock underlying the $3.00 Warrants,
(v) 50,000 shares of Common Stock underlying
the $3.50 Warrants, (vi) 331,540 shares of
Common Stock underlying the $.78125
Warrants, (vii) 61,600 shares of Common
Stock underlying the $.8125 Warrants, (viii)
247,500 shares of Common Stock which may be
issued by the Company as dividends on its
Series D Convertible Preferred Stock, (ix)
66,666 shares of Common Stock issued upon
conversion of shares of the Series D
Convertible Preferred Stock, and (x)
1,634,013 shares of Common Stock issuable
upon conversion of the Company's Series D
Convertible Preferred Stock. All of the
Warrants contain antidilution provisions
pursuant to which the exercise prices and
number of shares to be issued are adjusted
in the event of stock splits, stock
dividends and other similar events.
Shares of Common Stock
Outstanding
Before Offering................15,298,203(1)
After Offering.................16,158,205(2)
Use of Proceeds..................The Company will receive no proceeds in
connection with an offering hereunder, as
shares of Common Stock will be sold by the
Selling Stockholders. Proceeds from the
potential exercise of the Warrants
($812,790) are expected to be utilized for
working capital purposes.
Risk Factors.....................Investment in the securities offered hereby
involves a high degree of risk and immediate
substantial dilution and should not be
purchased by investors who cannot afford the
loss of their entire investment. Such risk
factors include, without limitation, the
Company's history of losses and accumulated
deficit, working capital deficit and need
for additional financing. See "Risk
Factors."
NASDAQ Symbol of
Common Stock....................DFAX
_________________
(1) Does not include (i) an aggregate of 2,421,500 shares of Common Stock
issuable upon the exercise of outstanding stock options, (ii) 4,406,211
shares of Common Stock issuable upon the exercise of outstanding
warrants, (iii) a maximum of 1,375,000 shares of Common Stock issuable
upon conversion of the shares of Series D Convertible Preferred Stock and
(iv) a maximum of 247,500 shares of Common Stock which may be issued by
the Company, at its option and in lieu of cash, as dividends in its
Series D Convertible Preferred Stock.
(2) Assumes the exercise of all of the Warrants and the issuance of 247,500
shares of Common Stock, the number registered hereunder, as dividends on
the Series D Convertible Preferred Stock. Does not include (i) an
aggregate of 2,421,500 shares of Common Stock issuable upon the exercise
of outstanding stock options, (ii) 3,793,709 shares of Common Stock
issuable upon the exercise of outstanding warrants (excluding the
Warrants), and (iii) a maximum of 1,375,000 shares of Common Stock
issuable upon conversion of the shares of Series D Convertible Preferred
Stock.
4
<PAGE>
RISK FACTORS
The securities offered hereby are speculative and involve a high degree
of risk. Only those persons economically able to lose their entire
investment should purchase these securities. Prospective investors, prior to
making an investment decision, should carefully consider, along with other
matters referred to herein, the following risk factors.
1. Company's Ability to Continue as a Going Concern; History of Losses
and Accumulated Deficit. The Company incurred net losses for the fiscal
years ended November 30, 1996, 1995 and 1994 of $2,170,867, $3,218,962 and
$1,165,627, respectively, and $145,578 for the nine months ended August 31,
1997. At August 31, 1997, the Company had an accumulated (deficit) of
$(7,117,359). No assurance can be given that the Company will not continue
to report losses or that the Company's business operations will ultimately
prove to be profitable. The continuation of the Company as a going concern
is presently, and may be in the future, dependent on obtaining additional
equity or other form of financing in amounts sufficient to satisfy its
liabilities as they become due, but there is no assurance that any such
additional capital can be raised. As a result, the report of the independent
public accountants for the year ended November 30, 1996 contains explanatory
language as to the Company's ability to continue as a going concern. If
additional funds are not available, the Company may be required to curtail or
discontinue some of its operations.
2. Need for Additional Funds. At August 31, 1997, the Company had
working capital of $1,470,230. In view of the Company's operating losses and
need for capital to finance potential acquisitions, to purchase capital
equipment and to market the Smart Switch and microfiche scanner units, the
Company is likely to need additional funds. Also, the cash requirements
needed to pursue opportunities or to address problems not now anticipated may
put a further strain on the Company's available cash resources. Through
October 31, 1997, Dr. Irwin A. Horowitz, Chairman of the Board, Chief
Executive Officer and President of the Company, has loaned a net aggregate
amount of approximately $2,003,982 to the Company (including reduced salary
payments). There is no assurance that additional capital will be available
to the Company if required or that capital, if any, will be available on
terms acceptable to the Company.
3. ScreenScan Arbitration and Settlement; Minimum Purchase Requirements.
On July 16, 1997, ScreenScan Systems, Inc. ("ScreenScan") instituted
arbitration proceedings in connection with the Supply and Distribution
Agreement between the Company and ScreenScan, dated October 1, 1996, which
provides for the Company's exclusive right to distribute microfiche scanner
units. ScreenScan claimed that the Company failed to comply with the terms
of the agreement and therefore sought to terminate the exclusivity of the
Company's distribution rights under this agreement and increase the price of
the microfiche scanner units to be sold to the Company thereunder. The
Company does not believe it has breached this agreement, that its exclusivity
should be terminated or that the price it pays per microfiche scanner unit
should be increased. Pursuant to a Letter Agreement, dated October 17, 1997
(the "Settlement Agreement"), the parties have agreed to settle this dispute
and postpone hearings pending final compliance with the terms of the
Settlement Agreement. Under the Settlement Agreement, the parties have
agreed that the Company shall continue to have exclusive distribution rights
to the microfiche scanner units through March 1998, and that the Company
would purchase a specified number of microfiche scanner units through March
1998, for an aggregate purchase price of $1,080,000. There can be no
assurance that the Company will be able to distribute the full $1,080,000 of
microfiche scanner units. In the event the Company fails to make payment for
a scheduled delivery, arbitration proceedings will continue and the Company
shall lose its right to exclusive distribution of the microfiche scanner
units. In addition, ScreenScan may refuse to renew the Company's right to
distribute microfiche scanner units entirely.
5
<PAGE>
4. Dependence on Key Personnel. The Company is dependent upon the
services of its Chairman, Chief Executive Officer and President, Dr. Irwin A.
Horowitz, with whom it has no employment contract, for the successful
operation and development of its business. The loss of services of Dr.
Horowitz could materially and adversely affect its operations. In addition,
in order to market, produce and upgrade its products, the Company will have
to attract and retain additional technically qualified personnel with
backgrounds in engineering, production and marketing. The Company currently
does not maintain key man life insurance on the life of Dr. Horowitz.
5. Uncertainty of Market Acceptance of Smart Switch. In connection with
its Smart Switch, the Company faces the types of problems, delays, expenses
and difficulties which are frequently encountered by a company trying to
introduce a new line of products to the market. The Company has only limited
operating experience with the Smart Switch and, to date, revenues derived
from the Smart Switch have been minimal. The initial results from the
Company's Smart Switch operations have varied. A number of hotels, airport
lounges, libraries and colleges have installed and are currently utilizing
the Smart Switch. Several other hotels, which primarily installed the Smart
Switch on a trial basis, have canceled or determined not to permanently
install such machines, apparently primarily due to a competitor who was
providing in-room fax machines to hotels free of charge. There can be no
assurance that there will not be a material amount of additional
cancellations, or that significant new orders will develop so as to make the
Smart Switch operations of the Company profitable. There can be no assurance
that the Smart Switch services will gain broad market acceptance. The
Company entered into agreements with each of AT&T Corp. ("AT&T") and Danka
Business Systems plc ("Danka") with respect to the joint marketing of the
Company's in-room fax services. There can be no assurance that any material
sales or leases will result from these agreements or that AT&T and/or Danka
will not terminate the agreement.
6. Limited Market Research of Potential Demand for Smart Switch.
Although there are results of several market research studies and surveys
available which indicate that over 50% of all business travelers expect
hotels to offer fax and copier services, there has been no research completed
in connection with in-room fax services that gives management sufficient
information to estimate potential demand for its Smart Switch with certainty.
There can be no assurance that sufficient market penetration can be achieved
or the planned placement of the Company's equipment will be absorbed by the
market in the event such demand can be identified.
7. Uncertainty of Market Acceptance of Microfiche Scanner Units. In
connection with its microfiche scanner unit operations, the Company also
faces the types of problems, delays, expenses and difficulties which are
encountered by a company trying to introduce a new line of products to the
market. There can be no assurance that the microfiche scanner units will gain
broad market acceptance.
8. Competition.
Copiers. The Company markets its coin-operated copier services to
those users who need to copy documents, books, and other materials that are
located at the sites where the Company's copiers have been placed. Other
companies that offer similar coin-operated copier services include
Continental Copy Products Limited, Dual Office Supplies, Inc., Boston Copico
and Compucopy. Each of these competitors competes with the Company in a
different limited geographic region. Continental Copy Products Limited
principally conducts operations in Connecticut and downstate New York; Dual
Office Supplies principally conducts operations in Illinois; Boston Copico
principally conducts operations in Massachusetts, Connecticut and downstate
New York; and Compucopy principally conducts operations in southern Florida.
Competition between companies is generally based on price and quality of
service offered.
6
<PAGE>
Fax Machines. The public fax business is in an early stage of
development. The Company does not know of any other company that offers a
computer software switching device which can convert any "off-the-shelf" fax
machine into a public fax. The Company's principal competitors must
physically reconfigure each fax machine they install using a procedure that
can only be used on a particular model of fax machine in which they usually
specialize (the same procedure cannot be used on different models).
AlphaNet, the Company's largest competitor, is able to reconfigure a
particular model fax machine and has placed these reconfigured machines at a
large number of locations. Other competitors, Teledex and Action Fax, offer
products which do not currently offer the various features of the Company's
Smart Switch, such as the range of useable fax machines, customized billing
by floor or room and voice mail. In general, AlphaNet competes in all of the
Company's markets while Teledex and Action Fax offer only limited competition
and are located in limited markets. Competition between companies is
generally based on price and quality of service offered. It should be noted,
however, that if the public fax business generates substantial profits and
appears to be capable of significant growth, other companies with greater
resources than the Company's may enter the business and present intense
competition. The Company believes that if this were to occur, it could
expect to encounter significant competition from two general areas: (i)
other companies organized to provide public facsimile transmission services
and/or equipment, and (ii) assisted facsimile transmission services. In
addition, it should be noted that facsimile transmission also competes with
alternative methods of document delivery, principally overnight small package
express services such as Federal Express and United Parcel Service, as well
as the United States Post Office Express Mail Service. In all of the
foregoing areas, virtually all competitors can be expected to be considerably
better established and larger than the Company in total assets and resources.
Microfiche Scanner Units. The Company has recently commenced the
marketing and sale of microfiche scanner units, for which it currently has
exclusive distribution rights. In the event the terms of the Settlement
Agreement are not complied with and arbitration proceedings are reinstituted,
ScreenScan may become free to market and distribute the microfiche scanner
units itself or through other vendors. Competition with respect to the
microfiche scanner units includes a laser scanning machine produced by Canon
Corporation, which the Company believes is of lesser quality and more
expensive. There can be no assurance that additional competition, including
from companies with greater resources than that of the Company, will not
occur in the future.
9. Credit Card Regulations. The Company's public fax business is
dependent on its securing processing for its credit card transactions. Credit
card companies establish the rules and regulations for processing eligibility
and determine which businesses may accept their cards, and on what terms.
While the Company's facsimile machines are presently processed through all
major credit card companies, there can be no assurance that in the future
some or all credit card companies may not change the terms on or
circumstances under which their credit cards will be accepted so as to
adversely effect the business of the Company.
10. Government Regulation. There are no known federal or state
regulations which regulate the public facsimile transmission business, other
than the regulations of the telephone industry, whose services the Company
utilizes. There can be no assurance that the Company's business will not be
regulated in the future or that such regulations will not have an adverse
effect upon the Company's profitability.
7
<PAGE>
11. Lack of Patent Protection; Technological Changes; Risk of Product
Obsolescence.
Copiers. The Company does not, in general, rely on patented
technology with respect to its copier operations, although the Company does
purchase and operate copiers which may contain patented technology. However,
management believes that the proprietary nature of this technology does not
affect the Company's operations. There can be no assurance, however, that
patented technology will not affect the Company in the future if the Company
is unable to obtain copiers that have a patented feature which make them more
desirable than copiers currently being used by the Company or that will be
acquired by the Company in the future.
Fax Machines. The Company does not believe that the technology upon
which the Smart Switch systems are based is patentable. Other companies may
have been or may be involved in research and development which may lead to
patents relating to specific aspects of the Company's products and
technologies, and the Company has not engaged counsel to determine whether
its products in general are free from patent infringement. Unless protected
by patents or by nondisclosure agreements, the Smart Switch is susceptible to
being analyzed and reconstructed by an existing or potential competitor. The
Company is not aware of any claims that its products infringe upon the
proprietary rights of third parties. However, there can be no assurance that
third parties will not assert infringement claims against the Company in the
future, and the cost of responding to such assertions, regardless of their
validity, could be significant. In addition, such claims may be found to be
valid and could result in awards against the Company, which could have a
material adverse effect on the Company's business. As a result, the cost to
the Company of protecting itself against patent claims could be substantial.
The market for the Company's public-fax products is characterized by rapidly
changing technologies and evolving industry standards. The Company's success
will depend in large part on the Company having a technically competent staff
and on its ability to anticipate changes in technology and industry standards
and, to the extent such changes impact the Company's technology and products,
to respond to market and technological developments on a timely basis. There
can be no assurance that the Company will be able to keep pace with the
technological demands of the market place. Moreover, there can be no
assurance that new products or technologies will not render the Company's
Smart Switch less competitive or obsolete.
12. Dependence on Suppliers.
Copiers. The Company currently purchases both new and used copiers
from a variety of sources. The Company has not experienced any difficulties
in obtaining equipment or parts and supplies and does not anticipate that
there will be any problems obtaining any equipment, parts or supplies in the
future.
Fax Machines. The Company assembles the Smart Switch by programming
the Company's proprietary software into off-the-shelf computers and then
leases the programmed computer together with off-the-shelf fax machines,
telephones, dialers and components all of which are manufactured by other
vendors. The Company purchases certain custom components and complete fax
machines from single suppliers in order to obtain lower prices. In the past,
the Company has had satisfactory relationships with its suppliers and has not
experienced delays in the delivery of components or public-fax machines. The
Company generally does not maintain supply contracts with its suppliers and
purchases components pursuant to purchase orders in the ordinary course of
business. The Company believes that there are a number of other suppliers
for the components that it uses. The Company has not experienced any
difficulties in obtaining equipment or parts and supplies and, although there
can be no assurance thereof, does not anticipate that there will be any
problems obtaining any equipment, parts or supplies in the future.
8
<PAGE>
Microfiche Scanner Units. The Company purchases the microfiche
scanner units from a single source, ScreenScan, pursuant to a supply and
distribution agreement and a Settlement Agreement between the parties. The
Company is therefore wholly dependent upon ScreenScan in connection with this
product, and delays or continued problems in connection with the supply
relationship could adversely affect the Company. In the event the terms of
the Settlement Agreement are not complied with, arbitration proceedings will
be reinstituted and ScreenScan may continue to seek to terminate the
Company's right to exclusively distribute the microfiche scanner units and to
increase the price paid by the Company for each microfiche scanner unit. In
addition, in such event, ScreenScan may refuse to renew the Company's right
to purchase the microfiche scanner units entirely.
13. Dependence on Certain Customers; Loss of Large Customer. During the
fiscal year ended November 30, 1996, revenue derived from one of the
Company's copier customers, a large university located in the southeastern
United States, amounted to approximately 11.6% of the Company's revenues.
The Company's contract with this university, which is not terminable at will,
was for a term of one year and is renewable at the parties' option for four
additional one year terms. Another customer, a major library system in the
City of New York, accounted for approximately 4% and 12.3% of the Company's
revenues for the fiscal years ended November 30, 1996 and 1995, respectively.
In March 1996, the Company was not successful in its bid for the renewal of
its contract with this library system. In general, customer accounts are
maintained pursuant to contractual agreements that have terms ranging from
three to five years. Currently, there are varying terms remaining on all of
the Company's customer contracts.
14. Growth Strategy. The Company currently intends to pursue a strategy
of growth by acquisition of companies involved in the copier business, fax
business or other businesses which the Company may determine to pursue.
Although the Company may utilize Common Stock to pay all or a portion of such
acquisition costs, there can be no assurance that the Company will find
appropriate candidates for acquisition or that, if found, the Company shall
have sufficient cash available to pay any cash portion for such acquisitions.
In addition, in the event that acquisitions are consummated, there can be no
assurance that the operations acquired will operate profitably or will not
require significant additional operating capital.
15. Company Party to Lawsuits. The Company is involved in the following
legal proceedings: (1) the Company has instituted an action to enforce a
restrictive covenant against a former employee; the employee's current
employer has counterclaimed for $1,750,000 based upon an alleged unfair or
trade practice in seeking to prevent it from employing the employee; (2) the
Company is a party to a suit brought by Nassau County to obtain an accounting
of amounts which it believes are due to the county pursuant to a contract
with IMSG, a subsidiary of the Company; and (3) the Company is a party to a
suit brought by a former public relations firm of the Company which alleges
that it has incurred damages as a direct result of alleged representations by
the Company that it would enter into a contract with such firm.
In addition, in May 1997, the New York State Appellate Division
determined in connection with a suit for $228,670 brought by former creditors
to the Company, that payment of the debt owed to such creditors should be
made in cash, and not Common Stock, as asserted by the Company. The
Company's motion for leave to appeal to the New York State Court of Appeals
was dismissed. The Company has paid over funds totalling $287,000 which had
been in escrow pending the outcome of said motion, thereby diminishing the
Company's cash position.
16. Seasonality. The Company's copier activities are subject to seasonal
fluctuations. Revenues from copiers tend to be lower during the summer
months of June through September and in the last weeks of December and the
first week of January due to school and employee vacation patterns. Although
cash
9
<PAGE>
flow tends to be tight in these periods of low revenue, the Company has not
experienced severe cash flow difficulties, due to the reasons discussed in
this paragraph. Seasonally slow periods are immediately preceded by periods
of high volume of use, which generate increased cash flows. In addition,
because the copier business is conducted primarily in cash, there is no lead
time between sales and collections. Also fluctuations are regular and
predictable, thereby allowing the Company to plan for such low revenue
months. Historically, the President of the Company has advanced funds to the
Company when needed so that it could meet its day to day cash obligations,
although there can be no assurance he will continue to do so in the future.
Finally, many creditors have typically allowed the Company to forbear during
these slow months, although there can be no assurance they will continue to
do so in the future.
17. Potential Depressive Effect on Market Price Due to Future Sales of
Common Stock; Dilution. 6,480,696 shares of the Company's outstanding Common
Stock are "restricted securities" as that term is defined in Rule 144
promulgated under the Securities Act of 1933, as amended (the "Securities
Act") (excluding, for this purpose, the shares registered hereby).
Ordinarily, under Rule 144, a person holding restricted securities for a
period of one year may, every three months, sell in ordinary brokerage
transactions or in transactions directly with a market maker an amount equal
to the greater of one percent of the Company's then outstanding Common Stock
or the average weekly trading volume during the four calendar weeks prior to
such sale. Rule 144 also permits the sale of shares without any quantity
limitation by a person who is not an affiliate of the Company and who has
satisfied a two year holding period. Substantially all of such shares are
currently eligible for sale under Rule 144. Furthermore, there is an
aggregate of 6,827,711 shares of Common Stock underlying warrants (including
the Warrants) and stock options issued by the Company, which shares may
ultimately be sold into the open market. In addition, there are a maximum of
1,634,013 shares of Common Stock, plus dividends potentially payable in
Common Stock, issuable upon conversion of the Series D Preferred Stock, which
shares may also ultimately be sold into the open market. The sale of a large
number of shares in the open market is likely to have a depressive effect on
the market price of the Common Stock.
18. Possibility of Delisting from NASDAQ. The Company's Common Stock is
listed on the NASDAQ System. To remain listed with NASDAQ, companies are
required to have not less than (i) $2,000,000 in net tangible assets, or (ii)
a market capitalization of $35 million, or (iii) net income for the last
fiscal year, or two of the last three fiscal years, of $500,000. In
addition, effective in February 1998 NASDAQ will require that all listed
companies maintain a per share trading price of $1.00. In the event a
company's price per share trades below $1.00 for 30 consecutive days, it has
90 days in which it must trade above $1.00 per share for 10 consecutive days
or else it will be subject to delisting procedures. As of December 2, 1997,
the Common Stock was trading at $.375 per share. In the event the Common
Stock continues to trade below $1.00, the Company will need to develop a plan
of compliance with these listing requirements or the Common Stock will be
delisted. As of August 31, 1997, the Company had net tangible assets of
$3,538,053. In the event the Company is unable to continue to meet the
NASDAQ requirements for continued listing, trading, if any, in the Common
Stock would thereafter be conducted in the over-the-counter market in the
so-called "pink sheets" or the NASD's "Electronic Bulletin Board," and it
would be more difficult to dispose of the Common Stock or to obtain as
favorable a price for the Common Stock. Thus, the liquidity of the Common
Stock could be impaired, not only in the number of shares of Common Stock
that could be bought and sold at a given price, but also through delays in
the timing of transactions.
19. Penny Stock Regulation. Broker-dealer practices in connection with
transactions in "penny stocks" are regulated by certain penny stock rules
adopted by the Commission. Penny stocks generally are equity securities with
a price of less than $5.00 (other than securities registered on certain
national securities exchanges or quoted on the NASDAQ system, provided that
current price and volume information with respect to transactions in such
securities is provided by the exchange or system). The
10
<PAGE>
penny stock rules require a broker-dealer, prior to a transaction in a penny
stock not otherwise exempt from the rules, to deliver a standardized risk
disclosure document that provides information about penny stocks and the
risks in the penny stock market. The broker-dealer also must provide the
customer with current bid and offer quotations for the penny stock, the
compensation of the broker-dealer and its salesperson in the transaction, and
monthly account statements showing the market value of each penny stock held
in the customer's account. In addition, the penny stock rules generally
require that prior to a transaction in a penny stock, the broker-dealer must
make a special written determination that the penny stock is a suitable
investment for the purchaser and receive the purchaser's written agreement to
the transaction. These disclosure requirements may have the effect of
reducing the level of trading activity in the secondary market for a stock
that becomes subject to the penny stock rules. If the Common Stock becomes
subject to the penny stock rules, investors may find it more difficult to
sell the Common Stock.
20. Control of the Company. Dr. Irwin Horowitz, President of the
Company, presently owns 6,310,000 shares of Common Stock, representing 41.2%
of the outstanding Common Stock of the Company, holds options to purchase up
to an additional 1,600,000 shares and warrants to purchase up to an
additional 2,263,097 shares, and thus effectively controls the Company. Due
to this control, Dr. Horowitz will be able to control or influence such
actions as election of directors and the authorization of certain
transactions that require stockholder approval and be able to otherwise
control the Company's policies without concurrence of the Company's other
stockholders.
21. Dividends On Common Stock Not Likely. The Company has never paid any
cash dividends on its Common Stock. For the foreseeable future it is
anticipated that earnings, if any, which may be generated from the Company's
operations will be used to finance the growth of the Company and that cash
dividends will not be paid to holders of shares of Common Stock.
USE OF PROCEEDS
No proceeds will be realized by the Company from the sale of shares of
Common Stock by the Selling Stockholders. Proceeds from the potential
exercise of the Warrants ($812,790) are expected to be utilized for working
capital purposes. See "Plan of Distribution."
11
<PAGE>
DILUTION
The difference between the public offering price per share of Common
Stock and the net tangible book value per share after this Offering
constitutes the dilution to investors in this offering. Net tangible book
value is determined by dividing the net tangible book value of the Company
(total tangible assets less total liabilities) by the number of outstanding
shares of Common Stock.
At August 31, 1997, the net tangible book value of the Company was
$3,538,053 or $.25 per share of Common Stock. After giving effect to the
exercise of the Warrants, at their respective exercise prices and the
conversion of the Series D Convertible Preferred Stock (1) (less estimated
expenses of this Offering), the net tangible book value of the Company at
August 31, 1997 would have been $4,329,053, or $.26 per share, representing
an immediate increase in net tangible book value of $.01 per share to
existing stockholders of the Company and an immediate dilution of $3.24 per
share to exercising $3.50 Warrantholders. The following table illustrates
the foregoing information with respect to dilution exercising $3.50
Warrantholder on a per share basis:
$3.50 Warrant exercise price $3.50
Net tangible book value before exercise of Warrants .25
Increase attributable to new exercise of Warrants .01
Net tangible book value after exercise of Warrants $ .26
-----
Dilution to $3.50 Warrantholder $3.24
=====
_________________________
1 Assumes the maximum number of shares issuable upon conversion.
12
<PAGE>
SELLING STOCKHOLDERS
The following table sets forth the present record and beneficial
ownership of the Common Stock of the Company owned by the Selling
Stockholders as of the date of this Prospectus.
<TABLE>
<CAPTION>
Percentage Percentage
of of
Outstanding Outstanding
Stock Shares Shares Shares
Owned Owned Shares Owned Owned
Name of Selling Prior to Before to be Sold After After
Stockholder Offering Offering in Offering Offering Offering
- --------------- ------------- ----------- ------------- -------- ------------
<S> <C> <C> <C> <C> <C>
Brian Bosworth 10,000(1) * 10,000 0 0
Keith Jackson 6,800(1) * 6,800 0 0
Cedric Jones 13,200(1) * 13,200 0 0
Stephen D. Hayes 50,000(2) * 50,000 0 0
Judd Rothman 60,000(3) * 60,000 0 0
Marketing Direct
Concepts, Inc. 150,000(4) * 50,000(4) 100,000 *
Hyman and Debbie
Ashkenazy 19,200(5) * 19,200(5) 0 0
Lawrence and Ruth
Linden 12,800(6) * 12,800(6) 0 0
Lewis Hanan 7,442(7) * 7,442(7) 0 0
Allan and Roberta
Lichtenstein 6,808(8) * 6,808(8) 0 0
Alan and Ellen Katz 1,362(9) * 1,362(9) 0 0
Stephen J. and Mary
E. Petro 11,112(10) * 11,112(10) 0 0
Libertyview Fund,
LLC 31,666(11) * 31,666(11) 0 0
Libertyview Plus Fund 93,500(12) * 93,500(12) 0 0
Paresco, Inc. 201,000(13) 1.3% 201,000(13) 0 0
Greg M. Horowitz 1,330,000(14) 8.5% 1,100,000(14) 230,000 1.4%
</TABLE>
13
<PAGE>
* Less than 1%.
(1) Represents shares of Common Stock underlying the $3.00 Warrants.
(2) Represents shares of Common Stock underlying the $1.50 Warrants.
(3) Represents 50,000 shares of Common Stock underlying the $1.50
Warrants and 10,000 shares of Common Stock underlying the $3.00
Warrants.
(4) Includes 50,000 shares of Common Stock underlying the $3.50
Warrants, the resale of which shares is covered by this
Prospectus.
(5) Includes 9,600 shares of Common Stock underlying the Private
Placement Warrants, the resale of which shares is covered by this
Prospectus.
(6) Includes 6,400 shares of Common Stock underlying the Private
Placement Warrants, the resale of which shares is covered by this
Prospectus.
(7) Includes 3,721 shares of Common Stock underlying the Private
Placement Warrants, the resale of which shares is covered by this
Prospectus.
(8) Includes 3,404 shares of Common Stock underlying the Private
Placement Warrants, the resale of which shares is covered by this
Prospectus.
(9) Includes 681 shares of Common Stock underlying the Private
Placement Warrants, the resale of which shares is covered by this
Prospectus.
(10) Includes 5,556 shares of Common Stock underlying the Private
Placement Warrants, the resale of which shares is covered by this
Prospectus.
(11) Includes 15,000 shares of Common Stock which may be issued by the
Company as dividends on its Series D Convertible Preferred Stock,
the resale of which shares is covered under this Prospectus. The
number of shares that may be issued as dividends may vary
significantly, depending upon the fair market value of the Common
Stock at the time of payment, the length of time the Series D
Convertible Preferred Stock is held prior to conversion and
whether the Company chooses to pay dividends in Common Stock or
cash. Does not include 40 shares of the Company's Series D
Convertible Preferred Stock (4.8% of the issued and outstanding
shares of Series D Convertible Preferred Stock) owned by this
entity. Each share of Series D Convertible Preferred Stock is
convertible into such number of shares of Common Stock as is
obtained by dividing $1,000 by 80% of the fair market value of
the Common Stock at the time of conversion, which shall in no
event be less than $.60 nor more than $2.75.
(12) Includes 43,500 shares of Common Stock which may be issued by the
Company as dividends on its Series D Convertible Preferred Stock,
the resale of which shares is covered under this Prospectus.
Does not include 115 shares of the Company's Series D Convertible
Preferred Stock (13.9% of the issued and outstanding shares of
Series D Convertible Preferred Stock) owned by this entity. See
note (11) for information regarding the estimated nature of the
number of the dividend shares as well as for the conversion terms
of the Series D Convertible Preferred Stock.
(13) Includes 201,000 shares of Common Stock which may be issued by
the Company as dividends on its Series D Convertible Preferred
Stock, the resale of which shares is covered under this
Prospectus. Does not include 670 shares of the Company's Series
D Convertible Preferred Stock (81.2% of the issued and
outstanding shares of Series D Convertible Preferred Stock) owned
by this entity. See note (11) for information regarding the
estimated nature of the number of the dividend shares as well as
for the conversion terms of the Series D Convertible Preferred
Stock.
14
<PAGE>
(14) Includes 331,540 shares of Common Stock underlying the $.78125
Warrants and 61,600 shares of Common Stock underlying the $.8125
Warrants, the resale of which shares is covered by this
Prospectus.
PLAN OF DISTRIBUTION
The Selling Stockholders may offer and sell shares of Common Stock from
time to time as market conditions permit in the over-the-counter market, or
otherwise, at prices and terms then prevailing or at prices related to the
then-current market price, or in negotiated transactions. The shares may be
sold by one or more of the following methods, without limitation: (a) a block
trade in which a broker or dealer so engaged will attempt to sell the shares
as agent but may position and resell a portion of the block as principal to
facilitate the transaction; (b) purchases by a broker or dealer as principal
and resale by such broker or dealer for its account pursuant to this
Prospectus; (c) ordinary brokerage transactions and transactions in which the
broker solicits purchases; and (d) face-to-face transactions between sellers
and purchasers without a broker or dealer. In effecting sales, brokers or
dealers engaged by the Selling Stockholders may arrange for other brokers or
dealers to participate. Such brokers or dealers may receive commissions or
discounts from Selling Stockholders in amounts to be negotiated. Such
brokers, dealers and any other participating brokers or dealers may be deemed
to be "underwriters" within the meaning of the Securities Act, in connection
with such sales.
LEGAL MATTERS
Legal matters in connection with the Securities offered hereby will be
passed upon for the Company by Breslow & Walker, LLP, 767 Third Avenue, New
York, New York 10017.
EXPERTS
The financial statements of the Company as of November 30, 1996, and for
the years ended November 30, 1995 and November 30, 1996, incorporated by
reference herein and elsewhere in the Registration Statement, have been
incorporated by reference herein and in the Registration Statement in
reliance upon the reports of Hoberman, Miller, Goldstein & Lesser, P.C.,
independent certified public accountants, given upon authority of said firm
as experts in accounting and auditing.
ADDITIONAL INFORMATION
The Company has filed with the Securities and Exchange Commission, 450
Fifth Street, N.W., Washington, D.C., a Registration Statement on Form S-3
under the Securities Act of 1933, as amended, for the registration of the
securities offered hereby. This Prospectus, which is part of the
Registration Statement, does not contain all of the information contained in
the Registration Statement. For further information with respect to the
Company and the securities offered hereby, reference is made to the
Registration Statement, including the exhibits thereto, which may be
inspected, without charge, at the Office of the Securities and Exchange
Commission, or copies of which may be obtained from the Commission in
Washington, D.C., upon payment of the requisite fees, or from the
Commission's Website at http://www.sec.gov. Statements contained in this
Prospectus as to the content of any contract or other document referred to
are not necessarily complete, and in each instance reference is made to the
copy of such contract or other document filed as an exhibit to the
Registration Statement, each such statement being qualified in all respects
by such reference.
15
<PAGE>
________________________________________ ____________________________________
No dealer, salesperson, or other
person has been authorized in
connection with this offering to give
any information or to make any
representations other than those
contained in this Prospectus. This
Prospectus does not constitute an
offer or a solicitation in any
jurisdiction to anyone to whom it is
unlawful to make such offer or DIVERSIFAX, INC.
solicitation. Neither the delivery
of this Prospectus, nor any sale made
hereunder shall, under any
circumstances, create an implication
that there has been no change in the
circumstances or the facts herein set
forth since the date hereof.
___________________________
TABLE OF CONTENTS 2,331,030 Shares of Common Stock
Page
Available Information............. 2
Documents Incorporated by
Reference....................... 2
The Company....................... 3
The Offering...................... 4
Risk Factors...................... 5 ----------
Use of Proceeds................... 11 PROSPECTUS
Dilution.......................... 12 ----------
Selling Stockholders.............. 13
Plan of Distribution.............. 15
Legal Matters..................... 15
Experts........................... 15
Additional Information............ 15
_______, 1997
___________________________
______________________________________ ____________________________________
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution.
The estimated expenses of the Registrant in connection with the issuance
and distribution of the securities being registered hereby are as follows:
Registration Fee.............................................. $ 100
Accounting Fees and Expenses.................................. 1,500
Legal Fees and Expenses....................................... 15,000
Blue Sky Fees and Expenses.................................... 3,000
Miscellaneous Expenses........................................ 2,400
------
Total................................................. $22,000
------
------
________________________
Item 15. Indemnification of Directors and Officers.
Under Section 145 of the Delaware General Corporation Law the registrant
may or shall, subject to various exceptions and limitations, indemnify its
directors or officers and may purchase and maintain insurance therefor.
The Company has included in its Certificate of Incorporation pursuant to
Section 102(b)(7) of the Delaware General Corporation Law a provision
eliminating the personal liability of directors to the Company or its
stockholders for damages for breach of fiduciary duty. The principal effect
of this provision in the Company's Certificate of Incorporation is to
eliminate potential monetary damage actions against any director for breach
of his duties as a director except (a) for any breach of the director's duty
of loyalty to the corporation or its stockholders, (b) for acts or omissions
not in good faith or which involve intentional misconduct or a knowing
violation of law, (c) under Section 174 of the General Corporation Law, which
relates to a willful or negligent violation of Section 160 (regarding the
illegal purchase or redemption of stock by a corporation) or 173 (regarding a
corporations illegal declaration or payment of dividends) of the General
Corporation Law, or (d) for any transaction from which the director derived
an improper benefit. This provision does not affect the liability of any
director for acts or omissions occurring prior to the date of adoption of
this provision. In addition, Section 145 of the Delaware General Corporation
Law empowers a corporation (a) to grant indemnification to any officer or
director where it is determined that he acted in good faith and in a manner
he reasonably believed to be in or not opposed to the best interests of the
corporation, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful and (b) to advance to an
officer or director the expenses of defending claims upon receipt of his
undertaking to repay any amount to which it is later determined he is not
entitled. The Company's By-laws provide that the Company will indemnify and
advance expenses of defense to its officers and directors substantially to
the full extent authorized by the Delaware General Corporation Law.
The foregoing statement is subject to the detailed provisions of Sections
102 and 145 of the Delaware General Corporation Law.
<PAGE>
Item 16. Exhibits.
Exhibit # Document
- --------- --------
4.(a) Form of $1.50 Warrant
(b) Form of Private Placement Warrant
(c) Form of $3.00 Warrant
(d) Form of $3.50 Warrant
(e) Form of $.78125 Warrant
(f) Form of $.8125 Warrant
(g) Certificate of Designations of Series D
Convertible Preferred Stock*
5. Opinion of Counsel
23.(a) Independent Auditor's Consent
(b) Consent of Counsel**
________________________
* Incorporated by reference to the Company's Registration Statement
on Form SB-2, filed with the Securities and Exchange Commission
on June 25, 1997 (Registration No. 333-30021).
** Contained in the opinion of counsel filed as part hereof as
Exhibit 5.
Item 17. Undertakings.
The undersigned Registrant hereby undertakes that it will:
(1) File, during any period in which it offers or sells securities, a
post-effective amendment to this Registration Statement to include any
additional or changed material information on the plan of distribution.
(2) For determining liability under the Securities Act, treat each
post-effective amendment as a new registration statement of the securities
offered, and the offering of the securities at that time to be the initial
bona fide offering.
(3) File a post-effective amendment to remove from registration any of
the securities which remain unsold at the end of the offering.
Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Commission such indemnification
is against public policy as expressed in the Securities Act and is,
therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than payment by the Registrant of expenses
II-2
<PAGE>
incurred or paid by a director, officer or controlling person of the
Registrant in the successful defense of any action, suit or proceeding) is
asserted by such director, officer or controlling person in connection with
the securities being registered, the Registrant will, unless in the opinion
of its counsel the matter has been settled by controlling precedent, submit
to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Securities
Act and will be governed by final adjudication of such issue.
II-3
<PAGE>
SIGNATURES
In accordance with the requirements of the Securities Act of 1933, the
Registrant certifies that it has reasonable grounds to believe that it meets
all of the requirements for filing on Form S-3 and authorized this
Registration Statement to be signed on its behalf by the undersigned, in the
city of Valley Stream, State of New York, on December 3, 1997.
DIVERSIFAX, INC.
By: /s/ Irwin A. Horowitz
-------------------------------------
Dr. Irwin A. Horowitz
President and Chief Executive Officer
(Principal Executive, Financial and
Accounting Officer)
In accordance with the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates stated.
Signature Title Date
--------- ----- ----
/s/ Irwin A. Horowitz Director December 3, 1997
- -----------------------
Dr. Irwin A. Horowitz
/s/ Eugene Bilotti Director December 3, 1997
- -----------------------
Eugene Bilotti
/s/ Kenneth Ross Wolfe Director December 3, 1997
- -----------------------
Kenneth Ross Wolfe
II-4
<PAGE>
Exhibit 4(a)
THIS SECURITY AND THE SECURITIES ISSUABLE UPON EXERCISE HEREOF HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), AND MAY
NOT BE OFFERED, SOLD, PLEDGED, HYPOTHECATED, ASSIGNED OR TRANSFERRED EXCEPT
(i) PURSUANT TO A REGISTRATION STATEMENT UNDER THE ACT WHICH HAS BECOME
EFFECTIVE AND IS CURRENT WITH RESPECT TO THE SECURITIES, OR (ii) PURSUANT TO
A SPECIFIC EXEMPTION FROM REGISTRATION UNDER THE ACT BUT ONLY UPON THE HOLDER
HEREOF FIRST HAVING OBTAINED THE WRITTEN OPINION OF COUNSEL TO THE COMPANY,
OR OTHER COUNSEL ACCEPTABLE TO THE COMPANY, THAT THE PROPOSED DISPOSITION IS
CONSISTENT WITH ALL APPLICABLE PROVISIONS OF THE ACT AS WELL AS ANY
APPLICABLE "BLUE SKY" OR SIMILAR SECURITIES LAW.
___________, 1995
DIVERSIFAX, INC.
The Transferability of this Warrant is
Restricted as Provided in Sections 3 and 9
For good and valuable consideration in the amount of $_______, the
receipt and sufficiency of which are hereby acknowledged by Diversifax, Inc.,
a Delaware corporation, with its principal office at 39 Stringham Avenue,
Valley Stream, New York 11580 (the "Company"), ____________ (the "Holder"),
subject to the terms and conditions of this Warrant, is hereby granted the
right to purchase, at the initial exercise price of $1.50 per share, at any
one or more times from the date hereof until 5:00 p.m. on the __________,
1998, in the aggregate, ________ shares of Common Stock of the Company, $.001
par value (the "Shares").
This Warrant initially is exercisable at a price of $1.50 per Share
payable in cash, by certified or official bank check in New York Clearing
House funds or other form of payment satisfactory to the Company, subject to
adjustment as provided in Section 5 hereof.
<PAGE>
1. Exercise of Warrant. The purchase rights represented by this
Warrant are exercisable at the option of the Holder hereof, in whole or in
part, at one or more times during any period in which this Warrant may be
exercised as set forth above. The Holder shall not be deemed to have
exercised its purchase rights hereunder until the Company receives written
notice of the Holder's intent to exercise its purchase rights hereunder.
The written notice shall be in the form of the Subscription Form attached
hereto and made a part hereof. Less than all of the Shares may be
purchased under this Warrant.
2. Issuance of Certificates. Upon the exercise of this Warrant, the
issuance of certificates for Shares underlying this Warrant shall be made
forthwith (and in any event within twenty (20) business days after the
Company's receipt of written notice hereunder as specified in Section 1
above) and such certificates shall be issued in the name of the Holder
hereof.
3. Restriction on Transfer. Neither this Warrant nor any Shares
issuable upon exercise hereof have been registered under the Securities Act
of 1933, as amended (the "Act"), and neither may be sold or transferred in
whole or in part unless the Holder shall have first given prior written
notice to the Company describing such sale or transfer and furnished to the
Company an opinion, satisfactory to counsel for the Company as determined
by such counsel in its sole discretion, to the effect that the proposed
sale or transfer may be made without registration under the Act; provided,
however, that the foregoing shall not apply if there is in effect a
registration statement with respect to this Warrant or the Shares issuable
upon exercise hereof, as the case may be, at the time of the proposed sale
or transfer. Upon exercise, in part or in whole, of this Warrant, each
certificate issued representing the Shares underlying this Warrant shall
bear a legend to the foregoing effect.
2
<PAGE>
4. Price.
4.1 Initial and Adjusted Purchase Price. The initial Purchase
price shall be $1.50 per Share. The adjusted Purchase Price shall be the
price which shall result from time to time from any and all adjustments of
the initial purchase price in accordance with the provisions of Section 5
hereof.
4.2 Purchase Price. The term "Purchase Price" herein shall mean
the initial purchase price or the adjusted purchase price, depending upon
the context.
5. Adjustments of Purchase Price and Number of Shares. In the event
that, prior to the issuance by the Company of all the Shares issuable upon
exercise of this Warrant, there shall be any change in the outstanding
Common Stock of the Company by reason of the declaration of stock
dividends, or through recapitalization resulting in stock splits or
combinations, without the payment of any compensation therefor in money,
services or property, the Shares subject to this Warrant and the Purchase
Price thereof shall be appropriately adjusted (but without regard to
fractions) by the Company to reflect such change so that after such
adjustments the Holder has the same substantive rights under this Warrant
as he had immediately prior to such declaration or recapitalization.
6. Replacement of Warrant. Upon receipt by the Company of evidence
reasonably satisfactory to it of the loss, theft, destruction or mutilation
of this Warrant, and, in case of such loss, theft, destruction or
mutilation, of indemnity or security reasonably satisfactory to it in its
sole discretion, and reimbursement to the Company of all expenses
incidental or relating thereto, and upon surrender and cancellation of this
Warrant (unless mutilated), the Company will make and deliver a new Warrant
of like tenor, in lieu of this Warrant.
7. Notices to Warrant Holder. Nothing contained in this Warrant
shall be construed as conferring upon the Holder hereof the right to vote
or to consent or to receive notice as a shareholder in respect of any
meetings
3
<PAGE>
of shareholders for the election of directors or any other matter, or as
having any rights whatsoever as a shareholder of the Company.
8. Notices. All notices, requests, consents and other
communications hereunder shall be in writing and shall be deemed to have
been duly made when delivered, or mailed by registered or certified mail,
return receipt requested:
(a) If to the registered Holder of this Warrant, to the address
of such Holder as shown on the books of the Company; or
(b) If to the Company, to the address set forth on the first
page of this Warrant or to such other address as the Company may
designate by notice to the Holder.
9. Successors. All the covenants, agreements, representations and
warranties contained in this Warrant shall bind the parties hereto and
their respective heirs, executors, administrators, distributees, permitted
successors and assigns. The Holder may assign this Warrant without the
Company's prior written consent provided that the holder complies with
applicable securities laws. Any attempted assignment in violation of the
preceding sentence shall be void and of no effect.
10. Headings. The headings in this Warrant are inserted for purposes
of convenience only and shall have no substantive effect.
11. Law Governing. This Warrant is delivered in the State of New
York and shall be construed and enforced in accordance with, and governed
by, the laws of the State of new York, without giving effect to conflicts
of law principles.
IN WITNESS WHEREOF, the Company has caused this Warrant to be signed
in its corporate name by, and such signature to be attested to by, a duly
authorized officer as of the date first above written.
4
<PAGE>
Diversifax, Inc.
By: ________________________
Its: _______________________
Attest:
___________________________
5
<PAGE>
SUBSCRIPTION FORM
(To be Executed by the Registered Holder
in order to Exercise the Warrant dated
January 26, 1995 and issued by
Diversifax, Inc. to the Undersigned)
The undersigned hereby irrevocably elects to exercise the right to
purchase _____ Shares by he above referenced Warrant according to the
conditions thereof and herewith makes payment of the Purchase Price of such
Shares in full.
__________________________________
Signature
__________________________________
Address
Dated: _____________________ __________________________________
Social Security Number or Holder's
Identification Number
6
<PAGE>
Exhibit 4(b)
The securities represented by this certificate have been acquired for
investment and have not been registered pursuant to the Securities Act of
1933 or any applicable state statutes. Such securities may not be
transferred, sold, pledged, hypothecated or otherwise disposed of without
either an effective registration statement relating to such disposition or an
opinion of counsel satisfactory to DiversiFax, Inc. that the securities may
be so disposed of without being registered.
The securities represented by this certificate, if held by a Pennsylvania
resident, may not be sold, transferred, pledged or hypothecated for a period
of twelve months from the date hereof, except in accordance with Section
204.011 of the regulations promulgated under the Pennsylvania Securities Act
of 1972.
WARRANT CERTIFICATE
Dated ____________, 1997
VOID AFTER 5:00 P.M., New York Local Time
_______, 2000
DIVERSIFAX, INC.
Warrants to purchase __________ shares of Common Stock, par value $.001 per
share.
DIVERSIFAX, INC., a Delaware corporation, with offices at 39 Stringham
Avenue, Valley Stream, New York 11580 (the "Company"), hereby certifies that
________________, individuals with an address at __________________ (jointly,
the "Warrant Holder"), for value received and subject to the provisions
hereinafter set forth is entitled to purchase from the Company ______ shares
of Common Stock, par value $.001 per share, of the Company (the "Common
Stock") at a price of ______ ($____) per share, subject to adjustment as set
forth herein, exercisable commencing on the date hereof until 5:00 P.M., New
York time, on _________, 2000.
1. Exercise. The Warrants represented by this Warrant Certificate may
be exercised only by the Warrant Holder on the terms and conditions set forth
in this Warrant Certificate, in whole or in part, upon the surrender of this
Warrant Certificate, with the subscription form attached hereto duly
executed, to the Company and upon payment to the Company of the price
hereinabove set forth for the shares so purchased. If the Warrants
represented hereby shall be exercised in part only, the Company shall, upon
surrender of this Warrant Certificate for cancellation, deliver a new Warrant
Certificate evidencing the rights of the Warrant Holder to purchase the
balance of the shares of Common Stock to which the Warrant Holder is
entitled. The Company shall not be required to issue any fraction of a share
upon the exercise of the Warrants represented hereby.
<PAGE>
If any fractional interest in a share shall be deliverable upon the exercise
of the Warrants represented hereby or any portion thereof, the Company
shall make an adjustment therefor in cash equal to such fraction multiplied
by the fair market value of shares of Common Stock as determined by the
Company's Board of Directors.
2. Title. This Warrant Certificate is issued subject to the condition
that it may not be sold, transferred or hypothecated and that title to this
Warrant Certificate and all rights hereunder are not transferable.
3. Covenants. The above provisions are subject to the following:
(a) Any certificate(s) for shares of Common Stock issued upon the
exercise of the Warrants represented hereby shall bear the following legend:
"The securities represented by this certificate have been
acquired for investment and have not been registered
pursuant to the Securities Act of 1933 or any applicable
state statutes. Such shares may not be sold, transferred,
pledged, hypothecated or otherwise disposed of without
either an effective registration statement relating to such
disposition or an opinion of counsel satisfactory to
DiversiFax, Inc. that the securities may be so disposed of
without being registered."
(b) The Company covenants and agrees that all shares which may be
issued upon the exercise of the rights represented by this Warrant
Certificate shall, upon issuance, be fully paid and non-assessable and free
from all taxes, liens and charges with respect to the issue thereof; without
limiting the generality of the foregoing, the Company covenants and agrees
that it will from time to time take any such action as may be requisite to
assure that the par value per share of the Common Stock is at all times equal
to or less than the then effective purchase price per share of the Common
Stock issuable pursuant to this Warrant Certificate. The Company further
covenants and agrees that during the period within which the rights
represented by this Warrant Certificate may be exercised, the Company shall
at all times have authorized, and reserved for the purpose of issue upon
exercise of the subscription rights evidenced by this Warrant Certificate, a
sufficient number of shares of its Common Stock to provide for the exercise
of the rights represented by this Warrant Certificate.
(c) In the event that the Company shall, at any time prior to the
expiration date of the Warrants represented hereby and prior to the exercise
thereof: (i) declare or pay to the holders of the Common Stock a dividend
payable in any kind of shares of stock of the Company; or (ii) change or
divide or otherwise reclassify its Common Stock into the same or a different
number of shares with or without par value, or into shares of any class or
classes; or (iii) consolidate or merge with, or transfer its property as an
entirety or substantially as an entirety to, any other corporation; or (iv)
make any distribution of its assets to holders of its Common Stock as a
liquidation or partial liquidation dividend or by way of return of capital;
then, upon the subsequent exercise of the Warrants represented hereby, the
Warrant Holder shall receive for the exercise price, in addition to or in
substitution for the shares of Common Stock to which he would otherwise be
entitled upon such exercise, such additional (or lesser) shares of stock or
scrip of the Company, or such reclassified shares of stock of the Company, or
such shares of the securities or property of the Company resulting from
2
<PAGE>
such consolidation or merger or transfer, or such assets of the Company,
which he would have been entitled to receive had he exercised the Warrants
represented hereby prior to the happening of any of the foregoing events.
Nothing contained herein shall require the Company to segregate or otherwise
set aside any particular asset for possible distribution to the Warrant
Holder upon exercise of the Warrant Holder's rights under the Warrants
represented hereby subsequent to a liquidation, partial or otherwise.
4. Securities Laws. In connection with the issuance to the Warrant
Holder of this Warrant, the Warrant Holder agrees to execute an investment
letter in such form as reasonably requested by the Company and its counsel
and as may be required to comply with federal and applicable state securities
laws. Upon any issuance of shares of Common Stock upon exercise of this
Warrant, it shall be the Company's responsibility to comply with the
requirements of: (1) the Securities Act of 1933, as amended; (2) the
Securities Exchange Act of 1934, as amended; (3) any applicable listing
requirements of any national securities exchange; (4) any state securities
regulation or "Blue Sky" laws; and (5) requirements under any other law or
regulation applicable to the issuance or transfer of such shares. If
required by the Company, in connection with each issuance of shares of Common
Stock upon exercise of this Warrant, the Warrant Holder will give: (i)
assurances in writing, satisfactory to the Company, that such shares are not
being purchased with a view to the distribution thereof in violation of
applicable laws, (ii) sufficient information, in writing, to enable the
Company to rely on exemptions from the registration or qualification
requirements of applicable laws, if available, with respect to such exercise,
and (iii) its cooperation to the Company in connection with such compliance.
5. Subscription. This Warrant Certificate does not confer upon the
Warrant Holder any rights whatsoever as a stockholder of the Company. Upon
the exercise of the Warrants represented hereby the subscription form
annexed hereto must be duly executed.
6. Survival. The various rights and obligations of the Warrant Holder
and the Company, as set forth in Sections 3 and 4 hereof, shall survive the
exercise of the Warrants represented hereby and the surrender of this Warrant
Certificate, and upon the surrender of this Warrant Certificate and the
exercise of all the Warrants represented hereby, the Company shall, if
requested, deliver to the Warrant Holder its written acknowledgement of its
continuing obligations under said Section.
7. Notice. All notices required by this Warrant Certificate to be
given to or made by the Company shall be given or made by Certified Mail
Return Receipt Requested addressed to the Warrant Holder or the Company at
his or its respective address as set forth above.
8. Loss or Destruction. Upon receipt of evidence satisfactory to the
Company of the loss, theft, destruction or mutilation of this Warrant
Certificate and, in the case of any such loss, theft or destruction, upon
delivery of an indemnity agreement satisfactory in form and amount to the
Company or, in the case of any such mutilation, upon surrender and
cancellation of this Warrant Certificate, the Company at its expense will
execute and deliver, in lieu thereof, a new Warrant Certificate of like tenor.
9. Pronouns; Singular/Plural. For purposes of this Warrant
Certificate, pronouns shall be deemed to refer to whatever gender and number
the identity of the person or entities involved may require, and words in the
singular shall be construed as though in the plural, or the plural as though
in the singular, whenever the context so admits.
3
<PAGE>
DIVERSIFAX, INC.
By:___________________________
Dr. Irwin A. Horowitz
President
Attest:
____________________________
4
<PAGE>
SUBSCRIPTION
To: Diversifax, Inc.
30 Stringham Road
Valley Stream, New York 11580
The undersigned hereby exercises, according to the terms and
conditions thereof, __________________ of the Warrants evidenced by the
within Warrant Certificate, and herewith makes payment in full of the
purchase price for the number of shares of common stock, par value $.001 per
share, of Diversifax, Inc., for which the undersigned has exercised these
Warrants. Kindly issue all shares of such common stock to the undersigned
and deliver them to the undersigned at the address stated below.
___________________________
Name
___________________________
Address
___________________________
___________________________
Signature
Dated:
5
<PAGE>
Exhibit 4(c)
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR
INVESTMENT AND HAVE NOT BEEN REGISTERED PURSUANT TO THE SECURITIES ACT OF
1933 OR ANY APPLICABLE STATE STATUTES. SUCH SECURITIES MAY NOT BE
TRANSFERRED, SOLD, PLEDGED, HYPOTHECATED OR OTHERWISE DISPOSED OF WITHOUT
EITHER AN EFFECTIVE REGISTRATION STATEMENT RELATING TO SUCH DISPOSITION OR
AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT THE SECURITIES MAY
BE SO DISPOSED OF WITHOUT BEING REGISTERED.
WARRANT TO PURCHASE ______ SHARES OF COMMON STOCK
OF
DIVERSIFAX, INC.
Dated _______, 1997
DIVERSIFAX, INC., a Delaware corporation, with offices at 39 Stringham
Avenue, Valley Stream, New York, New York 11580 (the "Company"), hereby
certifies that, for value received and subject to the provisions
hereinafter set forth, ___________ (the "Warrant Holder") is entitled to
purchase from the Company _____________ (______) shares of the Company's
common stock, par value $.001 per share (the "Common Stock"), at a price of
$3.00 per share (the "Exercise Price"), exercisable commencing on the date
hereof (the "Commencement Date") and terminating 5:00 P.M., New York time,
on __________, 1999. The shares of Common Stock deliverable upon exercise
of this Warrant, as adjusted from time to time, are hereinafter sometimes
referred to as the "Warrant Shares."
1. Exercise. This Warrant may be exercised, in whole or in part,
only by the Warrant Holder by presentation and surrender of this Warrant to
the Company at its principal office with the subscription form attached
hereto duly executed and accompanied by payment of the Exercise Price for
the number of Warrant Shares specified in such form. If this Warrant shall
be exercised only in part, then the Company, upon surrender of this Warrant
for cancellation, shall deliver a new Warrant evidencing the rights of the
Warrant Holder to purchase the balance of the Warrant Shares to which the
Warrant Holder is entitled. The Company shall not be required to issue any
fraction of a share upon the exercise of this Warrant. If any fractional
interest in a share shall be deliverable upon the exercise of this Warrant,
then the Company shall make an adjustment therefor in cash equal to such
fraction multiplied by the fair market value of the Common Stock as
determined by the Company's Board of Directors.
2. Title. This Warrant may not be sold, transferred, or
hypothecated, and title to this Warrant and all rights hereunder are not
transferable.
<PAGE>
3. Covenants. The above provisions are subject to the following:
(a) Any certificate(s) for Warrant Shares issued upon the
exercise of this Warrant shall bear the following legend:
"The securities represented by this certificate have been
acquired for investment and have not been registered
pursuant to the Securities Act of 1933, or any applicable
state statutes. Such shares may not be sold, transferred,
pledged, hypothecated, or otherwise disposed of without
either an effective registration statement relating to such
disposition or an opinion of counsel satisfactory to the
Company that the shares may be so disposed of without being
registered."
(b) The Company covenants and agrees that all Warrant Shares
which may be issued upon the exercise of this Warrant, upon issuance, shall
be fully paid and non-assessable and free from all taxes, liens and charges
with respect to the issue thereof. The Company covenants and agrees that
during the period within which this Warrant may be exercised, the Company
shall at all times have authorized and reserved for issuance a sufficient
number of shares of its Common Stock as shall be required for issuance and
delivery upon exercise of this Warrant.
(c) If, at any time prior to the expiration date of this Warrant
and prior to the exercise hereof, the Company shall (i) declare or pay to
the holders of Common Stock a dividend payable in any kind of shares of
stock of the Company; (ii) change, divide, or otherwise reclassify the
Common Stock into the same or a different number of shares with or without
par value, or into shares of any class or classes; (iii) consolidate or
merge with, or transfer its property as an entirety or substantially as an
entirety to, any other corporation; or (iv) make any distribution of its
assets to holders of its Common Stock as a liquidation or partial
liquidation dividend or by way of return of capital, then, upon the
subsequent exercise of this Warrant, the Warrant Holder shall receive, in
addition to or in substitution for the shares of Common Stock to which he
would otherwise be entitled upon such exercise, such additional (or lesser)
shares of stock or scrip of the Company, or such reclassified shares of
stock of the Company, or such shares of the securities or property of the
Company resulting from such consolidation, merger, or transfer, or such
assets of the Company, which he would have been entitled to receive had he
exercised this Warrant prior to the happening of any of the foregoing
events. Nothing contained herein shall require the Company to segregate or
otherwise set aside any particular asset for possible distribution to the
Warrant Holder upon exercise of this Warrant subsequent to a liquidation,
partial or otherwise.
4. Securities Laws. Upon any issuance of shares of Common Stock
upon exercise of this Warrant, it shall be the Company's responsibility to
comply with the requirements of (a) the Securities Act of 1933, as amended;
(b)the Securities Exchange Act of 1934, as amended;(c) any applicable
listing requirements of any national securities exchange;(d) any state
securities regulation or "Blue Sky" laws; and (e) requirements under any
other law or regulation applicable to the issuance or transfer of such
shares. In connection with each issuance of shares of Common Stock upon
exercise of this Warrant, the Warrant Holder shall give, if required by the
Company,(i) assurances in writing, satisfactory to the Company, that such
shares are not being purchased with a view to the distribution thereof in
violation of applicable laws,(ii) sufficient information, in writing, to
enable the Company to rely on exemptions from the registration or
qualification requirements of applicable laws, if available, with respect
to such exercise, and (iii) its cooperation to the Company in connection
with such compliance.
2
<PAGE>
5. Subscription. The Warrant Holder shall not be entitled, by
virtue hereof, to any rights of a shareholder in the Company, either at law
or equity, and the rights of the Warrant Holder are limited to those
expressed in this Warrant and are not enforceable against the Company,
except to the extent set forth herein.
6. Survival. The various rights and obligations of the Warrant
Holder and the Company, as set forth in Sections 3 and 4 hereof, shall
survive the exercise of this Warrant, and upon the exercise and surrender
of this Warrant, the Company, if requested, shall deliver to the Warrant
Holder its written acknowledgement of its continuing obligations under said
Sections.
7. Notice. All notices required by this Warrant to be given to or
made by the Company shall be given or made by certified mail, return
receipt requested, addressed to the Warrant Holder or the Company at his or
its respective address as set forth above.
8. Loss or Destruction. Upon receipt of evidence satisfactory to
the Company of the loss, theft, destruction, or mutilation of this Warrant
and, in the case of any such loss, theft, or destruction, upon delivery of
an indemnity agreement satisfactory in form and amount to the Company or,
in the case of any such mutilation, upon surrender and cancellation of this
Warrant, the Company, at its expense, will execute and deliver, in lieu
thereof, a new Warrant of like tenor.
9. Amendment; Waiver of Provisions. This Warrant may not be amended by
or compliance with any provision hereof waived except pursuant to a written
instrument signed by the parties hereto.
DIVERSIFAX, INC.
By:
-----------------------------
Irwin A. Horowitz,
President
Attest:
-------------------------
3
<PAGE>
SUBSCRIPTION
To: DiversiFax, Inc.
39 Stringham Avenue
Valley Stream, New York 11580
The undersigned hereby exercises, according to the terms and
conditions thereof, the within Warrant to the extent of purchasing
___________ shares of common stock of DiversiFax, Inc., par value $0.001
per share, and herewith makes payment of $______________ in payment of the
purchase price thereof. Please issue and deliver all such shares of common
stock to the undersigned at the address stated below.
__________________________
Name
___________________________
Address
___________________________
___________________________
Signature
Dated:
4
<PAGE>
Exhibit 4 (d)
The securities represented by this certificate have been acquired for
investment and have not been registered pursuant to the Securities Act of
1933 or any applicable state statutes. Such securities may not be
transferred, sold, pledged, hypothecated or otherwise disposed of without
either an effective registration statement relating to such disposition or an
opinion of counsel satisfactory to DiversiFax, Inc. that the securities may
be so disposed of without being registered.
WARRANT CERTIFICATE
Dated ________ __, 1996
VOID AFTER 5:00 P.M., New York Local Time
________ __, 2001
DIVERSIFAX, INC.
Warrants to purchase _______ shares of Common Stock, par value $.001 per
share.
DIVERSIFAX, INC., a Delaware corporation, with offices at 39 Stringham
Avenue, Valley Stream, New York 11580 (the "Company"), hereby certifies that
_____________________________ ("Warrant Holder"), for value received and
subject to the provisions hereinafter set forth is entitled to purchase from
the Company ______ shares, par value $.001 per share, of Common Stock of the
Company (the "Common Stock") at a price of THREE DOLLARS AND 50/100 ($3.50)
per share, subject to adjustment as set forth herein, exercisable commencing
on the date hereof until 5:00 P.M., New York time, on ________ 22, 2001.
1. Exercise. The Warrants represented by this Warrant Certificate may
be exercised only by the Warrant Holder on the terms and conditions set forth
in this Warrant Certificate, in whole or in part, upon the surrender of this
Warrant Certificate, with the subscription form attached hereto duly
executed, to the Company and upon payment to the Company of the price
hereinabove set forth for the shares so purchased. If the Warrants
represented hereby shall be exercised in part only, the Company shall, upon
surrender of this Warrant Certificate for cancellation, deliver a new Warrant
Certificate evidencing the rights of the Warrant Holder to purchase the
balance of the shares of Common Stock to which the Warrant Holder is
entitled. The Company shall not be required to issue any fraction of a share
upon the exercise of the Warrants represented hereby. If any fractional
interest in a share shall be deliverable upon the exercise of the Warrants
represented hereby or any portion thereof, the Company shall make an
adjustment therefor in cash equal to such fraction multiplied by the fair
market value of shares of Common Stock as determined by the Company's Board
of Directors.
2. Title. This Warrant Certificate is issued subject to the condition
that it may not be sold, transferred or hypothecated and that title to this
Warrant Certificate and all rights hereunder are not transferable.
<PAGE>
3. Covenants. The above provisions are subject to the following:
(a) Any certificate(s) for shares of Common Stock issued upon the
exercise of the Warrants represented hereby shall bear the following legend:
"The securities represented by this certificate have been
acquired for investment and have not been registered
pursuant to the Securities Act of 1933 or any applicable
state statutes. Such shares may not be sold, transferred,
pledged, hypothecated or otherwise disposed of without
either an effective registration statement relating to such
disposition or an opinion of counsel satisfactory to
DiversiFax, Inc. that the securities may be so disposed of
without being registered."
(b) The Company covenants and agrees that all shares which may be
issued upon the exercise of the rights represented by this Warrant
Certificate shall, upon issuance, be fully paid and non-assessable and free
from all taxes, liens and charges with respect to the issue thereof; without
limiting the generality of the foregoing, the Company covenants and agrees
that it will from time to time take any such action as may be requisite to
assure that the par value per share of the Common Stock is at all times equal
to or less than the then effective purchase price per share of the Common
Stock issuable pursuant to this Warrant Certificate. The Company further
covenants and agrees that during the period within which the rights
represented by this Warrant Certificate may be exercised, the Company shall
at all times have authorized, and reserved for the purpose of issue upon
exercise of the subscription rights evidenced by this Warrant Certificate, a
sufficient number of shares of its Common Stock to provide for the exercise
of the rights represented by this Warrant Certificate.
(c) In the event that the Company shall, at any time prior to the
expiration date of the Warrants represented hereby and prior to the exercise
thereof: (i) declare or pay to the holders of the Common Stock a dividend
payable in any kind of shares of stock of the Company; or (ii) change or
divide or otherwise reclassify its Common Stock into the same or a different
number of shares with or without par value, or into shares of any class or
classes; or (iii) consolidate or merge with, or transfer its property as an
entirety or substantially as an entirety to, any other corporation; or (iv)
make any distribution of its assets to holders of its Common Stock as a
liquidation or partial liquidation dividend or by way of return of capital;
then, upon the subsequent exercise of the Warrants represented hereby, the
Warrant Holder shall receive for the exercise price, in addition to or in
substitution for the shares of Common Stock to which he would otherwise be
entitled upon such exercise, such additional (or lesser) shares of stock or
scrip of the Company, or such reclassified shares of stock of the Company, or
such shares of the securities or property of the Company resulting from such
consolidation or merger or transfer, or such assets of the Company, which he
would have been entitled to receive had he exercised the Warrants represented
hereby prior to the happening of any of the foregoing events. Nothing
contained herein shall require the Company to segregate or otherwise set
aside any particular asset for possible distribution to the Warrant Holder
upon exercise of the Warrant Holder's rights under the Warrants represented
hereby subsequent to a liquidation, partial or otherwise.
4. Securities Laws. In connection with the issuance to the Warrant
Holder of this Warrant, the Warrant Holder agrees to execute an investment
letter in such form as reasonably requested by the Company and its counsel
and as may be required to comply with federal and applicable state securities
laws. Upon any issuance of shares of Common Stock upon exercise of this
Warrant, it shall be the Company's responsibility to comply with the
requirements of: (1) the Securities Act of 1933, as amended; (2) the
Securities Exchange
2
<PAGE>
Act of 1934, as amended; (3) any applicable listing requirements of any
national securities exchange; (4) any state securities regulation or "Blue
Sky" laws; and (5) requirements under any other law or regulation applicable
to the issuance or transfer of such shares. If required by the Company, in
connection with each issuance of shares of Common Stock upon exercise of this
Warrant, the Warrant Holder will give: (i) assurances in writing,
satisfactory to the Company, that such shares are not being purchased with a
view to the distribution thereof in violation of applicable laws, (ii)
sufficient information, in writing, to enable the Company to rely on
exemptions from the registration or qualification requirements of applicable
laws, if available, with respect to such exercise, and (iii) its cooperation
to the Company in connection with such compliance.
5. Subscription. This Warrant Certificate does not confer upon the
Warrant Holder any rights whatsoever as a stockholder of the Company. Upon
the exercise of the Warrants represented hereby the subscription form
annexed hereto must be duly executed.
6. Piggyback Registration Rights. If the Company registers any of
its securities under the Securities Act of 1933, as amended (the "Act"),
during the period of five years from the date of this Warrant Certificate,
other than a registration solely to implement an employee benefit plan, a
transaction to which Rule 145 under the Act is applicable, or any other form
of registration in which the shares of Common Stock underlying this Warrant
Certificate (the "Warrant Shares") cannot be included pursuant to the Act and
the Rules thereunder, the Company shall advise the Warrant Holder by written
notice at least 20 days prior to the filing of any such registration
statement or post-effective amendment thereto, and, upon written request of
the Warrant Holder, the Company shall cause the Warrant Shares, whether or
not the Warrants represented by the Warrant Certificate have been exercised,
to be registered under the Act and qualified for sale under such state
securities laws as the Warrant Holder shall reasonable request.
Notwithstanding the foregoing, in the event that the underwriter, if any,
managing such registration (the "Underwriter") advises the Company in writing
that, in its opinion, the distribution of all or a portion of the Warrant
Shares requested to be included in such registration statement would
materially adversely affect the distribution of securities by the Company for
its own account, then the Warrant Holder shall waive its right to include the
Warrant Shares (or such portion thereof so designated by the Underwriter) in
such registration statement.
3
<PAGE>
7. Survival. The various rights and obligations of the Warrant Holder
and the Company, as set forth in Sections 3 and 4 hereof, shall survive the
exercise of the Warrants represented hereby and the surrender of this Warrant
Certificate, and upon the surrender of this Warrant Certificate and the
exercise of all the Warrants represented hereby, the Company shall, if
requested, deliver to the Warrant Holder its written acknowledgement of its
continuing obligations under said Section.
8. Notice. All notices required by this Warrant Certificate to be
given to or made by the Company shall be given or made by Certified Mail
Return Receipt Requested addressed to the Warrant Holder or the Company at
his or its respective address as set forth above.
9. Loss or Destruction. Upon receipt of evidence satisfactory to the
Company of the loss, theft, destruction or mutilation of this Warrant
Certificate and, in the case of any such loss, theft or destruction, upon
delivery of an indemnity agreement satisfactory in form and amount to the
Company or, in the case of any such mutilation, upon surrender and
cancellation of this Warrant Certificate, the Company at its expense will
execute and deliver, in lieu thereof, a new Warrant Certificate of like tenor.
10. Pronouns; Singular/Plural. For purposes of this Warrant
Certificate, pronouns shall be deemed to refer to whatever gender and number
the identity of the person or entities involved may require, and words in the
singular shall be construed as though in the plural, or the plural as though
in the singular, whenever the context so admits.
DIVERSIFAX, INC.
By:___________________________
Dr. Irwin A. Horowitz
President
Attest:
____________________________
4
<PAGE>
SUBSCRIPTION
To: Diversifax, Inc.
30 Stringham Road
Valley Stream, New York 11580
The undersigned hereby exercises, according to the terms and
conditions thereof, __________________ of the Warrants evidenced by the
within Warrant Certificate, and herewith makes payment in full of the
purchase price for the number of shares of common stock, par value $.001 per
share, of Diversifax, Inc., for which the undersigned has exercised these
Warrants. Kindly issue all shares of such common stock to the undersigned
and deliver them to the undersigned at the address stated below.
___________________________
Name
___________________________
Address
___________________________
___________________________
Signature
Dated:
5
<PAGE>
Exhibit 4(e)
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR
INVESTMENT AND HAVE NOT BEEN REGISTERED PURSUANT TO THE SECURITIES ACT OF
1933, AS AMENDED, OR ANY APPLICABLE STATE STATUTES. SUCH SECURITIES MAY
NOT BE TRANSFERRED, SOLD, PLEDGED, HYPOTHECATED, OR OTHERWISE DISPOSED OF
WITHOUT EITHER AN EFFECTIVE REGISTRATION STATEMENT RELATING TO SUCH
DISPOSITION OR AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT THE
SECURITIES MAY BE SO DISPOSED OF WITHOUT BEING REGISTERED.
WARRANT TO PURCHASE _______ SHARES OF COMMON STOCK
OF
DIVERSIFAX, INC.
Dated ____________, 1997
DIVERSIFAX, INC., a Delaware corporation, with offices at 39 Stringham
Avenue, Valley Stream, New York, New York 11580 (the "Company"), hereby
certifies that, for value received and subject to the provisions
hereinafter set forth, _________________ (the "Warrant Holder") is entitled
to purchase from the Company _____________________________ (_______) shares
of the Company's common stock, par value $0.001 per share (the "Common
Stock"), at a price of $0.78125 per share (the "Exercise Price"),
exercisable commencing on the date hereof (the "Commencement Date") and
terminating 5:00 P.M., New York time, on the third anniversary of the
Commencement Date. The shares of Common Stock deliverable upon exercise of
this Warrant, as adjusted from time to time, are hereinafter sometimes
referred to as the "Warrant Shares".
1. Exercise. This Warrant may be exercised, in whole or in part,
only by the Warrant Holder by presentation and surrender of this Warrant to
the Company at its principal office with the subscription form attached
hereto duly executed and accompanied by payment of the Exercise Price for
the number of Warrant Shares specified in such form. If this Warrant shall
be exercised only in part, then the Company, upon surrender of this Warrant
for cancellation, shall deliver a new Warrant evidencing the rights of the
Warrant Holder to purchase the balance of the Warrant Shares to which the
Warrant Holder is entitled. The Company shall not be required to issue any
fraction of a share upon the exercise of this Warrant. If any fractional
interest in a share shall be deliverable upon the exercise of this Warrant,
then the Company shall make an adjustment therefor in cash equal to such
fraction multiplied by the fair market value of the Common Stock as
determined by the Company's Board of Directors.
2. Title. This Warrant may not be sold, transferred, or
hypothecated, and title to this Warrant and all rights hereunder are not
transferable.
3. Covenants. The above provisions are subject to the following:
(a) Any certificate(s) for Warrant Shares issued upon the
exercise of this Warrant shall bear the following legend:
<PAGE>
"The securities represented by this certificate have been
acquired for investment and have not been registered
pursuant to the Securities Act of 1933, as amended, or any
applicable state statutes. Such shares may not be sold,
transferred, pledged, hypothecated, or otherwise disposed of
without either an effective registration statement relating
to such disposition or an opinion of counsel satisfactory to
the Company that the shares may be so disposed of without
being registered."
(b) The Company covenants and agrees that all Warrant Shares
which may be issued upon the exercise of this Warrant, upon issuance, shall
be fully paid and non-assessable and free from all taxes, liens and charges
with respect to the issuance thereof. The Company covenants and agrees
that during the period within which this Warrant may be exercised, the
Company shall at all times have authorized and reserved for issuance a
sufficient number of shares of Common Stock as shall be required for
issuance and delivery upon exercise of this Warrant.
(c) If, at any time prior to the expiration date of this Warrant
and prior to the exercise hereof, the Company shall (i) declare or pay to
the holders of Common Stock a dividend payable in any kind of shares of
stock of the Company; (ii) change, divide, combine, or otherwise reclassify
the Common Stock into the same or a different number of shares with or
without par value, or into shares of any class or classes; (iii)
consolidate or merge with, or transfer its property as an entirety or
substantially as an entirety to, any other corporation; or (iv) make any
distribution of its assets to holders of the Common Stock as a liquidation
or partial liquidation dividend or by way of return of capital, then, upon
the subsequent exercise of this Warrant, the Warrant Holder shall receive,
in addition to or in substitution for the Warrant Shares to which he would
otherwise be entitled upon such exercise, such additional (or lesser)
shares of stock or scrip of the Company, or such reclassified shares of
stock of the Company, or such securities or property of the Company
resulting from such consolidation, merger, or transfer, or such assets of
the Company, which he would have been entitled to receive had he exercised
this Warrant prior to the happening of any of the foregoing events.
Nothing contained herein shall require the Company to segregate or
otherwise set aside any particular asset for possible distribution to the
Warrant Holder upon exercise of this Warrant subsequent to a liquidation,
partial or otherwise.
4. Securities Laws. Upon any issuance of Warrant Shares upon
exercise of this Warrant, it shall be the Company's responsibility to
comply with the requirements of (a) the Securities Act of 1933, as amended;
(b)the Securities Exchange Act of 1934, as amended;(c) any applicable
listing requirements of any national securities exchange;(d) any state
securities regulation or "Blue Sky" laws; and (e) requirements under any
other law or regulation applicable to the issuance or transfer of such
Warrant Shares. In connection with each issuance of Warrant Shares upon
exercise of this Warrant, the Warrant Holder shall give, if required by the
Company,(i) assurances in writing, satisfactory to the Company, that such
Warrant Shares are not being purchased with a view to the distribution
thereof in violation of applicable laws,(ii) sufficient information, in
writing, to enable the Company to rely on exemptions from the registration
or qualification requirements of applicable laws with respect to such
exercise, and (iii) its cooperation to the Company in connection with such
compliance.
5. Subscription. The Warrant Holder shall not be entitled, by
virtue hereof, to any rights of a shareholder in the Company, either at law
or equity, and the rights of the Warrant Holder are limited to those
expressed in this Warrant and are not enforceable against the Company,
except to the extent set forth herein.
2
<PAGE>
6. Survival. The various rights and obligations of the Warrant
Holder and the Company, as set forth in Sections 3 and 4 hereof, shall
survive the exercise of this Warrant, and upon the exercise and surrender
of this Warrant, the Company, if requested, shall deliver to the Warrant
Holder its written acknowledgement of its continuing obligations under said
Sections.
7. Notice. All notices required by this Warrant to be given to or
made by the Company shall be given or made by certified mail, return
receipt requested, addressed to the Warrant Holder or the Company at his or
its respective address as set forth above.
8. Loss or Destruction. Upon receipt of evidence satisfactory to
the Company of the loss, theft, destruction, or mutilation of this Warrant
and, in the case of any such loss, theft, or destruction, upon delivery of
an indemnity agreement satisfactory in form and amount to the Company or,
in the case of any such mutilation, upon surrender and cancellation of this
Warrant, the Company, at its expense, will execute and deliver, in lieu
thereof, a new Warrant of like tenor.
9. Amendment; Waiver of Provisions. This Warrant may not be amended by
or compliance with any provision hereof waived except pursuant to a written
instrument signed by the parties hereto.
DIVERSIFAX, INC.
By:
-------------------------
Kenneth Ross Wolfe,
Secretary
3
<PAGE>
SUBSCRIPTION
To: Diversifax, Inc.
39 Stringham Avenue
Valley Stream, New York 11580
The undersigned hereby exercises, according to the terms and
conditions thereof, the within Warrant to the extent of purchasing
shares of common stock of Diversifax, Inc., par value $0.001
per share, and herewith makes payment of $ in payment of the
purchase price thereof. Please issue and deliver all such shares of common
stock to the undersigned at the address stated below.
__________________________
Name
___________________________
Address
___________________________
___________________________
Signature
Dated:
4
<PAGE>
Exhibit 4(f)
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR
INVESTMENT AND HAVE NOT BEEN REGISTERED PURSUANT TO THE SECURITIES ACT OF
1933, AS AMENDED, OR ANY APPLICABLE STATE STATUTES. SUCH SECURITIES MAY NOT
BE TRANSFERRED, SOLD, PLEDGED, HYPOTHECATED, OR OTHERWISE DISPOSED OF WITHOUT
EITHER AN EFFECTIVE REGISTRATION STATEMENT RELATING TO SUCH DISPOSITION OR AN
OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT THE SECURITIES MAY BE SO
DISPOSED OF WITHOUT BEING REGISTERED.
WARRANT TO PURCHASE ______ SHARES OF COMMON STOCK
OF
DIVERSIFAX, INC.
Dated ____________, 1997
DIVERSIFAX, INC., a Delaware corporation, with offices at 39 Stringham
Avenue, Valley Stream, New York, New York 11580 (the "Company"), hereby
certifies that, for value received and subject to the provisions hereinafter
set forth, _________________ (the "Warrant Holder") is entitled to purchase
from the Company ______________________________ (______) shares of the
Company's common stock, par value $0.001 per share (the "Common Stock"), at a
price of $0.8125 per share (the "Exercise Price"), exercisable commencing on
the date hereof (the "Commencement Date") and terminating 5:00 P.M., New York
time, on the third anniversary of the Commencement Date. The shares of
Common Stock deliverable upon exercise of this Warrant, as adjusted from time
to time, are hereinafter sometimes referred to as the "Warrant Shares".
1. Exercise. This Warrant may be exercised, in whole or in part,
only by the Warrant Holder by presentation and surrender of this Warrant to
the Company at its principal office with the subscription form attached
hereto duly executed and accompanied by payment of the Exercise Price for
the number of Warrant Shares specified in such form. If this Warrant shall
be exercised only in part, then the Company, upon surrender of this Warrant
for cancellation, shall deliver a new Warrant evidencing the rights of the
Warrant Holder to purchase the balance of the Warrant Shares to which the
Warrant Holder is entitled. The Company shall not be required to issue any
fraction of a share upon the exercise of this Warrant. If any fractional
interest in a share shall be deliverable upon the exercise of this Warrant,
then the Company shall make an adjustment therefor in cash equal to such
fraction multiplied by the fair market value of the Common Stock as
determined by the Company's Board of Directors.
2. Title. This Warrant may not be sold, transferred, or
hypothecated, and title to this Warrant and all rights hereunder are not
transferable.
3. Covenants. The above provisions are subject to the following:
(a) Any certificate(s) for Warrant Shares issued upon the
exercise of this Warrant shall bear the following legend:
<PAGE>
"The securities represented by this certificate have been
acquired for investment and have not been registered
pursuant to the Securities Act of 1933, as amended, or any
applicable state statutes. Such shares may not be sold,
transferred, pledged, hypothecated, or otherwise disposed of
without either an effective registration statement relating
to such disposition or an opinion of counsel satisfactory to
the Company that the shares may be so disposed of without
being registered."
(b) The Company covenants and agrees that all Warrant Shares which
may be issued upon the exercise of this Warrant, upon issuance, shall be
fully paid and non-assessable and free from all taxes, liens and charges with
respect to the issuance thereof. The Company covenants and agrees that
during the period within which this Warrant may be exercised, the Company
shall at all times have authorized and reserved for issuance a sufficient
number of shares of Common Stock as shall be required for issuance and
delivery upon exercise of this Warrant.
(c) If, at any time prior to the expiration date of this Warrant
and prior to the exercise hereof, the Company shall (i) declare or pay to the
holders of Common Stock a dividend payable in any kind of shares of stock of
the Company; (ii) change, divide, combine, or otherwise reclassify the Common
Stock into the same or a different number of shares with or without par
value, or into shares of any class or classes; (iii) consolidate or merge
with, or transfer its property as an entirety or substantially as an entirety
to, any other corporation; or (iv) make any distribution of its assets to
holders of the Common Stock as a liquidation or partial liquidation dividend
or by way of return of capital, then, upon the subsequent exercise of this
Warrant, the Warrant Holder shall receive, in addition to or in substitution
for the Warrant Shares to which he would otherwise be entitled upon such
exercise, such additional (or lesser) shares of stock or scrip of the
Company, or such reclassified shares of stock of the Company, or such
securities or property of the Company resulting from such consolidation,
merger, or transfer, or such assets of the Company, which he would have been
entitled to receive had he exercised this Warrant prior to the happening of
any of the foregoing events. Nothing contained herein shall require the
Company to segregate or otherwise set aside any particular asset for possible
distribution to the Warrant Holder upon exercise of this Warrant subsequent
to a liquidation, partial or otherwise.
4. Securities Laws. Upon any issuance of Warrant Shares upon exercise
of this Warrant, it shall be the Company's responsibility to comply with the
requirements of (a) the Securities Act of 1933, as amended; (b)the Securities
Exchange Act of 1934, as amended;(c) any applicable listing requirements of
any national securities exchange;(d) any state securities regulation or "Blue
Sky" laws; and (e) requirements under any other law or regulation applicable
to the issuance or transfer of such Warrant Shares. In connection with each
issuance of Warrant Shares upon exercise of this Warrant, the Warrant Holder
shall give, if required by the Company,(i) assurances in writing,
satisfactory to the Company, that such Warrant Shares are not being purchased
with a view to the distribution thereof in violation of applicable laws,(ii)
sufficient information, in writing, to enable the Company to rely on
exemptions from the registration or qualification requirements of applicable
laws with respect to such exercise, and (iii) its cooperation to the Company
in connection with such compliance.
5. Subscription. The Warrant Holder shall not be entitled, by virtue
hereof, to any rights of a shareholder in the Company, either at law or
equity, and the rights of the Warrant Holder are limited to those expressed
in this Warrant and are not enforceable against the Company, except to the
extent set forth herein.
2
<PAGE>
6. Survival. The various rights and obligations of the Warrant
Holder and the Company, as set forth in Sections 3 and 4 hereof, shall
survive the exercise of this Warrant, and upon the exercise and surrender
of this Warrant, the Company, if requested, shall deliver to the Warrant
Holder its written acknowledgement of its continuing obligations under said
Sections.
7. Notice. All notices required by this Warrant to be given to or
made by the Company shall be given or made by certified mail, return
receipt requested, addressed to the Warrant Holder or the Company at his or
its respective address as set forth above.
8. Loss or Destruction. Upon receipt of evidence satisfactory to
the Company of the loss, theft, destruction, or mutilation of this Warrant
and, in the case of any such loss, theft, or destruction, upon delivery of
an indemnity agreement satisfactory in form and amount to the Company or,
in the case of any such mutilation, upon surrender and cancellation of this
Warrant, the Company, at its expense, will execute and deliver, in lieu
thereof, a new Warrant of like tenor.
9. Amendment; Waiver of Provisions. This Warrant may not be amended by
or compliance with any provision hereof waived except pursuant to a written
instrument signed by the parties hereto.
DIVERSIFAX, INC.
By:
------------------------------
Kenneth Ross Wolfe,
Secretary
3
<PAGE>
SUBSCRIPTION
To: Diversifax, Inc.
39 Stringham Avenue
Valley Stream, New York 11580
The undersigned hereby exercises, according to the terms and
conditions thereof, the within Warrant to the extent of purchasing
___________ shares of common stock of Diversifax, Inc., par value $0.001 per
share, and herewith makes payment of $______________ in payment of the
purchase price thereof. Please issue and deliver all such shares of common
stock to the undersigned at the address stated below.
__________________________
Name
___________________________
Address
___________________________
___________________________
Signature
Dated:
4
<PAGE>
Exhibit 5
BRESLOW & WALKER, LLP
767 Third Avenue
New York, New York 10017
December 5, 1997
Board of Directors
DiversiFax, Inc.
39 Stringham Avenue
Valley Stream, New York 11580
Gentlemen:
It is our opinion that the securities being registered with the
Securities and Exchange Commission pursuant to the Registration Statement
of Diversifax, Inc. on Form S-3 will, when sold, be legally issued, fully
paid and nonassessable.
We consent to the filing of this opinion as an exhibit to the
aforesaid Registration Statement and further consent to the reference made
to us under the caption "Legal Matters" in the Prospectus constituting part
of such Registration Statement.
Very truly yours,
/s/ Breslow & Walker, LLP
Breslow & Walker, LLP
<PAGE>
Exhibit 23(a)
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in this Registration Statement of
DiversiFax, Inc. and Subsidiaries on Form S-3 relating to the registration of
2,331,030 shares of common stock, of our report dated March 7, 1997, appearing
in the Annual Report on Form 10-KSB of DiversiFax, Inc. and Subsidiaries for the
year ended November 30, 1996, and the use of our name, and the statements with
respect to us, under the heading "Experts" in the Prospectus.
/s/ Hoberman, Miller Goldstein & Lesser, P.C.
----------------------------------------------
HOBERMAN, MILLER, GOLDSTEIN & LESSER, P.C.
December 4, 1997
