EXHIBIT 10.21
PURCHASE AND DEBT RESTRUCTURING AGREEMENT
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This Purchase and Debt Restructuring Agreement (this "Agreement") is
made as of August 3, 1994, between JetFax, Inc., a Delaware corporation
("JetFax"), and Ailicec International Enterprises Limited, a Hong Kong
corporation ("Ailicec"), with reference to the following facts:
Ailicec has delivered 800 units of the 8000-D model of plain paper
facsimile machine (the "8000-D Model") pursuant to a Purchase Order dated
September 21, 1993, between JetFax and Ailicec (the "Purchase Order"). The
amount unpaid with respect to the delivery of such units is $667,700 as of the
date hereof (the "Unpaid Amount"). Ailicec and JetFax have entered into a
Manufacturing Agreement, dated as of October 21, 1991 (the "Manufacturing
Agreement"), and a Security Agreement, dated as of October 1991 (the "Old
Security Agreement"), applicable to such 800 units of the 8000-D Model and the
units of the 8000-D Model purchased hereunder. JetFax, Ailicec and investors
(the "Bridge Investors") who will provide bridge loan financing (the "Bridge
Financing") to JetFax will execute and deliver an intercreditor agreement (the
"Intercreditor Agreement") contemporaneously with the execution and delivery of
this Agreement. JetFax also intends to raise capital through an equity
financing (the "Equity Financing") by the issuance of a series of preferred
stock (the "Financing Preferred").
NOW THEREFORE, in consideration of the foregoing premises and the
mutual covenants herein, JetFax and Ailicec agree as follows:
1. Purchase of Additional Units. Ailicec hereby agrees to sell and
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deliver to JetFax, and JetFax agrees to purchase 1,000 units of the 8000-D
Model, on the request of JetFax, which shall specifically identify that such
units will be purchased at $800 per unit, according to the terms and conditions
in this Agreement. Ailicec has delivered the first 515 units of the 8000-D
Model, which have been paid for by JetFax except for $42,000 owed to Ailicec for
units shipped more than 15 days prior to July 26, 1994 (the "Current Debt") and
payment for 100 of such units (the "July Units") that will be paid according to
Schedule 1 attached hereto. On the next succeeding Business Day (as defined
below) after the date that JetFax receives funds from the Bridge Financing or
other lender, JetFax shall pay to Ailicec the Current Debt. JetFax will order
and pay for and Ailicec will ship to JetFax the number of units set forth on
Schedule 1 hereto substantially according to the shipping and payment schedule
set forth on such Schedule; provided that (a) for each Business Day that
shipment of such units (identified on the Schedule by code 5) is delayed, JetFax
may delay its payments called for on that Schedule for such delayed units
(identified by code 7) by one Business Day; and (b) for each Business Day that
receipt of any of the amounts indicated on such Schedule (including payment for
units shipped previously and the reduction in the Unpaid Amount by $300 per unit
as set
forth in Section 3 for the 485 units delivered after the date of this Agreement
and the 100 July Units, the payment for reduction of the Unpaid Amount as
provided in Section 4 below and any additional amounts required by such
Schedule) is delayed from the date originally scheduled (identified by code 8),
Ailicec may delay the shipment of subsequent units (identified by code 5) by one
Business Day; provided that with respect to units not in Ailicec's inventory for
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which Ailicec must remit payment to Ailicec's supplier prior to shipment to
Ailicec, Ailicec may delay the shipment of such units (with a corresponding
adjustment to the Schedule) until funds identified by Code 1 are received from
JetFax so that Ailicec can issue the appropriate remuneration or letter of
credit to such supplier in order to release such units, as set forth in such
Schedule.
The parties understand that Schedule 1 may be further adjusted for
events of force majeure as described Section 10 of the Manufacturing Agreement.
The parties agree to cooperate in good faith to make appropriate adjustments to
such Schedule as reasonably required by the circumstances, within the parameters
established under such Schedule for payment (that is, net 15 days in July and
net 10 days thereafter) and prerequisites for shipment of units (that is,
receipt of amounts to fund the appropriate letters of credit and timing required
for shipment following receipt of funds).
2. Delivery. Unless advised otherwise in writing, all shipments
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shall be addressed to JetFax at the address indicated below its signature.
Title (subject to Ailicec's purchase money and general security interest) shall
pass to JetFax on payment for the units as referred to in section 1. Risk of
loss or damage to units of the 8000-D Model that are specified on a Request
shall pass to JetFax from the time the units are placed on the carrier
designated by JetFax in Hong Kong. All shipping dates are Hong Kong dates.
3. Purchase Price. The purchase price for the units of the 8000-D
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Model purchased and sold hereunder shall be $800 per unit plus, with respect to
each of the 485 units delivered after the date of this Agreement and the 100
July Units previously shipped, an additional $300 per unit (the "Additional
Amounts") to be applied toward the reduction of the Unpaid Amount (or Debt if
such Unpaid Amount is paid in full). "JetFax shall be responsible for all taxes,
claims, shipping costs and insurance related to the delivery of the units of the
8000-D Model arising after the units have been delivered to the carrier
designated by JetFax at the Hong Kong port.
4. Paydown of Unpaid Amount. (a) Subject to the conditions
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specified in section 4(b) and the modifications specified in section 4(c),
JetFax shall pay to Ailicec the Unpaid Amount in installments as specified
herein with interest thereon at the rate of 6% simple interest
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per annum on such amount remaining unpaid from time to time from the date hereof
until such Unpaid Amount is fully repaid. Any amounts not paid when due under
this section 4 shall bear interest at a rate of 10% simple interest per annum.
Subject to the provisions of section 4(b), until the Unpaid Amount is paid in
full, JetFax shall make the following payments to Ailicec to reduce the unpaid
balance of the Unpaid Amount: (i) $15,000 on the next succeeding Business Day
after the date that JetFax receives funds from any Bridge Financing or the date
that JetFax receives funds from any other lender (such as a factoring agent),
whichever is earlier, and JetFax shall make successive payments starting at
$20,000 due and payable one month thereafter and increasing by $5,000 each month
due and payable on the same day of each month, or the next succeeding Business
Day (as defined below) if that day is not a Business Day; (ii) 10% of the amount
of any Bridge or Equity Financing or financing provided by a commercial lending
institution, as to which Ailicec has agreed to subordinate its security
interest, that is received by JetFax shall be added to the next payment owed to
Ailicec following the receipt of such Bridge or Equity Financing; and (iii) the
Additional Amounts as provided in section 3. Subject to the provisions of
section 4(b), the remaining unpaid balance of the Unpaid Amount, together with
all accrued but unpaid interest, shall be due and payable on December 31, 1994.
JetFax shall have the right to prepay all or any portion of the Unpaid Amount
without premium or penalty, so long as any amount prepaid is applied first to
reduce accrued interest. "Business Day" shall mean any day other than a
Saturday, Sunday, statutory holiday, or other day on which banks in the State of
California are required by law to close or are customarily closed.
(b) The obligations of JetFax to make any payments under section 4(a)
shall be subject to the fulfillment of the following condition: Ailicec shall
have performed and complied in all material respects with the obligations and
agreements to be performed or complied with by it under this Agreement. It is
understood that failure to strictly comply with the schedule referred to in
section 1 is a failure to comply in a material respect with this Agreement.
(c) If the condition set forth in section 4(b) is not satisfied, as
JetFax's sole remedy under such section, JetFax may postpone payment of any
obligations under section 4(a) for the period in which Ailicec has failed to
perform or comply with the obligations and agreements to be performed or
complied with by it under this Agreement beginning on such failure and applying
to payments due during the period of such failure.
(d) Notwithstanding the conditions of section 4(b), the remaining
unpaid balance of the Unpaid Amount, together with all accrued but unpaid
interest, shall be due and payable on December 31, 1994 (subject to adjustment
specified in section 4(c)).
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5. Conditions of Ailicec. The obligations of Ailicec in this
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Agreement shall be subject to the performance and compliance by JetFax in all
material respects (including, without limitation, payment strictly in accordance
with Schedule 1, subject to section 4(c) above) with the obligations and
agreements to be performed or complied with by it under this Agreement; provided
that except with respect to payments by JetFax pursuant to Section 1 above, if
JetFax does not so perform and comply, Ailicec shall notify JetFax in writing
and JetFax shall have 30 days after receipt of such notice to cure such
nonperformance or noncompliance. If JetFax does not cure such nonperformance or
noncompliance in such 30-day period, Ailicec may terminate its obligations to
deliver units of the 8000-D Model under this Agreement.
6. Manufacturing Agreement. This Agreement shall be subject to all
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terms and conditions of the Manufacturing Agreement not inconsistent with the
terms and conditions hereof, and if any terms and conditions of this Agreement
are inconsistent with any terms and conditions of the Manufacturing Agreement,
the terms and conditions of this Agreement shall prevail.
7. Use of Proceeds of Bridge Financing. JetFax agrees to use a
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majority of the Bridge Financing to finance the purchase of the units of the
8000-D Model to be delivered pursuant to this Agreement and to pay the Unpaid
Amount.
8. Purchase Money Security Interest. JetFax acknowledges and agrees
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that all goods delivered pursuant to this Agreement and the Debt (as defined
below) shall be subject to the general and purchase money security interest
granted by JetFax to Ailicec pursuant to the New Security Agreement and Section
2.5 of the Manufacturing Agreement. Ailicec has agreed to subordinate such
general and purchase money security interest to the security interests of the
Bridge Investors pursuant to the Intercreditor Agreement.
9. Conversion of Outstanding Debt. (a) Subject to the conditions
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specified in section 9(e)(i), $675,000 in outstanding debt owed by JetFax to
Ailicec shall be converted into a warrant to purchase 290,000 shares of JetFax
Series E Preferred Stock (the "Warrant"). The exercise price of the Warrant
shall be the lesser of $2.75 per share or the purchase price of the JetFax
preferred stock next sold by JetFax to a third party. The Warrant shall be
exercisable for a period of five years following the date that JetFax has raised
at least $400,000 in the Bridge Financing. The Warrant shall include
registration rights equivalent to the registration rights granted with respect
to the Series E Preferred Stock currently held by Ailicec. Except as set forth
above, the Warrant shall have substantially the same terms as the warrant issued
to Ailicec by JetFax pursuant to the August 1991 Series E Stock Purchase
Agreement. In addition, the Warrant may be exercised by "net exercise"
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(such that Ailicec may exercise the warrant by receiving, in lieu of making
payment in cash, the number of shares purchasable under the Warrant less the
number of shares with an aggregate fair market value equal to the exercise price
of the Warrant); provided that the aggregate fair market value of a share of
JetFax Series E Preferred Stock (or other securities for which such Warrant is
exercisable) equals or exceeds the exercise price per Share of the Warrant, as
then adjusted. Furthermore, the number of shares under the Warrant will be
increased by 100 (as adjusted for stock splits, combinations, reclassifications
and the like) for each unit of 8000-D shipped by Ailicec to JetFax at a purchase
price of $800 in excess of the initial 400 units previously shipped.
(b) The remaining $2,582,621 in indebtedness (the "Debt") (which is
the remaining indebtedness of JetFax to Ailicec net of the $1,275,806 payable by
Ailicec to JetFax) due to Ailicec from JetFax shall remain outstanding as
secured debt to be evidenced by a note in the form attached hereto as Exhibit A
(the "Note"). The Note shall bear interest at the rate of 6% simple interest
per annum on such amount remaining unpaid and shall mature on the fifth
anniversary from the date of this Agreement. The Note shall be subordinated to
the Bridge Financing pursuant to the Intercreditor Agreement in the form
attached hereto as Exhibit B and secured pursuant to the New Security Agreement.
The unpaid balance of the Debt shall be reduced by any Additional Amounts
applied thereto pursuant to Section 3.
(c) Notwithstanding section 9(b), subject to the satisfaction of the
conditions specified in section 9(e)(i) and (ii), (i) $675,000 of the unpaid
principal balance of the Debt shall, on the receipt by JetFax of at least
$400,000 in Bridge Financing, automatically be converted into shares of a new
series of Preferred Stock described in section 9(d) (the "Performance
Preferred") and (ii) the amount of the Debt equal to the amount of the Equity
Financing (including the Bridge Financing that is converted into the Equity
Financing), shall, on such conversion or receipt, automatically be converted
into shares of Performance Preferred. Except as specified in section 9(d), the
conversion price per share for the foregoing shall be $7.50, as adjusted for
stock splits, combinations, reclassifications and the like (the "Ordinary
Conversion Price"). The amount of Debt converted pursuant to this paragraph (c)
shall be referred to as the "Purchase Price".
(d) The Performance Preferred shall be junior to the Financing
Preferred and senior to all other series of Preferred Stock of JetFax (it being
understood that the Performance Preferred will participate with the Common Stock
with respect to dividend payments in excess of the preferences afforded to the
Performance Preferred and will vote on the basis of one vote for each share of
Common Stock into which it is convertible at the Ordinary Conversion Price);
provided that cumulative dividends shall accrue on the Performance Preferred at
the rate of 6% of the Purchase Price per year. JetFax shall have the option to
redeem in whole or in part the outstanding Performance Preferred at
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the Purchase Price plus accrued but unpaid dividends at any time prior to
JetFax's initial public offering of capital stock (the "IPO") of its securities
or a Buy-Out Event (as defined below). Effective on the closing of the IPO or a
Buy-Out Event, JetFax shall redeem the outstanding Performance Preferred plus
accrued dividends and shall pay the unpaid Debt (up to the greater of 15% of the
aggregate gross IPO proceeds or proceeds to JetFax, if any, from a Buy-Out Event
or $1,125,000) or, at Ailicec's option shall convert, in whole or in part, the
Performance Preferred and all dividends accrued thereon and all unpaid Debt into
Common Stock as follows: (i) the Performance Preferred will be converted into a
number of shares of Common Stock equal to the quotient obtained from dividing
the Purchase Price plus accrued but unpaid dividends for the Performance
Preferred by the Conversion Price (as defined below); and (ii) the Debt will be
converted into a number of shares of Common Stock equal to the quotient obtained
from dividing the amount of the Debt outstanding by the Conversion Price. The
"Conversion Price" is an amount equal to 75% of the underwritten IPO price per
share, or 75% of the value of a share of Common Stock of JetFax at the time of
the Buy-Out Event, which shall be the purchase price for those shares in the
case of a stock purchase, the exchange price in the case of a merger, or the
value determined by an investment banking firm assisting JetFax in the case of a
different form of Buy-Out Event or, in the absence of such firm, the value as
determined by the Company's Board of Directors in good faith taking into account
the value of the assets to be distributed to the holders of Common Stock and the
fair market value of the Common Stock. This option shall be exercised on the
closing of the IPO or Buy-Out Event by notifying JetFax in writing of such
election within 30 days after JetFax notifies Ailicec of its intention to
conduct an IPO or consummate a Buy-Out Event (provided that JetFax notifies
Ailicec at least 30 days but no more than 60 days prior to the filing of its
registration statement for the IPO or the closing of a Buy-Out Event).
Performance Preferred and unpaid Debt in excess of such 15% or $1,125,000 shall
automatically convert into Common Stock at such rate. The Performance Preferred
shall not be convertible prior to the IPO or the Buy-Out Event. The Performance
Preferred shall have registration rights equivalent to the Series E Preferred
Stock currently held by Ailicec. The registration rights granted under the
Warrant and the Performance Preferred shall be cut back no more than pro rata
with the shares of the Financing Preferred. In addition to the foregoing, JetFax
shall apply the following toward the redemption of the Performance Preferred:
10% of JetFax's net income as determined on a consolidated basis in accordance
with U.S. GAAP consistently applied in excess of $1 million per fiscal year. The
shares of Common Stock issuable on conversion of the Performance Preferred shall
be subject to lock-ups to the extent provided in the Series E Preferred Stock
registration rights, unless investors holding similar registration rights
holding more than 50% of securities registrable in a given transaction agree to
a longer market standback, up to a total of 180 days. JetFax will take all steps
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in its power to maintain in reserve a sufficient number of shares of Performance
Preferred issuable hereunder and Common Stock issuable upon conversion of the
Performance Preferred. A "Buy-Out Event" means: (a) a consolidation or merger of
JetFax with or into any entity in which the holders of JetFax's outstanding
shares immediately before such consolidation or merger do not, immediately after
such consolidation or merger, retain stock representing a majority of the voting
powers of the surviving entity; (b) the purchase of more than 50% of the fully
diluted Common Stock of JetFax by a third party; or (c) the liquidation,
dissolution or winding up of JetFax if Ailicec provides JetFax with written
notice of its intent to treat such event as a Buy-Out Event within 30 days after
JetFax notifies Ailicec of its intention to liquidate, dissolve or wind-up
(provided that JetFax notifies Ailicec at least 30 days but no more than 60 days
prior to its consummation of such transaction). The acquisition of substantially
all of the assets of JetFax will be deemed a liquidation, dissolution or winding
up of JetFax. If Ailicec does not elect to treat a liquidation, dissolution or
winding up of JetFax as a Buy-Out Event, the Performance Preferred shall receive
a liquidation preference equal to the Purchase Price plus accrued dividends
reduced by the amount of the Purchase Price previously paid for the redemption
of shares of Performance Preferred; the Performance Preferred shall not be
entitled to any other proceeds other than such liquidation preference in the
event of such liquidation, dissolution or winding up.
(e) (i) The consummation of the transactions specified in sections
9(a) and 9(c) is conditioned on the execution and delivery by JetFax and Ailicec
of a license agreement containing the terms and conditions specified in Summary
of Terms Ailicec/JetFax/Endeavor Inkjet Product (the "Summary of Terms") and
containing such other terms and conditions that are reasonable and customary in
an agreement of this nature.
(ii) The consummation of the transactions specified in section
9(c) is conditioned on the provision of all then-current Technology (as defined
in the Summary of Terms) to Ailicec.
(f) On satisfaction of the conditions and agreements in this section
9, JetFax shall not be indebted to Ailicec, except with respect to the Unpaid
Amount, as set forth in section 4, the purchase of units of the 8000-D Model, as
set forth in section 1, and the Debt, as set forth in this section 9.
Accordingly, all indebtedness and obligations of Ailicec to pay money to JetFax,
including, without limitation, the $1,275,806 payable by Ailicec to JetFax,
shall be terminated. Both Ailicec and JetFax shall sign a mutual release to
this effect containing terms that are customary and reasonable for such a mutual
release, and, without limiting the obligations of the parties under the
agreements to be signed by them, shall cooperate in good faith in performing
their obligations under these terms.
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(g) JetFax hereby makes to Ailicec the representations and warranties
specified in Section 6 of that certain Series E Preferred Stock Purchase
Agreement, dated as of August 18, 1991, between JetFax and Ailicec California
Corporation (the "Stock Purchase Agreement") with respect to this Agreement and
the agreements entered into between the parties concurrently herewith
("Associated Agreements"), and the issuance of the Warrant, shares of
Performance Preferred and the shares of Common Stock issuable upon conversion of
the Performance Preferred and exercise of the Warrants (such securities are
collectively referred to as the "Securities"), except as indicated in this
Agreement or on Schedule 2 attached hereto. Ailicec hereby makes to JetFax the
representations and warranties make by the Purchaser specified in Section 7 of
the Stock Purchase Agreement with respect to this Agreement and the Associated
Agreements and the issuance of the Securities as if Ailicec and not the
Purchaser was named therein and except that as to the first sentence of Section
7(c) of the Stock Purchase Agreement, Ailicec is not a wholly owned subsidiary
of Ailicec International Enterprises, Ltd. as stated in that sentence.
10. Governing Law. This Agreement shall be governed by and construed
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and interpreted in accordance with the laws of the State of California, without
regard to the United Nations Convention on Contracts for the International Sale
of Goods.
11. Notices. Any notice, consent, authorization or other
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communication to be given hereunder shall be in writing and shall be deemed duly
given and received when delivered personally or transmitted by facsimile
transmission with receipt acknowledged by the addressee or ten days after being
mailed by first class airmail, or one day after being deposited for next-day
delivery or two days after being deposited for two-day delivery with an
internationally recognized overnight delivery service, charges and postage
prepaid, properly addressed to the party to receive such notice at the following
address for such party (or at such other address as shall be specified by like
notice):
(a) if to Ailicec, to:
Ailicec International Enterprises, Limited
▇▇▇▇ ▇▇-▇▇, ▇/▇
▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ I
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Telephone: ▇▇▇-▇▇▇-▇▇▇-▇▇▇▇
Facsimile: ▇▇▇-▇▇▇-▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇ ▇▇▇▇
with copies to:
Fenwick & ▇▇▇▇
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▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇, Esq.
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(b) if to JetFax, to
JetFax, Inc.
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Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇ ▇▇▇▇▇▇
with copies to:
General Counsel Associates
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Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq.
Endeavor Capital Management
Two ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇
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Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Shartsis, ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇
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Attention: ▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
12. Amendments. The terms of this Agreement may not be amended or
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modified except by a writing signed by JetFax and Ailicec.
13. Counterparts. This Agreement may be executed in any number of
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counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
14. Entire Agreement. Ailicec and JetFax shall enter into a Security
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Agreement in the form of Exhibit B attached hereto (the "New Security
Agreement"). This Agreement, the Intercreditor Agreement, the New Security
Agreement and the Manufacturing Agreement (including the Performance
Specifications (as defined in the Manufacturing Agreement), which is
incorporated herein by this reference) are the entire agreements of the parties
with respect to the subject matter hereof and supersede
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all prior or contemporaneous written or oral negotiations, correspondence,
agreements and understandings regarding the subject matter hereof,including,
without limitation, the Old Security Agreement (except to the extent that such
Security Agreement affords Ailicec with a priority security interest over third
parties other than those persons providing the Bridge Financing) (provided that
JetFax represents and warrants that no security interests have attached to the
assets of JetFax since the date of the Old Security Agreement or to the extent
such security interests have attached, such Old Security Agreement shall remain
in full force and effect); provided that the Purchase Order shall survive until
the Unpaid Amount is fully repaid and provided further that Ailicec agrees that
it shall take no action to enforce its rights under the Purchase Order unless
JetFax has breached its obligations under section 4(a), Ailicec has notified
JetFax in writing of such breach and JetFax has not cured such breach within 30
days after receipt of such notice. The provisions of Sections 4, 8 and 9 of this
Agreement will survive any termination hereof or of the Manufacturing Agreement.
15. Attorneys' Fees. In the event of any action or proceeding
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arising out of this Agreement, the prevailing party shall be entitled to such
party's costs of suit and attorneys' fees, which shall be payable whether or not
such action or proceeding is prosecuted to final judgment.
IN WITNESS WHEREOF, this Agreement has been duly signed by or on
behalf of the parties hereto as of the date first written above.
JETFAX, INC.
By: /s/▇▇▇▇ ▇▇▇▇▇▇
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▇▇▇▇ ▇▇▇▇▇▇, President
AILICEC INTERNATIONAL
ENTERPRISES LIMITED
By
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Name:
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Title:
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EXHIBIT A
PROMISSORY NOTE
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THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR UNDER ANY APPLICABLE STATE SECURITIES LAW, AND NEITHER THIS
NOTE NOR ANY INTEREST HEREIN MAY BE ENCUMBERED, PLEDGED, HYPOTHECATED,
SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF AN EFFECTIVE
REGISTRATION STATEMENT THEREFOR UNDER SAID ACT AND QUALIFICATION UNDER SAID
LAW OR AN OPINION OF COUNSEL SATISFACTORY IN FORM AND SUBSTANCE TO MAKER
AND CONCURRED IN BY MAKER'S COUNSEL TO THE EFFECT THAT SUCH REGISTRATION
AND QUALIFICATION ARE NOT REQUIRED.
$2,582,621 August 3, 1994
6% Menlo Park, California
FOR VALUE RECEIVED, the undersigned, JetFax, Inc., a Delaware
corporation ("Maker"), promises to pay to Ailicec International Enterprises
Limited, a Hong Kong corporation, ("Holder"), at the principal offices of Maker
(or at such other place as Holder may from time to time designate by written
notice to Maker), in lawful money of the United States, the principal sum of
$2,582,621 with interest at the rate of 6% simple interest per annum on the
principal amount of this Note remaining unpaid from time to time from the date
hereof until such principal amount is fully repaid. Payments of principal and
interest shall be payable as specified herein.
1. Payment. Payments of accrued interest shall be due and payable
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annually. The first such interest payment shall be due and payable on August 3,
1995. Should interest not be paid when due on this Note, it shall bear interest
at the same rate as the principal. The entire unpaid principal balance of this
Note, together with all accrued but unpaid interest thereon shall be due and
payable on August 3, 1999. Notwithstanding the foregoing, unpaid principal and
interest hereunder may be payable to Holder or converted into shares of Maker's
stock, prior to such dates, on the terms and conditions set forth in that
certain Purchase and Debt Restructuring Agreement between Maker and the original
Holder dated as of August 3, 1994.
2. Prepayment. Maker shall have the right, at any time and from time
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to time, to prepay all or any portion of the amount due under this Note without
premium or penalty, so long as any amount prepaid is applied first to reduce
accrued interest and then to reduce principal.
3. Incorporation of Security Agreement and Intercreditor Agreement.
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This Note is secured by and pursuant to a Security Agreement, dated August 3,
1994, in favor of Holder (the "Security Agreement"), and the provisions
contained in such Security Agreement are incorporated herein by reference and
made a part hereof as though fully set forth herein. This Note is subordinated
to indebtedness incurred by Maker to certain bridge lenders pursuant to an
Intercreditor Agreement, dated as of August 3, 1994, between Holder and those
bridge lenders (the "Intercreditor Agreement"), and the provisions contained in
such Intercreditor Agreement are incorporated herein by reference and made a
part hereof as though fully set forth herein.
4. Default. The entire unpaid principal amount of this Note and any
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accrued interest thereon shall, by declaration at the option of Holder (or
without such declaration in the case of event (b) below), immediately become due
and payable upon the occurrence of any of the following events (an "Event of
Default"):
(a) Maker defaults in the payment of any installment of
principal or interest on this Note and such default is not remedied within
fifteen days after Holder gives written notice thereof;
(b) Maker becomes insolvent or makes a general assignment for
the benefit of creditors or Maker admits Maker's inability to pay its debts as
they become due or an order for relief is entered against Maker under any
chapter of Title 11 of the United States Code or Maker is adjudicated a bankrupt
or insolvent under or institutes any bankruptcy, insolvency, or similar
proceeding relating to it under the laws of any jurisdiction or any such
proceeding is instituted against Maker and remains undismissed for a period of
60 days.
Upon the occurrence of an Event of Default, Maker shall be liable for
the reasonable costs of enforcement and collection of this Note, including
reasonable attorneys' fees. Maker expressly waives demand, presentment, notice
of dishonor, diligence in collection and notice of protests and agrees to all
extensions and partial payments before or after maturity.
5. Governing Law. This Note shall be governed by, construed and
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interpreted in accordance with the laws of the State of California.
IN WITNESS WHEREOF, Maker has executed this Note or caused this Note
to be executed as of the date first set forth above.
JETFAX, INC.
By: /s/▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ III
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Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, III
Title: President