THESE SECURITIES HAVE NOT BEEN REGISTERED WITH THE UNITED STATES SECURITIES AND
EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE PURSUANT TO AN
EXEMPTION FROM REGISTRATION UNDER REGULATION D PROMULGATED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"). THIS SUBSCRIPTION AGREEMENT
SHALL NOT CONSTITUTE AN OFFER TO SELL NOR A SOLICITATION OF AN OFFER TO BUY THE
SECURITIES IN ANY JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION WOULD BE
UNLAWFUL. THE SECURITIES ARE "RESTRICTED" AND MAY NOT BE RESOLD OR TRANSFERRED
EXCEPT AS PERMITTED UNDER THE SECURITIES ACT PURSUANT TO REGISTRATION OR
EXEMPTION THEREFROM.
SERIES D PREFERRED STOCK
SECURITIES PURCHASE AGREEMENT
DIVERSIFAX, INC.
THIS AGREEMENT is made as of the ____ day of May, 1997, between
DIVERSIFAX, INC., Nasdaq Symbol "DFAX" (the "Company"), a Delaware corporation,
with its principal office at 00 Xxxxxxxxx Xxxxxx, Xxxxxx Xxxxxx, XX 00000, and
_____________________ (the "Purchaser"), with its principal office at __________
__________________________.
IN CONSIDERATION of the mutual covenants contained in this
Agreement, the Company and the Purchaser agree as follows:
Section 1. Certain Definitions. For purposes of this Agreement:
"Closing Date" means the date agreed to by the parties for the
delivery of the stock certificate against a wire transfer of the funds to the
Company.
"Closing" means the completion of the purchase and sale of the
Shares on the Closing Date.
"Common Stock" means the common stock of the Company, $.001par value
per share.
"Conversion Date" means the date on which the Purchaser has
telecopied the Notice of Conversion to the Company.
"Convertible Preferred Stock" means the shares of Series D Preferred
Stock of the Company, the terms of which are set forth in the Certificate of
Designation filed with the Secretary of State of the State of Delaware (a copy
of which is attached hereto as Exhibit A, the
"Certificate of Designation").
"Conversion Price" shall have the meaning as set forth in the
Certificate of Designation.
"Purchase Price" means the aggregate purchase price of the Shares
purchased.
"Shares" means the shares of Convertible Preferred Stock purchased
hereunder.
Section 2. Authorization and Sale of Shares.
2.1 Authorization. Subject to the terms and conditions of this
Agreement, the Company has authorized the sale and issuance of the Shares.
2.2 Agreement to Sell and Purchase the Shares. In reliance upon the
representations and warranties of the Company and Purchaser contained in this
Agreement, and upon the terms and conditions hereinafter set forth, the Company
hereby agrees to sell to the Purchaser and the Purchaser hereby agrees to buy
from the Company __________ Shares for an aggregate purchase price of
________________ Dollars based on U.S. $1,000 per share. The Shares shall pay a
6% cumulative dividend, payable in cash or Common Stock, at the discretion of
the Company, all as set forth in the Certificate of Designation. Such purchase
and sale shall occur on the Closing Date.
2.3 Time and Place of Closing. The Closing shall be held at the
offices of Xxxxxxx X. Xxxxxxxxx, P.C. ("Escrow Agent"), 00 Xxxxxxxx, Xxx Xxxx,
XX 00000, as promptly as practicable as agreed to by the parties to this
Agreement.
2.4 Payment and Delivery. At or prior to the Closing, the following
shall occur:
(a) Purchaser shall remit by wire transfer the Purchase Price to
Escrow Agent as per a separate escrow agreement (a copy of which is attached
hereto as Exhibit B, the "Escrow Agreement"), as payment in full for the Shares.
(b) The Company shall deliver or cause to be delivered to Escrow
Agent a certificate representing the Shares, registered in the name of the
Purchaser (or any nominee designated by the Purchaser at least three days before
the Closing Date), free and clear of all liens, claims, charges and
encumbrances.
(c) Wire instructions for Escrow Agent are as follows:
Chase Manhattan Bank, N.A.
ABA #000000000
For the Account of
United States Trust Company of New York
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Account #000-0-000000
In Favor of
Xxxxxxx X. Xxxxxxxxx, P.C. Attorney Trust Account
Account #59-02347
(d) At the closing, the Escrow Agent shall remit the monies
received in payment of the Purchase Price to the Company, and shall deliver the
certificate evidencing the Shares to the Purchaser (or the Purchaser's
designee), all in accordance with the provisions of the Escrow Agreement.
Section 3. General Representations and Warranties of the Company.
The Company hereby represents and warrants to, and covenants with, the Purchaser
that the following are true and correct as of the date hereof .
3.1 Organization; Qualification. The Company is a corporation duly
organized and validly existing under the laws of the State of Delaware and is in
good standing under such laws. The Company has all requisite corporate power and
authority to own, lease and operate its properties and assets, and to carry on
its business as presently conducted. The Company is qualified to do business as
a foreign corporation in each jurisdiction in which the ownership of its
property or the nature of its business requires such qualification, except where
failure to so qualify would not have a material adverse effect on the Company.
3.2 Capitalization. The authorized capital stock of the Company
consists of 25,000,000 shares of Common Stock, 1,000,000 shares of Series A
Convertible Preferred Stock, 2,900 shares of Series B Convertible Preferred
Stock, and 1,500 shares of Series D Convertible Preferred Stock. All issued and
outstanding shares of Common Stock have been duly authorized and validly issued
and are fully paid and nonassessable. The Company will reserve from its
authorized but unissued shares of Common Stock a sufficient number of shares of
Common Stock to permit the conversion in full of the Shares.
3.3 Authorization. The Company has all requisite corporate right,
power and authority to execute and deliver this Agreement and to consummate the
transactions contemplated hereby. All corporate action on the part of the
Company, its directors and stockholders necessary for the authorization,
execution, delivery and performance of this Agreement by the Company, the
authorization, sale, issuance and delivery of the Shares and the performance of
the Company's obligations hereunder has been taken. This Agreement has been duly
executed and delivered by the Company and constitutes a legal, valid and binding
obligation of the Company enforceable in accordance with its terms, subject to
laws of general application relating to bankruptcy, insolvency and the relief of
debtors and rules of law governing specific performance, injunctive relief or
other equitable remedies, and to limitations of public policy as they may apply
to the indemnification provisions set forth in Sections 7.8 and 7.11 of this
Agreement. Upon their issuance and delivery pursuant to this Agreement, the
Shares will be validly issued, fully paid and nonassessable and will be free of
any liens or encumbrances; provided, however, the Shares are subject to
restrictions on transfer under state and/or federal securities laws. The
issuance and sale of the Shares will not give rise to any preemptive right or
3
right of first refusal or right of participation on behalf of any person.
3.4 No Conflict. The execution and delivery of this Agreement do
not, and the consummation of the transactions contemplated hereby will not,
conflict with, or result in any violation of, or default (with or without notice
or lapse of time, or both), or give rise to a right of termination, cancellation
or acceleration of any obligation or to a loss of a material benefit, under, any
provision of the Certificate of Incorporation, Bylaws, or any stockholders
agreements and any amendments thereto of the Company or any material mortgage,
indenture, lease or other agreement or instrument, permit, concession,
franchise, license, judgment, order, decree statute, law, ordinance, rule or
regulation applicable to the Company, its properties or assets.
3.5 Accuracy of Reports and Information.
(a) The Company is in full compliance, to the extent applicable,
with all reporting obligations under either Section 12(b), 12 (g) or 15(d) of
the Securities Exchange Act of 1934, as amended (the "Exchange Act"). The
Company has registered its Common Stock pursuant to Section 12 of the Exchange
Act and the Common Stock is listed and trades on Nasdaq.
(b) The Company has filed all material required to be filed pursuant
to all reporting obligations, under either Section 13(a) or 15(d) of the
Exchange Act for a period of at least twelve (12) months immediately preceding
the offer to sale of the Shares (or for such shorter period that the Company has
been required to file such material).
3.6 SEC Filings/Full Disclosure.
(a) None of the Company's filings with the Securities and Exchange
Commission since January 1, 1996 contain any untrue statement of a material fact
or omit to state any material fact required to be stated therein or necessary to
make the statements therein in light of the circumstances under which they were
made, not misleading. Except for the Company's Form 10-Q for the quarter ended
August 31, 1996, the Company has, since January 1, 1996, timely filed all
requisite forms, reports and exhibits thereto with the Securities and Exchange
Commission.
(b) There is no fact known to the Company (other than information in
the public domain) that has not been disclosed to the Purchaser that could
reasonably be expected to have a material adverse effect on the condition
(financial or otherwise), earnings, business affairs, properties or assets of
the Company, or could reasonably be expected to materially and adversely affect
the ability of the Company to perform its obligations pursuant to this
Agreement.
3.7 Absence of Undisclosed Liabilities. Except as set forth in
Schedule 3.7 hereto, the Company has no material liabilities or obligations,
absolute or contingent (individually or in the aggregate), except as set forth
in the Financial Statements (as defined in Section 4.6 hereof) or as incurred in
the ordinary course of business after the date of the
4
Financial Statements.
3.8 Governmental Consent, etc. No consent, approval or authorization
of, or designation, declaration or filing with, any governmental authority on
the part of the Company is required in connection with the valid execution and
delivery of this Agreement, or the offer, sale or issuance of the Shares, or the
consummation of any other transaction contemplated hereby, except (a) the filing
with the SEC of a registration statement on Form S-3 (or other appropriate form)
for the purpose of registering the Common Stock underlying the Shares (the
"Underlying Shares"), (b) the filing of a Form D with the Securities and
Exchange Commission in reliance of Regulation D promulgated under the Securities
Act, and (c) that the offer and sale of the Shares in certain jurisdictions may
be subject to the provisions of, and/or require filings under, the securities or
Blue Sky laws of such jurisdictions.
3.9 Intellectual Property Rights. Except as disclosed in the
Company's Form 10-K for the fiscal year ended November 30, 1996 (the "Form
10-K"), the Company has sufficient trademarks, trade names, patent rights,
copyrights and licenses to conduct its business as contemplated in the Form
10-K. To the Company's knowledge, neither the Company nor its products is
infringing or will infringe any trademark, trade name, patent right, copyright,
license, trade secret or other similar right of others currently in existence;
and there is no claim being made against the Company regarding any trademark,
trade name, patent, copyright, license, trade secret or other intellectual
property right which could have a material adverse effect on the condition
(financial or otherwise), business, or results of operations of the Company.
3.10 Material Contracts. Except as set forth in the Form 10-K, the
agreements to which the Company is a party described in the Form 10-K are valid
agreements, in full force and effect, the Company is not in material breach or
material default (with or without notice or lapse of time, or both) under any of
such agreements, and, to the Company's knowledge, the other contracting party or
parties thereto are not in material breach or material default (with or without
notice or lapse of time, or both) under any of such agreements.
3.11 Litigation. Except as set forth in the Form 10-K, there is no
action, proceeding or investigation pending, or to the Company's knowledge
threatened, against the Company which might result, either individually or in
the aggregate, in any material adverse change in the business, conditions,
affairs or operations of the Company. Except as set forth in the Form 10-K or in
Schedule 3.11 hereto, the Company is not a party to or subject to the provisions
of any order, writ, injunction, judgment or decree of any court or government
agency or instrumentality. Except for litigation commenced in the ordinary
course of business or as set forth in the Form 10-K, there is no material
action, suit, proceeding or investigation by the Company currently pending or
which the Company currently intends to initiate.
3.12 Title to Assets. Except as set forth in Form 10-K, the Company
has good and marketable title to all properties and material assets described in
the Form 10-K as owned by it, free and clear of any pledge, lien, security
interest, encumbrance, claim or equitable interest other than such as are not
material to the business of the Company.
5
3.13 Subsidiaries. The Company does not presently own or control,
directly or indirectly, any interest in any other corporation, partnership,
association or other business entity, except as stated in the Form 10-K.
3.14 Required Governmental Permits. The Company is in possession of
and operating in compliance with all authorizations, licenses, certificates,
consents, orders and permits from state, federal and other regulatory
authorities which are material to the conduct of its business, all of which are
valid and in full force and effect.
3.15 Listing. The Company will use its best efforts to maintain the
listing of its Common Stock on the Nasdaq Small Cap Market or other organized
United States market or quotation system.
3.16 Financing Restrictions.
(a) There are no other outstanding securities debt or equity
presently convertible into Common Shares.
(b) The Company cannot, without the prior approval in writing from a
majority in interest of the holders of the Convertible Preferred Stock, obtain
convertible debt or equity financing for a period of one hundred eighty (180)
days following the Closing Date; however, the Company will not require prior
approval if (i) the Company's share price at the time of such financing is
greater than 200% of the closing price of the Common Stock on the Closing Date,
(ii) the financing is with a company or entity with which the Company has a
business or strategic relationship, or (iii) the financing is made in accordance
with Section 3.17.
3.17 Right of First Refusal. If within one hundred and eighty (180)
days from the Closing Date, the Company wishes to complete a financing involving
the issuance of securities with similar characteristics to the Shares, then the
Purchaser shall have the right of first refusal to participate in such offering
and shall have three (3) business days to reply in writing after receipt of
written notice of such proposed financing from the Company. In the event a
writing is not received by the Company, this will be deemed a refusal by the
Purchaser.
3.18 Legal Opinion. Purchaser shall, upon purchase of the Shares,
receive an opinion letter from counsel to the Company, to the effect that:
(a) The Company is duly incorporated and validly existing in
the jurisdiction of its incorporation.
(b) To such counsel's knowledge, except as set forth in the
Form 10-K, there is no action, proceeding or investigation pending or
threatened against the Company which might result, either individually or
in the aggregate, in any material adverse change in the business,
conditions, affairs or operations of the Company.
6
(c) To such counsel's knowledge, except as set forth in Section
3.11 the Company is not a party to or subject to the provisions of any
order, writ, injunction, judgment or decree of any court or government
agency or instrumentality.
(d) To such counsel's knowledge, except for litigation
commenced in the ordinary course of business or as set forth in the Form
10-K, there is no material action, suit, proceeding or investigation by
the Company currently pending or which the Company currently intends to
initiate.
(e) This Agreement, the issuance of the Shares and the issuance
of Underlying Shares upon conversion of the Shares, have been duly
approved by all required corporate action and that all such securities,
upon delivery in accordance with the terms of this Agreement and the
related Escrow Agreement, shall be validly issued and outstanding, fully
paid and nonassessable.
3.19 Use of Proceeds. The Company represents that the net proceeds
from this offering will be used to fund the possible acquisitions, strategic
alliances, working capital and general corporate purposes.
Section 4. Representations, Warranties and Covenants of the
Purchaser. The Purchaser represents and warrants to, and covenants with, the
Company that the following are true and correct as of the date hereof.
4.1 Authority. The Purchaser's signatory has all right, power,
authority and capacity to execute and deliver this Agreement and to consummate
the transactions contemplated hereby. This Agreement has been duly executed and
delivered by the Purchaser and will constitute the legal, valid and binding
obligations of the Purchaser, enforceable in accordance with its terms, subject
to laws of general application relating to bankruptcy, insolvency and the relief
of debtors and rules of law governing specific performance, injunctive relief or
other equitable remedies, and to limitations of public policy as they may apply
to the indemnification provisions set forth in Sections 7.8 and 7.11 of this
Agreement.
4.2 Investment Experience. Purchaser is an "accredited investor" as
defined in Rule 501(a) under the Securities Act, based upon Purchaser being a
corporation, Massachusetts or similar business trust or partnership, not formed
for the specific purpose of acquiring the Shares, with assets in excess of Five
Million ($5,000,000) Dollars. Purchaser is aware of the Company's business
affairs and financial condition and has had access to and has acquired
sufficient information about the Company, including the Form 10-K and the
Company's Form 10-Q for the three months ended February 28, 1997 (the "SEC
Reports"), to reach an informed and knowledgeable decision to acquire the
Shares. Purchaser has such business and financial experience as is required to
give it the capacity to protect its own interests in connection with the
purchase of the Shares.
7
4.3 Investment Intent. Without limiting its ability to resell the
Shares and underlying Common Stock pursuant to an effective registration
statement, Purchaser represents that it is purchasing the Shares for its own
account as principal for investment purposes. Purchaser understands that its
acquisition of the Shares has not been registered under the Securities Act or
registered or qualified under any state securities law in reliance on specific
exemptions therefrom, which exemptions may depend upon, among other things, the
bona fide nature of Purchaser's investment intent as expressed herein. Purchaser
will not, directly or indirectly, offer, sell, pledge, transfer or otherwise
dispose of (or solicit any offers to buy, purchaser or otherwise acquire or take
a pledge of) any of the Shares except in compliance with the Securities Act and
any applicable state securities laws, and the rules and regulations promulgated
thereunder.
4.4 Registration or Exemption Requirements. Purchaser further
acknowledges and understands that the Shares may not be resold or otherwise
transferred except in a transaction registered under the Securities Act and any
applicable state securities laws or unless an exemption from such registration
is available. Purchaser understands that the certificate(s) evidencing the
Shares will be imprinted with a legend that prohibits the transfer of the Shares
unless (i) they are registered or such registration is not required, and (ii) if
the transfer is pursuant to an exemption from registration under the Securities
Act and, if the Company shall so request in writing, an opinion of counsel
reasonably satisfactory to the Company is obtained to the effect that the
transaction is so exempt.
4.5 No Legal, Tax or Investment Advice. Purchaser understands that
nothing in this Agreement or any other materials presented to Purchaser in
connection with the purchase and sale of the Shares constitutes legal, tax or
investment advice. Purchaser has consulted such legal, tax and investment
advisors as it, in its sole discretion, has deemed necessary or appropriate in
connection with its purchase of the Shares.
4.6 Purchaser Review. Purchaser hereby represents and warrants that
the Purchaser has carefully examined the SEC Reports and the financial
statements contained therein (the "Financial Statements"). The Purchaser
acknowledges that the Company has made available to the Purchaser all documents
and information that it has requested relating to the Company and has provided
answers to all of its questions concerning the Company and the Shares. More
specifically, the Purchaser has had an opportunity to ask questions of and speak
with representatives of the Company, including, without limitation, the
President of the Company. Nothing stated in the previous two sentences, however,
shall be deemed to affect the representations and warranties of the Company
contained in this Agreement.
4.7 Legend.
(a) In addition to any other legends which may be necessary to
reflect the maximum conversion prices of the Shares, or the time at which the
Shares become convertible, the certificate or certificates representing the
Shares shall be subject to a legend restricting transfer under the Securities
Act, such legend to be substantially as follows:
8
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR
INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933.
SUCH SHARES MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF SUCH
REGISTRATION OR AN EXEMP-TION THEREFROM UNDER SAID ACT WHICH IS CONFIRMED
IN A LEGAL OPINION SATISFACTORY TO THE COMPANY."
The certificates shall also include any legends required by any applicable state
securities laws.
(b) Subject to this section, prior to any transfer or sale of any of
the Shares, the holder desiring to effect such transfer or sale shall deliver to
the Company (i) a written notice briefly describing the manner of such transfer
or sale, (ii) if requested by the Company, a written opinion of counsel for such
holder (provided that such counsel, and the form and substance of such opinion,
are reasonably satisfactory to the Company) to the effect that such transfer or
sale may be effected without the registration of such Shares under the
Securities Act and applicable state law, and (iii) the agreement of the
transferee to the provisions of this Section 4.7, and the Company shall
thereupon permit or cause its transfer agent (if any) to permit such transfer or
sale to be effective.
(c) The legend(s) endorsed on a stock certificate pursuant to this
Section 4.7 shall be removed and the Company shall issue a replacement
certificate without such legend to the holder of such certificate if (1) the
Shares represented by such certificate are registered under the Securities Act,
and sold by the holder thereof in accordance with such registration, (2) a
written opinion to the effect that such restrictions are no longer required or
necessary under any federal or state securities law or regulation has been
received from counsel for the holder thereof (provided that such counsel, and
the form and substance of such opinion, are reasonably satisfactory to the
Company) or counsel for the Company, (3) such Shares have been sold without
registration under the Securities Act in compliance with Rule 144 or Rule 144A
promulgated under the Securities Act, or (4) the Company is reasonably satisfied
that the holder of such Shares, in accordance with the terms of Subsection (k)
of Rule 144 or of Rule 144A promulgated under the Securities Act, shall be
entitled to sell such Shares pursuant to such Subsection.
Section 5. Conditions to the Purchaser's Obligation to Purchase. The
Company understands that the Purchaser's obligation to purchase the Shares is
conditioned upon:
(a) Acceptance by Purchaser of this Agreement for the sale of
the Shares, as evidenced by the execution of this Agreement by its authorized
officers;
(b) Delivery of the Shares into Escrow;
(c) A filed Certificate of Designation.
Section 6. Conditions to Company's Obligation to Sell. Purchaser
understands that the Company's obligation to sell the Shares is conditioned
upon:
9
(a) The receipt and acceptance by the Company of this Agreement for the sale of
the Shares as evidenced by execution of this Agreement by an officer of the
Company;
(b) Delivery into escrow by Purchaser of good funds as payment
in full for the purchase of the Shares.
Section 7. Registration Rights of the Shares; Compliance with the
Securities Act.
7.1 On or before thirty (30) days after the Closing Date, the
Company shall file, at its own expense, a Registration Statement under the
Securities Act, covering the resale of the Underlying Shares (the "Registrable
Securities"), and shall use its best efforts to cause such Registration
Statement to become effective. The Company promptly shall give the Purchaser
written notification of the effectiveness of such Registration Statement under
the Securities Act, and, when determined, each state where registered.
7.2 The number of Registrable Securities to be registered shall be
two hundred (200%) percent of the number of shares that would be required if all
of the Registrable Securities were converted on the date two days prior to the
date of the initial filing of the Registration Statement, but not to exceed the
maximum number of shares obtainable upon conversion.
(a) The Company will maintain any Registration Statement or
post-effective amendment filed under this Section 7 current under the Securities
Act until the earlier of (i) the date that all of the Registrable Securities
have been sold pursuant to the Registration Statement, (ii) the date the
Purchaser receives an opinion of counsel that the Registrable Securities may be
sold under the provisions of Rule 144, or (iii) the second anniversary of the
effective date of the Registration Statement.
(b) All fees, disbursements and out-of-pocket expenses and costs
incurred by the Company in connection with the preparation and filing of any
Registration Statement under subparagraph 7.1 and in complying with applicable
securities and Blue Sky laws (including, without limitation, all attorneys'
fees) shall be borne by the Company. The Purchaser shall bear the cost of
underwriting discounts and commissions, if any, applicable to the Registrable
Securities being registered and the fees and expenses of its counsel. The
Company shall use its best efforts to qualify the Registrable Securities for
sale in such states as the Purchaser reasonably designates and shall furnish
indemnification in the manner provided in Section 7.8 hereof. However, the
Company shall not be required to qualify in any state which will require an
escrow or other restriction relating to the Company and/or the Purchaser. The
Company at its expense will supply the Purchaser with copies of such
Registration Statement and the prospectus or offering circular included therein
and other related documents in such quantities as may be reasonably requested by
the Purchaser.
(c) The Company shall not be required by this Section to include the
Registrable Securities in any Registration Statement which is to be filed if, in
the opinion of counsel for both the Purchaser and the Company (or, should they
not agree, in the opinion of another counsel experienced in securities law
matters acceptable to counsel for the Purchaser and
10
the Company) the proposed offering or other transfer as to which such
registration is requested is exempt from applicable federal and state securities
laws and would result in the Purchaser obtaining securities which are not
"restricted securities", as defined in Rule 144 under the Securities Act.
(d) In the event the Registration Statement to be filed by the
Company pursuant to Section 7(a) above is not declared effective by the SEC
within ninety (90) days of the Closing Date, then the Company will pay Purchaser
by wire transfer, as liquidated damages for such failure and not as a penalty,
one (1%) percent of the principal amount of the Shares for the first month and
two (2%) percent of the principal amount of the Shares each month thereafter
until the Company procures registration of the Registrable Securities. These
liquidated damages shall be pro-rated based upon the number of days in each
month that the Registration Statement is not effective. If the Company does not
remit the damages to the Purchaser as set forth above, the Company will pay the
Purchaser reasonable costs of collection, including reasonable attorneys fees,
in addition to the liquidated damages. Such payment shall be made to the
Purchaser immediately if the registration of the Registrable Securities is not
effected; provided, however, that the payment of such liquidated damages shall
not relieve the Company from its obligations to register the Registrable
Securities pursuant to this Section. The registration of the Registrable
Securities pursuant to this provision shall not affect or limit the Purchaser's
other rights or remedies as set forth in this Agreement.
7.4 Cooperation with Company. The Purchaser will cooperate with the
Company in all respects in connection with this Agreement, including, timely
supplying all information reasonably requested by the Company and executing and
returning all documents reasonably requested in connection with the registration
and sale of the Registrable Securities.
7.5 Registration Procedures. If and whenever the Company is required
by any of the provisions of this Agreement to effect the registration of any of
the Registrable Securities under the Securities Act, the Company shall (except
as otherwise provided in this Agreement), as expeditiously as possible:
(a) prepare and file with the Commission such amendments and
supplements to the Registration Statement and the Prospectus used in connection
therewith as may be necessary to keep the Registration Statement effective and
to comply with the provisions of the Securities Act with respect to the sale or
other disposition of the Registrable Securities whenever the Purchaser shall
desire to sell or otherwise dispose of the same;
(b) furnish to the Purchaser such numbers of copies of a summary
prospectus or other prospectus, including a preliminary prospectus or any
amendment or supplement to any prospectus, in conformity with the requirements
of the Securities Act, and such other documents, as the Purchaser may reasonably
request in order to facilitate the public sale or other disposition of the
Registrable Securities;
(c) use its best efforts to register and qualify the Registrable
Securities under such other securities or blue sky laws of such jurisdictions as
the Purchaser shall reasonably
11
request, and do any and all other acts and things which may be necessary or
advisable to enable the Purchaser to consummate the public sale or other
disposition in such jurisdiction of the Registrable Securities, except that the
Company shall not for any such purpose be required to qualify to do business as
a foreign corporation in any jurisdiction wherein it is not so qualified or to
file therein any general consent to service of process;
(d) use its best efforts to list the Registrable Securities on the
NASDAQ National Market System or Small Cap Market or any securities exchange on
which any securities of the Company is then listed, if the listing of the
Registrable Securities is then permitted under the rules of such exchange or
NASDAQ Small Cap Market or National Market System;
(e) enter into and perform its obligations under an underwriting
agreement, if the offering is an underwritten offering, in usual and customary
form, with the managing underwriter or underwriters of such underwritten
offering;
(f) notify the Purchaser of Registrable Securities covered by the
Registration Statement, at any time when a prospectus relating thereto covered
by the Registration Statement is required to be delivered under the Securities
Act, of the happening of any event of which it has knowledge as a result of
which the prospectus included in the Registration Statement, as then in effect,
includes an untrue statement of a material fact or omits to state a material
fact required to be stated therein or necessary to make the statements therein
not misleading in the light of the circumstances then existing.
7.6 Temporary Cessation of Offers and Sales by Purchaser. The
Purchaser acknowledges that there may occasionally be times when the Company may
be required to suspend the use of the prospectus forming part of the
Registration Statement until such time as an amendment to the Registration
Statement has been filed by the Company and declared effective by the
Commission, until the prospectus is supplemented or amended to comply with the
Securities Act, or until such time as the Company has filed an appropriate
report with the Commission pursuant to the Exchange Act. The Company agrees to
file any necessary amendments, supplements and reports as soon as practicable
under the circumstances. Purchaser hereby covenants that it will not sell any
Registrable Securities pursuant to said prospectus during a period of not more
than 45 days commencing at the time at which the Company gives the Purchaser
notice of the suspension of the use of said prospectus and ending at the time
the Company gives the Purchaser notice that Purchaser may thereafter effect
sales pursuant to said prospectus, as the same may have been supplemented or
amended.
7.7 Information by Purchaser. The Purchaser of Registrable
Securities included in the Registration Statement shall furnish to the Company
such information regarding the Purchaser and the distribution proposed by the
Purchaser as the Company may request in writing and as shall be required in
connection with any registration, qualification or compliance referred to in
this Section 7.
12
7.8 Indemnification.
(a) In the event of the filing of any Registration Statement with
respect to Registrable Securities pursuant to Section 7 hereof, the Company
agrees to indemnify and hold harmless the Purchaser and each person, if any, who
controls the Purchaser within the meaning of the Securities Act ("Distributing
Purchasers") against any losses, claims, damages or liabilities, joint or
several (which shall, for all purposes of this Agreement, include, but not be
limited to, all reasonable costs of defense and investigation and all reasonable
attorneys' fees), to which the Distributing Purchasers may become subject, under
the Securities Act or otherwise, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based upon any
untrue statement or alleged untrue statement of any material fact contained in
any such Registration Statement, or any related preliminary prospectus, final
prospectus, offering circular, notification or amendment or supplement thereto,
or arise out of or are based upon the omission or alleged omission to state
therein a material fact required to be stated therein or necessary to make the
statements therein not misleading; provided, however, that the Company will not
be liable in any such case to the extent that any such loss, claim, damage or
liability arises out of or is based upon an untrue statement or alleged untrue
statement or omission or alleged omission made in such Registration Statement,
preliminary prospectus, final prospectus, offering circular, notification or
amendment or supplement thereto in reliance upon, and in conformity with,
information furnished to the Company by any Distributing Purchasers. This
indemnity agreement will be in addition to any liability which the Company may
otherwise have.
(b) Each Distributing Purchaser agrees that it will indemnify and
hold harmless the Company, and each officer, director of the Company or person,
if any, who controls the Company within the meaning of the Securities Act,
against any losses, claims, damages or liabilities (which shall, for all
purposes of this Agreement, include, but not be limited to, all reasonable costs
of defense and investigation and all reasonable attorneys' fees) to which the
Company or any such officer, director or controlling person may become subject
under the Securities Act or otherwise, insofar as such losses, claims, damages
or liabilities (or actions in respect thereof) arise out of or are based upon
any untrue statement or alleged untrue statement of any material fact contained
in a Registration Statement in which Registrable Securities are included, or any
related preliminary prospectus, final prospectus, offering circular,
notification or amendment or supplement thereto, or arise out of or are based
upon the omission or the alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading, but in each case only to the extent that such untrue statement or
alleged untrue statement or omission or alleged omission was made in such
Registration Statement, preliminary prospectus, final prospectus, offering
circular, notification or amendment or supplement thereto in reliance upon, and
in conformity with, information furnished to the Company by such Distributing
Purchaser and, provided further, that the indemnity agreement contained in this
Section 7.8(b) shall not inure to the benefit of the Company with respect to any
person asserting such loss, claim, damage or liability who purchased the
Registrable Securities which are the subject thereof if the Company failed to
send or give (in violation of the Securities Act or the rules and regulations
promulgated thereunder) a copy of the prospectus contained in such Registration
Statement to such person at or prior to the written confirmation to such person
of the sale of such Registrable Securities, where the
13
Company was obligated to do so under the Securities Act or the rules and
regulations promulgated thereunder. This indemnity agreement will be in addition
to any liability which the Distributing Purchasers may otherwise have.
(c) Promptly after receipt by an indemnified party under this
Section of notice of the commencement of any action, such indemnified party
will, if a claim in respect thereof is to be made against the indemnifying party
under this Section, notify the indemnifying party of the commencement thereof;
but the omission so to notify the indemnifying party will not relieve the
indemnifying party from any liability which it may have to any indemnified party
otherwise than as to the particular item as to which indemnification is then
being sought solely pursuant to this Section. In case any such action is brought
against any indemnified party, and it notifies the indemnifying party of the
commencement thereof, the indemnifying party will be entitled to participate in,
and, to the extent that it may wish, jointly with any other indemnifying party
similarly notified, assume the defense thereof, subject to the provisions herein
stated. After notice from the indemnifying party to such indemnified party of
its election so to assume the defense thereof, the indemnifying party will not
be liable to such indemnified party under this Section for any legal or other
expenses subsequently incurred by such indemnified party in connection with the
defense thereof other than reasonable costs of investigation, unless the
indemnifying party shall not pursue the action to its final conclusion. The
indemnified party shall have the right to employ separate counsel in any such
action and to participate in the defense thereof, but the reasonable fees and
expenses of such counsel shall not be at the expense of the indemnifying party
if the indemnifying party has assumed the defense of the action with counsel
reasonably satisfactory to the indemnified party; provided that if the
indemnified party is the Distributing Purchaser, the reasonable fees and
expenses of such counsel shall be at the expense of the indemnifying party if
(i) the employment of such counsel has been specifically authorized in writing
by the indemnifying party, or (ii) the named parties to any such action
(including any impleaded parties) include both the Distributing Purchaser and
the indemnifying party and the Distributing Purchaser shall have been advised by
such counsel that there may be one or more legal defenses available to the
indemnifying party different from or in conflict with any legal defenses which
may be available to the Distributing Purchaser (in which case the indemnifying
party shall not have the right to assume the defense of such action on behalf of
the Distributing Purchaser, it being understood, however, that the indemnifying
party shall, in connection with any one such action or separate but
substantially similar or related actions in the same jurisdiction arising out of
the same general allegations or circumstances, be liable only for the reasonable
fees and expenses of one separate firm of attorneys for the Distributing
Purchaser, which firm shall be designated in writing by the Distributing
Purchaser). No settlement of any action against an indemnified party shall be
made without the prior written consent of the indemnified party, which consent
shall not be unreasonably withheld.
7.9 Contribution. In order to provide for just and equitable
contribution under the Securities Act in any case in which (i) the Distributing
Purchaser makes a claim for indemnification pursuant to Section 7.8 hereof but
is judicially determined (by the entry of a final judgment or decree by a court
of competent jurisdiction and the expiration of time to appeal or the denial of
the last right of appeal) that such indemnification may not be enforced in such
case notwithstanding the fact that the express provisions of Section 7.8 hereof
provide for
14
indemnification in such case, or (ii) contribution under the Securities Act may
be required on the part of any Distributing Purchaser, then the Company and the
applicable Distributing Purchaser shall contribute to the aggregate losses,
claims, damages or liabilities to which they may be subject (which shall, for
all purposes of this Agreement, include, but not be limited to, all reasonable
costs of defense and investigation and all reasonable attorneys' fees), in
either such case (after contribution from others) on the basis of relative fault
as well as any other relevant equitable considerations. The relative fault shall
be determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or the omission or alleged omission to state
a material fact relates to information supplied by the Company on the one hand
or the applicable Distributing Purchaser, on the other hand, and the parties'
relative intent, knowledge, access to information and opportunity to correct or
prevent such statement or omission. The Company and the Distributing Purchaser
agree that it would not be just and equitable if contribution pursuant to this
Section were determined by pro rata allocation or by any other method of
allocation which does not take account of the equitable considerations referred
to in this Section. The amount paid or payable by an indemnified party as a
result of the losses, claims, damages or liabilities (or actions in respect
thereof) referred to above in this Section shall be deemed to include any legal
or other expenses reasonably incurred by such indemnified party in connection
with investigating or defending any such action or claim. No person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the
Securities Act) shall be entitled to contribution from any person who was not
guilty of such fraudulent misrepresentation.
7.10 Underwriter. The Company understands that the Purchaser
disclaims being an "underwriter" (as such term is defined under the Securities
Act and the rules and regulations promulgated thereunder (an "Underwriter")),
but Purchaser being deemed an Underwriter shall not relieve the Company of any
obligation it has hereunder.
7.11 Indemnification. Each of the Company and the Purchaser agrees
to indemnify the other and to hold the other harmless from and against any and
all losses, damages, liabilities, costs and expenses (including reasonable
attorneys' fees) which the other may sustain or incur in connection with the
breach by the indemnifying party of any representation, warranty or covenant
made by it in this Agreement.
7.12 Rule 144 Reporting. With a view to making available the
benefits of certain rules and regulations of the SEC which may at any time
permit the sale of the Shares to the public without registration, the Company
agrees to use its best efforts to:
(a) make and keep public information available, as those terms
are understood and defined in Rule 144 under the Securities Act, for as long as
the Company is subject to the reporting requirements of the Securities Act or
the Exchange Act;
(b) use its best efforts to file with the SEC in a timely
manner all reports and other documents required of the Company under the
Securities Act and the Exchange Act;
15
(c) to furnish to Purchaser forthwith upon request a written
statement by the Company as to its compliance with the reporting requirements of
said Rule 144, and of the Securities Act and the Exchange Act, a copy of the
most recent annual or quarterly report of the Company, and such other reports
and documents of the Company and other information in the possession of or
reasonably obtainable by the Company as Purchaser may reasonably request in
availing itself of any rule or regulation of the SEC allowing Purchaser to sell
any such Shares without registration.
Section 8. Legal Fees and Expenses. Each of the parties shall pay
its own fees and expenses (including the fees of any attorneys, accountants,
appraisers or others engaged by such party) in connection with this Agreement
and the transactions contemplated hereby. The parties acknowledge that Malachi
Group, Inc. shall receive a placement fee of 10%.
Section 9. Conversion.
(a) Conversion of the Shares may be made at the Conversion Price
after effectiveness of registration under the Securities Act of the Underlying
Shares, or at such time as the Underlying Shares may be sold without
registration under the Securities Act in compliance with Rule 144 promulgated
under the Securities Act, as follows:
0 - 30 days - One-third of investment
31 - 60 days - Two-thirds of investment
After 61 days - 100% of investment
(b) Subject to the Corporation's right to redeem the Shares in
certain instances as described in the Certificate of Designation, any and all
Shares outstanding on the third anniversary of the Closing Date shall
automatically convert into Common Stock as provided in the Certificate of
Designation.
(c) Purchaser shall convert the Shares to Common Stock, in whole or
in part by telecopying an executed and completed Notice of Conversion (in the
form annexed hereto as Exhibit C, the "Notice of Conversion") to the Company and
delivering the original Notice of Conversion and the certificate representing
the Shares to be converted to the Company within three (3) business days of
exercise. Each date on which a Notice of Conversion is telecopied to and
received by the Company in accordance with the provisions hereof shall be deemed
a Conversion Date. The Company will transmit the certificates representing the
Common Stock issuable upon conversion of all or any part of the Shares (together
with the certificates representing portions of the Shares not so converted) to
the Purchaser within three (3) business days after the Company has received the
original Notice of Conversion and the certificate evidencing the Shares being so
converted. The Notice of Conversion and certificate representing the Shares
being converted shall be delivered to the Company at the address provided in
Section 11 hereof.
(d) In the event Purchaser converts the Shares subject to the
"ceiling" formula of $2.25 per share on the first one-third of the Shares
converted; $2.50 per share on the second
16
one-third of the Shares converted; and $2.75 per share on the third one-third of
the Shares converted, Purchaser agrees to convert at $2.25 first, $2.50 next and
$2.75 last.
In the event that the Shares are not converted within ten (10)
business days of receipt by the Company of a valid Conversion Notice and
certificates representing the Shares to be converted (such date of receipt
referred to as the "Applicable Date") due to the failure of the Company to
timely process the Conversion Notice, as opposed to the failure to timely
process by the transfer agent, the Company shall pay to the Purchaser, by wire
transfer, as liquidated damages for such failure and not as a penalty, an amount
in cash equal to one (1%) percent per day of the purchase price of the Shares to
be converted which shall run from the Applicable Date; provided, however, that
the liquidated damages for a failure to deliver certificates of Common Stock
shall equal only 15% per month of the purchase price of the Shares to be
converted for the first two months from the Applicable Date that the
certificates of Common Stock are not delivered, and 25% per month for each month
thereafter, if both of the following conditions are satisfied by the Company:
(i) the failure to deliver certificates of Common Stock is the result of a lack
of available authorized shares of Common Stock, and (ii) the Company commences,
within 15 business days after the Applicable Date, the process to obtain
stockholder approval to amend its Certificate of Incorporation to increase the
number of authorized shares of Common Stock by an amount sufficient to permit
conversion of all shares of Convertible Preferred Stock then outstanding;
provided, further, in no event shall the liquidated damages paid hereunder
exceed the fair market value of the shares of Common Stock underlying the Shares
to be converted on the Applicable Date.
Section 10. Covenant of Purchaser. Purchaser agrees that it will not
at any time sell the Common Stock short.
Section 11. Notices. All notices, requests, consents and other
communications hereunder shall be in writing, shall be mailed by first class
registered or certified airmail, postage prepaid, and shall be deemed given when
so mailed:
(a) if to the Company, to
Diversifax, Inc.
00 Xxxxxxxxx Xxxxxx
Xxxxxx Xxxxxx, XX 00000
Attn: Xxxxx X. Xxxxxxxx, President
(Tele) (000) 000-0000
(Fax) (000) 000-0000
17
copy to:
Xxxxxxx & Xxxxxx, LLP
000 Xxxxx Xxxxxx
Xxx Xxxx, XX 00000
Attn: Xxxx X. Xxxxxxxx
(Tele) (000) 000-0000
(Fax) (000) 000-0000
or to such other person at such other place as the Company shall designate to
the Purchaser in writing;
(b) if to the Purchaser, to
copy to:
Xxxxxxx X. Xxxxxxxxx, P.C.
00 Xxxxxxxx
Xxx Xxxx, XX 00000
Attn: Xxxxxxx X. Xxxxxxxxx, Esq.
or at such other address or addresses as may have been furnished to the Company
in writing; or
(c) if to any transferee or transferees of a Purchaser, at such
address or addresses as shall have been furnished to the Company at the time of
the transfer or transfers, or at such other address or addresses as may have
been furnished by such transferee or transferees to the Company in writing.
Section 12. Miscellaneous.
12.1 Entire Agreement. This Agreement embodies the entire agreement
and understanding between the parties hereto with respect to the subject matter
hereof and supersedes all prior oral or written agreements and understandings
relating to the subject matter hereof. No statement, representation, warranty,
covenant or agreement or any kind not expressly set forth in this Agreement
shall affect, or be used to interpret, change or restrict, the express terms and
provisions of this Agreement.
12.2 Amendments. This Agreement may not be modified or amended
except
18
pursuant to an instrument in writing signed by the Company and by a majority in
interest of the holders of the Convertible Preferred Stock.
12.3 Headings. The headings of the various sections of this
Agreement have been inserted for convenience of reference only and shall not be
deemed to be part of this Agreement.
12.4 Severability. In case any provision contained in this Agreement
should be invalid, illegal or unenforceable in any respect, the validity,
legality and enforceability of the remaining provisions contained herein shall
not in any way be affected or impaired thereby.
12.5 Governing Law/Jurisdiction. This Agreement will be construed
and enforced in accordance with and governed by the laws of the State of New
York, except for matters arising under the 1933 Act, without reference to
principles of conflicts of law. Each of the parties consents to the jurisdiction
of the courts of or located in the State of New York, specifically the Southern
District of New York and/or the Supreme Court of the State of New York in
connection with any dispute arising under this Agreement and hereby waives, to
the maximum extent permitted by law, any objection, including any objection
based on forum non conveniens, to the bringing of any such proceeding in such
jurisdictions. Each party hereby agrees that if another party to this Agreement
obtains a judgment against it in such a proceeding, the party which obtained
such judgment may enforce same by summary judgment in the courts of any country
having jurisdiction over the party against whom such judgment was obtained, and
each party hereby waives any defenses available to it under local law and agrees
to the enforcement of such a judgment. Each party to this Agreement irrevocably
consents to the service of process in any such proceeding by the mailing of
copies thereof by registered or certified mail, postage prepaid, to such party
at its address set forth herein. Nothing herein shall affect the right of any
party to serve process in any other manner permitted by law.
12.6 Recovery of Attorney's Fees. Should any party bring an action
to enforce the terms of this Agreement then, if Purchaser prevails in such
action it should be entitled to recovery of its reasonable attorney's fees from
the Company, and if the Company prevails in such action it shall be entitled to
recovery of its reasonable attorney's fees from the Purchaser.
12.7 Fees. Except as provided in Section 12.6, the Company
acknowledges that Purchaser shall have no responsibility for the payment of any
of the Company's fees in connection with this offering.
12.8 Counterparts/Facsimile. This Agreement may be executed in two
or more counterparts, each of which shall constitute an original, but all of
which, when taken together, shall constitute but one instrument, and shall
become effective when one or more counterparts have been signed by each party
hereto and delivered to the other party. In lieu of the original, a facsimile
transmission or copy of the original shall be as effective and enforceable as
the original.
12.9 Publicity. The Purchaser shall not issue any press releases or
otherwise
19
make any public statement with respect to the transactions contemplated by this
Agreement without the prior written consent of the Company, except as may be
required by applicable law or regulation.
12.10 Assignment. The rights granted to Purchaser under this
Agreement shall not be assigned without the agreement of the transferee to
assume all of the rights and obligations of the Purchaser under this Agreement.
12.11 Survival. The representations and warranties in this Agreement
shall survive Closing.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be signed by their duly authorized representatives the day and year first above
written.
DIVERSIFAX, INC.
By
-------------------------------
Officer
----------------------------------
By
-------------------------------
Officer
20
EXHIBIT C
NOTICE OF CONVERSION
(To be Executed by the Registered Holder in order to Convert the
Series D Preferred Stock)
The undersigned hereby irrevocably elects to convert ______ shares of Series D
Preferred Stock (the "Preferred Stock") of DIVERSIFAX, INC. (the "Company")
evidenced by Certificate No. ____ into shares of common stock of the Company
(the "Common Stock"), according to the conditions hereof, as of the date written
below.
The undersigned represents and warrants that all offers and sales by the
undersigned of the shares of Common Stock issuable to the undersigned upon
conversion of the Preferred Stock shall be made in compliance with Regulation D,
pursuant to an exemption from registration under the Act, or pursuant to
registration of the Common Stock under the Securities Act of 1933, as amended
(the "Securities Act"), subject to any restrictions on sale or transfer set
forth in the Preferred Stock Securities Purchase Agreement between the Company
and the undersigned.
----------------------------------- ---------------------------
Date of Conversion Applicable Conversion Price
----------------------------------- ---------------------------
Number of Common Shares upon $ Amount of Conversion
Conversion
----------------------------------- ---------------------------
Signature Name
Address: Delivery of Shares to:
EXHIBIT B
ESCROW AGREEMENT
THIS AGREEMENT is made as of the ____ day of May, 1997 by and
between DIVERSIFAX, INC., with its principal office at 00 Xxxxxxxxx Xxxxxx,
Xxxxxx Xxxxxx, XX 00000 (hereinafter the "Company"), __________________ LLC (the
"Purchaser"), with its principal office at _____________________________________
(hereinafter the "Purchaser") and XXXXXXX X. XXXXXXXXX, P.C., 00 Xxxxxxxx, 00xx
Xx., Xxx Xxxx, XX 00000 (hereinafter the "Escrow Agent").
W I T N E S S E T H:
WHEREAS, pursuant to the Securities Purchase Agreement dated May __,
1997 by and between the Company and the Purchaser (the "Agreement"), Purchaser
has agreed to purchase shares of the Series D Preferred Stock of the Company
(the "Securities") at a purchase price as set forth in the Agreement, signed by
the Company and Purchaser; and
WHEREAS, the Company and the Purchaser desire that the Escrow Agent
hold the funds remitted by Purchaser in payment of the Purchase Price (the
"Funds") in escrow, subject to the terms and conditions set forth herein.
NOW, THEREFORE, in consideration of the covenants and mutual
promises contained herein and other good and valuable consideration, the receipt
and legal sufficiency of which are hereby acknowledged and intending to be
legally bound hereby, the parties agree as follows:
ARTICLE 1
TERMS OF THE ESCROW
1.1 The parties hereby establish an escrow account (the "Escrow
Account") with the Escrow Agent whereby the Escrow Agent shall hold the Funds
for the purchase of the Securities.
1.2 Upon the Escrow Agent's receipt of the Funds into the Escrow
Account, he shall notify the Company, or the Company's designated attorney or
agent, of the receipt and the amount thereof.
1.3 The Company, upon receipt of said notice and acceptance of the
1
Agreement, as evidenced by the Company's execution thereof, shall deliver to
Escrow Agent the Securities being purchased. Escrow Agent shall then communicate
with the Company to confirm the confirmation of receipt.
1.4 Once the Escrow Agent has received the Securities, he shall
immediately wire the Funds to the Company, per the written instructions of the
Company. Once the Funds have been received per the Company's instructions, the
Escrow Agent shall then arrange to have the Securities delivered as per
instructions from the Purchaser.
1.5 Should the Company attempt to change this Agreement in a manner
which, in the Escrow Agent's discretion, shall be undesirable, the Escrow Agent
may resign as Escrow Agent by notifying the Company and the Purchaser in
writing. In the case of the Escrow Agent's resignation or removal pursuant to
the foregoing, his only duty, until receipt of notice from the Company and the
Purchaser or its agent that a successor escrow agent shall have been appointed,
shall be to hold and preserve the Securities and the Funds. Upon receipt by the
Escrow Agent of said notice from the Company and the Purchaser of the
appointment of a successor escrow agent, the name of a successor escrow account
and a direction to transfer the Securities and/or the Funds, the Escrow Agent
shall promptly thereafter transfer all of the Securities and/or the Funds held
in the Escrow Account to said successor escrow agent. Immediately after said
transfer of Securities, the Escrow Agent shall furnish the Company and the
Purchaser with proof of such transfer. The Escrow Agent is authorized to
disregard any notices, requests, instructions or demands received by it from the
Company or the Purchaser after notice of resignation or removal shall have been
given, unless the same shall be the aforementioned notice from the Company and
the Purchaser to transfer the Securities and/or the Funds to a successor escrow
agent or joint instructions from the Company and the Purchaser to return the
funds to the Purchaser and/or the Securities to the Company.
1.6 The Escrow Agent shall be reimbursed by the Company and the
Purchaser for any reasonable expenses incurred in the event there is a conflict
between the parties and the Escrow Agent shall deem it necessary to retain
counsel.
1.7 The Escrow Agent shall not be liable for any action taken or
omitted by him in good faith in accordance with the advice of the Escrow Agent's
counsel; and in no event shall the Escrow Agent be liable or responsible except
for the Escrow Agent's own gross negligence or willful misconduct.
1.8 The Company and the Purchaser warrant to and agree with the
Escrow Agent that, unless otherwise expressly set forth in this Agreement:
(i) there is no security interest in the Securities or any part
thereof;
(ii) no financing statement under the Uniform Commercial Code is
on file in any jurisdiction claiming a security interest or
in describing (whether
2
specifically or generally) the Securities or any part thereof;
and
(iii) the Escrow Agent shall have no responsibility at any time
to ascertain whether or not any security interest exists in
the Securities or any part thereof or to file any financing
statement under the Uniform Commercial Code with respect to
the Securities or any part thereof.
1.9 The Escrow Agent has no liability hereunder to either party
other than to hold the Securities and the Funds and to deliver them under the
terms hereof. Each party hereto agrees to indemnify and hold harmless the Escrow
Agent from and with respect to any suits, claims, actions or liabilities arising
in any way out of this transaction including the obligation to defend any legal
action brought which in any way arises out of or is related to this Agreement,
unless such liability is the result of the gross negligence or willful
misconduct of the Escrow Agent.
ARTICLE 2
MISCELLANEOUS
2.1 No waiver or any breach of any covenant or provision herein
contained shall be deemed a waiver of any preceding or succeeding breach
thereof, or of any other covenant or provision herein contained. No extension of
time for performance of any obligation or act shall be deemed any extension of
the time for performance of any other obligation or act.
2.2 All notices or other communications required or permitted
hereunder shall be in writing, and shall be sent by fax, overnight courier,
registered or certified mail, postage prepaid, return receipt requested, and
shall be deemed received upon receipt thereof, as follows:
(i) Diversifax, Inc.
00 Xxxxxxxxx Xxxxxx
Xxxxxx Xxxxxx, XX 00000
Attn: Xxxxx X. Xxxxxxxx, President
(Tele) (000) 000-0000
(Fax) (000) 000-0000
(ii) Libertyview Fund, LLC
000 Xxxxxx Xxxxxx
Xxxxxx Xxxx, XX 00000
Attn: Xxxxxx Xxxxxxxx
Tele: (000) 000-0000
Fax: (000) 000-0000
(iii) Xxxxxxx X. Xxxxxxxxx, P.C.
3
00 Xxxxxxxx
Xxx Xxxx, XX 00000
Attn: Xxxxxxx X. Xxxxxxxxx, Esq.
Tele: (000) 000-0000
Fax: (000) 000-0000
2.3 This Agreement shall be binding upon and shall inure to the
benefit of the permitted successors and assigns of the parties hereto.
2.4 This Agreement is the final expression of, and contains the
entire agreement between, the parties with respect to the subject matter hereof
and supersedes all prior understandings with respect thereto. This Agreement may
not be modified, changed, supplemented or terminated, nor may any obligations
hereunder be waived, except by written instrument signed by all of the parties
hereto.
2.5 Whenever required by the context of this Agreement, the singular
shall include the plural and masculine shall include the feminine. This
Agreement shall not be construed as if it had been prepared by one of the
parties, but rather as if both parties had prepared the same.
2.6 The Company acknowledges and confirms that it is not being
represented in a legal capacity by Xxxxxxx X. Xxxxxxxxx, P.C. and it has had the
opportunity to consult with its own legal advisors prior to the signing of this
Agreement.
2.7 The parties hereto expressly agree that this Agreement shall be
governed by, interpreted under and construed and enforced in accordance with the
laws of the State of New York. Any action to enforce, existing out of, or
relating in any way to, any provisions of this Agreement shall be brought
through the American Arbitration Association at the designated locale of New
York, New York.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
as of the ____ day of May, 1997.
DIVERSIFAX, INC.
By
------------------------------
Officer
--------------------------------
By
------------------------------
Officer
XXXXXXX X. XXXXXXXXX, P.C.,
Escrow Agent
By
------------------------------
Xxxxxxx X. Xxxxxxxxx
4
